Document farmingtonnm_gov_doc_272f4b9183

City of Farmington New Mexico July 1, 2005 - June 30, 2006 Comprehensive Annual Financial Report ---PAGE BREAK--- CITY OF FARMINGTON NEW MEXICO COMPREHENSIVE ANNUAL FINANCIAL REPORT For The Year Ended June 30, 2006 Printing by City of Farmington Print Shop Prepared By: Administrative Services Department Eric D. Schlotthauer, Controller Susan Nipper, Enterprise Accounting Supervisor Sheree Wilson, General Accountant Steve Ellison, Financial Accountant Carol Taulbee, Administrative Accountant ---PAGE BREAK--- ---PAGE BREAK--- TABLE OF CONTENTS Page INTRODUCTORY SECTION Transmittal Letter i Certificate of Achievement for Excellence in Financial vii Organizational Chart viii List of Principal ix City of Farmington x Four Corners Area Map xi FINANCIAL SECTION Independent Auditor’s Report 1 Management’s Discussion and 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net 15 Statement of 16 Fund Financial Statements: Balance Sheet – Governmental 17 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 19 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – General 20 Statement of Net Assets – Proprietary Funds 21 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary 23 Statement of Cash Flows – Proprietary 24 Notes to the Financial 27 Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet – Nonmajor Governmental 51 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds 55 Special Revenue Funds: Gross Receipts Tax Streets Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 59 ---PAGE BREAK--- Page Gross Receipts Tax Parks and Public Works Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 60 Park Development Fees Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 61 Recreation Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 62 Library Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 63 Parks/Recreation Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 64 Museum Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 65 Lodgers Tax Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 66 State Police Protection Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 67 Region II Narcotics Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 68 Law Enforcement Block Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 69 State Fire Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 70 Penalty Assessment Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 71 ---PAGE BREAK--- Page Capital Projects Funds: Community Development Grant Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 72 GRT Bond Proceeds Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 73 Library Construction Project Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 74 Fire GRT Bond Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 75 Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 76 Business-type Funds: Internal Service Fund: Health Insurance Fund: Statement of Net 78 Schedule of Revenues, Expenses and Changes in Fund Net 79 Statement of Cash 80 Enterprise Funds: Electric Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 81 Water Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 82 Wastewater Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 83 Sanitation Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 84 Golf Courses Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 85 Airport Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 86 ---PAGE BREAK--- Page Capital Assets Used in the Operation of Governmental Funds: Comparative Schedules by 87 Schedule by Function and Activity 88 Schedule of Changes by Function and 89 STATISTICAL SECTION (Unaudited) Schedule Financial Trends: Net Assets by 1 93 Changes in Net 2 94 Fund Balance, Governmental 3 96 Changes in Fund Balances, Governmental 4 97 Revenue Capacity: Tax Revenue by Source, Governmental Funds 5 98 Gross Receipts Tax Revenue by 6 99 Direct and Overlapping Gross Receipts Tax 7 100 Gross Receipts Tax Revenue Payers by 8 101 Assessed Value and Estimated Actual Value of Taxable 9 102 Direct and Overlapping Property Tax 10 103 Principle Property Tax 11 104 Property Tax Levies and 12 105 Debt Capacity: Ratios of Outstanding Debt by Type 13 106 Direct and Overlapping Governmental Activities Debt 14 107 Legal Debt Margin 15 108 Pledged-Revenue 16 109 Demographic and Economic Information: Demographic and Economic 17 110 Principle 18 111 Operating Information: Full-time-Equivalent City Government Employees by Function / 19 112 Operating Indicators by Function / 20 113 Capital Asset Statistics by Function / Program 21 114 Single Audit Section: Schedule of Expenditures of Federal Awards 115 Notes to Schedule of Expenditures of Federal Awards 116 ---PAGE BREAK--- Page Report 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 117 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 119 Schedule of Findings and Questioned 121 Report on Compliance Applicable to the PFC Charge Program and on Internal Control Over Compliance in Accordance with the PFC Audit Guide for Public Agencies and on the Schedule of PFC Revenues and Disbursements.................. 127 Schedule of PFC Revenues and Disbursements 129 PFC Program Audit Summary 130 Exit Conference 131 Other Information: Schedule of Pledged Collateral by Financial Institution 133 Schedule of Joint Powers Agreements 134 ---PAGE BREAK--- ---PAGE BREAK--- INTRODUCTORY SECTION INTRODUCTORY SECTION ---PAGE BREAK--- CITY OF FARMINGTON 800 Municipal Drive Farmington, NM 87401-2663 (505) 599-1102 Fax: (505) 599-8430 http://www.fmtn.org i OFFICE of the CITY MANAGER UTAH COLO. ARIZ. N.M. December 1, 2006 To the Honorable Mayor, City Council Members, and Citizens of the City of Farmington, New Mexico: State law requires that all general-purpose local governments publish, within five months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Farmington for the fiscal year ended June 30, 2006. This report consists of management’s representations concerning the finances of the City of Farmington. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Farmington has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse, and to compile sufficient reliable information for the preparation of the City of Farmington’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Farmington’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. David Berry CPA, PC has audited the City of Farmington’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Farmington, for the fiscal year ended June 30, 2006, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Farmington’s financial statements, for the fiscal year ended June 30, 2006, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City of Farmington was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements ---PAGE BREAK--- involving the administration of federal awards. This information is presented in the Single Audit section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement 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 The City was originally incorporated in 1901 and has a current land area of 31.03 square miles and serves a population of 43,200. 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 state 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 any local municipal option component is then distributed back to the municipality by the Department. The current total in-city GRT rate is 7.0% 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 .625% 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 is responsible, among other things, for adopting ordinances, adopting the budget, appointing committees, and appointing the City Manager, City Clerk, 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 multi-utility systems; the construction and maintenance of highways, streets, and other infrastructure; and recreational activities 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 submil requests for appropriation to the City Manager on or before the last day in March each year. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents this proposed budget to the Council for review prior to May 31. 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 30 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, i; ---PAGE BREAK--- 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, this comparison is presented on page 20 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. 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 regional population base of more than 225,000. Historically, the local economy has fluctuated in cycles that correspond to the price of oil and natural gas. In the last five years however, energy prices have dramatically increased and retail/services/tourism have continued to develop as major sources of revenue. During the past year, GRT revenue increased 15.9% and Lodgers Tax revenue was up 12.7% from the prior fiscal year. Electric Utility operating revenue decreased 1.5% over the prior year. Strong energy markets, continued construction activity, and an improving service sector are indicators that the local economy has improved over last year. Revenue projections for the next fiscal year indicate a return to a growth mode, albeit at a lower level than the 9% historical average. Growth in retail sales are expected to continue as Wal-mart, the world's largest retailer, opened a second store in Farmington in May, 2006. During FY 2004, the U.S. Office of Management and Budget designated Farmington as the central city of the Farmington-San Juan County Metropolitan Statistical Area. This designation qualifies Farmington for various Federal entitlement programs and, more importantly, increases the visibility of Farmington in various national economic databases that should highlight the desirability of Farmington as a potential business location. Although just recently designated a Metropolitan Statistical Area, Farmington has participated in a national urban cost of living survey for many years. As a participant in this survey, Farmington is compared with about 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 100% of the national average. As our locality and facilities continue to gain recognition, Farmington will host more national and regional events in baseball, softball, soccer, swimming, mountain biking, and off-road rock climbing, as well as numerous conventions and the National High School Finals Rodeo The was hosted by San Juan County in 2002 and 2003 and proved to be a successful event for the County and the City of Farmington. In January, 2004 the City, San Juan County, and other local agencies were successful in their bid to again host the rodeo in 2008 and 2009. These events III ---PAGE BREAK--- will again be a boost to the local economy. With respect to the National High School Finals Rodeo in 2004 the City in conjunction with other local governments and agencies beat out two sites from Washington State for the right to host the event in 2008 & 2009. This event is billed as the "World's Largest Rodeo", When the was held in San Juan County in July 2002 & 2003, more than 1500 contestants participated. In addition, an average of 7,100 spectators attended each performance. As a result, more than $11 million was brought into the New Mexico economy. The community of Farmington annually hosts the Connie Mack World Series which continues to be a popular and beneficial event for the community. This national tournament for amateur baseball's best 17 and 18 year-olds brings in 10 teams from across the country. The teams hail from regions throughout the contiguous United States as well as Puerto Rico and Canada. It is one of the largest spectator attended events in the state of New Mexico and provides a significant economic boost to the entire region. The Series began in Farmington in 1965. The City of Farmington was also recently awarded the bid to host the Western Zones Swim Meet in the summer of 2007. There are four nationwide swim zones and the Western Swim Zone includes state swim teams from Alaska, Hawaii, and all the western United States. More than 850 registered athletes with 17 teams from the Western United States will participate in this swimming qualification competition at the Farmington Aquatic Center. This swim meet will qualify the winners for continued national competition. San Juan Regional Medical Center of Farmington will complete a $70 million expansion and renovation project in August 2006. The East Tower expansion project of will add 72 private patient rooms, 8 new operating suites, a recovery room, and several day surgery rooms. A new entrance, lobby, and public square will also be part of the new addition. A financing partnership between the hospital and the community is paying for the project, which will also include renovation of the existing five-story facility following completion of the East Tower expansion. San Juan County voters approved a $25-million, one-eighth cent gross receipts tax in 2003 to help pay for the expansion and renovation at San Juan Regional. is funding the remainder of the project. This expansion project is another example of the growth that the community of Farmington is experiencing. The region (which includes the City of Farmington and surrounding rural areas within the same county) has an employed labor force of approximately 57,600, an increase of 2.3% over last year mostly attributable to an increase in oil & gas production. Major employers include a regional medical center, four public school districts, a community college, a coal mining operation, two electrical power generation plants, and two Wal-Mart superstores. Meanwhile, there continues to be a discernible trend toward steady residential growth of about 2% per year. Long-term financial planning. The construction of a new library was completed during FY 2003. This $9.7 million project was financed with $7.6 million of gross receipts tax revenue bonds issued in November 2001 and the balance from the General Fund's existing cash balance from within the general fund. A major project completed in FY 2004 was the wastewater treatment plant expansion, which has been financed with a 3 percent $14.2 million loan from the New Mexico Environment Department (NMED). The first loan payment of $952,997 is due July 1, 2007 and the fina/loan payment will be July IV ---PAGE BREAK--- 2026. The treatment plant's capacity has been increased by 15% to meet a projected 6.67 mgd flow rate. In addition, increased reliability and flexibility has been obtained through the rehabilitation of the primary clarifiers and sludge drying beds as well as the capacity expansion of the disinfection process. The wastewater treatment plant's next expansion phase for a new facility that will more efficiently treat three million gallons of waste per day, is scheduled for FY 2009 with design work to begin in the fall of FY 2006. Construction for this expansion project will be budgeted in FY 2009 at an estimated cost of $7 million. It is anticipated the City will be working with the NMED on an additional low interest loan through the Clean Water State Revolving Fund Program. 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 FY 2004, 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. In FY 2005, the City issued $5,725,000 of Series 2005 Sales Tax Revenue Bonds to construct, furnish, equip and improve fire-fighting facilities, and acquire and rehabilitate fire-fighting equipment. Fire Station 6, completed in July 2006, provides much-needed response and emergency service coverage to the west side of the city. In addition to the new state-of-the-art fire station, the bond proceeds purchased two new 95 foot platform ladder trucks and three 75 foot aerial ladder trucks. Other long-term financial planning is incorporated into the City of Farmington's Comprehensive Plan approved by the City Council in October 2002. This plan was developed in a multi-stage process and provides the vision, goals, objectives, and actions necessary to direct the City's progress over the next twenty years. It is an official public document that will serve as the guide for policy decisions relating to the physical, social, and economic growth of the community. 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. This planning document will serve as a planning guide for future financial capital investments. It is also currently serving as the springboard for development of a Metropolitan Redevelopment Plan (MRP) covering all three downtown neighborhoods. Cash management policies and practices. Cash temporarily idle during the year was invested in certificates of deposits, obligations of the U.S. Treasury, overnight deposits, money market accounts, and the State Treasurer's investment pool. The City earned interest revenue of $858,611 on all governmental investments including capital projects and internal service funds and $1,454,975 on all proprietary funds for the year ended June 30, 2006. The maturities of the investments range from overnight to 3 years. The City's investment policy is to minimize credit and market risks while maintaining a competitive yield on its portfolio. Accordingly, all investments were protected by federal depository insurance, adequate collateral, or the full faith and credit of the United States Government. Risk management. The City continues to maintain a self-insured program for health, workers' compensation, property, boiler and machinery, pollution, crime, and general liability insurance. The workers compensation and general liability programs continued to v ---PAGE BREAK--- be financially sound throughout FY 2006, while the health fund's cash balance increased to $1,507. Management will review the fiscal stability of the health insurance fund in FY 2007 and make appropriate modifications to the plan. The risk management and workers compensation funds were transferred to the general fund as separate divisions in the legal and human resources departments in FY 2004. Pension and other post-employment benefits. The City's full time employees participate in a defined benefit contributory retirement plan through the Public Employees' Retirement Association (PERA) of the State of New Mexico. The plan is authorized under the Public Employees Retirement Act (Chapter 10, Article 11 NMSA 1978). PERA is the administrator of the plan, which is a cost-sharing, multiple-employer public employee retirement plan. Actual pension data for the State of New Mexico, as employer, is provided at the statewide level in a separately issued financial report of the PERA. 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, 2005. This was the eleventh 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 published an easily readable and efficiently organized comprehensive annual financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. In addition, the City of Farmington also received the GFOA's Distinguished Budget Presentation Award for its annual budget document for FY 2006. In order to qualify for the Distinguished Budget Presentation Award, the government's budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide, and a communications device. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Division. We would like to express our appreciation to all members of the Division who assisted and contributed to the preparation of this report. Credit must also be given to the Mayor and City Council for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Farmington's finances. ReSpe,ZIY:Ubitted ,J ~ ~d1Z~ Ii1 . Bob Hudson H. Andrew Mason City Manager Administrative Services Director VI ---PAGE BREAK--- ---PAGE BREAK--- Citizens of Farmington CITY OF FARMINGTON ORGANIZATIONAL CHART June 2006 Municipal Judges Liese & Rowland Mayor and Council Standley, Darnell, Fischer, Sandel, Sharpe City Clerk Morris Archives Business Registration City Manager Hudson City Attorney Burnham Claims Management Legal Library System Information Services PC Services GIS Administrative Services Mason Administration Purchasing Accounting Operations Utility/Enterprise Finance Operations Warehouse Community Development Sullivan Administration Planning Building Inspection Streets CDBG Survey City Engineering Traffic Engineering Construction Inspection Water/Wastewater Admin. Development Services Solid Waste MPO General Services Hunt Administration Farmington Indian Center Airport Print Shop Building & Maintenance Transit Building Support Vehicle Maintenance Community Services Human Resources Brooks Employee Benefits Personnel Insurances Safety Payroll Electric Utility Grantham-Richards Administration Electric Meter Shop Animas Power Plant Electric Relay Shop Bluffview Power Plant Navajo Dam Power Plant Customer Service San Juan No. 4 Electric Construction System Control Center Electric Engineering Transmission & Distribution Fire Martin Administration Homeland Security Fire Marshall’s Office Operations Parks, Recreation & Cultural Affairs Bowman Administration Museum System Animal Shelter/Park Ranger Parks Operations Aquatics Facilities Recreation Center Civic Center Recreation Programs Downtown Association Sandstone Production Golf Courses Senior Citizen Center Police Burridge Administration Holding Facility Communications Operations Grant Funds School Crossing Guards viii ---PAGE BREAK--- CITY OF FARMINGTON Principal Officials June 30, 2006 MAYOR William Standley CITY COUNCIL Mary M. Fischer George Sharpe Dan Darnell Jason Sandel CITY MANAGER Bob Hudson ADMINISTRATIVE SERVICES DIRECTOR H. Andrew Mason GENERAL SERVICES Rod Hunt PARKS & RECREATION Jeff Bowman POLICE Michael Burridge FIRE Robert Martin COMMUNITY DEVELOPEMENT Michael Sullivan HUMAN RESOURCES Donna Brooks ELECTRIC UTILITY DIRECTOR Maude Grantham-Richards CONTROLLER Eric D. Schlotthauer ix ---PAGE BREAK--- x x c: en - J' ---PAGE BREAK--- IX dew e J'V SJ UJo:> Jn0.:l ---PAGE BREAK--- ---PAGE BREAK--- FINANCIAL SECTION FINANCIAL SECTION ---PAGE BREAK--- PO Box 308 • F,lrmington, New Mexico 87499 505 32(,-0270 • FeR [PHONE REDACTED] DAVID BERRY, CPA, PC c-m.nt: CERTIFIED PUBLIC ACCOUNTANT· SMALLBUSINESS CONSULTANT Independent Auditor's Report City of Farmington Farmington, New Mexico Honorable Mayor and City Council and Mr. Domingo P. Martinez, CGFM New Mexico State Auditor We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Farmington, New Mexico (City), as of and for the year ended June 30, 2006, which collectively comprise the City's basic financial statements as listed in the table of contents. We also have audited the financial statements of each of the City's nonmajor governmental, enterprise, and internal service funds presented as supplementary information in the accompanying combining and individual fund financial statements as of and for the year ended June 30, 2006, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2006, and the respective changes in financial position and cash flows, where applicable, thereof and the budgetary comparison for the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each nonmajor governmental, enterprise, and internal service fund of the City, as of June 30, 2006, and the respective changes in the financial position and cash flows, where applicable, thereof and the respective budgetary comparisons for the major debt service fund, nonmajor governmental funds and business-type funds for the year then ended in conformity with accounting principles generally accepted in the United States of America. ---PAGE BREAK--- Page Two In accordance with Government Auditing Standards, we have also issued our report dated November 3, 2006, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Audit Standards and should be considered in assessing the results of our audit. Management's discussion and analysis on pages 3 through 14 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the basic financial statements, the combining and individual fund financial statements, and budgetary comparisons. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audit of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statements. The additional schedules listed as "other information" in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The information included in the accompanying introductory section and statistical section is presented for the purposes of additional analysis and is not a required part of the basic financial statements. This information has not been subject to the auditing procedures applied in our audit of the basic financial statements and, accordingly, we express no opinion on it. Farmington, New Mexico November 3,2006 2 ---PAGE BREAK--- Management Discussion and Analysis Management Discussion and Analysis ---PAGE BREAK--- 3 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, 2006. 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 FY 2006 by $363,649,522 (net assets). Of this amount, $54,849,583 (unrestricted net assets) may be used to meet the City’s ongoing obligations. • As of June 30, 2006, the City of Farmington’s governmental funds reported combined ending fund balances of $29,133,425, a decrease of $28,772 or 0.1% in comparison with the prior year. A total of $24,559,417 (unreserved fund balance) is available for spending at the City’s discretion. • At the end of the current fiscal year, unreserved fund balance for the general fund was $14,594,072, or 32.2 % of the total general fund expenditures. • The City’s total net debt decreased by $5,830,000 or 10.5% 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 ---PAGE BREAK--- 4 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). 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, highways, and streets. The business-type activities of the City of Farmington include electric, water, wastewater, sanitation, golf, and airport operations. The government- wide financial statements can be found on pages 15-16 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 debt service 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 51-58). ---PAGE BREAK--- 5 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. The basic governmental fund financial statements can be found on pages 17-20 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, golf, and airport 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, golf, and airport operations and are found on pages 81-86 of this report. Fund data for the internal service fund is provided on pages 78-80 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 27-47 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 $363,649,522 at the close of the most recent fiscal year. The largest portion of the City of Farmington’s net assets (83%) 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. ---PAGE BREAK--- 6 Governmental Business-type Activities Activities FY 2006 FY 2005 FY 2006 FY 2005 FY 2006 FY 2005 Current and other assets 34,251,005 $ 37,140,194 $ 57,349,164 $ 44,395,940 $ 91,600,169 $ 81,536,134 $ Capital assets 87,133,682 80,217,153 279,351,393 272,208,948 366,485,075 352,426,101 Total assets 121,384,687 117,357,347 336,700,557 316,604,888 458,085,244 433,962,235 Long-term liabilities outstanding 14,156,962 15,207,163 52,696,330 57,709,602 66,853,292 72,916,765 Other liabilities 4,109,577 7,220,669 23,472,853 24,405,325 27,582,430 31,625,994 Total liabilities 18,266,539 22,427,832 76,169,183 82,114,927 94,435,722 104,542,759 Net assets: Invested in capital assets, net of related debt 74,339,304 66,265,472 227,625,271 215,390,130 301,964,575 281,655,602 Restricted 4,219,427 3,514,726 2,615,937 2,564,255 6,835,364 6,078,981 Unrestricted 24,559,417 25,149,317 30,290,166 16,535,576 54,849,583 41,684,893 Total net assets 103,118,148 $ 94,929,515 $ 260,531,374 $ 234,489,961 $ 363,649,522 $ 329,419,476 $ Total City of Farmington's Net Assets Another portion of the City of Farmington’s net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($54,849,583) 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 $34,230,046 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 $8,188,633. Key elements of the change in net assets are as follows: ---PAGE BREAK--- 7 Governmental Business-type Activities Activities FY 2006 FY 2005 FY 2006 FY 2005 FY 2006 FY 2005 Revenues: Program revenues: Charges for services 6,224,584 $ 5,838,533 $ 108,470,937 $ 108,623,372 $ 114,695,521 $ 114,461,905 $ Operating grants and Contributions 2,929,307 2,238,291 927,492 880,654 3,856,799 3,118,945 Capital grants and Contributions - - 794,531 625,693 794,531 625,693 General revenues: Property taxes 1,121,723 1,043,064 - - 1,121,723 1,043,064 GRT taxes 49,274,220 43,134,352 - - 49,274,220 43,134,352 Other taxes 3,536,122 2,594,484 - - 3,536,122 2,594,484 Other 3,855,564 3,979,128 1,454,975 790,027 5,310,539 4,769,155 Total revenues 66,941,520 58,827,852 111,647,935 110,919,746 178,589,455 169,747,598 Expenses: General Government 21,649,221 21,153,411 - - 21,649,221 21,153,411 Police 12,356,592 11,351,590 - - 12,356,592 11,351,590 Fire 6,466,886 5,470,572 - - 6,466,886 5,470,572 Parks, rec & cultural affairs 11,105,380 9,497,875 - - 11,105,380 9,497,875 Community development 8,511,853 7,481,297 - - 8,511,853 7,481,297 Electric - - 65,152,992 72,914,727 65,152,992 72,914,727 Water - - 6,992,577 6,944,219 6,992,577 6,944,219 Wastewater - - 4,690,385 4,983,626 4,690,385 4,983,626 Sanitation - - 3,815,728 3,625,722 3,815,728 3,625,722 Golf - - 1,217,011 1,209,293 1,217,011 1,209,293 Airport - - 1,812,263 1,871,508 1,812,263 1,871,508 Other 588,521 421,480 - - 588,521 421,480 Total expenses 60,678,453 55,376,225 83,680,956 91,549,095 144,359,409 146,925,320 Increase in net assets before transfers 6,263,067 3,451,627 27,966,979 19,370,651 34,230,046 22,822,278 Transfers 1,925,566 1,754,818 (1,925,566) (1,754,818) - - Increase in net assets 8,188,633 5,206,445 26,041,413 17,615,833 34,230,046 22,822,278 Net assets - 7/01/05 94,929,515 89,723,070 234,489,961 216,874,128 329,419,476 306,597,198 Net assets - 6/30/06 103,118,148 $ 94,929,515 $ 260,531,374 $ 234,489,961 $ 363,649,522 $ 329,419,476 $ Total City of Farmington's Changes in Net Assets Property taxes increased by $78,659 or 7.5% during the year. This increase is attributable to increasing property values and continued expansion in community development. Operating grants and contributions increased $691,016 or 30.9% during the year. This is primarily due to increases in police, CDBG, and library grant funding. ---PAGE BREAK--- 8 PILT transfers decreased $17,300 or 0.8% over the prior year due to decreased utility revenue. Business-type activities. Business-type activities increased the City of Farmington’s net assets by $26,041,413, accounting for 76.1% of the total growth in the government’s net assets. Key financial elements of the past fiscal year are as follows: • Operating expenses are 75.3% of operating revenues, resulting in $26,774,219 in operating income. • Total electric revenue was down $815,728 or 0.9%. Electric sales were down $1.15 million, but increased investment earnings offset half of this. Surplus energy sales decreased approximately $4.7 million, but increased industrial electric sales of $2.1 million combined with an increase in the power cost adjustment of $1.67 million mitigated this decline in revenue. Commercial sales also decreased $974,000, but wholesale revenues increased $600,000 . • Total water revenue increased $686,767 or 9.3% from increased water sales to residential and commercial customers. • Total wastewater revenue increased by $398,007 or 8.2% during the year due to higher sales to commercial customers and to greater receipts from the environmental gross receipts tax. • Total sanitation revenue increased $203,460 or 5.5% due to higher demand for sanitation services. • Investment earnings for business-type activities were $1,454,975, an 84.2% increase due to rising interest rates and increasing cash reserves. 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, 2006, the City of Farmington’s governmental funds reported combined ending fund balances of $29,133,425 a decrease of $28,772 in comparison with the prior year. Approximately 84.8% of this total amount or $24,707,640 constitutes unreserved 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 has already been committed for debt service ($287,735), prepaid items ($206,358), and statutory reserves ($3,931,692). ---PAGE BREAK--- 9 The general fund is the chief operating fund of the City of Farmington. At the end of the current fiscal year, unreserved fund balance of the general fund was $14,594,072, while total fund balance reached $18,732,122. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 32.2% of total general fund expenditures, while total fund balance represents 41.4% of that same amount. The fund balance of the City of Farmington’s general fund increased $2,269,090 or 13.8% during the current fiscal year. The total increase in general fund revenue was $6,761,241 due mostly to a 15.9% increase in gross receipts tax. Total general fund expenditures increased $6,430,869 or 16.6% over the prior year. Key elements of this increase were the purchase of the Animas Credit Union building ($792,000), increased costs of community service contributions ($248,501) mainly due to a pass-through grant for Presbyterian Medical Services, increased vehicle purchases ($704,072), increased costs of the Red Apple bus transit service ($242,345), increased wages/benefits for police ($920,153) and fire ($482,909), and increased police equipment purchases ($468,022). Other key governmental-type funds include the streets fund and parks & public works fund. Both of these funds are funded primarily with gross receipt tax revenue earmarked specifically for streets, parks, and public works activities. The streets fund is generally budgeted for full expenditure each fiscal year, but expenditures decreased by $144,648 or 4% in FY 2006 due to a decrease in streets projects. The parks & public works fund also is generally budgeted for full expenditure each fiscal year. However, the fund balance increased by $79,290 or 2.5% due to higher than expected GRT revenue. 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 $22,031,374 in the electric utility system; $2,296,448 in the water utility system; $5,074,562 in the wastewater utility system; and $887,782 in combined net assets for the other propriety funds (sanitation, golf course, and airport). The total growth in net assets was $25,223,587 in the electric fund, $716,190 in the water fund, $391,362 in the wastewater fund, and $(289,726) in the other funds combined. The decrease in the other proprietary funds was due primarily to continuing reductions in federal funding for the airport. 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 FY 2006 was a very good year for revenues in that gross receipts tax proceeds increased by $5,174,337 or 15.9% from the prior year on a GAAP basis. This was an even steeper growth curve than FY 2005, when GRT increased 13.3% over FY 2004. After the 4.6% decline in FY 2003, this was a welcome continuation of the economic recovery and significantly better than the twenty-five year average growth trend of In the general fund, which received approximately 77.6% of revenue from the ---PAGE BREAK--- 10 gross receipts tax (GRT), FY 2006 GRT revenue was $37,800,669 or 15.9% over FY 2005 actual receipts. This compares very favorably with FY 2005, which was 9.9% over budget. On the expenditure side, the original general fund budget of $46,637,684 was increased by almost $650 thousand during FY 2006 due to the continuing increase in GRT revenue. As the positive revenue trend continued in FY 2006, selected expenditures postponed in prior years were approved. This resulted in a 16.5% increase in actual FY 2006 expenditures over the prior year. Considering the postponement of expenditures from prior years, the growth in cash reserves available for expenditure, and continued expansion in demand for services, FY 2006 expenditure levels could be considered fiscally conservative. During the year, seven separate revisions were made to the original FY 2006 budget. These adjustments were not large on a percentage basis. Budget revisions in the general fund were typical with the difference between the original and final budget for revenue and expenditures amounting to 1.9% and 4.2% respectively. In the governmental funds, the largest increase was in the GRT-parks and public works fund. This was due to increased GRT proceeds that were designated for the new Southside Community Center project and the Noise Reduction Wall on Pinon Hills Blvd. Several enterprise funds had significant increases from original to final budget due to the need to increase capital spending. The capital outlay budget in the electric utility was increased by 16.4% to meet additional service requests. When some requests failed to materialize and the budget increase not utilized, the revenue and expense budgets were left unchanged resulting in under-budget actuals. Only in the water fund was increased budget authority actually utilized, with expenses amounting to 19.6% of the additional authorization. In FY 2006 several budget issues were addressed. The first was the ISO rating for the fire department. To maintain the current favorable rating the department was required to upgrade five fire trucks and construct a new fire station. To accomplish these improvements, bonds of $5.7 million were issued in April of 2005, with the construction of the new fire station commencing in July 2005. Completion is scheduled for August of 2006. To adequately staff the new station an additional twelve (12) fire positions are required. These 12 positions were budgeted in increments during FY 2006 at an annualized cost of $575,000. Additional public safety concerns were addressed with the addition to the budget of nine police positions in FY 2006 at an annualized cost of $460,000. These additional public safety positions will have a definite budget impact on future budgets. Due to growth in the northwest sector of the City, an additional fire station may be constructed in the next few years. On another community issue, progress was also made on the new $2.0 million Southside Community Center by gathering input from the community concerning their opinion on the types of functions this facility should fulfill. Subsequently, conceptual design work on the new center commenced and is proceeding forward. ---PAGE BREAK--- 11 During FY 2006, the City had the opportunity to acquire additional office space across the street from City Hall. A former savings and loan building went into foreclosure and the City submitted the winning bid at the foreclosure sale. For $792,000, the City received much-needed space in a prime location. Since this was a totally unforeseen expenditure, a budget revision was required with the cash purchase funded by royalties from a new oil and gas lease on City property. Additional funding will be required in FY 2007 to remodel various offices affected by the move. Two new programs also had budgetary impacts during the fiscal year. The City is in the early operational stage of developing a mass transit system. The results from prior years have been very favorable in terms of ridership, but now the original fleet of vans need replacing and additional vans are required for expanded routes. Although federal funds are available, the City is carefully monitoring the financial resources required to maintain and improve the transit system. During FY 2006 the City spent $280,000, at approximately $39,000 apiece, to acquire seven additional vans for the Red Apple Transit system. Future budgets will be responsible for maintaining and replacing these vans as they require maintenance and wear out. The second issue addressed in FY 2006 related to the City’s utility system. FY 2006 was the first year since 1991 that a water/wastewater rate increase has been considered. Due to requests for extension of existing lines and the need to replace aging infrastructure, a consultant was hired to evaluate the current system and propose various options for generating sufficient revenue to address these concerns. The final result of this effort will not be known until FY 2007 when various rate options are discussed by the City Council. When new rates are implemented, a schedule for capital improvements will be developed to prioritize specific projects for construction. The most favorable budget highlight for the year was the budget to actual comparison for the general fund at the end of the year. Actual revenue for the year exceeded the budget by $792,878 or 1.7% and actual expenditures were under budget by $2,001,078 or 4.2%. These results left the cash balance in the general fund at $13.2 million which approaches the historical high of $13.6 million. This balance generates additional flexibility for the FY 2007 budget in that a significant “cushion” exists which allows for additional spending without creating negative financial consequences. The preliminary FY 2007 budget anticipates spending down over $3.3 million of this accumulated reserve, mostly for the Southside Community Center. 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, 2006, amounts to $366,485,075 (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 $279,351,393 or 76.2% of the total City of Farmington capital assets. The total increase in the business-type investment in capital assets for the ---PAGE BREAK--- 12 current fiscal year was $7,142,445 or 2.6%. The governmental activities investment in capital assets accounted for $87,133,682 or 23.8% of all capital assets owned by the City. The total increase in governmental activities investment in capital assets for the current year was $6,916,529 or 8.6%. Major capital asset investment activities during the current fiscal year included the following: Governental Business-type Activities Activities FY 2006 FY 2005 FY 2006 FY 2005 FY 2006 FY 2005 Land 25,780,126 $ 25,436,011 $ 5,905,282 $ 3,791,140 $ 31,685,408 $ 29,227,151 $ Buildings and system 25,276,672 25,129,700 63,768,452 43,153,855 89,045,124 68,283,555 Improvements 6,360,550 6,563,258 54,662,046 52,434,587 61,022,596 58,997,845 Machinery & equipment 7,508,552 7,569,915 125,127,246 96,301,144 132,635,798 103,871,059 Infrastructure 11,215,804 10,941,375 - - 11,215,804 10,941,375 Construction in progress 10,991,978 4,576,894 29,888,367 76,528,222 40,880,345 81,105,116 Total 87,133,682 $ 80,217,153 $ 279,351,393 $ 272,208,948 $ 366,485,075 $ 352,426,101 $ Total City of Farmington's Capital Assets (net of depreciation) Capital expenditures for the electric utility system will average approximately $12,704,060 per year over the next five fiscal years. Some large projects included in the FY 2007 capital budget are the new College Substation ($2,270,000), the West Loop Switching Station ($2,300,000), new transmission transfer capacity lines ($2,900,000), and miscellaneous customer projects ($4,200,000). The City expects to fund these projects from electric customer-generated revenues. 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 $2,233,757 per year, totaling $11,168,785 for fiscal years 2007 through 2011. Anticipated mid-year FY 2007, the City of Farmington will have the first water rate increase since 1991. Included in this rate increase is a renewal and replacement fee, plus a water rights acquisition fee to generate revenues for capital projects and ensure adequate water sources for the future. The water fund will also have an additional $240,000 per year for five years for water projects coming from reduced payments in lieu of taxes to the general fund. Pursuant to the Wastewater System Master Plan, in FY 2004 the City placed in service a new wastewater treatment plant that included a new activated sludge treatment process train complete with a new secondary clarifier, rehabilitation of the existing primary clarifiers, expansion of the disinfection facility (chlorine contact chamber), reconstruction and expansion of sludge drying beds, repair of one of the digesters and provision of positive control of stormwater discharges from the facility. The expansion added approximately 870,000 gallons of treatment capacity to the existing 5.8 mgd plant. A $9,800,000 loan obtained in August 2000 from the New Mexico Environment Department (NMED) and increased to $13,000,000 in ---PAGE BREAK--- 13 September 2002 paid for this project. As of June 30, 2006, draws on the loan were $12,830,162 and interest on the draws during the construction period totaled $1,346,974. The repayment phase of the loan will begin in FY 2007, with the Final Promissory Note to the NMED that will equal draws to date plus construction interest, with the first payment due July 1, 2007. The note will bear interest at 3% per annum and will be amortized over twenty years and have equal annual installments. An additional expansion of the wastewater treatment plant in FY 2009 is estimated to cost $7 million. In FY 2007, the wastewater fund will also have a rate increase and a new renewal and replacement fee to generate additional revenues for capital projects. Additionally, $160,000 per year for five years will be available from reduced payments in lieu of taxes to the general fund for capital projects. Additional information on the City of Farmington’s capital assets can be found in Note C on pages 37-38 of this report. Long-term debt. At the end of the current fiscal year, the City of Farmington had total bonded debt outstanding of $49,650,000. Of this amount, $12,800,000 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 of Farmington’s debt is secured solely by specified revenue sources. FY 2006 FY 2005 FY 2006 FY 2005 FY 2006 FY 2005 Sales tax bonds 12,800,000 $ 13,860,000 $ - $ - $ 12,800,000 $ 13,860,000 $ Revenue bonds - - 36,850,000 41,620,000 36,850,000 41,620,000 Total 12,800,000 $ 13,860,000 $ 36,850,000 $ 41,620,000 $ 49,650,000 $ 55,480,000 $ City of Farmington's Outstanding Debt Sales Tax and Revenue Bonds Activities Activities Governmental Business-type Total Outstanding Debt $10 $20 $30 $40 $50 Governmental Business-type Millions FY 2005 FY 2006 ---PAGE BREAK--- 14 The City of Farmington’s total net debt decreased $5,830,000 or 10.5% during FY 2006. The wastewater utility system also has expended $12,830,162 of the $13,000,000 loan for its wastewater treatment plant expansion project and accrued $1,346,974 in construction interest as discussed above under the capital assets section. 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 2005 assessed valuation of $760,704,972, the City’s general obligation debt limit is $30,428,199. The City presently has no general obligation bonds outstanding. For more detailed information on the City’s debt, see pages 40-43 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 government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Administrative Services Director, 800 Municipal Drive, Farmington, NM 87401. ---PAGE BREAK--- Basic Financial Statements Basic Financial Statements ---PAGE BREAK--- Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents $ 21,688,852 $ 26,120,592 $ 47,809,444 Receivables (net, where applicable, of allowances for uncollectibles): 1,038,407 4,485,648 5,524,055 Accrued unbilled revenues - 4,972,090 4,972,090 Special assessments 14,869 - 14,869 Intergovernmental receivable 11,001,045 64,541 11,065,586 Inventories 301,474 3,828,708 4,130,182 Prepaids 206,358 200,104 406,462 Deferred charges - 345,886 345,886 Restricted assets Temporarily restricted: Cash and equivalents - 17,331,595 17,331,595 Capital assets (not being depreciated): Land and land rights 25,780,126 5,905,282 31,685,408 Capital assets (net of accumulated depreciation): Buildings and system 25,276,672 63,768,452 89,045,124 Improvements other than buildings 6,360,550 54,662,046 61,022,596 Machinery and equipment 7,508,552 125,127,246 132,635,798 Infrastructure 11,215,804 - 11,215,804 Construction in progress 10,991,978 29,888,367 40,880,345 Total assets 121,384,687 336,700,557 458,085,244 LIABILITIES Accounts payable and other current liabilities 1,773,036 4,732,495 6,505,531 Wages and benefits payable 664,108 216,045 880,153 Other accrued liabilities 29,373 1,080,760 1,110,133 Accrued claims liabilities 1,577,830 - 1,577,830 Retainage deposits payable 43,859 - 43,859 Unearned revenue - 1,174,983 1,174,983 Accrued interest payable 21,371 1,552,912 1,574,283 Customer deposits - 14,715,658 14,715,658 Non-current liabilities: Due within one year 1,189,342 5,444,692 6,634,034 Due in more than one year 12,967,620 47,251,638 60,219,258 Total liabilities 18,266,539 76,169,183 94,435,722 NET ASSETS Invested in capital assets, net of related debt 74,339,304 227,625,271 301,964,575 Restricted for: Debt service 206,358 2,615,937 2,822,295 Statutory reserve - - - Unrestricted 28,572,486 30,290,166 58,862,652 Total net assets $ 103,118,148 $ 260,531,374 $ 363,649,522 The notes to the financial statements are an integral part of this statement. CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets June 30, 2006 Primary Government 15 ---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 $ 21,649,221 $ 5,379,345 $ 1,721,631 $ - $ (14,548,245) $ - $ (14,548,245) Police 12,356,592 39,903 513,736 - (11,802,953) - (11,802,953) Fire 6,466,886 - 252,227 - (6,214,659) - (6,214,659) Parks, recreation, cultural affairs 11,105,380 703,731 143,793 - (10,257,856) - (10,257,856) Community development 8,511,853 101,605 297,920 - (8,112,328) - (8,112,328) Interest on long-term debt 588,521 - - - (588,521) - (588,521) Total governmental activities 60,678,453 6,224,584 2,929,307 - (51,524,562) - (51,524,562) Business-type activities: Electric 65,152,992 89,801,858 917,311 - - 25,566,177 25,566,177 Water 6,992,577 7,991,740 10,181 - - 1,009,344 1,009,344 Wastewater 4,690,385 5,071,951 - - - 381,566 381,566 Sanitation 3,815,728 3,889,876 - - - 74,148 74,148 Golf 1,217,011 1,121,313 - 5,500 - (90,198) (90,198) Airport 1,812,263 594,199 - 789,031 - (429,033) (429,033) Total business-type activities 83,680,956 108,470,937 927,492 794,531 - 26,512,004 26,512,004 Total government $ 144,359,409 $ 114,695,521 $ 3,856,799 $ 794,531 (51,524,562) 26,512,004 (25,012,558) General revenues: Property taxes 1,121,723 - 1,121,723 Sales taxes 49,274,220 - 49,274,220 Franchise taxes 1,594,098 - 1,594,098 Gasoline taxes 931,574 - 931,574 Cigarette taxes 42,316 - 42,316 Lodger's taxes 968,134 - 968,134 License / permits 951,280 - 951,280 Fines 1,133,053 - 1,133,053 Special Assesments 36,370 - 36,370 Miscellaneous 876,250 - 876,250 Unrestricted investment earnings 858,611 1,454,975 2,313,586 Transfers 1,925,566 (1,925,566) - Total general revenues and transfers 59,713,195 (470,591) 59,242,604 Change in net assets 8,188,633 26,041,413 34,230,046 Net assets - beginning 94,929,515 234,489,961 329,419,476 Net assets - ending $ 103,118,148 $ 260,531,374 $ 363,649,522 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, 2006 16 ---PAGE BREAK--- Other Total Debt Governmental Governmental General Service Funds Funds ASSETS: Pooled cash and investments $ 12,925,550 $ 33,153 $ 8,728,642 $ 21,687,345 Receivables (net, where applicable, of allowances for uncollectibles): 273,523 254,582 36,414 564,519 Special assessments 14,869 - - 14,869 Due from other funds 300,000 - - 300,000 Inventories, at cost 225,462 - 76,012 301,474 Prepaid items 206,358 - - 206,358 Intergovernmental 8,540,884 - 2,460,161 11,001,045 Total assets 22,486,646 287,735 11,301,229 34,075,610 LIABILITIES AND FUND BALANCES: Liabilities: Accounts payable 692,873 - 1,080,163 1,773,036 Wages and benefits payable 651,596 - 12,512 664,108 Other accrued expenditures 29,373 - - 29,373 Accrued claims payable 1,075,403 1,075,403 Retainage/deposits payable 43,859 - - 43,859 Deferred revenue 1,261,420 - 94,986 1,356,406 Unearned revenue - - - - Total liabilities 3,754,524 - 1,187,661 4,942,185 Fund Balances: Reserved for: Debt service - 287,735 - 287,735 Prepaids 206,358 - - 206,358 Subsequent year's statutory reserve 3,931,692 - - 3,931,692 Unreserved, reported in: Designated for debt service 2,000,000 2,000,000 General fund 12,594,072 - - 12,594,072 Special revenue funds - - 9,199,148 9,199,148 Capital project funds - - 914,420 914,420 Total fund balances 18,732,122 287,735 10,113,568 29,133,425 Total liabilities and fund balances $ 22,486,646 $ 287,735 $ 11,301,229 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. 87,133,682 Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. 1,356,406 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. (327,032) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (14,178,333) Net assets of governmental activities $ 103,118,148 CITY OF FARMINGTON, NEW MEXICO Balance Sheet Governmental Funds June 30, 2006 The notes to the financial statements are an integral part of this statement. 17 ---PAGE BREAK--- Other Total Debt Governmental Governmental General Service Funds Funds REVENUES: Taxes: Property $ 1,121,723 $ - $ - $ 1,121,723 Gross receipts 37,800,669 1,530,042 9,943,509 49,274,220 Franchise 1,594,098 - - 1,594,098 Gasoline - - 931,574 931,574 Cigarette - - 42,316 42,316 Lodger's - - 968,134 968,134 Licenses and permits 848,354 - 102,926 951,280 Intergovernmental 1,466,451 - 1,462,856 2,929,307 Charges for services 1,774,917 - 65,419 1,840,336 Fines 984,510 - 148,543 1,133,053 Special assessments 36,370 - - 36,370 Investment earnings 493,552 22,381 342,678 858,611 Miscellaneous 414,381 - 461,869 876,250 Total revenues 46,535,025 1,552,423 14,469,824 62,557,272 EXPENDITURES: Current: General government 18,478,746 - - 18,478,746 Police 11,980,875 - 625,826 12,606,701 Fire 5,707,617 - 164,733 5,872,350 Parks, recreation and cultural affairs 6,838,867 - 4,289,745 11,128,612 Community development 1,819,675 - 5,362,393 7,182,068 Debt service: Principal - 1,060,000 - 1,060,000 Interest - 588,521 - 588,521 Capital outlay: Highways and streets 460,101 - 2,471,260 2,931,361 Public safety - - 3,913,252 3,913,252 Total expenditures 45,285,881 1,648,521 16,827,209 63,761,611 Excess (deficiency) of revenues over (under) expenditures 1,249,144 (96,098) (2,357,385) (1,204,339) OTHER FINANCING SOURCES (USES): Transfers in 2,121,604 100,000 778,500 3,000,104 Transfers out (1,101,658) - (722,879) (1,824,537) Total other financing sources (uses) 1,019,946 100,000 55,621 1,175,567 Net change in fund balances 2,269,090 3,902 (2,301,764) (28,772) Fund balances-beginning 16,463,032 283,833 12,415,332 29,162,197 Fund balances- ending $ 18,732,122 $ 287,735 $ 10,113,568 $ 29,133,425 CITY OF FARMINGTON, NEW MEXICO Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For theYear Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 18 ---PAGE BREAK--- Amounts reported for governmental activities in the statement of activities (page 16) are different because: Net change in fund balances-total governmental funds (page 18) $ (28,772) 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. 6,916,529 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 420,478 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. 1,057,786 The net revenue/expense of certain activities of internal service funds is reported with governmental activities. (177,388) Change in net assets of governmental activities (page 16) $ 8,188,633 For the Year Ended June 30, 2006 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. 19 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Taxes: Property taxes $ 1,046,877 $ 1,046,877 $ 1,121,723 $ 74,846 Gross receipts tax 32,880,340 37,213,455 37,800,669 587,214 Franchise taxes 635,000 1,510,000 1,594,098 84,098 Licenses and permits 713,320 713,320 848,354 135,034 Intergovernmental 1,218,841 1,713,841 1,466,451 (247,390) Charges for services 4,663,779 1,573,045 1,774,917 201,872 Fines 1,175,500 1,175,500 984,510 (190,990) Special assessments 44,100 44,100 36,370 (7,730) Investment earnings 266,634 391,634 493,552 101,918 Miscellaneous 360,375 360,375 414,381 54,006 Total revenues 43,004,766 45,742,147 46,535,025 792,878 EXPENDITURES: Current: General government: Council 378,521 244,613 196,834 47,779 Municipal court 1,431,611 1,425,311 1,349,434 75,877 Administrative 8,703,289 9,158,723 9,052,630 106,093 Legal 1,014,511 916,724 1,205,457 (288,733) Administrative services 1,927,857 1,088,578 971,946 116,632 General services 4,921,373 6,071,755 5,702,445 369,310 Total general government 18,377,162 18,905,704 18,478,746 426,958 Public safety: Police 11,534,102 12,497,410 11,980,875 516,535 Fire 5,968,730 5,939,054 5,707,617 231,437 Total public safety 17,502,832 18,436,464 17,688,492 747,972 Community development: Streets 496,236 502,014 460,101 41,913 Other-unclassified 3,308,443 2,421,910 1,819,675 602,235 Total community development 3,804,679 2,923,924 2,279,776 644,148 Parks, recreation and cultural affairs 6,953,011 7,020,867 6,838,867 182,000 Total expenditures 46,637,684 47,286,959 45,285,881 2,001,078 Excess of revenues over expenditures (3,632,918) (1,544,812) 1,249,144 2,793,956 OTHER FINANCING SOURCES (USES): Transfers in 2,190,884 2,190,884 2,121,604 (69,280) Transfers out (154,858) (1,104,858) (1,101,658) 3,200 Total other financing sources and uses 2,036,026 1,086,026 1,019,946 (66,080) Net change in fund balances (1,596,892) (458,786) 2,269,090 2,727,876 Fund balances-beginning (restated) 16,463,032 16,463,032 16,463,032 - Fund balances-ending $ 14,866,140 $ 16,004,246 $ 18,732,122 $ 2,727,876 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO General Fund Statement of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 20 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service ASSETS Utility Utility Utility Sanitation Courses Airport Totals Fund Current assets: Pooled cash and investments $ 17,725,654 $ 1,469,073 $ 5,922,832 $ 409,463 $ 302,510 $ 291,060 $ 26,120,592 $ 1,507 Accounts receivable (net of allowance for doubtful accounts) 3,234,613 614,419 432,856 198,979 4,634 147 4,485,648 473,888 Accrued unbilled revenues 4,333,270 349,600 141,762 147,458 - - 4,972,090 - Intergovernmental receivable - - - - - 64,541 64,541 - Inventories 3,611,978 189,685 27,045 - - - 3,828,708 - Prepaid items 127,577 21,223 26,160 - 6,179 18,965 200,104 - Restricted cash, cash equivalents and investments 16,598,069 659,295 74,231 - - - 17,331,595 - Total current assets 45,631,161 3,303,295 6,624,886 755,900 313,323 374,713 57,003,278 475,395 Noncurrent assets: Deferred charges 276,423 59,648 9,815 - - - 345,886 - Capital assets: Land and land rights 3,543,906 1,614,275 479,388 23,341 100,000 784,968 6,545,878 - Building and system 55,440,953 13,990,025 22,376,821 80,640 781,367 1,962,488 94,632,294 - Improvements other than buildings 42,956,875 27,799,780 10,774,194 14,839 2,473,353 17,066,159 101,085,200 - Machinery and equipment 209,285,182 6,923,003 2,051,207 101,099 1,023,026 1,247,845 220,631,362 - Construction in progress 28,660,632 110,001 146,137 - - 971,597 29,888,367 - Less accumulated depreciation (120,444,725) (24,329,549) (11,595,450) (156,645) (1,563,732) (15,341,607) (173,431,708) - Total capital assets (net of accumulated depreciation) 219,442,823 26,107,535 24,232,297 63,274 2,814,014 6,691,450 279,351,393 - Total noncurrent assets 219,719,246 26,167,183 24,242,112 63,274 2,814,014 6,691,450 279,697,279 - Total assets $ 265,350,407 $ 29,470,478 $ 30,866,998 $ 819,174 $ 3,127,337 $ 7,066,163 $ 336,700,557 $ 475,395 Business-type Activities-Enterprise Funds CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets Proprietary Funds June 30, 2006 21 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund LIABILITIES Current liabilities: Current liabilites payable from unrestricted assets: Accounts payable $ 4,109,482 $ 264,327 $ 108,268 $ 438,759 $ 27,499 $ 205 $ 4,948,540 $ - Compensated absences 399,960 5,298 5,298 - 13,777 15,953 440,286 - Due to other funds - - - - - - - 300,000 Other accrued expenses 967,308 84,279 3,778 - 18,227 7,168 1,080,760 - Accrued claims payable - - - - - - - 502,427 Deferred revenue 1,172,947 2,036 - - - - 1,174,983 - Capital lease payable - current - - - - 99,406 - 99,406 - Accrued interest payable 164,580 35,514 1,352,818 - - - 1,552,912 - Revenue bonds payable 3,919,941 845,872 139,187 - - - 4,905,000 - Total current liabilities payable from unrestricted assets 10,734,218 1,237,326 1,609,349 438,759 158,909 23,326 14,201,887 802,427 . Current liabilities payable from restricted assets 14,507,484 208,174 - - - - 14,715,658 - Total current liabilities 25,241,702 1,445,500 1,609,349 438,759 158,909 23,326 28,917,545 802,427 Noncurrent liabilities: (net of unamortized discounts) Revenue bonds payable (net of unamortized discounts and deferred amount on refunding) 26,800,127 5,783,114 951,605 - - - 33,534,846 - NMED loan - - 12,830,162 - - - 12,830,162 - Compensated absences 463,864 15,746 15,746 - 31,541 3,025 529,922 - Capital lease payable - - - - 356,708 - 356,708 - Total noncurrent liabilities 27,263,991 5,798,860 13,797,513 - 388,249 3,025 47,251,638 - Total liabilities 52,505,693 7,244,360 15,406,862 438,759 547,158 26,351 76,169,183 802,427 NET ASSETS Invested in capital assets, net of related debt 188,722,755 19,478,549 10,311,343 63,274 2,357,900 6,691,450 227,625,271 - Restricted for debt service 2,090,585 451,121 74,231 - - - 2,615,937 - Unrestricted 22,031,374 2,296,448 5,074,562 317,141 222,279 348,362 30,290,166 (327,032) Total net assets $ 212,844,714 $ 22,226,118 $ 15,460,136 $ 380,415 $ 2,580,179 $ 7,039,812 $ 260,531,374 $ (327,032) Business-type Activities-Enterprise Funds CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets Proprietary Funds June 30, 2006 22 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund Operating revenues: Charges for sales and services: Electric $ 89,356,434 $ - $ - $ - $ - $ - $ 89,356,434 $ - Water - 7,960,059 - - - - 7,960,059 - Wastewater - - 5,065,458 - - - 5,065,458 - Sanitation - - - 3,822,965 - - 3,822,965 - Golf course - - - - 1,118,809 - 1,118,809 - Airport - - - - - 594,199 594,199 - Health - - - - - - - 4,384,248 Other revenues 445,424 31,681 6,493 66,911 2,504 - 553,013 - Total operating revenues 89,801,858 7,991,740 5,071,951 3,889,876 1,121,313 594,199 108,470,937 4,384,248 Operating expenses: Salaries and fringe benefits 8,167,772 413,759 187,461 - 615,122 228,927 9,613,041 - Purchased power, fuel and chemicals 40,895,737 - - - - - 40,895,737 - Other operating expenses 7,590,489 4,692,905 2,926,530 3,808,279 385,528 408,174 19,811,905 4,561,636 Depreciation and amortization 7,222,088 1,608,687 1,146,288 7,449 216,361 1,175,162 11,376,035 - Total operating expenses 63,876,086 6,715,351 4,260,279 3,815,728 1,217,011 1,812,263 81,696,718 4,561,636 Operating income (loss) 25,925,772 1,276,389 811,672 74,148 (95,698) (1,218,064) 26,774,219 (177,388) Nonoperating revenues (expenses): Investment earnings 1,118,186 105,335 197,755 12,563 9,015 12,121 1,454,975 - Interest expense (1,420,637) (308,241) (435,209) - - - (2,164,087) - Revenue from operating grants - - - - - 789,031 789,031 - Other fiscal charges 143,731 31,015 5,103 - - - 179,849 - Total nonoperating revenues (expenses) (158,720) (171,891) (232,351) 12,563 9,015 801,152 259,768 - Income (loss) before operating transfers 25,767,052 1,104,498 579,321 86,711 (86,683) (416,912) 27,033,987 (177,388) Capital contributions 917,311 10,181 - - 5,500 - 932,992 - Transfers in - - - - - 121,658 121,658 750,000 Transfers out (1,460,776) (398,489) (187,959) - - - (2,047,224) - Change in net assets 25,223,587 716,190 391,362 86,711 (81,183) (295,254) 26,041,413 572,612 Total net assets-beginning 187,621,127 21,509,928 15,068,774 293,704 2,661,362 7,335,066 234,489,961 (899,644) Total net assets-ending $ 212,844,714 $ 22,226,118 $ 15,460,136 $ 380,415 $ 2,580,179 $ 7,039,812 $ 260,531,374 $ (327,032) 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, 2006 23 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/users $ 87,763,480 $ 8,068,718 $ 5,101,944 $ 3,874,314 $ 1,121,666 $ 646,700 $ 106,576,822 $ 3,910,360 Payments to suppliers (50,395,444) (5,297,654) (4,291,379) (3,779,964) (488,075) (436,462) (64,688,978) (4,865,016) Payments to employees (5,009,443) (385,876) (185,178) - (635,993) (237,809) (6,454,299) - Net cash provided by operating activities 32,358,593 2,385,188 625,387 94,350 (2,402) (27,571) 35,433,545 (954,656) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds (1,460,776) (398,489) (187,959) - - - (2,047,224) 206,163 Transfer from other funds - - - - - 121,658 121,658 750,000 Advances from other funds - - - - - - - - Operating grants - - - - - 789,031 789,031 - Other fiscal charges 143,731 31,015 5,103 - - - 179,849 - Net cash provided (used) by capital and related financing activities (1,317,045) (367,474) (182,856) - - 910,689 (956,686) 956,163 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt - - - - - - - - Capital contributions 917,311 10,181 - - 5,500 - 932,992 - Purchases of capital assets - - - - (5,500) (939,940) (945,440) - Acquisition and construction of capital assets (16,356,298) (764,458) (452,284) - - - (17,573,040) - Restricted assets (3,377,903) (38,490) 1,345,396 - - - (2,070,997) - Principal paid on capital debt (632,140) (826,825) (140,808) - - - (1,599,773) - Interest paid on capital debt (1,420,637) (308,241) (435,209) - - - (2,164,087) - Net cash provided (used) by capital and related financing activities (20,869,667) (1,927,833) 317,095 - - (939,940) (23,420,345) - CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received 1,118,186 105,335 197,755 12,563 9,015 12,121 1,454,975 - Net increase in cash and cash equivalents 11,290,067 195,216 957,381 106,913 6,613 (44,701) 12,511,489 1,507 Cash and cash equivalents, July 1 23,033,656 1,933,152 5,039,682 302,550 295,897 335,761 30,940,698 - Cash and cash equivalents, June 30, 2006 $ 34,323,723 $ 2,128,368 $ 5,997,063 $ 409,463 $ 302,510 $ 291,060 $ 43,452,187 $ 1,507 The notes to the financial statements are an integral part of this statement. CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2006 Business-type Activities Enterprise Funds 24 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) $ 25,925,772 $ 1,276,389 $ 811,672 $ 74,148 $ (95,698) $ (1,218,064) $ 26,774,219 $ (177,388) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 7,222,088 1,608,687 1,146,288 7,449 216,361 1,175,162 11,376,035 - (Increase) decrease in accounts receivable 498,845 59,402 26,302 5,405 353 52,501 642,808 (473,888) (Increase) in accrued unbilled revenues 8,224 9,250 2,272 (20,967) - - (1,221) - (Increase) decrease in inventories (878,052) (189,685) (27,045) - - - (1,094,782) - (Increase) in prepaid items (24,828) (4,161) 1,791 - (3,697) (7,653) (38,548) - (Increase) in deferred revenue (2,545,447) 8,326 1,419 - - - (2,535,702) - (Increase) in other accrued expenses (163,605) 1,415 2,283 - (20,871) (8,882) (189,660) - (Decrease) in due to other funds - - - - - - - - (Increase) in accrued claims payable - - - - - - - (215,755) (Increase) in customer deposits 3,321,934 26,468 - - - - 3,348,402 - Increase (decrease) in accounts payable (1,006,338) (410,903) (1,339,595) 28,315 (6,011) (20,635) (2,755,167) (87,625) Increase (decrease) in capital lease - - - - (92,839) - (92,839) - Total adjustments 6,432,821 1,108,799 (186,285) 20,202 93,296 1,190,493 8,659,326 (777,268) Net cash provided by operating activities $ 32,358,593 $ 2,385,188 $ 625,387 $ 94,350 $ (2,402) $ (27,571) $ 35,433,545 $ (954,656) The notes to the financial statements are an integral part of this statement. Business-type Activities Enterprise Funds 25 ---PAGE BREAK--- 26 ---PAGE BREAK--- Notes to the Financial Statements Notes to the Financial Statements ---PAGE BREAK--- 27 CITY OF FARMINGTON, NEW MEXICO NOTES TO FINANCIAL STATEMENTS June 30, 2006 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 approximately 43,200 living within an area of 31 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, 2006. B. Government-wide and fund financial statements The government-wide financial statements the statement of net assets and the statement of changes in net assets) 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. ---PAGE BREAK--- 28 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 debt service fund accounts for the servicing of general long term debt not being financed by proprietary funds. 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. The airport fund accounts for the activities of the City’s airport operations. 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. ---PAGE BREAK--- 29 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 government’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. State statutes authorize the government to invest in obligations of the U.S. Treasury, 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.” 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. ---PAGE BREAK--- 30 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. 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. 5. 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 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. ---PAGE BREAK--- 31 Property, plant, and equipment of the primary government are depreciated using the straight line method over the following estimated useful lives: Buildings and structures 7 - 45 years Improvements other than buildings 5 - 75 years Infrastructure 3 - 50 years Personal property 5 - 45 years 6. 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. 7. 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. 8. Fund equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation, or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. E. Reserved fund balances The New Mexico Department of Finance and Administration (DFA) requires that 1/12th of the general fund budgeted expenditures ($3,931,692) be reserved as subsequent year expenditures to maintain an adequate cash flow until the next significant property tax collection. ---PAGE BREAK--- 32 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, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of this $14,178,333 difference are as follows: Bonds payable $ 12,800,000 Bond premium (to be amortized over the life of the debt) 175,148 Issuance costs (to be amortized over the life of the debt) (180,770) Accrued interest payable 21,371 Compensated absences payable 1,362,584 Net adjustment to reduce fund balance-total governmental funds to arrive at net assets-governmental activities $ 14,178,333 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 $6,916,529 are as follows: Capital outlay $ 13,065,589 Depreciation (6,031,607) Loss on disposals and other (117,453) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 6,916,529 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 $1,057,786 are as follows: Principal repayments $ 1,060,000 Amortization of bond premium 21,894 Amortization of issuance costs (22,596) Accrued interest 4,706 Capital leases 98,005 Compensated absences (104,223) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 1,057,786 ---PAGE BREAK--- 33 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 $(177,388) difference are as follows: Internal service charges for services $ 4,384,248 Internal service operating expenses (4,561,636) Net adjustment to decrease net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ (177,388) III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information Annual budgets are adopted for all funds. All budgets are consistent with generally accepted accounting principles (GAAP). 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 governing council. 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. ---PAGE BREAK--- 34 The City had the following encumbrances outstanding at June 30, 2006: B. Excess of expenditures over appropriations For the year ended June 30, 2006, the sanitation fund shows a negative budget variance in expenses of $12,241. This was due to booking accrued unbilled revenue received in July and the related expense which was booked due to the sanitation contract which states that 94% of the revenue will be paid to the contractor. This accrual entry was made after the final budget revision was approved. The airport fund shows a negative budget variance in expenses of $19,873. This fund received additional revenues during the year and the revenue increase was included in the final budget revision but the corresponding expenses were omitted. C. Deficit Fund Equity As of June 30, 2006, the health insurance internal service fund had a deficit net asset balance of $(327,032). This deficit is equal to an accrued claims payable amount of $502,427 and an interfund loan of $300,000, less cash and receivables totaling $475,395. Continued high claims contributed to this deficit. The negative net asset balance improved by $572,612 over FY 2005. Beginning in July of FY 2007, a health insurance premium increase will be implemented in an effort to return this fund to solvency. This premium increase will be paid for by the City. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and investments As of June 30, 2006, the City had the following investments: Investment Type Fair Value Weighted Average Maturity (Years) Repurchase Agreements $ 4,313,851 0.08 Certificates of Deposit 58,071,945 1.59 State Treasurer’s Pool 2,824 0.08 Total Fair Value $ 62,388,620 Portfolio weighted average maturity 1.48 Interest rate risk. In accordance with its investment policy, the City manages its exposure to interest rate risk by limiting the duration of investments to three years. General Fund $ 882,229 Gross Receipts Tax Streets Fund 443,808 Gross Receipts Tax Parks & Public Works Fund 714,739 Library Gifts and Grants Fund 159,249 Museum Gifts and Grants Fund 132,099 Lodgers Tax Fund 642 State Police Protection Fund 5,251 Region II Narcotics Grant Fund 1,423 Community Development Grant Projects 629,487 Gross Receipts Tax Bond Proceeds Projects Fund 21 Fire GRT Bond Projects Fund 691,725 Electric Utility Fund 2,484,990 Water Utility Fund 559,605 Wastewater Utility Fund 40,173 Airport Fund 242,169 Total Encumbrances $ 6,987,610 ---PAGE BREAK--- 35 Credit risk. 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. 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. State statute requires that the bank deposits be 50% collateralized and repurchase agreements be 102% collateralized. As of June 30, 2006, the City was in compliance with state statute. The City’s carrying amount of deposits as of June 30, 2006 was $65,141,039 and the bank balance was $66,176,177. Of the bank balance, $400,000 was covered by federal depository insurance, $43,765,142 was collateralized with securities held by the pledging financial institution’s trust department or agent in the City’s name, and $22,011,035 was uncollateralized, and subject to custodial credit risk. 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. ---PAGE BREAK--- 36 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, 2006. 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. B. Receivables Receivables as of June 30, 2006 are as follows: Intergovernmental receivables are made up of the following amounts in the general and special revenue funds: gross receipts taxes $8,416,916, property taxes $1,261,420, federal and state grants $ 811,502, franchise taxes $150,667, lodger’s taxes $188,686 and gasoline taxes $171,854. 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 $ 166,281 Uncollectibles related to water sales 7,951 Uncollectibles related to wastewater charges 5,845 Uncollectibles related to sanitation charges 3,729 Total uncollectibles of the current fiscal year $ 183,806 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, the various components of deferred revenue reported in the governmental funds were as follows: Unavailable Property Tax $ 1,261,420 Delinquent Gas Taxes 46,579 Lodger’s Tax 48,407 Total deferred revenue for governmental funds $ 1,356,406 General Special Revenue Debt Service Enterprise Total Receivables: Accounts Receivable $ 273,523 $ 36,414 $ 254,582 $ 4,984,871 $ 5,549,390 Unbilled Revenue - - - 4,972,090 4,972,090 Special Assessments 14,869 - - - 14,869 Due from other funds 300,000 - - - 300,000 Intergovernmental 8,540,884 2,460,161 - 64,541 11,065,586 Gross Receivables 9,129,276 2,496,575 254,582 10,021,502 21,901,935 Less: Allowance for Uncollectibles - - - (499,223) (499,223) Net Total Receivables: $ 9,129,276 $ 2,496,575 $ 254,582 $ 9,522,279 $ 21,402,712 ---PAGE BREAK--- 37 C. Capital assets Capital asset activity for the year ended June 30, 2006 was as follows: Balance Balance Governmental activities July 1, 2005 Transfers Additions Deletions June 30, 2006 Non-Depreciable Assets: Land 25,436,012 $ - $ 344,114 $ - $ 25,780,126 $ Construction in progress 4,576,894 - 7,059,081 (643,997) 10,991,978 Total Non-Depreciable Assets 30,012,906 - 7,403,195 (643,997) 36,772,104 Depreciable Assets: Buildings 45,491,834 1,740 1,885,422 (13,827) 47,365,169 Improvements other than buildings 9,441,573 (1,740) 510,917 (1,800) 9,948,950 Equipment 21,028,304 - 1,957,245 (687,328) 22,298,221 Infrastructure 52,877,375 - 1,943,452 (19,655) 54,801,172 Total Depreciable Assets 128,839,086 - 6,297,036 (722,610) 134,413,512 Total Governmental Assets 158,851,992 - 13,700,231 (1,366,607) 171,185,616 Accumulated Depreciation: Buildings (20,362,135) (1,066) (1,733,572) 8,276 (22,088,497) Improvements other than buildings (2,878,315) 1,066 (712,951) 1,800 (3,588,400) Equipment (13,458,390) - (1,916,060) 584,781 (14,789,669) Infrastructure (41,935,999) - (1,669,024) 19,655 (43,585,368) Total Accumulated Depreciation (78,634,839) - (6,031,607) 614,512 (84,051,934) Net Governmental Assets 80,217,153 $ - $ 7,668,624 $ (752,095) $ 87,133,682 $ Balance Balance Business-type activities July 1, 2005 Transfers Additions Deletions June 30, 2006 Non-Depreciable Assets: Land 2,752,930 $ - $ 2,034,057 $ - $ 4,786,987 $ Construction in progress 76,528,222 - 18,739,610 (65,379,465) 29,888,367 Total Non-Depreciable Assets 79,281,152 - 20,773,667 (65,379,465) 34,675,354 Depreciable Assets: Land Rights 1,633,943 - 124,948 - 1,758,891 Buildings 71,936,464 - 22,695,830 - 94,632,294 Improvements other than buildings 95,521,293 (676) 5,612,605 (48,022) 101,085,200 Equipment 186,610,686 676 34,613,046 (593,046) 220,631,362 Total Depreciable Assets 355,702,386 - 63,046,429 (641,068) 418,107,747 Total Business-type Assets 434,983,538 - 83,820,096 (66,020,533) 452,783,101 Accumulated Depreciation: Land Rights (595,733) - (44,863) - (640,596) Buildings (28,782,609) - (2,081,233) - (30,863,842) Improvements other than buildings (43,086,706) 6,178 (3,585,176) 242,550 (46,423,154) Equipment (90,309,542) (6,178) (5,664,763) 476,367 (95,504,116) Total Accumulated Depreciation (162,774,590) - (11,376,035) 718,917 (173,431,708) Net Business-type Assets 272,208,948 $ - $ 72,444,061 $ (65,301,616) $ 279,351,393 $ ---PAGE BREAK--- 38 Enterprise Assets – by fund Electric Water Wastewater Sanitation Golf Airport Land and land Rights 3,543,906 $ 1,614,275 $ 479,388 $ 23,341 $ 100,000 $ 784,968 $ Buildings and Structures 55,440,953 13,990,025 22,376,821 80,640 781,367 1,962,488 Improvements other Than buildings 42,956,875 27,799,780 10,774,194 14,839 2,473,353 17,066,159 Equipment 209,285,182 6,923,003 2,051,207 101,099 1,023,026 1,247,845 Total 311,226,916 50,327,083 35,681,610 219,919 4,377,746 21,061,460 Less accumulated Depreciation (120,444,725) (24,329,549) (11,595,450) (156,645) (1,563,732) (15,341,607) Work in progess 28,660,632 110,001 146,137 - - 971,597 Net Assets 219,442,823 $ 26,107,535 $ 24,232,297 $ 63,274 $ 2,814,014 $ 6,691,450 $ 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: Construction commitments The City has an active construction project as of June 30, 2006. The project is the building of a new fire station. At year end, the City’s commitment with contractors was as follows: Project Expended to-date Remaining Commitment Fire Station #6 $ 2,042,099 $ 129,243 Governmental activities: General government $ 610,767 Police 683,428 Fire 323,033 Parks, recreation, cultural affairs 2,473,627 Community development 541,922 Highways and streets 1,398,830 Total depreciation expense - governmental activities $ 6,031,607 Business-type activities: Electric $ 7,222,088 Water 1,608,687 Wastewater 1,146,288 Sanitation 7,449 Golf 216,361 Airport 1,175,162 Total depreciation expense - business-type activities $ 11,376,035 ---PAGE BREAK--- 39 D. Interfund receivables, payables and transfers The composition of interfund balances as of June 30, 2006 is as follows: Interfund Payables Due From Due To General fund - operating loan $ - $ 300,000 Health fund – operating loan 300,000 - Total Interfund Payables $ 300,000 $ 300,000 Transfers Governmental Funds In Out General fund – operating transfer $ - $ 901,658 General fund – operating transfer (pilt) 2,047,224 - General fund – matching funds for fire station - 200,000 General fund – matching funds for pd grant 380 - General fund – loan repayment 74.000 - GRT streets fund – operating transfer - 511,500 GRT parks and public works – operating transfer - 74,000 Region II fund – matching funds for grant 30,000 - State fire grant fund – matching funds for fire station - 137,000 Law enforcement block grant fund – matching funds for grant - 380 Community development grant projects fund – operating transfer 511,500 - Fire gross receipts bond tax projects fund – matching funds for fire station 237,000 - Debt service fund – operating transfer 100,000 - Health Fund transfer – operating transfer 750,000 - Total governmental funds transfers 3,750,104 $ 1,824,538 Net governmental funds transfers $ 1,925,566 Business-type funds Electric utility fund – operating transfer (pilt) $ - $ 1,460,776 Water utility fund – operating transfer (pilt) - 398,489 Wastewater utility fund – operating transfer (pilt) - 187,959 Airport fund – operating transfer 121,658 - Total business-type funds transfers $ 121,658 2,047,224 Net business-type transfers $ 1,925,566 E. Leases Capital Leases The City has entered into two lease agreements for golf carts and turf equipment for the golf courses. The golf carts are valued at $198,305 and the turf equipment is valued at $ 381,092. Both of these agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the inception date. ---PAGE BREAK--- 40 The assets acquired through this capital lease are as follows: Business Activities Asset: Machinery and equipment $ 579,397 Less: accumulated depreciation (173,819) Total $ 405,578 The future minimum lease obligation and the net present value of those minimum lease payments as of June 30, 2006 were as follows: Year Ending Golf Carts Golf Course Turf Equipment June 30, 2007 $ 39,499 $ 88,032 June 30, 2008 39,499 88,032 June 30, 2009 114,980 146,626 Total minimum lease payments 193,978 322,690 Less: amount representing interest (24,938) (35,616) Present value of minimum lease payments $ 169,040 $ 287,074 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, 2006 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 FY 2002, 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 dollars for the purpose of completing construction of a new library and several major street projects. ---PAGE BREAK--- 41 In FY 2005, 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. Revenue bonds outstanding as of June 30, 2006 are as follows: Interest Rates General Govt Electric Water Wastewater Total Governmental Activities Sales Tax Bonds 2001 4.00 - 5.00% $ 7,365,000 $ - $ - $ - $ 7,365,000 Sales Tax Bonds 2005 3.25 - 4.00% 5,435,000 - - - 5,435,000 Business Activities Serial Bonds 2002 2.25 - 5.00% - 29,449,507 6,354,815 1,045,678 36,850,000 Total Amount $12,800,000 $29,449,507 $ 6,354,815 $ 1,045,678 $49,650,000 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 Principal Interest Principal Interest Principal Interest Principal Interest 2007 $ 1,130,000 $ 512,904 $ 3,919,941 $ 1,316,642 $ 845,872 $ 284,113 $ 139,187 $ 46,750 2008 1,180,000 470,217 4,103,751 1,135,868 885,535 245,105 145,714 40,332 2009 1,225,000 425,643 4,267,581 971,718 920,888 209,684 151,531 34,503 2010 1,270,000 379,342 4,415,428 822,352 952,791 177,453 156,781 29,200 2011 1,315,000 330,393 4,639,197 601,581 1,001,077 129,813 164,726 21,361 2012 1,370,000 279,692 4,870,956 369,622 1,051,088 79,759 172,956 13,124 2013 1,420,000 225,680 3,232,653 126,073 697,564 27,205 114,783 4,477 2014 1,485,000 158,780 - - - - - - 2015 445,000 96,200 - - - - - - 2016 460,000 78,400 - - - - - - 2017 480,000 60,000 - - - - - - 2018 500,000 40,800 - - - - - - 2019 520,000 20,800 - - - - - - Total $ 12,800,000 $ 3,078,851 $ 29,449,507 $ 5,343,856 $ 6,354,815 $ 1,153,132 $ 1,045,678 $189,747 General Govt. Electric Water Wastewater ---PAGE BREAK--- 42 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, 2006, the City was in compliance with all significant limitations and restrictions. New Mexico Environment Department Loan. In August 2000, the City entered into a loan agreement with the New Mexico Environment Department for a $9.8 million, 3% loan for expansion of the wastewater treatment plant. On September 9, 2002 the loan amount was increased to $13 million. As of June 30, 2006, the City has received $12,830,162 in draw down payments and accrued $1,346,974 in construction interest. Repayment of the loan, which will be for payments plus construction interest, will begin on July 1, 2007, one year after completion of the expansion. 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, 2006 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, 2006, the following outstanding bonds are considered defeased (amounts in thousands): Series 1983 A Series 1983 B Series 1992 Original issue amount $ 109,100 $ 37,950 $ 49,205 Retired prior to fiscal year (46,715) (28,510) (130) Retired during the year ended 2006 (62,385) (3,555) (8,795) Balance of principal remaining $ - $ 5,885 $ 40,280 Interest payments made during year ended June 30, 2006 $ - $ 932 $ 2,821 ---PAGE BREAK--- 43 Changes in Long-term Liabilities During the year ended June 30, 2006, the following changes occurred in long-term liabilities: G. Restricted Assets The following is a summary of restricted assets as of June 30, 2006: Enterprise Funds Electric Water Wastewater Total Revenue bond current debt service $ 492,240 $ 106,219 $ 17,478 $ 615,937 Revenue bond renewal, replacement and contingency account 1,598,345 344,902 56,753 2,000,000 Customer deposits/overpayments 14,507,484 208,174 - 14,715,658 Total restricted assets $ 16,598,069 $ 659,295 $ 74,231 $ 17,331,595 Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: 2001 Sales tax revenue $ 8,135,000 $ - $ (770,000) $ 7,365,000 $ 795,000 2005 Sales tax revenue 5,725,000 - (290,000) 5,435,000 335,000 Issuance costs (203,366) - 22,596 (180,770) - Premium on bonds 197,042 - (21,894) 175,148 - Total bonds payable 13,853,676 - (1,059,298) 12,794,378 1,130,000 Capital leases 98,005 - (98,005) - - Compensated absences 1,255,482 1,298,976 (1,191,874) 1,362,584 59,342 Total long-term liabilities Governmental activities $ 15,207,163 $ 1,298,976 $ (2,349,177) $ 14,156,962 $ 1,189,342 Business-type activities: Bonds payable: Series 2002A $ 41,620,000 $ - $ (4,770,000) $ 36,850,000 $ 4,905,000 NMED loan 12,830,162 - - 12,830,162 - Premium on bonds 1,819,703 - (229,857) 1,589,846 - Total bonds payable 56,269,865 - (4,999,857) 51,270,008 4,905,000 Capital leases 548,953 - (92,839) 456,114 99,406 Compensated absences 890,784 519,710 (440,286) 970,208 440,286 Total long-term liabilities Business-type activities $ 57,709,602 $ 519,710 $ (5,532,982) $ 52,696,330 $ 5,444,692 ---PAGE BREAK--- 44 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. Effective November 11, 2002, the self insured retention for excess liability coverage was increased from $250,000 to $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 three years are as follows: June 30, 2004 June 30, 2005 June 30, 2006 Health Risk Mgmt. Health Risk Mgmt. Health Risk Mgmt. Unpaid claims, beginning of fiscal year $ 841,694 $ 1,756,856 $ 1,258,436 $ 1,486,966 $ 718,182 $ 1,508,352 Incurred claims and changes in estimate 3,927,951 876,724 2,313,954 431,857 2,974,866 398,126 Claim payments (3,511,209) (1,146,614) (2,854,208) (410,471) (3,190,621) (831,074) Unpaid claims, end of fiscal year $ 1,258,436 $ 1,486,966 $ 718,182 $ 1,508,352 $ 502,427 $ 1,075,404 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. 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 FY 2006, the City contributed $62,993 to the Authority. Complete financial statements for the Consolidated Communications Authority can be obtained from San Juan County, New Mexico. ---PAGE BREAK--- 45 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 FY 2006 the City did not make any financial contribution to the Commission. Complete financial statements may be obtained by contacting the San Juan Water Commission. Joint Powers Agreement for the San Juan County Criminal Justice Training Authority. The City joined with the cities of Aztec and Bloomfield, the County of San Juan, the State of New Mexico Department of Public Safety, and the San Juan Community College to create a separate entity to provide law enforcement training on a regional basis. The initial facilities included classrooms at San Juan College, a shooting range, and a driving track. The City is obligated to provide 44% of the operating budget of the authority. During FY 2006 the City contributed $35,150 as its share of the operating costs. San Juan College is the fiscal agent for the Authority and manages and maintains all accounts on behalf of the Authority. Complete financial statements may be obtained by contacting San Juan College. D. Other Post Employment Benefits The City allows retirees to maintain their access to the City health insurance plan by agreeing to assume the responsibility for the full cost of the premium. There are currently 108 retirees that participate in this arrangement out of a total group membership of 608. While there is no premium cost to the City, the cost of retiree claims constitutes a portion of total health expenditures in the health insurance fund. E. Employee Retirement Systems and Plans Public Employees Retirement Association (PERA) Plan Description. The City's full time employees participate in a defined benefit contributory retirement plan through the Public Employees' Retirement Association (PERA) of the State of New Mexico authorized under the Public Employees Retirement Act (Chapter 10, Article 11 NMSA 1978). PERA is the administrator of the plan which is a cost-sharing, multiple-employer public employee retirement plan. Actual pension data for the State of New Mexico, as employer, is provided at the state-wide level in a separately issued financial report of the PERA. A copy of the PERA financial report may be obtained by writing to PERA, P.O. Box 2123, Santa Fe, New Mexico 87504. Retirement Eligibility. Eligibility for receiving the benefits equal to the number of years of credited service times 2.5% of their final average salary for the thirty-six consecutive months of credited service producing the largest average is as follows: Any age with 25 or more years of credited service; or age 60 or older with 20 or more years of credited service; or Age 61 or older with 17 or more years of credited service; or Age 62 or older with 14 or more years of credited service; or Age 63 or older with 11 or more years of credited service; or Age 64 or older with 8 or more years of credited service; or ---PAGE BREAK--- 46 Age 65 or older with 5 or more years of credited service. Police officers and fire fighters are eligible for retirement at any age after 20 years of service. Benefits vest after 5 years of credited service. Contribution Requirements. Contributions to the pension plan as of June 30, 2006 are equal to percentages of annual salaries as follows: City Employee Contribution Contribution Total Police 18.50% 16.30% 34.80% Fire 21.25% 16.20% 37.45% General 9.15% 9.15% 18.30% IBEW 9.15% 13.15% 22.3% The contribution requirements of plan members and the City are established under Chapter 10, Article 11 NMSA 1978. The requirements may be amended by acts of the legislature. The actuarially determined contribution requirements and actual contributions made for the year ended June 30, 2006 were $7,278,096, (which consisted of $3,701,094 from the City and $3,577,002 from employees; representing 12.1% and 11.7% of covered payroll, respectively). The payroll for employees covered by PERA for the year ended June 30, 2006 was $30,527,866; the total payroll for all employees of the City was $36,801,206. Contributions for the past three years are as follows: Annual Net Fiscal Pension Percentage Benefit Year Cost Contribution Obligation 2004 $ 6,215,280 100% $ - 2005 $ 6,518,720 100% $ - 2006 $ 7,278,096 100% $ - If member's employment is terminated before the member is eligible for any other benefits under PERA, the member may receive a refund of the member's contribution and interest accrued based on rates established biannually by the retirement board. Trend Information. Information pertaining to the actuarially computed present value of vested accumulated plan benefits and non-vested accumulated plan benefits, the plan's net assets available for benefits and the assumed rate of return used in computing the present value, and ten-year historical trend information presenting PERA's progress in accumulating sufficient assets to pay benefits when due is not available by individual government agencies participating in the plan. Actuarial pension data for the State of New Mexico, as employer, is provided at the state-wide level in a separately-issued financial report of the PERA. 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. ---PAGE BREAK--- 47 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. G. Contracted Water and Wastewater Services. In November, 1999, the City entered into an agreement with Operations Management International (OMI) to provide water and wastewater services to the City of Farmington. The company operates and maintains the water and wastewater facilities. The contract expires in January, 2008. The company is responsible for operating expenditures, as well as repairs and replacements up to $2,000. The City paid approximately $4.7 million for contracted services for the year ended June 30, 2006. 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, 2006 was $1,343,385,000. This debt will never constitute an indebtedness of the City of Farmington 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 Farmington or a charge against its general or taxing powers. ---PAGE BREAK--- 48 ---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 Streets Fund - City Ordinance 606 established this fund to account for the City's share of gross receipts tax that is legally restricted to the maintenance of streets and storm drainage. Gross Receipts Tax Parks and Public Works 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 streets and parks. Parks 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. Recreation Fund - City management established this fund to account for the City's share of a state cigarette tax legally restricted for parks and recreation expenditures (approved by City Council Resolution # 2001-1013). 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 3-38-15N.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 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. 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). 49 ---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. Gross Receipts Tax Bond Proceeds Projects Fund - This fund is used to account for various infrastructure projects. Library Construction Project Fund - This fund is used to account for the purchase of land and the construction of the new library. Fire Gross Receipts Tax Bond Projects Fund - This fund is used to account for the purchase of new fire trucks and the construction of a new fire station. 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. 50 ---PAGE BREAK--- (Continued) Gross Gross Receipts Receipts Tax Park Library Tax Parks and Development Gifts and Streets Public Works Fees Recreation Grants ASSETS: Pooled cash and investments $ 2,966,588 $ 2,273,471 $ 347,954 $ - $ 467,508 Accounts receivable - - - - - Inventory - 76,012 - - - Intergovernmental receivable 1,004,821 921,882 - - - Total assets 3,971,409 3,271,365 347,954 - 467,508 LIABILITIES: Accounts payable 152,529 31,887 - - 38,550 Deferred revenue 46,579 - - - - Accrued wages payable - 5,854 - - - Total liabilities 199,108 37,741 - - 38,550 FUND BALANCES: Unreserved - designated for subsequent years 3,772,301 3,233,624 347,954 - 428,958 Unreserved - - - - - Total fund balances 3,772,301 3,233,624 347,954 - 428,958 Total liabilities and fund balances $ 3,971,409 $ 3,271,365 $ 347,954 $ - $ 467,508 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2006 The notes to the financial statements are an integral part of this statement. 51 ---PAGE BREAK--- (Continued) Parks/ State Recreation Museum Police Region II Gifts and Gifts and Lodgers Protection Narcotics Grants Grants Tax Grant Grant ASSETS: Pooled cash and investments $ 521,547 $ 25,501 $ 462,191 $ 1,338 $ 163,058 Accounts receivable - - - - - Inventory - - - - - Intergovernmental receivable 7,797 - 188,686 - 185,560 Total assets 529,344 25,501 650,877 1,338 348,618 LIABILITIES: Accounts payable 20,281 17,027 33,983 - 64,693 Deferred revenue - - 48,407 - - Accrued wages payable 1,847 - 1,376 - 2,466 Total liabilities 22,128 17,027 83,766 - 67,159 FUND BALANCES: Unreserved - designated for subsequent years 507,216 8,474 567,111 1,338 281,459 Unreserved - - - - - Total fund balances 507,216 8,474 567,111 1,338 281,459 Total liabilities and fund balances $ 529,344 $ 25,501 $ 650,877 $ 1,338 $ 348,618 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2006 The notes to the financial statements are an integral part of this statement. 52 ---PAGE BREAK--- (Continued) Law Enforcement State Total Block Fire Penalty Special Grant Grant Assessment Revenue ASSETS: Pooled cash and investments $ - $ - $ 11,364 $ 7,240,520 Accounts receivable - - - - Inventory - - - 76,012 Intergovernmental receivable 50,713 - - 2,359,459 Total assets 50,713 - 11,364 9,675,991 LIABILITIES: Accounts payable - - 11,364 370,314 Deferred revenue - - - 94,986 Accrued wages payable - - - 11,543 Total liabilities - - 11,364 476,843 FUND BALANCES: Unreserved - designated for subsequent years 50,713 - - 9,199,148 Unreserved - - - - Total fund balances 50,713 - - 9,199,148 Total liabilities and fund balances $ 50,713 $ - $ 11,364 $ 9,675,991 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2006 The notes to the financial statements are an integral part of this statement. 53 ---PAGE BREAK--- Community GRT Total Development Bond Library Fire GRT Total Nonmajor Grant Proceeds Constuction Bond Capital Governmental Projects Projects Project Projects Projects Funds ASSETS: Pooled cash and investments $ 821,743 $ - $ 49,295 $ 617,084 $ 1,488,122 $ 8,728,642 Accounts Receivable - - 36,414 - 36,414 36,414 Inventory - - - - - 76,012 Intergovernmental receivable 100,702 - - - 100,702 2,460,161 Total assets 922,445 - 85,709 617,084 1,625,238 11,301,229 LIABILITIES: Accounts payable 70,255 - 85,709 553,885 709,849 1,080,163 Deferred revenue - - - - - 94,986 Accrued wages payable 969 - - - 969 12,512 Total liabilities 71,224 - 85,709 553,885 710,818 1,187,661 FUND BALANCES: Unreserved - designated for special revenue purposes - - - - - 9,199,148 Unreserved - designated for capital projects 851,221 - - 63,199 914,420 914,420 Total fund balances 851,221 - - 63,199 914,420 10,113,568 Total liabilities and fund balances $ 922,445 $ - $ 85,709 $ 617,084 $ 1,625,238 $ 11,301,229 Capital Projects CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2006 The notes to the financial statements are an integral part of this statement. 54 ---PAGE BREAK--- (Continued) Gross Gross Receipts Receipts Tax Park Library Tax Parks and Development Gifts and Streets Public Works Fees Recreation Grants REVENUES: Taxes: Gross receipts tax $ 4,705,007 $ 5,238,502 $ - $ - $ - Gasoline taxes 931,574 - - - - Cigarette taxes - - - 42,316 - Lodger's taxes - - - - - Licenses and permits - - 102,926 - - Intergovernmental - - - - 255,180 Charges for services - - - - - Fines - - - - - Investment earnings 79,019 48,162 10,252 - 14,737 Donations - - - - 68,799 Miscellaneous - 20,000 - - - Total revenues 5,715,600 5,306,664 113,178 42,316 338,716 EXPENDITURES: Current: Police operations - - - - - Fire operations - - - - - Parks, recreation and cultural affairs - 2,487,739 1,170 42,316 359,281 Community development 2,696,758 2,665,635 - - - Capital outlay: Highways and streets 753,393 - - - - Total expenditures 3,450,151 5,153,374 1,170 42,316 359,281 Excess (deficiency) of revenues over (under) expenditures 2,265,449 153,290 112,008 - (20,565) OTHER FINANCING SOURCES (USES): Transfers in - - - - - Transfers out (511,500) (74,000) - - - Total other financing sources (uses) (511,500) (74,000) - - - Net change in fund balances 1,753,949 79,290 112,008 - (20,565) Fund balances-beginning 2,018,352 3,154,334 235,946 - 449,523 Fund balances-ending $ 3,772,301 $ 3,233,624 $ 347,954 $ - $ 428,958 Special Revenue CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 55 ---PAGE BREAK--- (Continued) Parks/ State Recreation Museum Police Region II Gifts and Gifts and Lodgers Protection Narcotics Grants Grants Tax Grant Grant REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - Gasoline taxes - - - - - Cigarette taxes - - - - - Lodger's taxes - - 968,134 - - Licenses and permits - - - - - Intergovernmental 143,793 - - 93,000 327,237 Charges for services - 65,419 - - - Fines - - - - - Investment earnings 18,022 629 16,314 - - Donations 222,486 44,550 - - - Miscellaneous 97,360 - - - 8,674 Total revenues 481,661 110,598 984,448 93,000 335,911 EXPENDITURES: Current: Police operations - - - 91,781 342,710 Fire operations - - - - - Parks, recreation and cultural affairs 366,593 106,415 812,805 - - Community development - - - - - Capital outlay: Highways and streets - - - - - Total expenditures 366,593 106,415 812,805 91,781 342,710 Excess (deficiency) of revenues over (under) expenditures 115,068 4,183 171,643 1,219 (6,799) OTHER FINANCING SOURCES (USES): Transfers in - - - - 30,000 Transfers out - - - - - Total other financing sources (uses) - - - - 30,000 Net change in fund balances 115,068 4,183 171,643 1,219 23,201 Fund balances-beginning 392,148 4,291 395,468 119 258,258 Fund balances-ending $ 507,216 $ 8,474 $ 567,111 $ 1,338 $ 281,459 Special Revenue CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 56 ---PAGE BREAK--- (Continued) Law Enforcement State Total Block Fire Penalty Special Grant Grant Assessment Revenue REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ 9,943,509 Gasoline taxes - - - 931,574 Cigarette taxes - - - 42,316 Lodger's taxes - - - 968,134 Licenses and permits - - - 102,926 Intergovernmental 93,499 252,227 - 1,164,936 Charges for services - - - 65,419 Fines - - 148,543 148,543 Investment earnings 385 5,377 - 192,897 Donations - - - 335,835 Miscellaneous - - - 126,034 Total revenues 93,884 257,604 148,543 14,022,123 EXPENDITURES: Current: Police operations 42,792 - 148,543 625,826 Fire operations - 164,733 - 164,733 Parks, recreation and cultural affairs - - - 4,176,319 Community development - - - 5,362,393 Capital outlay: Highways and streets - - - 753,393 Total expenditures 42,792 164,733 148,543 11,082,664 Excess (deficiency) of revenues over (under) expenditures 51,092 92,871 - 2,939,459 OTHER FINANCING SOURCES (USES): Transfers in - - - 30,000 Transfers out (379) (137,000) - (722,879) Total other financing sources (uses) (379) (137,000) - (692,879) Net change in fund balances 50,713 (44,129) - 2,246,580 Fund balances-beginning - 44,129 - 6,952,568 Fund balances-ending $ 50,713 $ - $ - $ 9,199,148 Special Revenue CITY OF FARMINGTON Nonmajor Governmental Funds For the Year Ended June 30, 2006 Combining Statement of Revenues, Expenditures and Changes in Fund Balances The notes to the financial statements are an integral part of this statement. 57 ---PAGE BREAK--- Community GRT Total Development Bond Library Fire GRT Total Nonmajor Grant Proceeds Constuction Bond Capital Governmental Projects Projects Project Projects Projects Funds REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - $ 9,943,509 Gasoline taxes - - - - - 931,574 Cigarette taxes - - - - - 42,316 Lodger's taxes - - - - - 968,134 Licenses and permits - - - - - 102,926 Intergovernmental 297,920 - - - 297,920 1,462,856 Charges for services - - - - - 65,419 Fines - - - - - 148,543 Investment earnings 24,424 42,092 2,794 80,471 149,781 342,678 Donations - - - - - 335,835 Miscellaneous - - - - - 126,034 Total revenues 322,344 42,092 2,794 80,471 447,701 14,469,824 EXPENDITURES: Current: Police operations - - - - - 625,826 Fire operations - - - - - 164,733 Parks, recreation and cultural affairs - - 113,426 - 113,426 4,289,745 Community development - - - - - 5,362,393 Capital outlay: Highways and streets 418,569 1,299,298 - - 1,717,867 2,471,260 Public safety - - - 3,913,252 3,913,252 3,913,252 Total expenditures 418,569 1,299,298 113,426 3,913,252 5,744,545 16,827,209 Excess (deficiency) of revenues over (under) expenditures (96,225) (1,257,206) (110,632) (3,832,781) (5,296,844) (2,357,385) OTHER FINANCING SOURCES (USES): Transfers in 511,500 - - 237,000 748,500 778,500 Transfers out - - - - - (722,879) Total other financing sources (uses) 511,500 - - 237,000 748,500 55,621 Net change in fund balances 415,275 (1,257,206) (110,632) (3,595,781) (4,548,344) (2,301,764) Fund balances-beginning 435,946 1,257,206 110,632 3,658,980 5,462,764 12,415,332 Fund balances-ending $ 851,221 $ - $ - $ 63,199 $ 914,420 $ 10,113,568 Capital Projects CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 58 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Gross receipts taxes $ 4,044,526 $ 4,626,867 $ 4,705,007 $ 78,140 Gasoline taxes 950,000 950,000 931,574 (18,426) Investment earnings 18,000 18,000 79,019 61,019 Miscellaneous 1,500 1,500 - (1,500) Total revenues 5,014,026 5,596,367 5,715,600 119,233 EXPENDITURES: Current: Community development 3,777,772 4,058,468 2,696,758 1,361,710 Capital Outlay: Highways and streets 500,000 1,862,047 753,393 1,108,654 Total expenditures 4,277,772 5,920,515 3,450,151 2,470,364 Excess (deficiency) of revenues over (under) expenditures 736,254 (324,148) 2,265,449 2,589,597 OTHER FINANCING SOURCES (USES): Transfers out (511,500) (511,500) (511,500) - Net change in fund balances 224,754 (835,648) 1,753,949 2,589,597 Fund balances-beginning 2,018,352 2,018,352 2,018,352 - Fund balances-ending $ 2,243,106 $ 1,182,704 $ 3,772,301 $ 2,589,597 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax Streets Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 59 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Gross receipts taxes $ 4,578,026 $ 5,160,367 $ 5,238,502 $ 78,135 Intergovernmental - 100,000 - (100,000) Investment earnings 41,500 41,500 48,162 6,662 Miscellaneous - - 20,000 20,000 Total revenues 4,619,526 5,301,867 5,306,664 4,797 EXPENDITURES: Current: Parks, Recreation and Cultural Affairs 2,235,763 2,882,683 2,487,739 394,944 Community development 2,630,380 3,858,026 2,665,635 1,192,391 Total expenditures 4,866,143 6,740,709 5,153,374 1,587,335 Excess (deficiency) of revenues over (under) expenditures (246,617) (1,438,842) 153,290 1,592,132 OTHER FINANCING SOURCES (USES): Transfers out (74,000) (74,000) (74,000) - Net change in fund balances (320,617) (1,512,842) 79,290 1,592,132 Fund balances-beginning 3,154,334 3,154,334 3,154,334 - Fund balances-ending $ 2,833,717 $ 1,641,492 $ 3,233,624 $ 1,592,132 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax Parks and Public Works Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 60 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Licenses and permits $ 35,000 $ 35,000 $ 102,926 $ 67,926 Investment earnings 4,000 4,000 10,252 6,252 Total revenues 39,000 39,000 113,178 74,178 EXPENDITURES: Current: Parks, recreation and cultural affairs 60,000 60,000 1,170 58,830 Excess (deficiency) of revenues over (under) expenditures (21,000) (21,000) 112,008 133,008 Fund balances-beginning 235,946 235,946 235,946 - Fund balances-ending $ 214,946 $ 214,946 $ 347,954 $ 133,008 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Park Development Fees Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 61 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Cigarette taxes $ 51,500 $ 51,500 $ 42,316 $ (9,184) EXPENDITURES: Current: Parks, recreation and cultural affairs 51,500 51,500 42,316 9,184 Excess (deficiency) of revenues over (under) expenditures - - - - Fund balances-beginning - - - - Fund balances-ending $ - $ - $ - $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Recreation Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 62 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 130,000 $ 260,000 $ 255,180 $ (4,820) Investment earnings 1,800 1,800 14,737 12,937 Donations 15,000 15,000 68,799 53,799 Total revenues 146,800 276,800 338,716 61,916 EXPENDITURES: Current: Parks, recreation and cultural affairs 200,000 381,188 359,281 21,907 Excess (deficiency) of revenues over (under) expenditures (53,200) (104,388) (20,565) 83,823 Fund balances-beginning 449,523 449,523 449,523 - Fund balances-ending $ 396,323 $ 345,135 $ 428,958 $ 83,823 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Library Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 63 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 24,500 $ 24,500 $ 143,793 $ 119,293 Investment earnings 9,000 9,000 18,022 9,022 Donations 130,200 130,200 222,486 92,286 Miscellaneous 115,000 115,000 97,360 (17,640) Total revenues 278,700 278,700 481,661 202,961 EXPENDITURES: Current: Parks, recreation and cultural affairs 272,557 544,089 366,593 177,496 Excess (deficiency) of revenues over (under) expenditures 6,143 (265,389) 115,068 380,457 Fund balances-beginning 392,148 392,148 392,148 - Fund balances-ending $ 398,291 $ 126,759 $ 507,216 $ 380,457 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Parks/Recreation Gifts and Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 64 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 12,000 $ 12,000 $ - $ (12,000) Charges for Services 78,000 99,750 65,419 (34,331) Investment earnings 600 600 629 29 Donations 29,200 38,140 44,550 6,410 Total revenues 119,800 150,490 110,598 (39,892) EXPENDITURES: Current: Parks, recreation and cultural affairs 53,520 127,810 106,415 21,395 Excess (deficiency) of revenues over (under) expenditures 66,280 22,680 4,183 (18,497) Fund balances-beginning 4,291 4,291 4,291 - Fund balances-ending $ 70,571 $ 26,971 $ 8,474 $ (18,497) Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Museum Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 65 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Lodger's taxes $ 925,000 $ 925,000 $ 968,134 $ 43,134 Investment earnings 7,500 7,500 16,314 8,814 Total revenues 932,500 932,500 984,448 51,948 EXPENDITURES: Current: Parks, recreation and cultural affairs 880,706 957,685 812,805 144,880 Excess (deficiency) of revenues over (under) expenditures 51,794 (25,185) 171,643 196,828 Fund balances-beginning 395,468 395,468 395,468 - Fund balances-ending $ 447,262 $ 370,283 $ 567,111 $ 196,828 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Lodgers Tax Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Intergovernmental $ 93,000 $ 93,000 $ 93,000 $ - EXPENDITURES: Current: Police operations 92,400 93,119 91,781 1,338 Excess (deficiency) of revenues over (under) expenditures 600 (119) 1,219 1,338 Fund balances-beginning 119 119 119 - Fund balances-ending $ 719 $ - $ 1,338 $ 1,338 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO State Police Protection Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Intergovernmental $ 294,675 $ 394,675 $ 327,237 $ (67,438) Miscellaneous 1,500 1,500 8,674 7,174 296,175 396,175 335,911 (60,264) EXPENDITURES: Current: Public safety 413,894 459,622 342,710 116,912 Excess (deficiency) of revenues over (under) expenditures (117,719) (63,447) (6,799) 56,648 OTHER FINANCING SOURCES (USES): Transfers in 30,000 30,000 30,000 - Net change in fund balances (87,719) (33,447) 23,201 56,648 Fund balances-beginning 258,258 258,258 258,258 - Fund balances-ending $ 170,539 $ 224,811 $ 281,459 $ 56,648 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Region II Narcotics Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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 $ 32,000 $ 42,500 $ 93,499 $ 50,999 Investment earnings - - 385 385 Total revenues 32,000 42,500 93,884 51,384 EXPENDITURES: Current: Public safety 33,000 43,500 42,792 708 Excess (deficiency) of revenues over (under) expenditures (1,000) (1,000) 51,092 52,092 OTHER FINANCING SOURCES (USES): Transfers in 3,200 3,200 - (3,200) Transfers out - - (379) (379) Total Other Financing Sources 3,200 3,200 (379) (3,579) Net change in fund balances 2,200 2,200 50,713 48,513 Fund balances-beginning - - - - Fund balances-ending $ 2,200 $ 2,200 $ 50,713 $ 48,513 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Law Enforcement Block Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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 $ 154,390 $ 254,390 $ 252,227 $ (2,163) Investment earnings 3,000 5,400 5,377 (23) Total revenues 157,390 259,790 257,604 (2,186) EXPENDITURES: Current: Fire operations 44,390 166,919 164,733 2,186 Excess (deficiency) of revenues over (under) expenditures 113,000 92,871 92,871 - OTHER FINANCING SOURCES (USES): Transfers out (110,000) (137,000) (137,000) - Net change in fund balances 3,000 (44,129) (44,129) - Fund balances-beginning 44,129 44,129 44,129 - Fund balances-ending $ 47,129 $ - $ - $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO State Fire Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Fines $ 190,000 $ 190,000 $ 148,543 $ (41,457) EXPENDITURES: Current: Public safety 190,000 190,000 148,543 41,457 Excess (deficiency) of revenues over (under) expenditures - - - - Fund balances-beginning - - - - Fund balances-ending $ - $ - $ - $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Penalty Assessment Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Intergovernmental $ 2,631,226 $ 2,631,226 $ 297,920 $ (2,333,306) Investment earnings 3,500 3,500 24,424 20,924 Total revenues 2,634,726 2,634,726 322,344 (2,312,382) EXPENDITURES: Capital Outlay: Highways and Streets 3,142,726 3,260,726 418,569 2,842,157 Excess (deficiency) of revenues over (under) expenditures (508,000) (626,000) (96,225) 529,775 OTHER FINANCING SOURCES (USES): Transfers in 511,500 511,500 511,500 - Net change in fund balances 3,500 (114,500) 415,275 529,775 Fund balances-beginning 435,946 435,946 435,946 - Fund balances-ending $ 439,446 $ 321,446 $ 851,221 $ 529,775 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Community Development Grant Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Investment earnings $ 42,500 $ 42,500 $ 42,092 $ (408) EXPENDITURES: Capital Outlay: Highways and Streets 2,192,500 1,388,006 1,299,298 88,708 Excess (deficiency) of revenues over (under) expenditures (2,150,000) (1,345,506) (1,257,206) 88,300 Fund balances-beginning 1,257,206 1,257,206 1,257,206 - Fund balances-ending $ (892,794) $ (88,300) $ - $ 88,300 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO GRT Bond Proceeds Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Investment earnings $ 2,500 $ 2,500 $ 2,794 $ 294 EXPENDITURES: Current: Parks, recreation and cultural affairs 352,500 151,887 113,426 38,461 Excess (deficiency) of revenues over (under) expenditures (350,000) (149,387) (110,632) 38,755 Fund balances-beginning 110,632 110,632 110,632 - Fund balances-ending $ (239,368) $ (38,755) $ - $ 38,755 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Library Construction Project Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Investment earnings $ 120,000 $ 120,000 $ 80,471 $ (39,529) EXPENDITURES: Capital Outlay: Public Safety 5,620,000 4,985,857 3,913,252 1,072,605 Excess (deficiency) of revenues over (under) expenditures (5,500,000) (4,865,857) (3,832,781) 1,033,076 OTHER FINANCING SOURCES (USES): Transfers in - 237,000 237,000 - Net change in fund balances (5,500,000) (4,628,857) (3,595,781) 1,033,076 Fund balances-beginning 3,658,980 3,658,980 3,658,980 - Fund balances-ending $ (1,841,020) $ (969,877) $ 63,199 $ 1,033,076 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Fire GRT Bond Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 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: Gross receipts taxes $ 1,530,554 $ 1,530,554 $ 1,530,042 $ (512) Investment earnings 16,000 16,000 22,381 6,381 Total revenues 1,546,554 1,546,554 1,552,423 5,869 EXPENDITURES: Debt Service: Principal 1,965,000 1,060,000 1,060,000 - Interest 421,480 588,525 588,521 4 Total expenditures 2,386,480 1,648,525 1,648,521 4 Excess (deficiency) of revenues over (under) expenditures (839,926) (101,971) (96,098) 5,873 OTHER FINANCING SOURCES (USES): Transfers in 110,000 100,000 100,000 - Net change in fund balances (729,926) (1,971) 3,902 5,873 Fund balances-beginning 283,833 283,833 283,833 - Fund balances-ending $ (446,093) $ 281,862 $ 287,735 $ 5,873 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 76 ---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. 77 ---PAGE BREAK--- Health Insurance Health Insurance ASSETS: Current assets: Pooled cash and investments $ 1,507 Accounts receivable 473,888 Total assets 475,395 LIABILITIES: Current liabilities: Accrued claims payable 502,427 Due to other funds 300,000 Total liabilities 802,427 NET ASSETS: Invested in capital assets - Unrestricted (327,032) Total net assets $ (327,032) CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets June 30, 2006 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) Operating revenues: Charges for services $ 4,684,734 $ 4,684,734 $ 4,384,248 $ (300,486) Operating expenses: Costs of services 4,689,034 5,439,034 4,561,636 877,398 Operating income (loss) (4,300) (754,300) (177,388) 576,912 Nonoperating revenues (expenses): Investment earnings 4,300 4,300 - (4,300) Income (loss) before transfers - (750,000) (177,388) 572,612 Transfers in - 750,000 750,000 - Change in net assets - - 572,612 572,612 Total net assets-beginning (899,644) (899,644) (899,644) - Total net assets-ending $ (899,644) $ (899,644) $ (327,032) $ 572,612 CITY OF FARMINGTON, NEW MEXICO Budgeted Amounts June 30, 2006 Schedule of Revenues, Expenses and Changes in Fund Net Assets Health Insurance The notes to the financial statements are an integral part of this statement. 79 ---PAGE BREAK--- Health Insurance Health Insurance CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/users $ 3,910,360 Payments to suppliers (4,865,016) Net cash provided by operating activities (954,656) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds 206,163 Transfer from other funds 750,000 Net cash provided (used) by capital and related financing activities 956,163 CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received - Net increase in cash and cash equivalents 1,507 Cash and cash equivalents, July 1 - Cash and cash equivalents, June 30 $ 1,507 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) $ (177,388) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Increase in accounts receivable (473,888) (Decrease) in accounts payable (87,625) (Decrease) in accrued claims payable (215,755) Total adjustments (777,268) Net cash provided by operating activities $ (954,656) CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows For the Year Ended June 30, 2006 The notes to the financial statements are an integral part of this statement. 80 ---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 Fund For the Year Ended June 30, 2006 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Electric $ 88,960,660 $ 88,960,660 $ 89,356,434 $ 395,774 Other revenues 420,125 420,125 445,424 25,299 Total operating revenues 89,380,785 89,380,785 89,801,858 421,073 Operating expenses: Salaries and fringe benefits 8,226,393 8,226,393 8,167,772 58,621 Purchased power, fuel and chemicals 41,198,225 41,198,225 40,895,737 302,488 Other operating expenses 13,522,718 13,845,412 7,590,489 6,254,923 Depreciation and amortization 8,761,000 8,761,000 7,222,088 1,538,912 Capital outlay 23,747,200 27,648,751 18,443,094 9,205,657 Total operating expenses 95,455,536 99,679,781 82,319,180 17,360,601 Operating income (6,074,751) (10,298,996) 7,482,678 17,781,674 Nonoperating revenues (expenses): Investment earnings 417,644 417,644 1,118,186 700,542 Interest expense (1,673,233) (1,673,233) (1,420,637) 252,596 Other fiscal charges 143,731 143,731 143,731 - Principal on debt service (3,812,053) (3,812,053) (3,812,053) - Total nonoperating revenues (expenses) (4,923,911) (4,923,911) (3,970,773) 953,138 Income (loss) before operating transfers (10,998,662) (15,222,907) 3,511,905 18,734,812 Capital contributions - - 917,311 917,311 Transfers out (1,550,584) (1,550,584) (1,460,776) 89,808 Change in net assets (12,549,246) (16,773,491) 2,968,440 $ 19,741,931 ADJUSTMENTS TO GAAP Capital outlay capitalized 18,443,094 Principal on debt service 3,812,053 22,255,147 GAAP BASIS CHANGE IN NET ASSETS 25,223,587 Total net assets-beginning 187,621,127 187,621,127 187,621,127 Total net assets-ending $ 175,071,881 $ 170,847,636 $ 212,844,714 The notes to the financial statements are an integral part of this statement. 81 ---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 Fund For the Year Ended June 30, 2006 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Water $ 7,759,305 $ 7,989,305 $ 7,960,059 $ (29,246) Other revenues 1,000 1,000 31,681 30,681 Total operating revenues 7,760,305 7,990,305 7,991,740 1,435 Operating expenses: Salaries and fringe benefits 541,922 541,922 413,759 128,163 Other operating expenses 4,763,473 5,067,376 4,692,905 374,471 Capital outlay 1,108,000 1,178,500 924,187 254,313 Total operating expenses 6,413,395 6,787,798 6,030,851 756,947 Operating income 1,346,910 1,202,507 1,960,889 758,382 Nonoperating revenues (expenses): Investment earnings 81,012 81,012 105,335 24,323 Interest expense (345,806) (345,806) (308,241) 37,565 Other fiscal charges 31,015 31,015 31,015 - Principal on debt service (822,591) (822,591) (822,591) - Total nonoperating revenues (expenses) (1,056,370) (1,056,370) (994,482) 61,888 Income (loss) before operating transfers 290,540 146,137 966,407 820,270 Capital contributions - - 10,181 10,181 Transfers out (382,500) (382,500) (398,489) (15,989) Change in net assets (91,960) (236,363) 578,099 $ 814,462 ADJUSTMENTS TO GAAP Depreciation and amortization (1,608,687) Capital outlay capitalized 924,187 Principal on debt service 822,591 138,091 GAAP BASIS CHANGE IN NET ASSETS 716,190 Total net assets-beginning 21,509,928 21,509,928 21,509,928 Total net assets-ending $ 21,417,968 $ 21,273,565 $ 22,226,118 The notes to the financial statements are an integral part of this statement. 82 ---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 Fund For the Year Ended June 30, 2006 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Wastewater $ 3,769,810 $ 3,769,810 $ 3,755,825 $ (13,985) Environmental tax 1,114,736 1,260,321 1,309,633 49,312 Other revenues 4,000 4,000 6,493 2,493 Total operating revenues 4,888,546 5,034,131 5,071,951 37,820 Operating expenses: Salaries and fringe benefits 242,216 242,216 187,461 54,755 Other operating expenses 3,221,722 3,296,714 2,926,530 370,184 Capital outlay 615,500 891,791 598,818 292,973 Total operating expenses 4,079,438 4,430,721 3,712,809 717,912 Operating income 809,108 603,410 1,359,142 755,732 Nonoperating revenues (expenses): Investment earnings 71,351 71,351 197,755 126,404 Interest expense (466,770) (466,770) (435,209) 31,561 Other fiscal charges 5,103 5,103 5,103 - Principal on debt service (645,023) (645,023) (135,356) 509,667 Total nonoperating revenues (expenses) (1,035,339) (1,035,339) (367,707) 667,632 Income (loss) before operating transfers (226,231) (431,929) 991,435 1,423,364 Transfers out (183,800) (183,800) (187,959) (4,159) Change in net assets (410,031) (615,729) 803,476 $ 1,419,205 ADJUSTMENTS TO GAAP Depreciation and amortization (1,146,288) Capital outlay capitalized 598,818 Principal on debt service 135,356 (412,114) GAAP BASIS CHANGE IN NET ASSETS 391,362 Total net assets-beginning 15,068,774 15,068,774 15,068,774 Total net assets-ending $ 14,658,743 $ 14,453,045 $ 15,460,136 The notes to the financial statements are an integral part of this statement. 83 ---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 Fund For the Year Ended June 30, 2006 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Sanitation $ 3,709,267 $ 3,829,867 $ 3,822,965 $ (6,902) Other revenues 36,568 36,568 66,911 30,343 Total operating revenues 3,745,835 3,866,435 3,889,876 23,441 Operating expenses: Other operating expenses 3,680,338 3,786,038 3,808,279 (22,241) Capital outlay 10,000 10,000 - 10,000 Total operating expenses 3,690,338 3,796,038 3,808,279 (12,241) Operating income 55,497 70,397 81,597 11,200 Nonoperating revenues (expenses): Investment earnings 3,253 3,253 12,563 9,310 Change in net assets 58,750 73,650 94,160 $ 20,510 ADJUSTMENTS TO GAAP Depreciation and amortization (7,449) GAAP BASIS CHANGE IN NET ASSETS 86,711 Total net assets-beginning 293,704 293,704 293,704 Total net assets-ending $ 352,454 $ 367,354 $ 380,415 The notes to the financial statements are an integral part of this statement. 84 ---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 Fund For the Year Ended June 30, 2006 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Golf $ 1,095,434 $ 1,095,434 $ 1,118,809 $ 23,375 Other revenues - - 2,504 2,504 Total operating revenues 1,095,434 1,095,434 1,121,313 25,879 Operating expenses: Salaries and fringe benefits 631,451 631,451 615,122 16,329 Other operating expenses 332,220 332,220 385,528 (53,308) Capital outlay 125,000 132,196 92,839 39,357 Total operating expenses 1,088,671 1,095,867 1,093,489 2,378 Operating income 6,763 (433) 27,824 28,257 Nonoperating revenues (expenses): Investment earnings 4,252 4,252 9,015 4,763 Income (loss) before operating transfers 11,015 3,819 36,839 33,020 Capital contributions - - 5,500 5,500 Change in net assets 11,015 3,819 42,339 $ 38,520 ADJUSTMENTS TO GAAP Depreciation and amortization (216,361) Capital outlay capitalized 92,839 (123,522) GAAP BASIS CHANGE IN NET ASSETS (81,183) Total net assets-beginning 2,661,362 2,661,362 2,661,362 Total net assets-ending $ 2,672,377 $ 2,665,181 $ 2,580,179 The notes to the financial statements are an integral part of this statement. 85 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Airport Fund For the Year Ended June 30, 2006 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Airport $ 630,071 $ 702,571 $ 594,199 $ (108,372) Other revenues 1,000 1,000 - (1,000) 631,071 703,571 594,199 (109,372) Operating expenses: Salaries and fringe benefits 251,301 251,301 228,927 22,374 Other operating expenses 463,372 463,372 408,174 55,198 Capital outlay 756,000 756,000 853,445 (97,445) Total operating expenses 1,470,673 1,470,673 1,490,546 (19,873) Operating income (839,602) (767,102) (896,347) (129,245) Nonoperating revenues (expenses): Investment earnings 1,124 12,124 12,121 Revenue from operating grants 710,325 775,325 789,031 13,706 Total nonoperating revenues (expenses) 711,449 787,449 801,152 13,703 Income (loss) before operating transfers (128,153) 20,347 (95,195) (115,542) Operating transfers, in 121,658 121,658 121,658 - Change in net assets (6,495) 142,005 26,463 $ (115,542) ADJUSTMENTS TO GAAP Depreciation and amortization (1,175,162) Capital outlay capitalized 853,445 (321,717) GAAP BASIS CHANGE IN NET ASSETS (295,254) Total net assets-beginning 7,335,066 7,335,066 7,335,066 Total net assets-ending $ 7,328,571 $ 7,477,071 $ 7,039,812 The notes to the financial statements are an integral part of this statement. 86 ---PAGE BREAK--- Capital Assets- Governmental Funds Capital Assets- Governmental Funds ---PAGE BREAK--- 2006 2005 Governmental funds capital assets: Land $ 25,780,126 $ 25,436,011 Buildings 47,365,169 45,491,835 Improvements other than buildings 9,948,950 9,441,573 Machinery and equipment 22,298,221 21,028,305 Infrastructure 54,801,172 52,877,374 Construction In Progress 10,991,978 4,576,894 Total governmental funds capital assets $ 171,185,616 $ 158,851,992 Investments in governmental funds capital assets by source: General fund $ 59,996,762 $ 50,672,259 Special revenue fund 95,401,522 92,611,003 Capital projects funds 14,632,269 14,823,667 Donations 1,155,063 745,063 Total governmental funds capital assets $ 171,185,616 $ 158,851,992 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Comparative Schedules By Source June 30, 2005 and 2006 87 ---PAGE BREAK--- Improvements Machinery Construction Other than and In Function and Activity Land Buildings Buildings Equipment Infrastructure Progress Total GENERAL GOVERNMENT: Legislative $ 4,000 $ 6,946 $ - $ 43,609 $ - $ 439 $ 54,994 Judicial 80,000 830,416 - 176,725 - 112 1,087,253 Operations center - - - 570,281 - 25,023 595,304 Fleet maintenance - 4,468 - 435,658 - 425 440,551 Stores - 21,264 154,301 390,189 - 22,052 587,806 Finance administration - 3,741 - 32,983 - 121 36,845 Personnel administration - 35,366 - 78,914 - 1,958 116,238 Purchasing - - - 84,440 - 1,006 85,446 Law enforcement - - - 25,796 - 1,085 26,881 Administrative services 1,105,313 7,764,964 53,545 990,601 - 24,190 9,938,613 Planning and zoning - - - 87,849 - 932 88,781 Data processing - 31,020 - 970,013 - - 1,001,033 Total general government 1,189,313 8,698,185 207,846 3,887,058 - 77,343 14,059,745 PUBLIC SAFETY: Police 399,869 3,688,517 61,719 5,421,364 - 75,727 9,647,196 Fire 60,098 1,977,067 1,989 3,686,103 - 4,949,999 10,675,256 Inspection - - - 236,923 - 470 237,393 Traffic - 6,656 - 452,994 2,029,606 - 2,489,256 Total public safety 459,967 5,672,240 63,708 9,797,384 2,029,606 5,026,196 23,049,101 PUBLIC WORKS: Streets 15,827,228 - - 2,108,121 42,079,010 4,115,091 64,129,450 Bridges and storm drains - - - - 10,201,788 756,420 10,958,208 Administration 1,320,817 164,774 375,341 117,526 490,768 166,248 2,635,474 Survey - - - 112,912 - 539 113,451 Engineering - - - 126,413 - 7,635 134,048 Total public works 17,148,045 164,774 375,341 2,464,972 52,771,566 5,045,933 77,970,631 CULTURE AND RECREATION: Parks and recreation 4,386,475 15,672,089 9,134,541 4,333,334 - 788,598 34,315,037 Civic center 92,174 3,113,034 6,047 427,932 - 5,865 3,645,052 Senior citizens center 141,496 670,949 - 147,224 - 1,218 960,887 Museum 970,988 4,712,101 55,467 131,574 - 39,765 5,909,895 Total culture and recreation 5,591,133 24,168,173 9,196,055 5,040,064 - 835,446 44,830,871 LIBRARIES 1,391,668 8,661,797 106,000 1,108,743 - 7,060 11,275,268 Total governmental funds capital assets $ 25,780,126 $ 47,365,169 $ 9,948,950 $ 22,298,221 $ 54,801,172 $ 10,991,978 $ 171,185,616 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, 2006 88 ---PAGE BREAK--- General Fixed General Fixed Assets Assets Function and Activity June 30, 2005 Additions Deductions Net Transfers June 30, 2006 GENERAL GOVERNMENT: Legislative $ 36,243 $ 18,751 $ - $ - $ 54,994 Judicial 162,111 24,822 - 900,321 1,087,254 Operations center 426,649 138,600 - 30,055 595,304 Fleet maintenance 311,190 142,955 (13,594) - 440,551 Stores 560,420 40,867 (1,800) (11,682) 587,805 Finance administration 37,947 - (1,102) - 36,845 Personnel administration 73,853 42,385 - - 116,238 Purchasing 85,446 - - - 85,446 Law enforcement 26,882 - - - 26,882 Administrative services 9,066,432 1,111,268 (47,696) (191,391) 9,938,613 Planning and zoning 76,371 12,411 - - 88,782 Data processing 1,244,201 78,181 (338,093) 16,744 1,001,033 Total general government 12,107,745 1,610,240 (402,285) 744,047 14,059,747 PUBLIC SAFETY: Police 8,908,842 968,463 (195,184) (34,926) 9,647,195 Fire 7,035,086 3,576,275 (3,181) 67,077 10,675,257 Inspection 212,780 65,215 - (40,603) 237,392 Traffic 2,281,835 234,088 (26,667) - 2,489,256 Total public safety 18,438,543 4,844,041 (225,032) (8,452) 23,049,100 PUBLIC WORKS: Streets 60,712,753 3,476,678 (5,916) (54,064) 64,129,451 Bridges and storm drains 10,571,069 325,576 - 61,564 10,958,209 Administration 3,176,782 293,489 - (834,799) 2,635,472 Survey 112,912 539 - - 113,451 Engineering 118,496 10,837 - 4,715 134,048 Total public works 74,692,012 4,107,119 (5,916) (822,584) 77,970,631 CULTURE AND RECREATION: Parks and recreation 32,246,000 2,060,709 (88,309) 96,636 34,315,036 Civic center 3,599,538 46,583 (1,069) - 3,645,052 Senior citizens center 974,041 - (9,354) (3,800) 960,887 Museum 5,869,929 45,814 - (5,847) 5,909,896 Total culture and recreation 42,689,508 2,153,106 (98,732) 86,989 44,830,871 LIBRARIES 10,924,184 351,083 - - 11,275,267 Total general fixed assets $ 158,851,992 $ 13,065,589 $ (731,965) $ - $ 171,185,616 Accumulated depreciation $ 78,634,839 $ 6,031,607 $ (614,512) $ - $ 84,051,934 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, 2006 89 ---PAGE BREAK--- 90 ---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. Financial Trends Page These schedules contain trend information to help the reader understand how the 93 City’s financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the City’s most 98 significant revenue source - gross receipts tax. Also included are property tax schedules. Debt Capacity These schedules present information to help the reader assess the affordability of 106 the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader 110 understand the environment within which the City’s financial activities take place. Operating Information The schedules contain service and infrastructure data to help the reader understand 112 how the information in the City’s financial report relates to the services the City provides and the activities it performs. 91 ---PAGE BREAK--- 92 ---PAGE BREAK--- City of Farmington Schedule 1 Net Assets by Component Last Five Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 Governmental activities Invested in capital assets, net of related debt 55,674,508 $ 63,961,010 $ 64,779,550 $ 66,265,472 $ 74,339,304 $ Restricted 2,689,505 2,678,373 2,422,104 3,514,726 4,219,427 Unrestricted 28,039,208 20,619,682 20,610,228 25,149,317 24,559,417 Total governmental activities net assets 86,403,221 $ 87,259,065 $ 87,811,882 $ 94,929,515 $ 103,118,148 $ Business-type activities Invested in capital assets, net of related debt 145,695,695 $ 151,976,725 $ 194,430,074 $ 215,390,130 $ 227,625,271 $ Restricted 3,450,823 2,643,773 2,648,557 2,564,255 2,615,937 Unrestricted 33,466,317 41,559,635 18,361,816 16,535,576 30,290,166 Total business-type activities net assets 182,612,835 $ 196,180,133 $ 215,440,447 $ 234,489,961 $ 260,531,374 $ Primary government Invested in capital assets, net of related debt 201,370,203 $ 215,937,735 $ 259,209,624 $ 281,655,602 $ 301,964,575 $ Restricted 6,140,328 5,322,146 5,070,661 6,078,981 6,835,364 Unrestricted 61,505,525 62,179,317 38,972,044 41,684,893 54,849,583 Total primary government net assets 269,016,056 $ 283,439,198 $ 303,252,329 $ 329,419,476 $ 363,649,522 $ Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. Fiscal Year 93 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Five Fiscal Years (continued) (accrual basis of accounting) 2002 2003 2004 2005 2006 Expenses Governmental activities: General government 17,921,350 $ 17,191,605 $ 23,996,456 $ 21,153,411 $ 21,649,221 $ Police 9,137,433 10,251,979 10,341,396 11,351,590 12,356,592 Fire 4,661,223 4,906,661 5,468,824 5,470,572 6,466,886 Parks, recreation, cultural affairs 9,232,612 8,392,730 9,284,623 9,497,875 11,105,380 Community development 7,359,539 7,395,603 5,727,834 7,481,297 8,511,853 Interest on long term debt 378,265 560,368 483,230 421,480 588,521 Total governmental activities expenses 48,690,422 48,698,946 55,302,363 55,376,225 60,678,453 Business-type activities: Electric 63,434,816 68,903,423 65,214,544 72,914,727 65,152,992 Water 6,096,326 7,180,833 6,785,002 6,944,219 6,992,577 Wastewater 3,203,574 3,488,296 4,127,386 4,983,626 4,690,385 Sanitation 3,345,147 3,358,430 3,493,487 3,625,722 3,815,728 Golf 1,076,241 1,060,103 1,198,867 1,209,293 1,217,011 Airport 1,422,951 1,563,162 2,008,715 1,871,508 1,812,263 Total business-type activities expenses 78,579,055 85,554,247 82,828,001 91,549,095 83,680,956 Total primary government expenses 127,269,477 $ 134,253,193 $ 138,130,364 $ 146,925,320 $ 144,359,409 $ Program Revenues Governmental activities: Charges for services: General government 4,315,068 $ 4,892,278 $ 5,085,210 $ 5,019,939 $ 5,379,345 $ Police 14,457 15,132 74,215 198,017 39,903 Parks, recreation, cultural affairs 546,488 530,669 552,114 545,461 703,731 Community development 69,040 68,155 77,390 75,116 101,605 Operating grants and contributions 1,526,052 1,276,299 2,674,803 2,238,291 2,929,307 Capital grants and contributions - - - - - Total governmental activities program revenues 6,471,105 6,782,533 8,463,732 8,076,824 9,153,891 Business-type activities: Charges for services: Electric 78,835,548 79,130,644 84,158,287 91,152,321 89,801,858 Water 7,997,027 7,073,545 7,515,514 7,338,869 7,991,740 Wastewater 3,824,407 4,239,721 4,489,948 4,751,802 5,071,951 Sanitation 3,350,941 3,392,079 3,538,632 3,692,937 3,889,876 Golf 859,042 933,981 1,042,176 1,088,137 1,121,313 Airport 541,523 564,237 596,765 599,306 594,199 Operating grants and contributions 4,207,905 1,151,196 916,477 880,654 927,492 Capital grants and contributions 1,211,547 1,025,342 154,309 625,693 794,531 Total business-type activities program revenues 100,827,940 97,510,745 102,412,108 110,129,719 110,192,960 Total primary government program revenues 107,299,045 $ 104,293,278 $ 110,875,840 $ 118,206,543 $ 119,346,851 $ Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. Fiscal Year 94 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Five Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 Net (Expenses)/Revenues Governmental activities (42,219,317) $ (41,916,413) $ (46,838,631) $ (47,299,401) $ (51,524,562) $ Business-type activities 22,248,885 11,956,498 19,584,107 18,580,624 26,512,004 Total primary governmental activities expenses (19,970,432) $ (29,959,915) $ (27,254,524) $ (28,718,777) $ (25,012,558) $ General Revenues and Other Changes in Net Assets Governmental activities: Taxes Gross receipts taxes 35,922,137 $ 35,146,693 $ 38,351,092 $ 43,134,352 $ 49,274,220 $ Property taxes 922,002 930,112 985,836 1,043,064 1,121,723 Franchise taxes 2,551,995 2,601,794 715,022 720,748 1,594,098 Other taxes 1,716,477 1,724,672 1,884,994 1,873,736 1,942,024 Other revenue 3,010,951 3,769,728 3,584,543 3,507,135 2,996,953 Unrestricted investment earnings 963,133 635,745 429,108 471,993 858,611 Loss on sale of capital assets (1,902,219) (1,904,487) - - - Transfers 415 (132,000) 1,440,853 1,754,818 1,925,566 Total governmental activities 43,184,891 42,772,257 47,391,448 52,505,846 59,713,195 Business-type activities: Unrestricted investment earnings 1,435,925 1,478,800 1,117,060 790,027 1,454,975 Transfers (415) 132,000 (1,440,853) (1,754,818) (1,925,566) Total business-type activities 1,435,510 1,610,800 (323,793) (964,791) (470,591) Total primary government 44,620,401 $ 44,383,057 $ 47,067,655 $ 51,541,055 $ 59,242,604 $ Change in Net Assets Governmental activities 965,574 $ 855,844 $ 552,817 $ 5,206,445 $ 8,188,633 $ Business-type activities 23,684,395 13,567,298 19,260,314 17,615,833 26,041,413 Total primary government 24,649,969 $ 14,423,142 $ 19,813,131 $ 22,822,278 $ 34,230,046 $ Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. Fiscal Year 95 ---PAGE BREAK--- City of Farmington Schedule 3 Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General Fund Reserved 435,244 $ 396,396 $ 439,874 $ 283,314 $ 229,464 $ 2,282,737 $ 2,256,852 $ 2,000,000 $ 3,393,756 $ 206,358 $ Unreserved 3,404,858 6,070,883 13,198,488 15,117,685 12,733,806 11,618,472 11,452,345 12,126,852 13,069,276 2,000,000 Total general fund 3,840,102 $ 6,467,279 $ 13,638,362 $ 15,400,999 $ 12,963,270 $ 13,901,209 $ 13,709,197 $ 14,126,852 $ 16,463,032 $ 2,206,358 $ All Other Governmental Funds Reserved Debt service funds 446,977 $ 395,732 $ 1,167,533 $ 1,109,110 $ 1,096,449 $ 406,768 $ 421,521 $ 422,104 $ 283,833 $ 287,735 $ Unreserved, reported in Special revenue funds 10,413,951 10,880,051 7,976,337 2,998,790 2,870,143 2,872,194 3,129,017 5,227,200 6,952,568 9,199,148 Capital projects funds 4,226,301 2,167,676 1,073,947 407,657 3,781,016 12,602,816 5,196,626 3,256,176 5,462,764 914,420 Total all other governmental funds 15,087,229 $ 13,443,459 $ 10,217,817 $ 4,515,557 $ 7,747,608 $ 15,881,778 $ 8,747,164 $ 8,905,480 $ 12,699,165 $ 10,401,303 $ 96 ---PAGE BREAK--- City of Farmington Schedule 4 Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Revenues Taxes 29,769,001 $ 37,750,804 $ 33,591,316 $ 36,336,066 $ 38,862,323 $ 41,112,611 $ 40,403,271 $ 41,936,943 $ 46,771,900 $ 53,932,065 $ Licenses and permits 496,364 474,271 545,882 541,787 605,528 556,573 605,478 602,971 819,869 951,280 Intergovernmental 5,114,188 8,074,476 5,458,960 4,684,185 3,083,418 1,761,181 1,869,860 2,674,803 2,238,291 2,929,307 Charges for services 626,690 623,088 623,128 591,993 599,326 852,738 978,022 1,170,531 1,365,408 1,840,336 Fines 722,709 627,185 560,224 923,530 1,069,025 1,265,848 1,403,928 1,602,721 1,418,646 1,133,053 Special assessments 188,713 154,617 160,775 180,097 92,337 77,800 72,337 61,327 46,859 36,370 Investment earnings 1,273,172 1,321,363 1,154,620 966,600 1,052,525 960,773 634,552 425,731 469,012 858,611 Miscellaneous 951,613 871,754 434,654 746,565 688,425 875,603 1,341,924 1,317,524 1,221,761 876,250 Total revenues 39,142,450 49,897,558 42,529,559 44,970,823 46,052,907 47,463,127 47,309,372 49,792,551 54,351,746 62,557,272 Expenditures Current General government 8,591,330 7,039,366 8,335,656 9,594,926 12,033,658 12,937,208 12,757,384 13,801,711 15,247,239 18,478,746 Police 8,425,140 8,829,177 7,377,884 9,680,015 9,861,647 9,499,112 10,359,890 10,690,905 10,647,826 12,606,701 Fire 3,802,824 3,699,463 4,069,023 4,245,944 4,426,573 4,491,634 4,719,878 5,416,395 5,097,630 5,872,350 Parks, recreation and cultural affairs 8,385,380 10,344,132 10,690,406 12,583,544 9,549,436 10,917,165 15,061,168 10,285,641 10,482,092 11,128,612 Community development 5,626,125 5,013,740 8,482,998 6,877,761 7,703,717 7,946,575 7,116,935 6,357,491 7,186,770 7,182,068 Debt service Principal 805,000 850,000 895,000 865,000 955,000 1,360,000 1,815,000 1,900,000 1,965,000 1,060,000 Interest 489,492 447,492 401,243 393,364 284,653 378,265 560,368 483,230 421,480 588,521 Arbitrage rebate - - - - - 34,387 - - - - Bond issuance costs - - - - - 70,733 - - - - Capital outlay 4,477,308 7,622,800 3,394,502 4,081,929 574,043 1,579,147 1,505,876 1,722,060 4,653,660 6,844,613 Total expenditures 40,602,599 43,846,170 43,646,712 48,322,483 45,388,727 49,214,226 53,896,499 50,657,433 55,701,697 63,761,611 Excess of revenues over (under) expenditures (1,460,149) 6,051,388 (1,117,153) (3,351,660) 664,180 (1,751,099) (6,587,127) (864,882) (1,349,951) (1,204,339) Other Financing Sources (Uses) Operating transfers in 1,359,065 771,703 2,566,188 3,088,479 5,540,599 960,119 104,810 2,539,337 2,856,182 3,000,104 Operating transfers out (1,362,415) (771,703) (2,571,575) (3,669,441) (5,603,991) (1,220,341) (844,310) (1,098,484) (1,101,365) (1,824,537) Refunding bonds issued - - - - - 15,076,862 - - - - Payment to refunded bond escrow agent - - - - - (4,412,245) - - - - Sale tax debt issuance - - - - - - - - 5,725,000 - Total other financing sources and uses (3,350) - (5,387) (580,962) (63,392) 10,404,395 (739,500) 1,440,853 7,479,817 1,175,567 Net change in fund balance (1,463,499) $ 6,051,388 $ (1,122,540) $ (3,932,622) $ 600,788 $ 8,653,296 $ (7,326,627) $ 575,971 $ 6,129,866 $ (28,772) $ Debt service as a percentage of noncapital expenditures 3.5% 3.1% 3.2% 3.2% 3.4% 4.5% 5.8% 5.4% 5.1% 3.3% Fiscal Year 97 ---PAGE BREAK--- City of Farmington Schedule 5 Tax Revenues by Source, Governmental Funds Last Ten Fiscal Years Fiscal Year Gross Receipts Tax Property Tax Franchise Tax Other Taxes Total Taxes 1997 24,596,189 $ 693,584 $ 3,504,911 $ 974,317 $ 29,769,001 $ 1998 32,471,206 755,619 3,506,973 1,017,006 37,750,804 1999 28,497,933 796,418 3,285,030 1,011,935 33,591,316 2000 31,039,545 831,478 2,893,504 1,571,539 36,336,066 2001 33,213,633 883,140 3,177,912 1,587,638 38,862,323 2002 35,922,137 922,002 2,551,995 1,716,477 41,112,611 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 Change 1997-2006 100.3% 61.7% (54.5%) 99.3% 81.2% Note: Prior to 2004 Payment in Lieu of Taxes (PILT) was reported in the Franchise Tax category. PILT is currently reported as an interfund transfer. 98 ---PAGE BREAK--- City of Farmington Schedule 6 Taxable Gross Receipts by Industry Last Ten Fiscal Years (in thousands) Ending 6/30 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Agriculture 1,713 $ 1,557 $ 1,724 $ 2,199 $ 12 $ 208 $ 2,002 $ 2,461 $ 2,726 $ 2,769 $ Mining 55,049 62,599 71,688 100,802 117,792 125,093 108,454 122,936 133,973 192,806 Construction 58,215 80,477 77,766 96,788 74,984 97,131 98,292 90,069 118,025 142,174 Manufacturing 28,186 26,943 33,136 31,951 32,266 40,120 27,001 33,015 50,656 78,377 Trans/Comm/Utility 36,506 40,831 41,789 42,428 59,034 48,676 24,178 15,481 20,096 33,026 Wholesale Trade 72,032 88,739 83,114 84,959 101,477 103,921 76,836 85,158 113,951 160,468 Retail Trade 554,840 591,284 609,087 630,252 620,126 667,453 668,134 653,535 673,785 634,152 Information and Cultural - - - - - - - 25,225 44,094 43,293 Finance/Ins/Real Estate 18,146 18,484 21,750 22,326 23,176 22,102 21,467 20,539 21,001 26,338 Services 214,774 237,056 265,693 298,995 302,388 365,188 365,245 464,410 507,610 506,892 Government - - 216 - - - - 2,240 1,920 - Unclassified - - - - - 84 75,713 35,955 40,682 39,669 Undisclosed - - - - 24,620 24,705 33,493 30,835 28,708 26,503 Total 1,039,461 $ 1,147,970 $ 1,205,963 $ 1,310,700 $ 1,355,875 $ 1,494,681 $ 1,500,815 $ 1,581,859 $ 1,757,227 $ 1,886,467 $ 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 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 FY 2001, the Gross Receipts Tax information is derived from the NM_FR003-500 Local Gov't Distribution Summary. Prior year history stems from the previously used Report 080-Analysis of Gross Receipts. 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 99 ---PAGE BREAK--- City of Farmington Schedule 7 Direct and Overlapping Gross Receipts Tax Rates Last Ten Fiscal Years (rate per $1,000 of assessed value) Fiscal Year State GRT City Share of State GRT City Direct Rate San Juan County Total City GRT 1997 3.2750% 1.2250% 1.1875% 0.2500% 5.9375% 1998 3.2750% 1.2250% 1.1875% 0.2500% 5.9375% 1999 3.2750% 1.2250% 1.1875% 0.2500% 5.9375% 2000 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 2001 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 2002 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 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% 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. 100 ---PAGE BREAK--- City of Farmington Schedule 8 Taxable Gross Receipts Payers by Industry Current Year and Nine Years Ago Ending 6/30 Number of Filers Percentage of Total Taxable Gross Receipts Percentage of Total Number of Filers Percentage of Total Taxable Gross Receipts Percentage of Total (thousands) (thousands) Agriculture 17 0.20% 2,769 $ 0.15% 16 0.27% 1,713 $ 0.16% Mining 205 2.42% 192,806 10.22% 160 2.65% 55,049 5.30% Construction 752 8.87% 142,174 7.54% 597 9.89% 58,215 5.60% Manufacturing 303 3.57% 78,377 4.15% 198 3.28% 28,186 2.71% Trans/Comm/Utility 109 1.29% 33,026 1.75% 188 3.11% 36,506 3.51% Wholesale Trade 582 6.86% 160,468 8.51% 409 6.77% 72,032 6.93% Retail Trade 1,921 22.66% 634,152 33.62% 1,833 30.36% 554,840 53.38% Information and Cultural 199 2.35% 43,293 2.29% - 0.00% - 0.00% Finance/Ins/Real Estate 314 3.70% 26,338 1.40% 204 3.38% 18,146 1.75% Services 4,045 47.71% 506,892 26.87% 2,421 40.10% 214,774 20.66% Government - 0.00% - 0.00% - 0.00% - 0.00% Unclassified 21 0.25% 39,669 2.10% - 0.00% - 0.00% Undisclosed 10 0.12% 26,503 1.40% 11 0.18% - 0.00% Total 8,478 100.00% 1,886,467 $ 100.00% 6,037 100.00% 1,039,461 $ 100.00% Source: State of New Mexico Department of Taxation & Revenue distribution reports Notes: 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. Beginning with FY2001, the Gross Receipts Tax information is derived from the NM_FR003-500 Local Gov't Distribution Summary. Prior year history stems from the previously used NM Report 080-Analysis of Gross Receipts. 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 receitps tax "harmless". Fiscal Year 2006 Fiscal Year 1997 101 ---PAGE BREAK--- City of Farmington Schedule 9 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 1997 235,856,912 $ 162,754,055 $ 39,260,240 $ 32,461,700 $ 405,409,507 $ 1.745 2.030 1,217,445,967 $ 33.3% 1998 253,132,399 165,015,621 43,332,429 32,901,231 428,579,218 1.713 2.042 1,287,024,679 33.3% 1999 267,418,680 169,225,794 47,930,836 33,380,149 451,195,161 1.667 2.051 1,354,940,423 33.3% 2000 305,827,139 238,899,699 52,732,381 57,201,892 540,257,327 1.539 1.916 1,622,394,375 33.3% 2001 315,605,501 242,149,847 56,231,225 54,407,855 559,578,718 1.582 1.935 1,680,416,571 33.3% 2002 301,906,840 266,855,420 61,117,936 53,434,815 576,445,381 1.584 1.905 1,731,067,210 33.3% 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% Source: San Juan County Treasurer 102 ---PAGE BREAK--- City of Farmington Schedule 10 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 1997 1.745 $ - $ 1.745 $ 1.347 $ 7.223 $ 11.512 $ 3.956 $ 0.600 $ 26.383 $ 1998 1.713 - 1.713 1.438 7.035 11.798 3.816 0.600 26.400 1999 1.667 - 1.667 1.482 6.693 11.054 3.631 0.600 25.127 2000 1.539 - 1.539 1.529 6.096 10.814 3.307 0.600 23.885 2001 1.582 - 1.582 1.765 6.276 10.409 3.405 0.600 24.037 2002 1.584 - 1.584 1.123 6.285 10.346 3.410 0.600 23.348 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 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 1997 2.030 $ - $ 2.030 $ 1.347 $ 8.000 $ 11.692 $ 4.500 $ 0.600 $ 28.169 $ 1998 2.042 - 2.042 1.438 8.000 11.902 4.500 0.600 28.482 1999 2.051 - 2.051 1.482 8.000 11.225 4.500 0.600 27.858 2000 1.916 - 1.916 1.529 8.000 11.077 4.500 0.600 27.622 2001 1.935 - 1.935 1.765 8.000 10.637 4.500 0.600 27.437 2002 1.905 - 1.905 1.123 8.000 10.469 4.500 0.600 26.597 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 Source: San Juan County Assessor's Office City of Farmington Residential Direct Rates City of Farmington Nonresidential Direct Rates Overlapping Rates Overlapping Rates 103 ---PAGE BREAK--- City of Farmington Schedule 11 Principle 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 Price Development - Animas Mall 31,270,854 $ 1 4.1% 7,507,953 $ 1 1.9% Qwest Corporation 21,901,409 2 2.9% 4,811,601 3 1.2% Burlington Resources 17,136,387 3 2.3% - - Alltel Communications 16,149,017 4 2.1% - - PNM Gas Services 10,915,003 5 1.4% 1,798,134 8 0.4% Hanover Compression Limited Partnership 9,305,782 6 1.2% - - Plaza Farmington II LLC 8,378,082 7 1.1% - - Constar Company 8,073,352 8 1.1% - - San Juan Development Corporation 7,792,227 9 1.0% - - Bank of America Leasing & Capital 7,704,890 10 1.0% - - Wal-Mart/Sam's Club - - 3,746,085 4 0.9% SW Farmington Incorporated (The Inn) - - 2,466,947 5 0.6% Mesa Airlines - - 4,964,815 2 1.2% Citizens Bank - - 2,377,560 6 0.6% El Paso Natural Gas - - 1,931,725 7 0.5% First National Bank - - 1,785,114 9 0.4% El Paso Field Service - - 1,670,492 10 0.4% Total 138,627,003 $ 18.2% 33,060,426 $ 8.2% 2006 1997 104 ---PAGE BREAK--- City of Farmington Schedule 12 Property Tax Levies and Collections Last Ten Fiscal Years Calendar Year Taxes Levied for the Fiscal Year Amount Percentage of Levy Collections in Subsequent Years Amount Percentage of Levy 1996 700,498 $ 671,897 $ 96% 21,781 $ 693,678 $ 99% 1997 734,277 717,162 98% 35,681 752,843 103% 1998 764,652 753,653 99% 36,620 790,273 103% 1999 789,988 782,611 99% 36,463 819,074 104% 2000 844,443 826,288 98% 31,365 857,653 102% 2001 899,429 865,899 96% 41,751 907,650 101% 2002 927,021 874,028 94% 38,212 912,240 98% 2003 971,270 926,305 95% 41,402 967,707 100% 2004 1,026,992 982,868 96% 37,284 1,020,152 99% 2005 1,103,523 1,055,826 96% 38,894 1,094,720 99% Source: San Juan County Treasurer Notes: 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. Collected Within the Fiscal Year of the Levy Total Collections to Date 105 ---PAGE BREAK--- City of Farmington Schedule 13 Ratios of Outstanding Debt by Type Last Ten Fiscal Years General Bonded Debt Governmental Activities Fiscal Year General Obligation Bonds Percentage of Actual Taxable Value of Property Per Capita Sales Tax Revenue Bonds Utility Revenue Bonds NMED Loan Capital Leases Total Primary Government Percentage of Personal Income Per Capita 1997 - $ N/A N/A 8,525,000 $ 149,355,000 $ - $ 205,552 $ 158,085,552 $ 23.2% 3,952 $ 1998 - N/A N/A 7,675,000 142,990,000 - 132,589 150,797,589 21.3% 3,723 1999 - N/A N/A 6,460,000 96,935,000 - 309,478 103,704,478 14.2% 2,561 2000 - N/A N/A 5,545,000 80,215,000 - 203,209 85,963,209 11.5% 2,123 2001 - N/A N/A 4,590,000 61,420,000 - 793,067 66,803,067 8.7% 1,629 2002 - N/A N/A 13,815,000 57,040,000 3,466,634 454,081 74,775,715 9.8% 1,869 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 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 17 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year. Business-type Activities 106 ---PAGE BREAK--- City of Farmington Schedule 14 Direct and Overlapping Governmental Activities Debt As of June 30, 2006 Governmental Unit Debt Outstanding Estimated Percentage Applicable Estimated Share of Direct and Overlapping Debt San Juan County - $ 30.32% - $ Farmington Public Schools 33,340,000 100.00% 33,340,000 San Juan College 27,512,480 30.32% 8,342,334 Subtotal Overlapping Debt 41,682,334 City direct debt 12,800,000 Total direct and overlapping debt 54,482,334 $ Source: Debt amounts are provided by each governmental unit 107 ---PAGE BREAK--- City of Farmington Schedule 15 Legal Debt Margin Information Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Assessed Valuations Assessed Value 372,947,807 $ 395,677,987 $ 417,815,012 $ 483,055,435 $ 505,170,863 $ 523,010,566 $ 577,578,600 $ 602,018,135 $ 650,930,835 $ 699,255,163 $ Add back - exempt property 32,461,700 32,901,231 33,380,149 57,201,892 54,407,855 53,434,815 56,984,789 59,092,903 61,710,344 61,449,809 Total Assessed Value 405,409,507 428,579,218 451,195,161 540,257,327 559,578,718 576,445,381 634,563,389 661,111,038 712,641,179 760,704,972 Legal Debt Margin Debt limitation - 4 % of total assessed value 16,216,380 17,143,169 18,047,806 21,610,293 22,387,149 23,057,815 25,382,536 27,134,479 28,505,647 30,428,199 Debt applicable to limitation: Total bonded debt 157,880,000 150,665,000 103,395,000 85,760,000 66,010,000 70,855,000 64,210,000 57,190,000 55,480,000 49,650,000 Less: Revenue bonds (157,880,000) (150,665,000) (103,395,000) (85,760,000) (66,010,000) (70,855,000) (64,210,000) (57,190,000) (55,480,000) (49,650,000) Total net debt applicable to limitation - - - - - - - - - - Legal Debt Margin 16,216,380 $ 17,143,169 $ 18,047,806 $ 21,610,293 $ 22,387,149 $ 23,057,815 $ 25,382,536 $ 27,134,479 $ 28,505,647 $ 30,428,199 $ Excludes centrally assessed property. Fiscal Year 108 ---PAGE BREAK--- City of Farmington Schedule 16 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 1997 62,008,078 $ 29,294,348 $ 32,713,730 $ 9,990,000 $ 10,798,482 $ 1.57 12,821,993 $ 265,000 $ 306,438 $ 22.44 1998 63,978,884 32,428,756 31,550,128 6,465,000 9,387,108 1.99 16,927,240 310,000 294,248 28.01 1999 70,945,775 39,720,550 31,225,225 5,252,551 7,518,423 2.45 14,855,972 325,000 279,368 24.58 2000 72,162,111 41,672,313 30,489,798 5,120,000 5,761,169 2.80 16,180,915 340,000 263,118 26.83 2001 95,338,525 52,772,478 42,566,047 5,385,000 3,625,288 4.72 17,314,267 355,000 245,778 28.82 2002 92,079,901 58,676,235 33,403,666 4,380,000 4,005,058 3.98 18,726,210 965,000 368,188 14.05 2003 91,914,248 61,217,128 30,697,120 4,350,000 2,726,755 4.34 18,321,971 1,815,000 560,368 7.71 2004 97,272,752 64,101,912 33,170,840 5,120,000 2,291,203 4.48 19,992,424 1,900,000 483,230 8.39 2005 104,017,779 73,226,886 30,790,893 5,470,000 2,048,221 4.10 22,485,938 1,965,000 421,480 9.42 2006 104,286,825 64,874,653 39,412,172 4,770,000 1,790,605 6.01 25,686,651 1,060,000 588,522 15.58 Utility Revenue Bonds Sales Tax Revenue bonds 109 ---PAGE BREAK--- City of Farmington Schedule 17 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 1996 40,000 680,000,000 $ $17,000 30.2 10,659 79.9% 18.4% 12.1% 1997 40,500 708,750,000 17,500 30.2 10,556 79.9% 18.4% 10.2% 1998 40,500 729,000,000 18,000 30.2 10,421 79.9% 18.4% 8.3% 1999 40,500 749,250,000 18,500 30.2 10,375 79.9% 18.4% 7.5% 2000 41,000 768,750,000 18,750 33.6 10,209 83.6% 19.7% 5.8% 2001 40,000 760,000,000 19,000 33.6 10,215 83.6% 19.7% 5.4% 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 43,200 1,006,257,600 23,293 33.6 10,253 83.6% 19.7% 5.5% 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, and the 1990 and 2000 Censuses. School enrollment provided by Farmington Municipal Schools as of the 40 day census. Unemployment information obtained from the New Mexico Department of Labor. Per Capita Personal Income estimated for current year based on prior year percent change. Calendar Year 110 ---PAGE BREAK--- City of Farmington Schedule 18 Principle Employers Current Year and Six Years Ago Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment Central Consolidated Schools 1,400 1 2.5% 1,128 1 2.3% San Juan Regional Medical Center 1,093 2 2.0% 776 4 1.6% Farmington Public Schools 1,200 3 2.2% 1,090 2 2.2% BHP Billiton 928 4 1.7% 854 3 1.7% City of Farmington 673 5 1.2% 596 5 1.2% San Juan County 612 6 1.1% 448 9 0.9% Arizona Public Service 579 7 1.0% 565 7 1.1% Public Service Company of New Mexico 567 8 1.0% 567 6 1.1% Bloomfield Schools 518 9 0.9% 492 8 1.0% San Juan College 500 10 0.9% 415 10 0.8% Total 8,070 14.5% 6,931 13.9% Source: San Juan Economic Development Service and the New Mexico Department of Labor Note: Statistical data is representative of entire county as City data is not available. Earliest accessible information is 2000. 2006 2000 111 ---PAGE BREAK--- City of Farmington Schedule 19 Full-time-Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General Government Administration 32.0 33.0 34.5 36.5 36.5 37.5 37.5 37.5 38.5 40.5 Administrative Services 30.0 29.0 28.0 28.0 29.0 30.0 31.0 31.0 31.0 31.0 General Services 31.0 31.0 30.0 30.0 32.0 32.0 38.0 37.0 36.0 36.0 Police 153.2 146.2 135.2 140.5 143.5 147.5 148.5 148.5 148.5 159.5 Fire 71.0 71.0 71.0 73.0 73.0 73.0 73.0 73.0 73.0 82.0 Parks, Recreation and Cultural Affairs 94.5 94.5 94.5 96.5 103.5 107.0 112.0 114.0 114.0 118.0 Community Development 64.6 64.6 66.0 65.0 65.0 67.0 68.0 68.0 70.0 73.0 Electric 132.0 135.0 130.0 130.0 130.0 133.0 135.0 135.0 144.0 146.0 Human Resources 10.0 10.0 10.0 10.0 11.0 10.0 10.0 10.0 10.0 11.0 Water/Wastewater 2.0 2.0 2.0 3.0 3.0 4.0 7.0 7.0 8.0 8.0 Golf 10.0 9.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 7.0 Airport 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 6.5 Total Employees 635.8 630.8 614.7 626.0 640.0 654.5 673.5 674.5 686.5 718.5 Source: City of Farmington Program Budget - Staffing Analysis Section, past ten years Note: Full-time-Equivalent includes all approved budgeted positions. Budgeted Full-time-Equivalent Employees as of June 30 112 ---PAGE BREAK--- City of Farmington Schedule 20 Operating Indicators by Function/Program Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General Government Total number of business registration/licenses 2,317 2,730 2,589 2,618 2,515 2,549 2,576 2,730 2,680 2,739 Police Police reports 8,995 7,153 6,605 7,462 8,213 8,429 7,177 6,512 6,636 6,254 Arrests 4,824 5,123 4,505 4,913 5,211 5,472 5,118 4,523 4,400 3,814 Traffic citations 18,286 13,554 18,291 27,219 23,898 23,475 26,147 22,274 17,473 16,263 Fire Fire alarm responses 431 1,013 782 938 1,033 886 804 772 700 888 Total responses 4,141 4,366 3,961 3,670 4,167 4,195 4,160 4,746 4,885 5,457 Parks and Recreation Parks and recreation participants 335,418 350,770 352,410 340,732 338,043 320,048 310,076 304,701 299,248 309,846 Library Patrons 327,943 343,207 337,569 322,209 307,982 289,280 247,983 327,505 410,690 427,831 Circulation 324,133 300,992 292,266 280,404 271,748 279,452 280,022 392,221 490,717 517,654 Number of volumes 184,064 176,316 165,235 194,222 207,270 165,195 174,689 162,653 174,381 187,431 Museum Patrons 100,010 11,749 38,277 60,350 53,544 47,281 57,782 52,314 64,572 75,427 Community Development Summary plats N/A N/A N/A 36 54 49 43 38 89 77 Building permits issued 1,956 1,821 1,861 1,797 1,315 1,382 1,339 1,443 1,554 1,494 Permit valuation (in 33,017,139 53,025,910 48,352,181 40,301,508 47,969,286 41,087,054 47,827,308 54,288,877 76,647,366 99,406,673 Asphalt placed (sq.ft.) 111,290 108,412 96,973 81,722 125,456 106,852 96,798 123,514 83,727 132,216 Concrete placed (cu.yd.) 991 1,029 1,029 821 762 1,071 1,032 756 698 441 Electric Meter connections N/A N/A 6,200 7,318 7,262 8,608 9,201 9,478 9,265 9,387 Meter reads N/A N/A 600,084 611,911 576,928 567,942 558,859 554,291 561,898 541,090 Water/Wastewater Water treated (millions of gallons) N/A N/A 4,062 4,011 4,100 4,534 4,452 4,057 3,366 3,842 Effluent treated (millions of gallons) N/A N/A 1,824 1,790 1,779 1,772 1,832 1,781 1,858 1,881 New water meter installations N/A N/A 216 221 191 177 176 205 304 373 Golf Golf course participants 77,929 81,564 78,408 70,626 62,274 58,466 54,388 58,399 60,999 71,689 Airport Total enplanements 86,124 75,495 63,774 63,403 62,459 39,085 27,160 30,132 35,503 32,575 Source: Provided by various City department Notes: A portion of 1997 and 1998 was estimated based on the same quarters for FY98, FY99 and FY00. Fluctuation in museum patronage is due to special exhibits. Fiscal Year 113 ---PAGE BREAK--- City of Farmington Schedule 21 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Police Police stations 1 1 1 1 1 1 1 1 1 1 Sub-stations N/A N/A 3 4 3 3 3 3 3 3 Patrol units N/A 134 141 151 158 166 170 172 155 170 Fire stations 5 5 5 5 5 5 5 5 5 6 Parks and Recreation Developed acres 515 519 529 584 584 584 586 588 588 589 Undeveloped acres 1,082 1,078 1,740 1,275 1,275 1,275 1,273 1,282 1,289 1,288 Number of parks 59 59 59 70 71 76 77 79 80 80 Baseball/softball diamonds 15 24 24 24 24 24 24 24 25 25 Soccer/football fields 9 11 11 11 11 11 11 11 13 13 Number of golf courses 2 2 2 2 2 2 2 2 2 2 Community Development Streets (miles) N/A N/A N/A N/A N/A 234 235 238 240 245 Highway (miles) N/A N/A N/A N/A N/A 17 17 17 17 17 Streetlights N/A N/A N/A N/A N/A 3,843 3,871 3,915 3,933 3,971 Traffic signals N/A N/A N/A N/A N/A 73 74 75 76 77 Water Water mains (miles) N/A N/A N/A N/A N/A 310 318 325 330 336 Fire hydrants N/A N/A N/A N/A N/A 1,866 2,010 2,154 2,296 2,360 Storage capacity (thousands of gallons) N/A N/A N/A N/A N/A 24,300 24,300 24,300 24,300 24,300 Wastewater Sanitary sewers (miles) N/A N/A N/A N/A N/A 191 195 199 203 207 Treatment capacity (thousands of gallons) N/A N/A N/A N/A N/A 5,800 5,800 6,670 6,670 6,670 Transit - minibuses N/A N/A N/A N/A 8 8 8 8 8 8 Source: Provided by various City department Note: The city implemented GASB Statement 34 infrastructure information in fiscal year 2002. Fiscal Year 114 ---PAGE BREAK--- Single Audit Section Single Audit Section ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2006 Grantor / Balance Balance CFDA Pass-through July 1, Cash Disburse- June 30, PROGRAM NAME Number ID Number 2005 Receipts ments 2006 DIRECT PROGRAMS Airport Improvement 20.106 U.S. Department $ 34,580 $ (34,580) $ - $ - Program of Transportation 2003-04 Project Noise Mitigation Project Airport Improvement 20.106 U.S. Department - (689,748) 689,748 - Program of Transportation 2004 Project Community Development 14.228 U.S. Department of - (297,920) 297,920 - Block Grant (CDBG) HUD Federal Transit - Metropolitan 20.505 U.S. Department 2005 Transit Operations of Transportation and Capital - (501,912) 501,912 - Law Enforcement Block 16.592 U.S. Department - - 50,713 50,713 Grant-2006 of Justice Bullet Proof Vest program 16.207 U.S. Department - (1,280) 1,280 - of Justice HIDTA Grant 16.000 Office of the 47,465 (153,572) 188,243 82,136 President / I4PSNP572 PASS THROUGH PROGRAMS From the State of New Mexico Department of Public Safety Region II Narcotics Grant 16.579 U.S. Department 110,584 (177,871) 170,711 103,424 (U.N.E.T.) of Justice / 04-DCSI-PPA 02-REGION II-FY05 Total Federal Assistance $ 192,629 $ (1,856,883) $ 1,900,527 $ 236,273 See accompanying notes to the Schedule of Expenditures of Federal Awards. 115 ---PAGE BREAK--- CITY OF FARMINGTON NOTES TO SCHEDULE OF EXPE NDITURES OF FEDERAL AWARDS Year Ended June 30, 2006 NOTE 1 - SCOPE OF AUDIT PURS UANT TO OMB CIRCULAR A-133 All federal grant operations of the City of Farmington (the "City") are included in the scope of the Office of Management and Budget ("OMB") Circular A-133 audit (the "Single Audit"). The Single Aud it was performed in accordance with the provisions of the OMS Circular Compliance Supplement. Compliance testing of all requirements as described in the Compliance Supplement was performed for the grant programs noted below. These programs represent all federal award programs and other grants with fiscal 2006 cash and non-cash expenditures to ensure coverage of at least 25 percent (low risk auditee) of federally granted funds . Actual coverage is 26% of total cash and non-cash federal award program expenditures. Fiscal Year 2006 Expenditure Major Federal Award Program Description 20.505 - Federal Transit Metropolitan Grants $ 501,912 The City has one high-risk type A and one low-risk type A program s for the 2006 audit. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The accompanying Schedule of Expenditures of Federal Awards includes all federal grants to the City that had activity during the fiscal year ended June 30, 2006. This schedule has been prepared on the accrual basis of accounting. Grant revenues are recorded for financial reporting purposes when the City has met the qualifications for the respect ive grants. Accrued and deferred reimbursements Various reimbursement procedures are used for Federal awards received by the City. Consequently, timing differences between expenditures and program reimbursements can exist at the beginning and end of the year. Accrued balances at year-end represent an excess of reimbursable expenditures over receipts to date. Generally, accrued or deferred balances covered by differences in the timing of cash receipts and expenditures will be reversed in the remaining grant period . 116 ---PAGE BREAK--- P.O. Box 308 • New MexIco 874'7'7 505-326-0?7U • F,lX 505-326-02'74 ('mdil DAVID BERRY, CPA, PC CERTIFIED PUBLICACCOUNTANT' SMALLBUSINESS CONSULTANT Report 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 City of Farmington Farmington, New Mexico Honorable Mayor and City Council and Mr. Domingo P. Martinez, CGFM New Mexico State Auditor We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information, and the combining and individual funds presented as supplemental information of the City of Farmington, New Mexico (City) as of and for the year ended June 30, 2006, and have issued our report thereon dated November 3, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. 117 ---PAGE BREAK--- Page Two We noted instances of noncompliance that are required to be reported under Section 12-6-5, NMSA 1978, which are described in the accompanying schedule of findings and responses as findings 2006-1, 2006-2 and 2006-3. This report is intended solely for the information and use of the City Council, City management, the Office of the State Auditor, the New Mexico Legislature, and federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. Farmington, New Me~tJ'~/ C 1"1 h November 3, 2006 / 118 ---PAGE BREAK--- PO Box 308 • New 87499 ';OS-326-02l'0 • FdX ')()'>-326-0294 ('-ln111 1VICi ,"cil)('11 ycp,IC om DAVID BERRY, CPA, PC CERTIFIED PUBLIC ACCOUNTANT· SMALL BUSINESS CONSULTANT ",IY'N.ciIJe'r rycpel (om Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMS Circular A-133 City of Farmington Farmington, New Mexico Honorable Mayor and City Council and Mr. Domingo P. Martinez, CGFM New Mexico State Auditor Compliance We have audited the compliance of the City of Farmington, New Mexico (City) with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2006. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMS Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Those standards and OMS Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2006. Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. 119 ---PAGE BREAK--- Page Two Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the City Council, City management, the Office of the State Auditor, the New Mexico Legislature, and federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. Farmington, New Mexico Y November 3, 2006 120 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2006 A. SUMMARY OF AUDIT RESULTS 1. The auditors’ report expresses an unqualified opinion on the basic financial statements of the City of Farmington. 2. No material weaknesses relating to the audit of the financial are reported in the Independent Auditor’s Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the financial statements of the City were disclosed during the audit. 4. No material weaknesses relating to the audit of the major federal award programs are reported in the Independent Auditors’ Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133. 5. The auditor’s report on compliance for the major federal award programs for the City expresses an unqualified opinion. 6. No audit findings relative to the major federal award programs for the City are reported in Part C. of this Schedule. 7. The program tested as major programs included: Major Federal Award Program Description Fiscal Year 2006 Expenditure 20.106 – Airport Improvement Program $ 551,845 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The City was determined to be a low-risk auditee. 121 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2006 B. FINDINGS – FINANCIAL STATEMENTS AUDIT Prior Year Findings Status 2005-1 Outstanding Bank Items Cleared 2005-2 Unbilled Property Taxes Cleared 2005-3 Enterprise Budget to Actual Comparisons Cleared Current Year Findings 2006-1 Travel Reimbursement Condition During our testing of 15 travel and per diem reimbursements, we noted that an individual requested a reimbursement for other expenses ($9.54) that were expended for food items. Criteria The City should follow its policies and procedures, and the State Per Diem and Mileage Act related to travel expenditures. Cause The “Actual Expenditure Worksheet” was approved for food expenditures listed as other expenditures. Effect The City is not in compliance with its policies and procedures related to travel expenditures. Recommendation The City should follow its policies and procedures and the State Per Diem and Mileage Act related to travel expenditures. Management Response The City discovered this noncompliance issue during a routine examination of our travel reimbursements. Procedures are in place to discover this type of noncompliance. The amount has been repaid to the City. We talked to the travel coordinator involved about this instance to ensure this doesn’t happen again and we have incorporated this situation into our travel training in an effort to prevent this from occurring in the future. 122 ---PAGE BREAK--- 2006-2 Personal Use of Purchase Cards Condition During the fiscal year, the City detected four instances (amounts of $130.00, $429.60, $1,199.99 and $120.00) of individuals using a City issued Purchase Card for personal use. Criteria The City’s policy for Purchase Cards prohibits the use of the Purchase Cards for personal purchases as addressed in FR-03-4. Cause The individuals did not comply with the City’s policy for Purchase Cards. Effect There were instances of noncompliance with the City’s policy on the use of the Purchase Cards. Recommendation The City should continue to strictly enforce the City’s policy and take appropriate action against individuals that do not comply with the City’s policy. Management Response The City discovered these noncompliance issues during the processing of the Purchase Card statements. Procedures are in place to discover this type of noncompliance. The amounts have been repaid to the City. Appropriate action was taken to address these instances with each employee involved. The City has recently updated the Purchase Card Policies and Procedures Handbook and incorporates all discoveries of noncompliance into training for all new Purchase Card holders in an effort to prevent any type of noncompliance. 123 ---PAGE BREAK--- 2006-3 Actual Expenses Exceeded Final Budget Condition The City’s actual expenses exceeded final budget in the Airport Enterprise Fund and the Sanitation Enterprise Fund. Criteria The City is not in compliance with State Statue 6-6-6 NMSA 1978 regarding expenses not exceeding budgeted authority. The State requires that actual expenses do not exceed final budgeted expenses. Cause The City did not sufficiently increase budgeted expenses at year end to cover actual expenses for the year ended June 30, 2006. Effect The City is not in compliance with the State Statue regarding expenses not exceeding budgeted authority. Recommendation The City should adopt a final budget so that actual expenses will not exceed budgeted expenditures. Management Response The Sanitation fund’s expenses exceeded the budget amount due to booking accrued unbilled revenue which was received in July. The related expense was booked due to the sanitation contract which states that 94% of the revenue will be paid to the contractor. This accrual entry was made after the final budget revision was approved. In the Airport fund, additional revenues were received during the year and the revenue increase was included in the final budget revision but the corresponding increase to the budgeted expense line item was omitted. In the future, management will make every effort to review final actual expenses and try to anticipate any additional accrued expense for each fund and adjust the final budget revision accordingly. C. FINDINGS – MAJOR FEDERAL AWARD PROGRAMS AUDIT None 124 ---PAGE BREAK--- REPORT AND OTHER INFORMATION REQUIRED BY THE PASSENGER FACILITY CHARGE AUDIT GUIDE FOR PUBLIC AGENCIES 125 ---PAGE BREAK--- 126 ---PAGE BREAK--- I' 0 f30x 308 • N('w MexIco 87499 DAVID BERRY, CPA, PC 5053Z(J0270 • F,IX SOC,3260294 CERTIFIED PUBLICACCOUNTANT· SMALL BUSINESS CONSULTANT r-rn. III' o III Report on Compliance Applicable to the Passenger Facility Charge Program and on Internal Control Over Compliance in Accordance with the Passenger Facility Charge Audit Guide for Public Agencies and on the Schedule of Passenger Facility Charges Revenues and Disbursements City of Farmington Farmington, New Mexico Honorable Mayor and City Council and Mr. Domingo P, Martinez, CGFM New Mexico State Auditor Compliance We have audited the compliance of the City of Farmington, New Mexico (City) with the compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration (Guide), for its passenger facility charge program for the year ended June 30, 2006, Compliance with the requirements of laws and regulations applicable to its passenger facility charge program is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the passenger facility charge program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances, We believe that our audit provides a reasonable basis for our opinion, Our audit does not provide a legal determination on the City's compliance with those requirements, In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its passenger facility program for the year ended June 30, 2006 Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws and regulations applicable to its passenger facility charge program. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on its passenger facility charge program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance in accordance with the Guide, 127 ---PAGE BREAK--- Page Two Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws and regulations caused by error or fraud that would be material in relation to the passenger facility charge program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. Schedule of Expenditures of Passenger Facility Charges We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information, and the combining and individual funds presented as supplemental information of the City of Farmington, New Mexico (City) as of and for the year ended June 30, 2006, and have issued our report thereon dated November 3, 2006. Our audit was conducted for the purpose of forming opinions on the basic financial statements, and the combining and individual fund financial statements. The accompanying schedule of passenger facility charges and disbursements as required by the Federal Aviation Administration's Passenger Facility Charge Audit Guide for Public Agencies, is presented for purposes of additional analysis and is not a required part of the financial statements of the City. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation to the basic financial statements taken as a whole. This report is intended solely for the information and use of the City Council, City management, the Office of the State Auditor, the New Mexico Legislature, and federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. Farmington, New MeXiC~!cfy, November 3, 2006 128 ---PAGE BREAK--- PFC Revenue and Disbursement Schedule Four Corners Regional Airport FY-06 7/1/05 - 6/30/06 FY-05 Quarter 1 Quarter 2 Quarter 3 Quarter 4 FY-06 FY-06 Program Total Jul-Sept Oct-Dec Jan-Mar Apr-Jun Total Program Total Revenue Collections 166,997 $ 16,189 $ 20,946 $ 20,059 $ 18,133 $ 75,327 $ 242,324 $ Interest - - - - - - - Total Revenue 166,997 16,189 20,946 20,059 18,133 75,327 242,324 Disbursements Application 01 Proj. 1-A Runway Improvements 148,596 - - - - - 148,596 Proj. 1-B Taxiway Improvements 18,401 16,189 20,946 20,059 18,133 75,327 93,728 Proj. 1-C Apron Imporvements - - - - - - - Proj. 1-D Drainage Improvements - - - - - - - Proj. 1-E Sinage Improvements - - - - - - - Proj. 1-F Airfield Electrical Improvements - - - - - - - Proj. 1-G Security Improvements - - - - - - - Proj. 1-H Terminal Improvements - - - - - - - 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 01 166,997 16,189 20,946 20,059 18,133 75,327 242,324 Total Disbursements 166,997 16,189 20,946 20,059 18,133 75,327 242,324 Net PFC Revenue (rev-disb.) PFC Account Balance - $ - $ - $ - $ - $ - $ - $ Notes: 1. Cash Basis 129 ---PAGE BREAK--- CITY OF FARMINGTON PASSENGER FACILITY CHARGE PROGRAM AUDIT SUMMARY Year Ended June 30, 2006 1. Type of report issued on PFC financial statements - Unqualified. 2. Type of report on PFC compliance – Unqualified. 3. Quarterly Revenue and Disbursements reconcile with submitted quarterly reports and reported un-liquidated revenue matches actual amounts – Yes. 4. PFC Revenue and Interest is accurately reported on FAA Form 5100-127 – Yes. 5. The Public Agency maintains a separate financial accounting record for each application – Yes. 6. Funds disbursed were for PFC eligible items as identified in the FAA Decision to pay only for allowable costs of the projects – Yes. 7. carrier receipts were reconciled with quarterly carrier reports – Yes. 8. PFC revenues were maintained in a separate interest-bearing capital account or commingled only with other interest-bearing airport capital funds – Yes. 9. Serving carriers were notified of PFC program actions/changes approved by the FAA – N/A. 10. Quarterly Reports were transmitted (or available via website) to remitting carriers – Yes. 11. The Public Agency is in compliance with Assurances 5, 6, 7 and 8 – Yes. 12. Project design and implementation is carried out in accordance with Assurance 9 – Yes. 13. Program administration is carried out in accordance with Assurance 10 – Yes. 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 – N/A. 130 ---PAGE BREAK--- CITY OF FARMINGTON EXIT CONFERENCE Year Ended June 30, 2006 An exit conference was held on November 27, 2006. In attendance were: For the City of Farmington: William Standley Mayor Bob Hudson City Manager Rob Mayes Executive Assistant to the City Manager Andy Mason Administrative Services Director Eric Schlotthauer Controller Steve Ellison Financial Accountant Sue Nipper Enterprise Accounting Supervisor Sheree Wilson General Accountant For David Berry, CPA, PC (auditors): David Berry CPA 131 ---PAGE BREAK--- 132 ---PAGE BREAK--- OTHER INFORMATION OTHER INFORMATION ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF PLEDGED COLLATERAL June 30, 2006 Citizens Bank of Bank of Wells America Farmington Fargo City of Farmington Deposits Demand Deposit Accounts $ - $ 300,005 $ 3,490,376 Overnight Deposits - - 4,313,851 Certificate of Deposit 10,000,000 23,071,945 25,000,000 Sub-Total 10,000,000 23,371,950 32,804,227 Less FDIC insurance 100,000 100,000 200,000 Uninsured amount 9,900,000 23,271,950 32,604,227 Pledge Collateral Required 102 percent - overnight - - 4,400,128 50 percent - deposits 4,950,000 11,635,975 14,145,188 Total Pledged Collateral Required 4,950,000 11,635,975 18,545,316 Pledged collateral 5,200,565 15,397,848 23,166,729 Excess of pledged collateral $ 250,565 $ 3,761,873 $ 4,621,413 Pledged collateral (market value) and location of each respective financial institution consists of the following: Location of of collateral Dallas, TX Dallas, TX Los Angeles Federal Home Loan Bank cusip # 013572FS6 08/01/06 $ $ 1,800,666 $ cusip # 3128F4SJ1 12/01/24 - cusip # 31359MSL8 07/17/13 4,656,250 cusip # 3136F6YL7 12/25/12 3,534,790 cusip # 31371LPU7 04/01/14 2,536,513 cusip # 31393APP6 12/25/32 1,001,139 cusip # 31394HYD7 05/15/16 1,868,490 FNMS cusip # 31385XAZO 05/01/33 5,200,565 FHARM cusip # 31348T2F8 10/01/20 69,005 FNCL cusip # 31371KF89 12/01/31 170,266 cusip # 31374TNW5 03/01/29 356,149 cusip # 31385HXE7 11/01/31 13,056 cusip # 31385JRN0 11/01/32 64,772 cusip # 31385JRT7 11/01/32 191,630 cusip # 31385W2S7 03/01/33 204,264 cusip # 31385XBD8 05/01/33 91,539 cusip # 31385XD95 04/01/33 402,815 cusip # 31388WXD3 01/01/32 167,281 cusip # 31391GGC4 11/01/32 167,098 cusip # 31391VKQ5 01/01/33 269,325 cusip # 31402DDP2 06/01/34 8,301,271 cusip # 31402RDF3 04/01/35 2,478,180 cusip # 31407HS80 02/01/36 151,136 cusip # 31408HBY0 03/01/36 318,860 cusip # 31409DUS0 04/01/36 2,458,346 cusip # 31409WAJ0 04/01/36 1,178,834 cusip # 31403DDX4 04/01/36 5,245,143 G2SF cusip # 36202DUV1 10/20/32 52,078 GNSF cusip # 36225BEK0 05/15/29 699,182 cusip # 36225BEV6 06/15/29 39,577 cusip # 36225BKX5 09/15/29 45,929 cusip # 36225BM39 04/15/31 30,993 $ 5,200,565 $ 15,397,848 $ 23,166,729 133 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF JOINT POWERS AGREEMENTS June 30, 2006 Participants Responsible Dates of Total Amount/ FY06 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/ 62,993 $ 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 06/30/2 $23,000/$10,410 10,410 $ City of Aztec San Juan County Aztec,Bloomfield, Water Water issues 3/5/86 until termination $18.2m/32.46% - Water Commission San Juan County Commission San Juan Water Users Assoc. Aztec,Bloomfield, SJ County, San Juan County Police Training 8/07/96 until termination $75,000/$35,150 35,150 $ SJ College NM Dept. of Public Safety Crimminal Justice San Juan College Training Authority Aztec,Bloomfield & City of Farmington Recycling Center 11/1/97 until termination $70,232/$64,291 64,291 $ Each entity San Juan County 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 Ilegal 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 As required - City San Juan County NM Taxation & Revenue Tax & Revenue Taxpayer Identi. 05/17/89 perpetual Not applicable - City NM Community Development Dept. of Finance Title 1 Housing 04/12/00 perpetual Not applicable - City Council and NM Dept of Finance & Admin. Aztec,Bloomfield, SJ County City of Farmington MPO 3/11/03 to 9/30/06 $ 52,090 / $ 17,645 17,645 $ City San Juan County San Juan County Detention Center 12/16/04 to 6/30/06 $9,272,000/$853,583 853,583 $ San Juan County San Juan County San Juan County DWI Treatment Ctr 04/15/98 to 12/31/06 $1,639,000/$440,000 440,000 $ San Juan County NM Energy, Minerals and Natural Resources Department (NMEMNRD) NMEMNRD Wildfire Firefighting 12/12/05 to 12/11/10 As needed 29,392 $ NMEMNRD 134