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Comprehensive Annual Financial Report cITY OF fARMINGTON nEW mEXICO jULY 1, 2006 - JUNE 30, 2007 ---PAGE BREAK--- CITY OF FARMINGTON NEW MEXICO COMPREHENSIVE ANNUAL FINANCIAL REPORT For The Year Ended June 30, 2007 Prepared By: Administrative Services Department – Finance Division Eric D. Schlotthauer, Controller Sheree Wilson, Enterprise Accountant Sarah Talley, Staff Accountant II With Special Thanks To: Steve Ellison, Budget Officer Susan Nipper, Utility Financial Analyst Carol Taulbee, Administrative Accountant ---PAGE BREAK--- Printing by City of Farmington Print Shop Brenda Keith, Print Shop Supervisor Brandy Sabo, Print Shop Technician ---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 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 Library Construction Project Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 73 Fire GRT Bond Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 74 Governmental 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 92 Changes in Net 2 93 Fund Balance, Governmental 3 95 Changes in Fund Balances, Governmental 4 96 Revenue Capacity: Electric Kilowatt Sales and 5 97 Electric Rates by Customer 6 98 Electric Principle Revenue Payers 7 99 Tax Revenue by Source, Governmental Funds 8 100 Taxable Gross Receipts by Industry 9 101 Direct and Overlapping Gross Receipts Tax 10 102 Taxable Gross Receipts Payers by Industry 11 103 Assessed Value and Estimated Actual Value of Taxable 12 104 Direct and Overlapping Property Tax 13 105 Principle Property Tax 14 106 Property Tax Levies and 15 107 Debt Capacity: Ratios of Outstanding Debt by Type 16 108 Direct and Overlapping Governmental Activities Debt 17 109 Legal Debt 18 110 Pledged-Revenue 19 111 Demographic and Economic Information: Demographic and Economic 20 112 Principle 21 113 Operating Information: Full-time-Equivalent City Government Employees by Function / 22 114 Operating Indicators by Function / 23 115 Capital Asset Statistics by Function / Program 24 116 Single Audit Section: Schedule of Expenditures of Federal Awards 117 Notes to Schedule of Expenditures of Federal Awards 118 ---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 119 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 121 Schedule of Findings and Questioned 123 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.................. 129 Schedule of PFC Revenues and Disbursements 131 PFC Program Audit Summary 132 Exit Conference 133 Other Information: Schedule of Pledged Collateral by Financial Institution 135 Schedule of Joint Powers Agreements 136 ---PAGE BREAK--- ---PAGE BREAK--- INTRODUCTORY SECTION INTRODUCTORY SECTION ---PAGE BREAK--- ---PAGE BREAK--- ii 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 43,600. 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 on a basis. 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, parks, and other infrastructure; and recreational activities, libraries and cultural events. The annual budget serves as the foundation for the City of Farmington’s financial planning and control. All departments of the City of Farmington are required to submit requests for appropriation to the City Manager on or before the last day in 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 31 of each year. The City of Farmington’s fiscal year begins July 1 of each year and ends on June 30. The appropriated budget is prepared according to fund, function (e.g. public safety), and department (e.g. police). Department directors may make transfers of appropriations within a fund and between their divisions. Transfers of appropriations between funds, however, require the special approval of the City ---PAGE BREAK--- iii 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 6.3% and Lodgers Tax revenue was up 13.7% from the prior fiscal year. Electric utility operating revenue increased 2.1% 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 repeat as host to the rodeo. Two sites from Washington State were beat out by the City and County for the right to host the event in 2008 and 2009. This event is billed as the “World’s Largest Rodeo”. When the was held in ---PAGE BREAK--- iv San Juan County in July 2002 and 2003, more than 1500 contestants participated and an average of 7,100 spectators attended each performance. As a result, more than $11 million was brought into the New Mexico economy. These events will again provide a boost to the local economy in 2008 and 2009. The Farmington community annually hosts the Connie Mack World Series which continues to be a popular and beneficial event for the local 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 World Series began in Farmington in 1965. San Juan Regional Medical Center of Farmington completed a $70 million expansion and renovation project during FY 2007. The East Tower expansion project of added 72 private patient rooms, 8 new operating suites, a recovery room, and several day surgery rooms. A new entrance, lobby, and public square are also a part of the new addition. A financing partnership between the hospital and the community is paying for the project, which includes 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 56,978, a decrease of 1.1% over last year mostly attributable to a leveling off of oil and 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 was financed with a 3% $14.2 million loan from the New Mexico Environment Department (NMED). The first loan payment of $952,997 was made on July 1, 2007 and the final loan payment will be July 2026. The treatment plant’s capacity has increased by 15% to meet a projected 6.67 mgd flow rate. In addition, reliability and flexibility have improved 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. Design work for the project began 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. ---PAGE BREAK--- v 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 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 $1,064,838 on all governmental investments including capital projects and internal service funds and $2,357,973 on all proprietary funds for the year ended June 30, 2007. 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 partially self-insured program for group health, workers' compensation, property, boiler and machinery, pollution, crime, and excess liability insurance. The workers compensation and general liability programs continued to be financially sound throughout FY 2007, while the health fund’s cash balance decreased $1,507 to $0 at June 30, 2007. Management will review the fiscal stability of the health insurance fund in FY 2008 and make appropriate modifications to the plan. Beginning January 1, 2008, the retirees participating in the City of Farmington’s health plan will be transferred to the New Mexico Retiree Health Care Authority. This is anticipated to reduce the amount of claims in the second half of FY 2008 which will theoretically have a positive effect on the health fund’s net asset balance. 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 401 defined benefit contributory retirement plan through the Public Employees’ Retirement Association (PERA) of the State of New Mexico. The plan is ---PAGE BREAK--- ---PAGE BREAK--- vii ---PAGE BREAK--- Citizens of Farmington CITY OF FARMINGTON ORGANIZATIONAL CHART June 2007 Municipal Judges Liese & Rowland Mayor and Council Standley, Darnell, Fischer, Sandel, Sharpe City Attorney Burnham Claims Management Legal City Clerk Fuhrman Archives Business Registration City Manager Miller Asst. City Manager Mayes GIS Info Services PC Services Library System 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 Insurance Safety Payroll Electric Utility Grantham-Richards Administration Electric Relay Shop Animas Power Plant Meter Reading/Installation Bluffview Power Plant Navajo Dam Power Plant Customer Service San Juan No. 4 Electric Construction System Control Center Electric Engineering Transmission & Distribution Electric Meter Shop 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 Runnels Administration Holding Facility Communications Operations Grant Funds School Crossing Guards viii ---PAGE BREAK--- ix CITY OF FARMINGTON Principal Officials June 30, 2007 MAYOR William Standley CITY COUNCIL Mary M. Fischer George Sharpe Dan Darnell Jason Sandel CITY MANAGER Michael G. Miller ADMINISTRATIVE SERVICES DIRECTOR H. Andrew Mason GENERAL SERVICES Rod Hunt PARKS & RECREATION Jeff Bowman POLICE James Runnels FIRE Robert Martin COMMUNITY DEVELOPEMENT Michael Sullivan HUMAN RESOURCES Donna Brooks ELECTRIC UTILITY DIRECTOR Maude Grantham-Richards CONTROLLER Eric D. Schlotthauer ---PAGE BREAK--- X MAP COURTESY OF FARMINGTON CONVENTION & VISTORS BUREAU ---PAGE BREAK--- xi MAP COURTESY OF FARMINGTON CONVENTION & VISITORS BUREAU ---PAGE BREAK--- ---PAGE BREAK--- FINANCIAL SECTION FINANCIAL SECTION ---PAGE BREAK--- ---PAGE BREAK--- ---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, 2007. 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 2007 by $391,562,674 (net assets). Of this amount, $68,623,846 (unrestricted net assets) may be used to meet the City’s ongoing obligations. • As of June 30, 2007, the City of Farmington’s governmental funds reported combined ending fund balances of $27,799,675, a decrease of $1,333,750 or 4.6% in comparison with the prior year. A total of $23,102,726 (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 $12,808,778, or 25.4 % of the total general fund expenditures. • The City’s total net debt decreased by $6,035,000 or 12.2% 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 27-48 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 $391,562,674 at the close of FY 2007. The largest portion of the City of Farmington’s net assets (80.6%) 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 2007 FY 2006 FY 2007 FY 2006 FY 2007 FY 2006 Current and other assets 34,225,116 $ 34,251,005 $ 76,404,785 $ 57,349,164 $ 110,629,901 $ 91,600,169 $ Capital assets 86,666,015 87,133,682 287,843,552 279,351,393 374,509,567 366,485,075 Total assets 120,891,131 121,384,687 364,248,337 336,700,557 485,139,468 458,085,244 Long-term liabilities outstanding 13,066,834 14,156,962 48,303,026 52,696,330 61,369,860 66,853,292 Other liabilities 5,457,869 4,109,577 26,749,065 23,472,853 32,206,934 27,582,430 Total liabilities 18,524,703 18,266,539 75,052,091 76,169,183 93,576,794 94,435,722 Net assets: Invested in capital assets, net of related debt 75,000,933 74,339,304 240,531,317 227,625,271 315,532,250 301,964,575 Restricted 4,491,602 4,219,427 2,914,976 2,615,937 7,406,578 6,835,364 Unrestricted 22,873,893 24,559,417 45,749,953 30,290,166 68,623,846 54,849,583 Total net assets 102,366,428 $ 103,118,148 $ 289,196,246 $ 260,531,374 $ 391,562,674 $ 363,649,522 $ 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 ($68,623,846) 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 $27,913,152 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 decreased the City of Farmington’s net assets by $751,720. Key elements of the change in net assets are as follows: ---PAGE BREAK--- 7 Governmental Business-type Activities Activities FY 2007 FY 2006 FY 2007 FY 2006 FY 2007 FY 2006 Revenues: Program revenues: Charges for services 9,156,926 $ 8,345,287 $ 111,374,243 $ 108,470,937 $ 120,531,169 $ 116,816,224 $ Operating grants and Contributions 2,600,396 2,929,307 1,227,869 927,492 3,828,265 3,856,799 Capital grants and Contributions - - 495,436 794,531 495,436 794,531 General revenues: Property taxes 1,235,064 1,121,723 - - 1,235,064 1,121,723 GRT taxes 51,818,982 49,274,220 - - 51,818,982 49,274,220 Other taxes 2,990,508 3,536,122 - - 2,990,508 3,536,122 Other 2,264,513 1,734,861 2,357,973 1,454,975 4,622,486 3,189,836 Total revenues 70,066,389 66,941,520 115,455,521 111,647,935 185,521,910 178,589,455 Expenses: General Government 24,470,791 21,649,221 - - 24,470,791 21,649,221 Police 15,029,695 12,356,592 - - 15,029,695 12,356,592 Fire 7,606,467 6,466,886 - - 7,606,467 6,466,886 Parks, rec & cultural affairs 13,769,347 11,105,380 - - 13,769,347 11,105,380 Community development 10,776,798 8,511,853 - - 10,776,798 8,511,853 Electric - - 66,341,885 65,152,992 66,341,885 65,152,992 Water - - 7,207,259 6,992,577 7,207,259 6,992,577 Wastewater - - 5,274,284 4,690,385 5,274,284 4,690,385 Sanitation - - 4,002,806 3,815,728 4,002,806 3,815,728 Golf - - 1,164,683 1,217,011 1,164,683 1,217,011 Airport - - 1,453,617 1,812,263 1,453,617 1,812,263 Other 511,126 588,521 - - 511,126 588,521 Total expenses 72,164,224 60,678,453 85,444,534 83,680,956 157,608,758 144,359,409 Increase in net assets before transfers (2,097,835) 6,263,067 30,010,987 27,966,979 27,913,152 34,230,046 Transfers 1,346,115 1,925,566 (1,346,115) (1,925,566) - - Increase in net assets (751,720) 8,188,633 28,664,872 26,041,413 27,913,152 34,230,046 Net assets - 7/01/06 103,118,148 94,929,515 260,531,374 234,489,961 363,649,522 329,419,476 Net assets - 6/30/07 102,366,428 $ 103,118,148 $ 289,196,246 $ 260,531,374 $ 391,562,674 $ 363,649,522 $ Total City of Farmington's Changes in Net Assets Oil and gas royalties decreased by $591,565 or 67.4% during the year. This is due to some non-recurring receipts and delinquent/overdue payments received in FY 2006. Operating grants and contributions decreased $328,911 or 11.2% during the year. This is primarily due to decreases in police, MPO, and San Juan County pass- through grant funding. ---PAGE BREAK--- 8 Business-type activities. Business-type activities increased the City of Farmington’s net assets by $28,664,872, accounting for 102.7% of the total growth in the government’s net assets. Key financial elements of the past fiscal year are as follows: • Operating expenses are 74.9% of operating revenues, resulting in $27,996,479 in operating income. • Total electric revenue increased $2,705,039 or 3.0%. Electric sales were up $1.8 million, and investment earnings increased 71.8% or $802,337. Surplus energy sales decreased $960,340, commercial electric sales increased $553,418, and the power cost adjustment increased $3.3 million. Industrial sales decreased $486,547 while wholesale revenues increased $2.2 million. • Total water revenue increased $709,685 or 8.8% due mainly to an increase in water rates and the implementation of a renewal and replacement fee for water infrastructure improvements. • Total wastewater revenue increased by $533,432 or 10.1% during the year due to an increase in wastewater rates, the implementation of a renewal and replacement fee for wastewater infrastructure improvements, and an infrastructure grant received from the State of New Mexico. • Total sanitation revenue increased $169,215 or 4.3% mainly due to the consumer price index increase that is built into the sanitation rate structure. • Investment earnings for business-type activities were $2,357,973, a 62.1% increase over FY 2006 due to increased 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, 2007, the City of Farmington’s governmental funds reported combined ending fund balances of $27,799,675, a decrease of $1,333,750 in comparison with the prior year. Approximately 83.1% of this total amount or $23,102,726 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 ---PAGE BREAK--- 9 available for new spending because it has already been committed for debt service ($310,848), prepaid items ($205,347), and statutory reserves ($4,180,754). 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 $12,808,778, while total fund balance reached $17,194,879. 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 25.4% of total general fund expenditures, while total fund balance represents 34.1% of that same amount. The fund balance of the City of Farmington’s general fund decreased $1,537,243 or 8.2% during the current fiscal year. The total increase in general fund revenue was $1,385,592 due mostly to a 5.3% increase in gross receipts tax. Total general fund expenditures increased $5,119,398 or 11.3% over the prior year. Key elements of this increase were the upgrade of the City’s phone system ($147,580), increased costs for jail fees ($147,616), expansion and additional staffing for the animal shelter/clinic ($208,991), a one-time cost for the buy- in to the New Mexico Health Care Authority ($1,274,744), and increases for wages/benefits for police ($1,765,800) and fire ($1,205,491). 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 increased by $2,769,326 or 80.3% in FY 2007 due to an increase in streets projects. The parks & public works fund also is generally budgeted for full expenditure each fiscal year. However, the fund balance increased by $1,025,785 or 31.7% due to funds for budgeted construction projects not being expended during the fiscal year. 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 $36,434,752 in the electric utility system, $2,220,216 in the water utility system, $6,325,118 in the wastewater utility system, and $769,867 in combined net assets for the other propriety funds (sanitation, golf course, and airport). The total growth in net assets was $26,635,890 in the electric fund, $1,284,682 in the water fund, $417,341 in the wastewater fund, and $326,959 in the other funds combined. The increase in the other proprietary funds was due primarily to a large airport improvement asset that became fully depreciated last year reducing the depreciation expense for FY 2007. 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 2007 was a favorable year for revenues as Gross Receipts Tax (GRT) proceeds increased by $3,195,241 or 6.3% from the prior year on a GAAP basis. This level reflects a continued flattening of the growth curve from FY 2006, when GRT ---PAGE BREAK--- 10 increased 15.9% over the prior year. While still favorable, this level is somewhat below the twenty-five year average growth trend of In the general fund, which received approximately 83.5% of revenue from the gross receipts tax (GRT), FY 2007 GRT revenue was $39,806,346 or 5.3% over FY 2006 actual revenue of $37,800,669. Comparison with the FY 2007 budget was also very favorable in that, actual revenue ended the year $722,809 or 1.8% over budget. On the expenditure side, the original general fund budget of $49,146,152 was increased by over $1.9 million to $51,083,992 during FY 2007. As the positive revenue trend continued in FY 2007, selected expenditures postponed in prior years were approved. This resulted in a 11.3% increase in actual FY 2007 expenditures over the prior year. The difference between the increase in revenue and the increase in expenditures was funded by existing cash balance which decreased by $1,079,525 from the prior year. This decrease in cash reserves will be carefully monitored to insure that only one-time expenditures are funded from cash balance and that projected revenue will be sufficient to cover normal operating expenditures. During the year, five separate revisions were made to the original FY 2007 budget. These adjustments totaled $11,148,451 and equaled 5.7% of the original total budget. Budget revisions in the general fund between the original and final budget for revenue and expenditures amounted to an increase of 0.4% and an increase of 3.9% respectively. In the governmental funds, the largest increase in expenditures was in the GRT-parks and public works fund. This was a result of encumbrances rolled over from the prior year. The water and wastewater enterprise funds had significant increases from original to final budget, due to a revised rate schedule that was adopted during the year to fund the need for increased capital spending to maintain and expand water/wastewater infrastructure. These adjustments were made to cover only a portion of the year. For the FY 2008 budget, the rate increases for a full year were implemented. In FY 2007, several general fund budget issues were addressed. The first issue involved the hiring of personnel to staff the newly completed Fire Station To accomplish this twelve new Fire positions were added. The second issue was the recommended increase in Police personnel to handle increasing incoming calls and other community policing issues. For FY 2007, an additional twenty-one Police positions were added. These additional thirty-three personnel obviously affected operating costs so the priority for the FY 2007 budget was to cover these operating costs without significantly affecting cash reserves. To do this, all general fund capital projects were budgeted to be transferred to the governmental capital projects fund when the project was ready to be started. In this way, expenditures could be controlled by not initiating capital projects unless revenue was coming in at, or above, projected levels and operating expenditures were under budget. In fact, this strategy worked well as revenue came in above projections, expenditures came in below projections, and design work on the Sycamore Park Community Center took longer than expected. As a result of these situations, the ending cash balance budget of $7,799,858 was exceeded by $4,046,167 as the actual ending cash balance totaled $11,846,025. This situation has allowed the increasing GRT to “catch up” with the ---PAGE BREAK--- 11 increased personnel costs so the FY 2008 budget will be balanced with the exception of the capital costs to be transferred to the governmental capital projects fund. Due to growth in the northwest sector of the City, an additional fire station may be needed in the next few years. Another community issue, the Sycamore Park Community Center has completed the design process and bids for construction will soon be awarded. For FY 2008, both of these projects have some funding allocated, in the governmental capital projects fund and elsewhere, $400 thousand for Fire Station #7 and $1.8 million for the Sycamore Park Community Center. However, another $4 million will be needed for these projects to be completed. The source for this funding has not yet been identified and without it the projects can not be completed. Other capital projects such as a regional animal shelter and a bridge over the Animas River are also in the planning stages. During FY 2007, the City used the acquisition of the Animas Credit Union building to establish new offices for the Human Resources Department. The additional remodeling costs were funded from transfers to the governmental capital projects fund. Additional funding will be required in FY 2008 to remodel various other offices affected by the move. The budget for 2007 was also affected by the implementation of new water and wastewater rates. Red Oak Consulting recommended the need to develop a revenue rate structure that would provide for the renewal and replacement of water and wastewater infrastructure, the rate adjustment was implemented and plans were made to start replacing the oldest and most deteriorated lines. This effort will continue in future years as the city upgrades it’s aging infrastructure and expands the system to new customers. A list of priority projects will be developed for work in FY 2008. 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 $3,172,250 or 6.9% and actual expenditures were under budget by $678,713 or 1.3%. These results left the cash balance in the general fund at $11,846,025 million which is equal to 22.6% of the FY 2008 beginning budget. This balance generates additional flexibility for the FY 2008 budget creating a significant “cushion” exists which allows for additional spending without creating negative financial consequences. The final FY 2008 budget anticipates spending down over $2.2 million of this accumulated reserve, mostly for the Sycamore Park 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, 2007 was $374,509,567 (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 ---PAGE BREAK--- 12 for $287,843,552 or 76.9% of the total City of Farmington capital assets. The total increase in the business-type investment in capital assets for the current fiscal year was $8,492,159 or 3.0%. The governmental activities investment in capital assets accounted for $86,666,015 or 23.1% of all capital assets owned by the City. The total increase in governmental activities investment in capital assets for the current year was $(467.667) or Major capital asset investment activities during the current fiscal year included the following: Governental Business-type Activities Activities FY 2007 FY 2006 FY 2007 FY 2006 FY 2007 FY 2006 Land 25,780,126 $ 25,780,126 $ 5,958,417 $ 5,905,282 $ 31,738,543 $ 31,685,408 $ Buildings and system 25,599,746 25,276,672 61,072,050 63,768,452 86,671,796 89,045,124 Improvements 6,831,034 6,360,550 54,873,106 54,662,046 61,704,140 61,022,596 Machinery & equipment 11,036,089 7,508,552 128,373,488 125,127,246 139,409,577 132,635,798 Infrastructure 10,853,642 11,215,804 - - 10,853,642 11,215,804 Construction in progress 6,565,378 10,991,978 37,566,491 29,888,367 44,131,869 40,880,345 Total 86,666,015 $ 87,133,682 $ 287,843,552 $ 279,351,393 $ 374,509,567 $ 366,485,075 $ Total City of Farmington's Capital Assets (net of depreciation) Capital expenditures for the electric utility system will average approximately $16,196,500 per year over the next five fiscal years. Some large projects included in the FY 2008 capital budget are the new San Juan Switching Station ($2,600,000), the Blanco Switching Station ($4,770,000), the West Loop Switching Station ($2,990,000), and miscellaneous customer projects ($4,300,000). 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 $4,288,000 per year, totaling $21,440,000 for fiscal years 2008 through 2012. In mid-year FY 2007, the City of Farmington implemented 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. 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 for 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. Funding of the expansion came from a $9,800,000 loan ---PAGE BREAK--- 13 obtained in August 2000 from the New Mexico Environment Department (NMED), which was later increased to $13,000,000 in September 2002. As of June 30, 2007, draws on the loan were $12,830,162 and interest on the draws during the construction period totaled $1,348,028. The repayment phase of the loan began in FY 2007 with the final promissory note to the NMED, which equaled draws to date plus construction interest, and the first payment was paid June 30, 2007. The note bears 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. During FY 2007, the wastewater fund implemented a rate increase and a new renewal and replacement fee to generate additional revenues for capital projects. Additional information on the City of Farmington’s capital assets can be found in Note C on pages 37-39 of this report. Long-term debt. At the end of the current fiscal year, the City of Farmington had total bonded debt outstanding of $43,615,000. Of this amount, $11,670,000 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 2007 FY 2006 FY 2007 FY 2006 FY 2007 FY 2006 Sales tax bonds 11,670,000 $ 12,800,000 $ - $ - $ 11,670,000 $ 12,800,000 $ Revenue bonds - - 31,945,000 36,850,000 31,945,000 36,850,000 Total 11,670,000 $ 12,800,000 $ 31,945,000 $ 36,850,000 $ 43,615,000 $ 49,650,000 $ City of Farmington's Outstanding Debt Sales Tax and Revenue Bonds Activities Activities Governmental Business-type Total Outstanding Debt $5 $10 $15 $20 $25 $30 $35 $40 Governmental Business-type Millions FY 2006 FY 2007 ---PAGE BREAK--- 14 The City of Farmington’s total net debt decreased $6,035,000 or 12.2% during FY 2007. The wastewater utility system expended $12,830,162 of the $13,000,000 loan for its wastewater treatment plant expansion project and accrued $1,348,028 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 2006 assessed valuation of $875,898,611, the City’s general obligation debt limit is $35,035,944. The City presently has no general obligation bonds outstanding. For more detailed information on the City’s debt, see pages 41-44 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 $ 21,031,491 $ 36,837,300 $ 57,868,791 Receivables (net, where applicable, of allowances for uncollectibles): 863,166 5,877,007 6,740,173 Accrued unbilled revenues - 5,675,594 5,675,594 Special assessments 10,057 - 10,057 Intergovernmental receivable 11,429,910 472,520 11,902,430 Internal balances 251,664 (251,664) - Inventories 275,307 4,128,680 4,403,987 Prepaids 205,347 1,387,972 1,593,319 Deferred charges 158,174 295,879 454,053 Restricted assets Temporarily restricted: Cash and equivalents - 21,981,497 21,981,497 Capital assets (not being depreciated): Land and land rights 25,780,126 5,958,417 31,738,543 Capital assets (net of accumulated depreciation): Buildings and system 25,599,746 61,072,050 86,671,796 Improvements other than buildings 6,831,034 54,873,106 61,704,140 Machinery and equipment 11,036,089 128,373,488 139,409,577 Infrastructure 10,853,642 - 10,853,642 Construction in progress 6,565,378 37,566,491 44,131,869 Total assets 120,891,131 364,248,337 485,139,468 LIABILITIES Accounts payable and other current liabilities 2,540,828 6,064,546 8,605,374 Wages and benefits payable 809,501 241,396 1,050,897 Other accrued liabilities 40,399 1,197,248 1,237,647 Accrued claims liabilities 1,979,118 - 1,979,118 Retainage deposits payable 68,431 - 68,431 Unearned revenue - 1,691 1,691 Accrued interest payable 19,592 177,663 197,255 Customer deposits - 19,066,521 19,066,521 Non-current liabilities: Due within one year 1,242,179 6,261,984 7,504,163 Due in more than one year 11,824,655 42,041,042 53,865,697 Total liabilities 18,524,703 75,052,091 93,576,794 NET ASSETS Invested in capital assets, net of related debt 75,000,933 240,531,317 315,532,250 Restricted for: Debt service 310,848 2,914,976 3,225,824 Statutory reserve 4,180,754 - 4,180,754 Unrestricted 22,873,893 45,749,953 68,623,846 Total net assets $ 102,366,428 $ 289,196,246 $ 391,562,674 The notes to the financial statements are an integral part of this statement. CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets June 30, 2007 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 $ 24,470,791 $ 6,906,273 $ 1,285,717 $ - $ (16,278,801) $ - $ (16,278,801) Police 15,029,695 1,266,550 461,025 - (13,302,120) - (13,302,120) Fire 7,606,467 - 308,095 - (7,298,372) - (7,298,372) Parks, recreation, cultural affairs 13,769,347 888,618 25,659 - (12,855,070) - (12,855,070) Community development 10,776,798 95,485 519,900 - (10,161,413) - (10,161,413) Interest on long-term debt 511,126 - - - (511,126) - (511,126) Total governmental activities 72,164,224 9,156,926 2,600,396 - (60,406,902) - (60,406,902) Business-type activities: Electric 66,341,885 91,704,560 916,900 - - 26,279,575 26,279,575 Water 7,207,259 8,688,421 - - - 1,481,162 1,481,162 Wastewater 5,274,284 5,214,261 310,969 - - 250,946 250,946 Sanitation 4,002,806 4,051,998 - - - 49,192 49,192 Golf 1,164,683 1,113,328 - - - (51,355) (51,355) Airport 1,453,617 601,675 - 495,436 - (356,506) (356,506) Total business-type activities 85,444,534 111,374,243 1,227,869 495,436 - 27,653,014 27,653,014 Total government $ 157,608,758 $ 120,531,169 $ 3,828,265 $ 495,436 (60,406,902) 27,653,014 (32,753,888) General revenues: Property taxes 1,235,064 - 1,235,064 Sales taxes 51,818,982 - 51,818,982 Franchise taxes 1,045,698 - 1,045,698 Gasoline taxes 788,518 - 788,518 Cigarette taxes 55,803 - 55,803 Lodger's taxes 1,100,489 - 1,100,489 Miscellaneous 1,199,675 - 1,199,675 Unrestricted investment earnings 1,064,838 2,357,973 3,422,811 Transfers 1,346,115 (1,346,115) - Total general revenues and transfers 59,655,182 1,011,858 60,667,040 Change in net assets (751,720) 28,664,872 27,913,152 Net assets - beginning 103,118,148 260,531,374 363,649,522 Net assets - ending $ 102,366,428 $ 289,196,246 $ 391,562,674 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, 2007 16 ---PAGE BREAK--- Other Total Debt Governmental Governmental General Service Funds Funds ASSETS: Pooled cash and investments $ 11,846,025 $ 56,266 $ 9,129,200 $ 21,031,491 Receivables (net, where applicable, of allowances for uncollectibles): 486,290 254,582 - 740,872 Special assessments 10,057 - - 10,057 Due from other funds 461,593 - - 461,593 Inventories, at cost 158,151 - 117,156 275,307 Prepaid items 205,347 - - 205,347 Intergovernmental 8,908,534 - 2,521,376 11,429,910 Total assets 22,075,997 310,848 11,767,732 34,154,577 LIABILITIES AND FUND BALANCES: Liabilities: Accounts payable 1,123,551 - 1,359,645 2,483,196 Wages and benefits payable 789,812 - 19,689 809,501 Other accrued expenditures 40,399 - - 40,399 Accrued claims payable 1,486,607 - - 1,486,607 Retainage/deposits payable 68,431 - - 68,431 Deferred revenue 1,372,318 - 94,450 1,466,768 Total liabilities 4,881,118 - 1,473,784 6,354,902 Fund Balances: Reserved for: Debt service - 310,848 - 310,848 Prepaids 205,347 - - 205,347 Subsequent year's statutory reserve 4,180,754 - - 4,180,754 Unreserved, reported in: Designated for debt service 2,000,000 - - 2,000,000 General fund 10,808,778 - - 10,808,778 Special revenue funds - - 9,331,067 9,331,067 Capital project funds - - 962,881 962,881 Total fund balances 17,194,879 310,848 10,293,948 27,799,675 Total liabilities and fund balances $ 22,075,997 $ 310,848 $ 11,767,732 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. 86,666,015 Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. 1,466,768 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. (637,778) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (12,928,252) Net assets of governmental activities $ 102,366,428 CITY OF FARMINGTON, NEW MEXICO Balance Sheet Governmental Funds June 30, 2007 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 $ 1,235,064 $ - $ - $ 1,235,064 Gross receipts 39,806,346 1,527,492 10,485,144 51,818,982 Franchise 1,045,698 - - 1,045,698 Gasoline - - 788,518 788,518 Cigarette - - 55,803 55,803 Lodger's - - 1,100,489 1,100,489 Licenses and permits 732,549 - 33,145 765,694 Intergovernmental 1,262,994 - 1,337,402 2,600,396 Charges for services 1,510,767 - 126,670 1,637,437 Fines 1,070,334 - 151,837 1,222,171 Special assessments 39,943 - - 39,943 Investment earnings 602,650 28,526 433,662 1,064,838 Miscellaneous 614,272 - 585,403 1,199,675 Total revenues 47,920,617 1,556,018 15,098,073 64,574,708 EXPENDITURES: Current: General government 18,715,493 - - 18,715,493 Police 14,005,315 - 672,864 14,678,179 Fire 7,084,937 - 180,787 7,265,724 Parks, recreation and cultural affairs 7,574,792 - 5,191,065 12,765,857 Community development 2,376,613 - 4,885,537 7,262,150 Debt service: Principal - 1,130,000 - 1,130,000 Interest - 512,905 - 512,905 Capital outlay: General government - - 462,935 462,935 Highways and streets 648,129 - 3,749,422 4,397,551 Public safety - - 63,779 63,779 Total expenditures 50,405,279 1,642,905 15,206,389 67,254,573 Excess (deficiency) of revenues over (under) expenditures (2,484,662) (86,887) (108,316) (2,679,865) OTHER FINANCING SOURCES (USES): Transfers in 1,991,115 110,000 1,187,696 3,288,811 Transfers out (1,043,696) - (899,000) (1,942,696) Total other financing sources (uses) 947,419 110,000 288,696 1,346,115 Net change in fund balances (1,537,243) 23,113 180,380 (1,333,750) Fund balances-beginning 18,732,122 287,735 10,113,568 29,133,425 Fund balances- ending $ 17,194,879 $ 310,848 $ 10,293,948 $ 27,799,675 CITY OF FARMINGTON, NEW MEXICO Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For theYear Ended June 30, 2007 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) $ (1,333,750) 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. (467,667) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 110,362 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. 1,250,081 The net revenue/expense of certain activities of internal service funds is reported with governmental activities. (310,746) Change in net assets of governmental activities (page 16) $ (751,720) For the Year Ended June 30, 2007 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 $ 1,122,890 $ 1,234,890 $ 1,235,064 $ 174 Gross receipts tax 39,083,537 39,083,537 39,806,346 722,809 Franchise taxes 785,000 875,000 1,045,698 170,698 Licenses and permits 830,420 780,420 732,549 (47,871) Intergovernmental 1,066,787 1,066,787 1,262,994 196,207 Charges for services 1,680,752 1,709,752 1,510,767 (198,985) Fines 1,035,500 985,500 1,070,334 84,834 Special assessments 23,100 23,100 39,943 16,843 Investment earnings 435,000 435,000 602,650 167,650 Miscellaneous 269,297 304,967 614,272 309,305 Total revenues 46,332,283 46,498,953 47,920,617 1,421,664 EXPENDITURES: Current: General government: Council 329,370 335,208 311,124 24,084 Municipal court 1,532,217 1,532,426 1,558,115 (25,689) Administrative 8,470,410 9,102,573 9,933,542 (830,969) Legal 1,061,281 1,066,738 1,192,179 (125,441) Administrative services 836,420 889,196 643,832 245,364 General services 5,300,415 5,844,311 5,076,701 767,610 Total general government 17,530,113 18,770,452 18,715,493 54,959 Public safety: Police 13,563,409 13,942,155 14,005,315 (63,160) Fire 6,844,717 6,896,520 7,084,937 (188,417) Total public safety 20,408,126 20,838,675 21,090,252 (251,577) Community development: Streets 661,860 662,012 648,129 13,883 Other-unclassified 2,897,934 2,919,142 2,376,613 542,529 Total community development 3,559,794 3,581,154 3,024,742 556,412 Parks, recreation and cultural affairs 7,648,119 7,893,711 7,574,792 318,919 Total expenditures 49,146,152 51,083,992 50,405,279 678,713 Excess of revenues over expenditures (2,813,869) (4,585,039) (2,484,662) 2,100,377 OTHER FINANCING SOURCES (USES): Transfers in 2,196,833 2,063,833 1,991,115 (72,718) Transfers out (2,697,000) (2,867,000) (1,043,696) 1,823,304 Total other financing sources and uses (500,167) (803,167) 947,419 1,750,586 Net change in fund balances (3,314,036) (5,388,206) (1,537,243) 3,850,963 Fund balances-beginning 18,732,122 18,732,122 18,732,122 - Fund balances-ending $ 15,418,086 $ 13,343,916 $ 17,194,879 $ 3,850,963 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, 2007 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 Utility Utility Utility Sanitation Courses Airport Totals Fund ASSETS Current assets: Pooled cash and investments $ 28,609,459 $ 1,570,653 $ 5,791,337 $ 487,018 $ 378,833 $ - $ 36,837,300 $ - Accounts receivable (net of allowance for doubtful accounts) 4,302,392 786,416 531,179 236,700 2,827 17,493 5,877,007 122,294 Accrued unbilled revenues 4,816,281 519,889 174,223 165,201 - - 5,675,594 - Intergovernmental receivable - - - - - 472,520 472,520 - Inventories 3,970,643 146,686 11,351 - - - 4,128,680 - Prepaid items 1,319,292 19,881 24,783 - 5,747 18,269 1,387,972 - Restricted cash, cash equivalents and investments 20,980,626 649,030 351,841 - - - 21,981,497 - Total current assets 63,998,693 3,692,555 6,884,714 888,919 387,407 508,282 76,360,570 122,294 Noncurrent assets: Deferred charges 236,458 51,025 8,396 - - - 295,879 - Capital assets: Land and land rights 3,543,906 1,617,275 479,388 23,341 100,000 879,968 6,643,878 - Building and system 55,449,709 13,994,247 22,376,821 80,640 781,367 1,962,488 94,645,272 - Improvements other than buildings 44,909,600 28,565,477 11,228,294 14,839 2,473,353 17,066,159 104,257,722 - Machinery and equipment 218,083,404 7,617,618 2,222,964 101,099 1,018,095 1,247,845 230,291,025 - Construction in progress 34,605,200 555,393 199,809 - - 2,206,089 37,566,491 - Less accumulated depreciation (129,037,746) (25,770,875) (12,711,137) (162,419) (1,755,989) (16,122,670) (185,560,836) - Total capital assets (net of accumulated depreciation) 227,554,073 26,579,135 23,796,139 57,500 2,616,826 7,239,879 287,843,552 - Total noncurrent assets 227,790,531 26,630,160 23,804,535 57,500 2,616,826 7,239,879 288,139,431 - Total assets $ 291,789,224 $ 30,322,715 $ 30,689,249 $ 946,419 $ 3,004,233 $ 7,748,161 $ 364,500,001 $ 122,294 CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets Proprietary Funds June 30, 2007 Business-type Activities Enterprise Funds 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 $ 4,708,646 $ 730,475 $ 185,196 $ 497,156 $ 48,977 $ 135,492 $ 6,305,942 $ 57,632 Compensated absences 437,467 7,093 7,093 - 13,891 11,521 477,065 - Due to other funds - - - - - 251,664 251,664 209,929 Other accrued expenses 1,075,057 89,445 3,829 - 21,866 7,051 1,197,248 - Accrued claims payable - - - - - - - 492,511 Deferred revenue - 1,691 - - - - 1,691 - Capital lease payable - current - - - - 106,438 - 106,438 - Accrued interest payable 141,984 30,638 5,041 - - - 177,663 - Revenue bonds payable 4,103,751 885,535 145,714 - - - 5,135,000 - NMED loan - - 543,481 - - - 543,481 - Total current liabilities payable from unrestricted assets 10,466,905 1,744,877 890,354 497,156 191,172 405,728 14,196,192 760,072 . Current liabilities payable from restricted assets 18,872,415 194,106 - - - - 19,066,521 - Total current liabilities 29,339,320 1,938,983 890,354 497,156 191,172 405,728 33,262,713 760,072 Noncurrent liabilities: (net of unamortized discounts) Revenue bonds payable (net of unamortized discounts and deferred amount on refunding) 22,512,681 4,857,940 799,368 - - - 28,169,989 - NMED loan - - 13,107,058 - - - 13,107,058 - Compensated absences 456,619 14,992 14,992 - 20,894 6,229 513,726 - Capital lease payable - - - - 250,269 - 250,269 - Total noncurrent liabilities 22,969,300 4,872,932 13,921,418 - 271,163 6,229 42,041,042 - Total liabilities 52,308,620 6,811,915 14,811,772 497,156 462,335 411,957 75,303,755 760,072 NET ASSETS Invested in capital assets, net of related debt 200,937,641 20,835,660 9,200,518 57,500 2,260,119 7,239,879 240,531,317 - Restricted for debt service 2,108,211 454,924 351,841 - - - 2,914,976 - Unrestricted 36,434,752 2,220,216 6,325,118 391,763 281,779 96,325 45,749,953 (637,778) Total net assets $ 239,480,604 $ 23,510,800 $ 15,877,477 $ 449,263 $ 2,541,898 $ 7,336,204 $ 289,196,246 $ (637,778) 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 Net Assets Proprietary Funds June 30, 2007 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 $ 91,199,674 $ - $ - $ - $ - $ - $ 91,199,674 $ - Water - 8,685,765 - - - - 8,685,765 - Wastewater - - 5,212,226 - - - 5,212,226 - Sanitation - - - 3,999,078 - - 3,999,078 - Golf course - - - - 1,111,493 - 1,111,493 - Airport - - - - - 601,675 601,675 - Health - - - - - - - 5,491,681 Other revenues 504,886 2,656 2,035 52,920 1,835 - 564,332 - Total operating revenues 91,704,560 8,688,421 5,214,261 4,051,998 1,113,328 601,675 111,374,243 5,491,681 Operating expenses: Salaries and fringe benefits 8,718,838 442,054 235,560 - 576,364 302,692 10,275,508 - Purchased power, fuel and chemicals 39,162,790 - - - - - 39,162,790 - Other operating expenses 8,206,758 5,019,570 3,434,658 3,997,032 391,131 369,863 21,419,012 5,802,427 Depreciation and amortization 8,941,903 1,461,755 1,132,772 5,774 197,188 781,062 12,520,454 - Total operating expenses 65,030,289 6,923,379 4,802,990 4,002,806 1,164,683 1,453,617 83,377,764 5,802,427 Operating income (loss) 26,674,271 1,765,042 411,271 49,192 (51,355) (851,942) 27,996,479 (310,746) Nonoperating revenues (expenses): Investment earnings 1,920,523 118,339 278,483 19,656 13,074 7,898 2,357,973 - Revenue from grants - - 310,394 - - 495,436 805,830 - Interest expense (1,311,596) (283,880) (471,294) - - - (2,066,770) - Total nonoperating revenues (expenses) 608,927 (165,541) 117,583 19,656 13,074 503,334 1,097,033 - Income (loss) before transfers 27,283,198 1,599,501 528,854 68,848 (38,281) (348,608) 29,093,512 (310,746) Capital contributions 916,900 - 575 - - - 917,475 - Transfers in - - - - - 645,000 645,000 - Transfers out (1,564,208) (314,819) (112,088) - - - (1,991,115) - Change in net assets 26,635,890 1,284,682 417,341 68,848 (38,281) 296,392 28,664,872 (310,746) Total net assets-beginning 212,844,714 22,226,118 15,460,136 380,415 2,580,179 7,039,812 260,531,374 (327,032) Total net assets-ending $ 239,480,604 $ 23,510,800 $ 15,877,477 $ 449,263 $ 2,541,898 $ 7,336,204 $ 289,196,246 $ (637,778) 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, 2007 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 $ 87,808,597 $ 8,354,413 $ 5,084,896 $ 3,996,534 $ 1,115,135 $ 176,350 $ 106,535,925 $ 5,843,275 Payments to suppliers (47,108,573) (4,509,081) (3,340,659) (3,938,635) (468,628) (236,076) (59,601,652) (5,754,711) Payments to employees (4,215,896) (449,915) (234,468) - (583,258) (304,037) (5,787,574) - Net cash provided by operating activities 36,484,128 3,395,417 1,509,769 57,899 63,249 (363,763) 41,146,699 88,564 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds (1,564,208) (314,819) (112,088) - - - (1,991,115) (90,071) Transfer from other funds - - - - - 645,000 645,000 - Operating grants - - 310,394 - - - 310,394 - Net cash provided (used) by capital and related financing activities (1,564,208) (314,819) 198,306 - - 645,000 (1,035,721) (90,071) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital contributions 916,900 - 575 - - - 917,475 - Purchases of capital assets - - - - - (1,329,491) (1,329,491) - Capital grants - - - - - 495,436 495,436 - Acquisition and construction of capital assets (17,053,153) (1,964,370) (701,717) - - - (19,719,240) - Restricted assets (4,405,153) 5,389 (1,625,387) - - - (6,025,151) - Principal paid on capital debt 278,921 (895,776) 952,277 - - - 335,422 - Interest paid on capital debt (1,311,596) (283,880) (471,294) - - - (2,066,770) - Net cash provided (used) by capital and related financing activities (21,574,081) (3,138,637) (1,845,546) - - (834,055) (27,392,319) - CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received 1,920,523 118,339 278,483 19,656 13,074 7,898 2,357,973 - Net increase in cash and cash equivalents 15,266,362 60,300 141,012 77,555 76,323 (544,920) 15,076,632 (1,507) Cash and cash equivalents, July 1 34,323,723 2,128,368 5,997,063 409,463 302,510 291,060 43,452,187 - Cash and cash equivalents, June 30, 2007 $ 49,590,085 $ 2,188,668 $ 6,138,075 $ 487,018 $ 378,833 $ (253,860) $ 58,528,819 $ (1,507) The notes to the financial statements are an integral part of this statement. Business-type Activities Enterprise Funds CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2007 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) $ 26,674,271 $ 1,765,042 $ 411,271 $ 49,192 $ (51,355) $ (851,942) $ 27,996,479 $ (310,746) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 8,941,903 1,461,755 1,132,772 5,774 197,188 781,062 12,520,454 - (Increase) decrease in accounts receivable (1,067,779) (171,997) (98,323) (37,721) 1,807 (425,325) (1,799,338) 351,594 (Increase) in accrued unbilled revenues (483,011) (170,289) (32,461) (17,743) - - (703,504) - (Increase) decrease in inventories (358,665) 42,999 15,694 - - - (299,972) - (Increase) in prepaid items 20,476 1,342 1,377 - 432 696 24,323 - (Increase) in deferred revenue (2,345,173) 8,278 1,419 - - - (2,335,476) - (Increase) in other accrued expenses 138,011 6,207 1,092 - (6,894) (1,345) 137,071 - (Increase) in accrued claims payable - - - - - - - (9,916) (Increase) in customer deposits 4,364,931 (14,068) - - - - 4,350,863 - Increase (decrease) in accounts payable 599,164 466,148 76,928 58,397 21,478 133,091 1,355,206 57,632 Increase (decrease) in capital lease - - - - (99,407) - (99,407) - Total adjustments 9,809,857 1,630,375 1,098,498 8,707 114,604 488,179 13,150,220 399,310 Net cash provided by operating activities $ 36,484,128 $ 3,395,417 $ 1,509,769 $ 57,899 $ 63,249 $ (363,763) $ 41,146,699 $ 88,564 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, 2007 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 43,600 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, 2007. 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 and capitalization thresholds: Estimated Threshold Useful Life Buildings and structures $ 10,000 7 - 45 years Improvements other than buildings $ 10,000 5 - 75 years Infrastructure $ 50,000 3 - 50 years Personal property $ 5,000 5 - 45 years 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. 9. Net Assets In the government-wide financial statements, restricted net assets are legally restricted by outside parties for a specific purpose. None of the City’s net assets are restricted as a result of enabling legislation adopted by the City. Invested in capital assets, net of related debt, represents the City’s investment in the book value of capital assets, less any outstanding debt that was issued to construct or acquire the capital asset. The City applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. 10. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in ---PAGE BREAK--- 32 the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. E. Reserved fund balances The New Mexico Department of Finance and Administration (DFA) requires that 1/12th of the general fund budgeted expenditures ($4,180,754) be reserved as subsequent year expenditures to maintain an adequate cash flow until the next significant property tax collection. 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 $12,928,252 difference are as follows: Bonds payable $ 11,670,000 Bond premium (to be amortized over the life of the debt) 153,254 Issuance costs (to be amortized over the life of the debt) (158,174) Accrued interest payable 19,592 Compensated absences payable 1,243,580 Net adjustment to reduce fund balance-total governmental funds to arrive at net assets- governmental activities $ 12,928,252 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 $(467,667) are as follows: Capital outlay $ 6,113,514 Depreciation (6,493,949) Loss on disposals and other (87,232) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ (467,667) 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 ---PAGE BREAK--- 33 amounts are deferred and amortized in the statement of activities”. Details of this $1,250,081 are as follows: Principal repayments $ 1,130,000 Amortization of bond premium 21,894 Amortization of issuance costs (22,596) Accrued interest 1,779 Compensated absences 119,004 Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 1,250,081 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 $(310,746) difference are as follows: Internal service charges for services $ 5,491,681 Internal service operating expenses (5,802,427) Net adjustment to decrease net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ (310,746) 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. ---PAGE BREAK--- 34 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. The City had the following encumbrances outstanding at June 30, 2007: General Fund $ 1,067,539 Gross Receipts Tax Streets Fund 660,245 Gross Receipts Tax Parks & Public Works Fund 1,281,755 Parks Gifts and Grants Fund 27,626 Museum Gifts and Grants Fund 108 Lodgers Tax Fund 123 State Fire Fund 82,806 Gross Receipts Tax Bond Proceeds Projects Fund 25,376 Electric Utility Fund 2,804,174 Water Utility Fund 445,605 Wastewater Utility Fund 653,932 Golf Course Fund 72 Airport Fund 496,583 Total Encumbrances $ 7,545,944 B. Excess of expenditures over appropriations For the year ended June 30, 2007, all expenditures for all funds were within the budgeted amounts approved by the City Council. C. Deficit Fund Equity As of June 30, 2007, the health insurance internal service fund had a deficit net asset balance of $(637,778). This deficit is equal to accrued payables of $550,143 and an interfund loan of $209,929, less receivables totaling $122,294. Continued high claims contributed to this deficit. The negative net asset balance declined by $310,746 over FY 2006. Beginning January 1, 2008, the retirees participating in the City of Farmington’s health plan will be spun-off to the New Mexico Retiree Health Care Authority. This is anticipated to reduce the amount of claims in FY 2008 which will have a positive effect on the health fund’s net asset balance. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and investments As of June 30, 2007, the City had the following investments: Investment Type Fair Value Weighted Average Maturity (Years) Repurchase Agreements $ 3,017,647 0.08 Certificates of Deposit 59,100,000 0.96 State Treasurer’s Pool 17,399,021 0.08 Total Fair Value $ 79,516,668 Portfolio weighted average maturity 0.98 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. ---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, 2007, the City was in compliance with state statute. The City’s carrying amount of deposits as of June 30, 2007 was $62,451,267 and the bank balance was $66,188,510. Of the bank balance, $400,000 was covered by federal depository insurance, $36,792,539 was collateralized with securities held by the pledging financial institution’s trust department or agent in the City’s name, and $28,995,971 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. 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, 2007. The State Treasurer Local Government Investment Pool (LGIP) is not SEC ---PAGE BREAK--- 36 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, 2007 are as follows: Intergovernmental receivables are made up of the following amounts in the general and special revenue funds: gross receipts taxes $8,725,253, property taxes $1,372,318, federal and state grants $ 792,591, franchise taxes $157,324, lodger’s taxes $265,472 and other taxes $116,952. 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 $ 92,087 Uncollectibles related to water sales 11,455 Uncollectibles related to wastewater charges 7,445 Uncollectibles related to sanitation charges 4,060 Total uncollectibles of the current fiscal year $ 115,047 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received but not yet earned. The City reported no unearned revenue during the year. At the end of the current fiscal year, deferred revenue reported in the governmental funds was as follows: Unavailable Property Tax $ 1,466,768 General Special Revenue Debt Service Enterprise Total Receivables: Accounts Receivable $ 486,290 $ - $ 254,582 $ 6,370,729 $ 7,111,601 Unbilled Revenue - - - 5,675,594 5,675,594 Special Assessments 10,057 - - - 10,057 Due from other funds 461,593 - - - 461,593 Intergovernmental 8,908,534 2,521,376 - 472,520 11,902,430 Gross Receivables 9,866,474 2,521,376 254,582 12,518,843 25,161,275 Less: Allowance for Uncollectibles - - - (493,722) (493,722) Net Total Receivables: $ 9,866,474 $ 2,521,376 $ 254,582 $ 12,025,121 $ 24,667,553 ---PAGE BREAK--- 37 C. Capital assets Capital asset activity for the year ended June 30, 2007 was as follows: Balance Balance Governmental activities July 1, 2006 Transfers Additions Deletions June 30, 2007 Non-Depreciable Assets: Land 25,780,126 $ - $ - $ - $ 25,780,126 $ Construction in progress 10,991,978 - 2,165,091 (6,591,691) 6,565,378 Total Non-Depreciable Assets 36,772,104 - 2,165,091 (6,591,691) 32,345,504 Depreciable Assets: Buildings 47,365,169 - 2,097,990 (24,076) 49,439,083 Improvements other than buildings 9,948,950 - 1,308,910 (9,900) 11,247,960 Equipment 22,298,221 (13,350) 5,822,034 (1,318,199) 26,788,706 Infrastructure 54,801,172 - 1,311,180 - 56,112,352 Total Depreciable Assets 134,413,512 (13,350) 10,540,114 (1,352,175) 143,588,101 Total Governmental Assets 171,185,616 (13,350) 12,705,205 (7,943,866) 175,933,605 Accumulated Depreciation: Buildings (22,088,497) - (1,764,858) 14,018 (23,839,337) Improvements other than buildings (3,588,400) - (838,426) 9,900 (4,416,926) Equipment (14,789,669) 13,350 (2,217,323) 1,241,025 (15,752,617) Infrastructure (43,585,368) - (1,673,342) - (45,258,710) Total Accumulated Depreciation (84,051,934) 13,350 (6,493,949) 1,264,943 (89,267,590) Net Governmental Assets 87,133,682 $ - $ 6,211,256 $ (6,678,923) $ 86,666,015 $ Balance Balance Business-type activities July 1, 2006 Transfers Additions Deletions June 30, 2007 Non-Depreciable Assets: Land 4,786,987 $ - $ 95,000 $ - $ 4,881,987 $ Construction in progress 29,888,367 - 16,895,434 (9,217,310) 37,566,491 Total Non-Depreciable Assets 34,675,354 - 16,990,434 (9,217,310) 42,448,478 Depreciable Assets: Land Rights 1,758,891 - 3,000 - 1,761,891 Buildings 94,632,294 - 12,978 - 94,645,272 Improvements other than buildings 101,085,200 - 3,277,527 (105,005) 104,257,722 Equipment 220,631,362 13,350 9,985,604 (339,291) 230,291,025 Total Depreciable Assets 418,107,747 13,350 13,279,109 (444,296) 430,955,910 Total Business-type Assets 452,783,101 13,350 30,269,543 (9,661,606) 473,404,388 Accumulated Depreciation: Land Rights (640,596) - (44,865) - (685,461) Buildings (30,863,842) - (2,709,380) - (33,573,222) Improvements other than buildings (46,423,154) - (3,240,648) 279,186 (49,384,616) Equipment (95,504,116) (13,350) (6,705,411) 305,340 (101,917,537) Total Accumulated Depreciation (173,431,708) (13,350) (12,700,304) 584,526 (185,560,836) Net Business-type Assets 279,351,393 $ - $ 17,569,239 $ (9,077,080) $ 287,843,552 $ ---PAGE BREAK--- 38 Enterprise Assets – by fund Electric Water Wastewater Sanitation Golf Airport Land and land Rights 3,543,906 $ 1,617,275 $ 479,388 $ 23,341 $ 100,000 $ 879,968 $ Buildings and Structures 55,449,709 13,994,247 22,376,821 80,640 781,367 1,962,488 Improvements other Than buildings 44,909,600 28,565,477 11,228,294 14,839 2,473,353 17,066,159 Equipment 218,083,404 7,617,618 2,222,964 101,099 1,018,095 1,247,845 Total 321,986,619 51,794,617 36,307,467 219,919 4,372,815 21,156,460 Less accumulated Depreciation (129,037,746) (25,770,875) (12,711,137) (162,419) (1,755,989) (16,122,670) Work in progess 34,605,200 555,393 199,809 - - 2,206,089 Net Assets 227,554,073 $ 26,579,135 $ 23,796,139 $ 57,500 $ 2,616,826 $ 7,239,879 $ In 1988, the City entered into a lease agreement to lease land for the Pinon Hills Golf Course from San Juan College for $10. The lease expires in the year 2087, at which time the land, including improvements, will be returned to San Juan College. Depreciation expense was charged to functions / programs of the government as follows: Governmental activities: General government $ 568,573 Police 722,871 Fire 532,473 Parks, recreation, cultural affairs 2,717,380 Community development 573,887 Highways and streets 1,378,765 Total depreciation expense - governmental activities $ 6,493,949 Business-type activities: Electric $ 9,085,634 Water 1,492,770 Wastewater 1,137,875 Sanitation 5,774 Golf 197,188 Airport 781,062 Total depreciation expense - business-type activities $ 12,700,303 ---PAGE BREAK--- 39 Construction commitments The City has an active construction project as of June 30, 2007. The project is the building of the new Southside Community Center. At year end, the City’s commitment with contractors was as follows: Expended Remaining Project To Date Commitment Southside Community Center $ 156,510 $ 3,200,000 D. Interfund receivables, payables and transfers The composition of accrued claims and other accrued liabilities as of June 30, 2007 is as follows: Governmental Health Accrued Claims Payable Funds Fund Total Health/WorkComp/Liability Claims 1,486,607 $ 492,511 $ 1,979,118 $ Other Accrued Liabilities Taxes 361 - 361 Intergovernemental 1,048 - 1,048 Court collections 10,872 - 10,872 Compensated absences 28,118 - 28,118 40,399 40,399 Total 1,527,006 $ 492,511 $ 2,019,517 $ The composition of other accrued expenses as of June 30, 2007 is as follows: Other Accrued Expenses Electric Water Wastewater Golf Airport Total Wages & benefits 213,430 $ 4,235 $ 2,910 $ 14,860 $ 5,962 $ 241,397 $ Gross receipts taxes 425,387 68,581 - 7,006 1,089 502,063 Water conservation fee - 16,629 - - - 16,629 Mainline extension/impact fee - - 919 - - 919 Compensating taxes 52,240 - - - - 52,240 Ad valorem taxes 207,500 - - - - 207,500 Franchise taxes 136,077 - - - - 136,077 PNM deferred credits 31,496 - - - - 31,496 Billed customer deposits 8,927 - - - - 8,927 Total 1,075,057 $ 89,445 $ 3,829 $ 21,866 $ 7,051 $ 1,197,248 $ ---PAGE BREAK--- 40 The composition of interfund balances as of June 30, 2007 is as follows: Interfund payables and receivables Due From Due To General fund - operating loan $ - $ 461,593 Airport fund - operating transfer 251,664 - Health fund - operating loan 209,929 - Total Interfund Payables $ 461,593 $ 461,593 Transfers Governmental Funds In Out General fund - operating transfer to airport fund $ - $ 270,000 General fund - operating transfer to region II fund - 30,000 General fund - operating transfer (pilt) from Electric/Water/Wastewater 1,991,115 - General fund - transfer to general government capital projects fund - 743,696 GRT streets fund – operating transfer to community development grant projects fund - 414,000 GRT parks and public works – operating transfer to airport fund - 75,000 Region II fund - matching funds for grant from general fund 30,000 - State fire grant fund - matching funds for fire station to debt service fund - 110,000 Community development grant projects fund – operating transfer from grt streets fund 414,000 - General government capital projects fund - from general fund 743,696 - General government capital projects fund - transfer to airport - 300,000 Debt service fund - operating transfer from state fire fund 110,000 - Total governmental funds transfers 3,288,811 $ 1,942,696 Net governmental funds transfers $ 1,346,115 Business-type funds Electric utility fund - operating transfer (pilt) to general fund $ - $ 1,564,208 Water utility fund - operating transfer (pilt) to general fund - 314,819 Wastewater utility fund - operating transfer (pilt) to general fund - 112,088 Airport fund - operating transfer from general fund 270,000 - Airport fund - transfer from general goverment capital projects fund 300,000 - Airport fund - operating transfer from grt parks & public works fund 75,000 - Total business-type funds transfers $ 645,000 1,991,115 Net business-type transfers $ 1,346,115 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--- 41 The assets acquired through this capital lease are as follows: Business Asset Activities Machinery and equipment $ 579,397 Less: accumulated depreciation (289,698) Total $ 289,699 The future minimum lease obligation and the net present value of those minimum lease payments as of June 30, 2007 were as follows: Year Ending Golf Carts Golf Course Turf Equipment June 30, 2008 $ 39,499 $ 88,032 June 30, 2009 114,980 146,626 Total minimum lease payments 154,479 234,658 Less: amount representing interest (14,414) (18,016) payments $ 140,065 $ 216,642 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, 2007 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. 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. ---PAGE BREAK--- 42 Revenue bonds outstanding as of June 30, 2007 are as follows: Interest Rates General Govt Electric Water Wastewater Total Governmental Activities Sales Tax Bonds 2001 4.00 - 5.00% 6,570,000 $ - $ - $ - $ 6,570,000 $ Sales Tax Bonds 2005 3.25 - 4.00% 5,100,000 - - - 5,100,000 Business Activities Serial Bonds 2002 3.50 - 5.00% - 25,529,566 5,508,944 906,490 31,945,000 Total 11,670,000 $ 25,529,566 $ 5,508,944 $ 906,490 $ 43,615,000 $ Annual debt service requirements to maturity for revenue bonds are as follows: For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond proceeds are reported as other financing source net of the applicable premium or discount. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. For proprietary fund types, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount, whereas issuance costs are reported as deferred charges. Deferred amounts on refunding (the difference between the reacquisition price and the net carrying amount of the old debt) are amortized as a component of interest expense. The unamortized portion of the deferred amount is reported as a deduction from revenue bonds payable. The 2002A Utility Revenue bonds are secured by and are payable solely from the net revenues derived by the City from the utility system (electric, water and wastewater utility funds), after payment of operating and maintenance expenses. Payment is also secured by an insurance policy issued by Financial Guaranty Insurance Company. The Policy is non-cancelable, and the premium Year Ending June 30 Principal Interest Principal Interest Principal Interest Principal Interest 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 79,759 172,955 13,124 2013 1,420,000 225,680 3,232,653 126,073 697,565 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 $ 11,670,000 $ 2,565,947 $ 25,529,566 $ 4,027,214 $ 5,508,944 $ 869,019 $ 906,490 $142,997 General Govt. Electric Water Wastewater ---PAGE BREAK--- 43 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, 2007, 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, 2007, the City has received $12,830,162 in draw down payments and accrued $1,346,974 in construction interest. Repayment of the loan, which includes payments plus construction interest, began on June 30, 2007, one year after completion of the expansion. The NMED loan repayment schedule is as follows: Year Ending June 30 Principal Interest 2008 $ 543,481 $ 409,516 2009 559,785 393,212 2010 576,579 376,418 2011 593,876 359,121 2012 611,693 341,305 2013-2017 3,344,985 1,420,000 2018-2022 3,877,756 887,229 2023-2026 3,542,384 269,605 Total $ 13,650,539 $ 4,456,406 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, 2007 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, 2007, the following outstanding bonds are considered defeased (amounts in thousands): Series 1983 B Series 1992 Original issue amount $ 37,950 $ 49,205 Retired prior to fiscal year (32,065) (8,925) Retired during the year ended 2007 (3,905) (7,270) Balance of principal remaining $ 1,980 $ 33,010 Interest payments made during year ended June 30, 2007 $ 581 $ 2,320 ---PAGE BREAK--- 44 Changes in Long-term Liabilities During the year ended June 30, 2007, the following changes occurred in long-term liabilities: G. Restricted Assets The following is a summary of restricted assets as of June 30, 2007: Enterprise Funds Electric Water Wastewater Total Revenue bond current debt service $ 509,866 $ 110,022 $ 18,104 $ 637,992 NMED loan debt service reserves - - 276,984 276,984 Revenue bond renewal, replacement and contingency account 1,598,345 344,902 56,753 2,000,000 Customer deposits/overpayments 18,872,415 194,106 - 19,066,521 Total restricted assets $ 20,980,626 $ 649,030 $ 351,841 $ 21,981,497 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 Beginning Ending Due within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: 2001 Sales tax revenue $ 7,365,000 $ - $ (795,000) $ 6,570,000 $ 830,000 2005 Sales tax revenue 5,435,000 - (335,000) 5,100,000 350,000 Premium on bonds 175,148 - (21,894) 153,254 - Total bonds payable 12,975,148 - (1,151,894) 11,823,254 1,180,000 Compensated absences 1,362,584 1,376,615 (1,495,619) 1,243,580 62,179 Total long-term liabilities Governmental activities $ 14,337,732 $ 1,376,615 $ (2,647,513) $ 13,066,834 $ 1,242,179 Business-type activities: Bonds payable: Series 2002A $ 36,850,000 $ - $ (4,905,000) $ 31,945,000 $ 5,135,000 Premium on bonds 1,589,846 - (229,857) 1,359,989 - Total bonds payable 38,439,846 - (5,134,857) 33,304,989 5,135,000 NMED loan 12,830,162 1,348,028 (527,651) 13,650,539 543,481 Capital leases 456,114 - (99,407) 356,707 106,438 Compensated absences 970,208 497,652 (477,069) 990,791 477,065 Total long-term liabilities Business-type activities $ 52,696,330 $ 1,845,680 $ (6,238,984) $ 48,303,026 $ 6,261,984 ---PAGE BREAK--- 45 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, 2005 June 30, 2006 June 30, 2007 Health Risk Mgmt Health Risk Mgmt Health Risk Mgmt Unpaid claims, beginning of fiscal year 1,258,436 $ 1,486,966 $ 718,182 $ 1,508,352 $ 502,427 $ 1,075,404 $ Incurred claims and changes in estimate 2,313,954 431,857 2,974,866 398,126 4,206,951 822,406 Claim payments (2,854,208) (410,471) (3,190,621) (831,074) (4,216,867) (411,203) Unpaid claims, end of fiscal year 718,182 $ 1,508,352 $ 502,427 $ 1,075,404 $ 492,511 $ 1,486,607 $ 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 2007, the City contributed $30,398 to the Authority. Complete financial statements for the Consolidated Communications Authority can be obtained from San Juan County, New Mexico. Joint Powers Agreement for the San Juan Water Commission. The City is a participant with the cities of Aztec and Bloomfield, the County of San Juan, and the San Juan Rural Waters Users Association in a joint powers agreement to create a countywide entity responsible for water planning and use. Much of the impetus to form the Commission came from the Animas La Plata water project and the subsequent need to develop methods to equitably share the related costs and benefits. In addition to this specific project the Commission is also authorized to acquire additional water rights and provide for the equitable distribution of such water. The Commission is financed by a San Juan County mill levy on real and personal property of approximately 3 mills. During FY 2007 the City did not make any financial contribution to the Commission. Complete financial statements may be obtained by contacting the San Juan Water Commission. ---PAGE BREAK--- 46 D. Other Post Employment Benefits The Retiree Health Care Act (Act) (Chapter 10, Article 7C NMSA 1978) provides comprehensive core group health insurance for persons who have retired from certain public service in New Mexico. The Retiree Health Care Authority is the administrator of the plan. The purpose is to provide eligible retirees, their spouses, dependents, and surviving spouses and dependents with health insurance consisting of a plan, or optional plans, of benefits that can be purchased by funds flowing into the Retiree Health Care Fund and by co-payments or the out-of-pocket payments of eligible retirees. Monies flow to the Retiree Health Care Fund on a pay-as-you-go basis from eligible employers and eligible retirees. Eligible employers consist of institutions of higher education, school districts, or other entities participating in the Public School Insurance Authority, state agencies, state courts, magistrate courts, municipalities or counties, which are affiliated under or covered by the Educational Retirement Act, Public Employees Retirement Act, Volunteer Firefighters Retirement Act, Judicial Retirement Act or the Magistrate Retirement Act. Eligible retirees are: retirees who make contributions to the fund for at least five years prior to retirement and whose eligible employer during that period of time made contributions as a participant in the Retiree Health Care Act on the person's behalf, unless that person retires before the employer’s effective date, in which event the time period required for employee and employer contributions shall become the period of time between the employer’s effective date and the date of retirement; retirees defined by the Act who retired prior to July 1, 1990; and former legislators who served at least two years. Each participating employer makes contributions to the fund in the amount of 1.3 percent of each participating employee's annual salary. Each participating employee contributes to the fund an employee contribution equal to .65 percent of the employee's annual salary. Each participating retiree pays a premium for the medical plus basic life plan and an additional participation fee of five dollars ($5.00) if the eligible participant retired prior to the employer’s effective date or is a former legislator. Participants may also enroll in optional plans of coverage. Contributions from participating employers and employees become the property of the Retiree Health Care Fund and are not refundable under any circumstances, including termination of employment or termination of the participating employer's operation or participation in the Retiree Health Care Act. The employer, employee, and retiree contributions are required to be remitted to the Retiree Health Care Authority on a basis. The Retiree Health Care Authority issues a separate, publicly available audited financial report that includes post employment benefit expenditures of premiums and claims paid, participant contributions (employer, employee, and retiree), and net expenditures for the fiscal year. The report also includes the approximate number of retirees participating in the plan. That report may be obtained in writing by the Retiree Health Care Authority, 4308 Carlisle Blvd., NE, Suite 104, Albuquerque, New Mexico 87107. For the year ended June 30, 2007, the City remitted $1,638,662 in employer contributions and $0 in employee contributions to the Retiree Health Care Authority as a one-time buy-in into the Retiree Health Care Authority. The City recorded $1,274,744 and $363,918 as an expense in the general fund and the enterprise funds, respectively, for the year ended June 30, 2007. E. Employee Retirement Systems and Plans Public Employees Retirement Association (PERA) ---PAGE BREAK--- 47 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 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, 2007 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, 2007 were $7,805,193, (which consisted of $4,001,094 from the City and $3,804,099 from employees; representing 12.3% and 11.7% of covered payroll, respectively). The payroll for employees covered by PERA for the year ended June 30, 2007 was $32,407,280; the total payroll for all employees of the City was $39,335,045. PERA contributions for the past three years are as follows: Annual Net Fiscal Pension Percentage Benefit Year Cost Contribution Obligation 2005 $ 6,518,720 100% $ - 2006 $ 7,278,096 100% $ - 2007 $ 7,805,193 100% $ - 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. ---PAGE BREAK--- 48 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. 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, 2007. 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, 2007 was $1,361,020,000. 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. I. Accounting Standard Pronouncements In June 2004, GASB issued Statement No. 45 “Accounting and Financial Reporting by Employers for Post Employment Benefits other than Pensions” which is effective for the City’s fiscal year ending June 30, 2008. As the City has joined the State of New Mexico Retiree Health Care Plan, the requirements of this statement are not expected to have an effect on the City. ---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. 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. Governmental Capital Projects Fund – This fund is used to account for capital projects that are funded with transfers from the general fund. 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 $ 2,985,555 $ 3,549,276 $ 353,283 $ - $ 180,524 Inventory - 117,156 - - - Intergovernmental receivable 977,493 954,608 - 5,152 - Total assets 3,963,048 4,621,040 353,283 5,152 180,524 LIABILITIES: Accounts payable 855,983 354,722 - - - Deferred revenue 39,426 - - - - Accrued wages payable - 6,909 - - - Total liabilities 895,409 361,631 - - - FUND BALANCES: Unreserved - designated for subsequent years 3,067,639 4,259,409 353,283 5,152 180,524 Unreserved - - - - - Total fund balances 3,067,639 4,259,409 353,283 5,152 180,524 Total liabilities and fund balances $ 3,963,048 $ 4,621,040 $ 353,283 $ 5,152 $ 180,524 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2007 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 $ 309,291 $ 64,731 $ 463,017 $ 402 $ 220,009 Inventory - - - - - Intergovernmental receivable 104,310 - 265,472 - 126,437 Total assets 413,601 64,731 728,489 402 346,446 LIABILITIES: Accounts payable 9,359 291 - - 42,585 Deferred revenue - - 55,024 - - Accrued wages payable 2,663 - 6,022 - 2,976 Total liabilities 12,022 291 61,046 - 45,561 FUND BALANCES: Unreserved - designated for subsequent years 401,579 64,440 667,443 402 300,885 Unreserved - - - - - Total fund balances 401,579 64,440 667,443 402 300,885 Total liabilities and fund balances $ 413,601 $ 64,731 $ 728,489 $ 402 $ 346,446 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2007 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 $ 3,993 $ 26,318 $ 27,577 $ 8,183,976 Inventory - - - 117,156 Intergovernmental receivable - - - 2,433,472 Total assets 3,993 26,318 27,577 10,734,604 LIABILITIES: Accounts payable - - 27,577 1,290,517 Deferred revenue - - - 94,450 Accrued wages payable - - - 18,570 Total liabilities - - 27,577 1,403,537 FUND BALANCES: Unreserved - designated for subsequent years 3,993 26,318 - 9,331,067 Unreserved - - - - Total fund balances 3,993 26,318 - 9,331,067 Total liabilities and fund balances $ 3,993 $ 26,318 $ 27,577 $ 10,734,604 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2007 The notes to the financial statements are an integral part of this statement. 53 ---PAGE BREAK--- Community Total Development Library Fire GRT Governmental Total Nonmajor Grant Constuction Bond Captial Capital Governmental Projects Project Projects Projects Projects Funds ASSETS: Pooled cash and investments $ 884,659 $ - $ - $ 60,565 $ 945,224 $ 9,129,200 Inventory - - - - - 117,156 Intergovernmental receivable 87,904 - - - 87,904 2,521,376 Total assets 972,563 - - 60,565 1,033,128 11,767,732 LIABILITIES: Accounts payable 8,563 - - 60,565 69,128 1,359,645 Deferred revenue - - - - - 94,450 Accrued wages payable 1,119 - - - 1,119 19,689 Total liabilities 9,682 - - 60,565 70,247 1,473,784 FUND BALANCES: Unreserved - designated for special revenue purposes - - - - - 9,331,067 Unreserved - designated for capital projects 962,881 - - - 962,881 962,881 Total fund balances 962,881 - - - 962,881 10,293,948 Total liabilities and fund balances $ 972,563 $ - $ - $ 60,565 $ 1,033,128 $ 11,767,732 Capital Projects CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2007 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 $ 4,975,824 $ 5,509,320 $ - $ - $ - Gasoline taxes 788,518 - - - - Cigarette taxes - - - 55,803 - Lodger's taxes - - - - - Licenses and permits - - 33,145 - - Intergovernmental - - - - 22,723 Charges for services - - - - - Fines - - - - - Investment earnings 162,112 142,241 14,766 - 13,889 Donations - - - - 54,370 Miscellaneous 2,361 3,323 11 - 293 Total revenues 5,928,815 5,654,884 47,922 55,803 91,275 EXPENDITURES: Current: Police operations - - - - - Fire operations - - - - - Parks, recreation and cultural affairs - 2,993,394 42,593 50,651 339,709 Community development 3,324,832 1,560,705 - - - Capital outlay: Highways and streets 2,894,645 - - - - Total expenditures 6,219,477 4,554,099 42,593 50,651 339,709 Excess (deficiency) of revenues over (under) expenditures (290,662) 1,100,785 5,329 5,152 (248,434) OTHER FINANCING SOURCES (USES): Transfers in - - - - - Transfers out (414,000) (75,000) - - - Total other financing sources (uses) (414,000) (75,000) - - - Net change in fund balances (704,662) 1,025,785 5,329 5,152 (248,434) Fund balances-beginning 3,772,301 3,233,624 347,954 - 428,958 Fund balances-ending $ 3,067,639 $ 4,259,409 $ 353,283 $ 5,152 $ 180,524 Special Revenue CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2007 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 - - 1,100,489 - - Licenses and permits - - - - - Intergovernmental 25,359 300 - 89,400 371,625 Charges for services - 126,670 - - - Fines - - - - - Investment earnings 19,045 2,241 21,170 - - Donations 333,610 13,390 - - - Miscellaneous 171,944 280 881 296 1,053 Total revenues 549,958 142,881 1,122,540 89,696 372,678 EXPENDITURES: Current: Police operations - - - 90,632 383,252 Fire operations - - - - - Parks, recreation and cultural affairs 655,595 86,915 1,022,208 - - Community development - - - - - Capital outlay: Highways and streets - - - - - Total expenditures 655,595 86,915 1,022,208 90,632 383,252 Excess (deficiency) of revenues over (under) expenditures (105,637) 55,966 100,332 (936) (10,574) OTHER FINANCING SOURCES (USES): Transfers in - - - - 30,000 Transfers out - - - - - Total other financing sources (uses) - - - - 30,000 Net change in fund balances (105,637) 55,966 100,332 (936) 19,426 Fund balances-beginning 507,216 8,474 567,111 1,338 281,459 Fund balances-ending $ 401,579 $ 64,440 $ 667,443 $ 402 $ 300,885 Special Revenue CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2007 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 $ - $ - $ - $ 10,485,144 Gasoline taxes - - - 788,518 Cigarette taxes - - - 55,803 Lodger's taxes - - - 1,100,489 Licenses and permits - - - 33,145 Intergovernmental - 308,095 - 817,502 Charges for services - - - 126,670 Fines - - 151,837 151,837 Investment earnings 423 6,561 - 382,448 Donations - 2,000 - 403,370 Miscellaneous - 449 - 180,891 Total revenues 423 317,105 151,837 14,525,817 EXPENDITURES: Current: Police operations 47,143 - 151,837 672,864 Fire operations - 180,787 - 180,787 Parks, recreation and cultural affairs - - - 5,191,065 Community development - - - 4,885,537 Capital outlay: Highways and streets - - - 2,894,645 Total expenditures 47,143 180,787 151,837 13,824,898 Excess (deficiency) of revenues over (under) expenditures (46,720) 136,318 - 700,919 OTHER FINANCING SOURCES (USES): Transfers in - - - 30,000 Transfers out - (110,000) - (599,000) Total other financing sources (uses) - (110,000) - (569,000) Net change in fund balances (46,720) 26,318 - 131,919 Fund balances-beginning 50,713 - - 9,199,148 Fund balances-ending $ 3,993 $ 26,318 $ - $ 9,331,067 Special Revenue CITY OF FARMINGTON Nonmajor Governmental Funds For the Year Ended June 30, 2007 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 Total Development Library Fire GRT Governmental Total Nonmajor Grant Constuction Bond Capital Capital Governmental Projects Project Projects Projects Projects Funds REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - $ 10,485,144 Gasoline taxes - - - - - 788,518 Cigarette taxes - - - - - 55,803 Lodger's taxes - - - - - 1,100,489 Licenses and permits - - - - - 33,145 Intergovernmental 519,900 - - - 519,900 1,337,402 Charges for services - - - - - 126,670 Fines - - - - - 151,837 Investment earnings 32,192 - 275 18,747 51,214 433,662 Donations - - - - - 403,370 Miscellaneous 345 - 305 492 1,142 182,033 Total revenues 552,437 - 580 19,239 572,256 15,098,073 EXPENDITURES: Current: Police operations - - - - - 672,864 Fire operations - - - - - 180,787 Parks, recreation and cultural affairs - - - - - 5,191,065 Community development - - - - - 4,885,537 Capital outlay: General government - - - 462,935 462,935 462,935 Highways and streets 854,777 - - - 854,777 3,749,422 Public safety - - 63,779 - 63,779 63,779 Total expenditures 854,777 - 63,779 462,935 1,381,491 15,206,389 Excess (deficiency) of revenues over (under) expenditures (302,340) - (63,199) (443,696) (809,235) (108,316) OTHER FINANCING SOURCES (USES): Transfers in 414,000 - - 743,696 1,157,696 1,187,696 Transfers out - - - (300,000) (300,000) (899,000) Total other financing sources (uses) 414,000 - - 443,696 857,696 288,696 Net change in fund balances 111,660 - (63,199) - 48,461 180,380 Fund balances-beginning 851,221 - 63,199 - 914,420 10,113,568 Fund balances-ending $ 962,881 $ - $ - $ - $ 962,881 $ 10,293,948 Capital Projects CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2007 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 $ 4,882,383 $ 4,882,383 $ 4,975,824 $ 93,441 Gasoline taxes 950,000 950,000 788,518 (161,482) Investment earnings 53,000 53,000 162,112 109,112 Miscellaneous - - 2,361 2,361 Total revenues 5,885,383 5,885,383 5,928,815 43,432 EXPENDITURES: Current: Community development 4,156,699 4,467,628 3,324,832 1,142,796 Capital Outlay: Highways and streets 1,935,000 2,048,642 2,894,645 (846,003) Total expenditures 6,091,699 6,516,270 6,219,477 296,793 Excess (deficiency) of revenues over (under) expenditures (206,316) (630,887) (290,662) 340,225 OTHER FINANCING SOURCES (USES): Transfers out (414,000) (414,000) (414,000) - Net change in fund balances (620,316) (1,044,887) (704,662) 340,225 Fund balances-beginning 3,772,301 3,772,301 3,772,301 - Fund balances-ending $ 3,151,985 $ 2,727,414 $ 3,067,639 $ 340,225 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, 2007 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 $ 5,415,883 $ 5,415,883 $ 5,509,320 $ 93,437 Investment earnings 55,000 90,000 142,241 52,241 Miscellaneous - 1,730 3,323 1,593 Total revenues 5,470,883 5,507,613 5,654,884 147,271 EXPENDITURES: Current: Parks, Recreation and Cultural Affairs 2,939,279 3,558,664 2,993,394 565,270 Community development 4,202,285 4,145,199 1,560,705 2,584,494 Total expenditures 7,141,564 7,703,863 4,554,099 3,149,764 Excess (deficiency) of revenues over (under) expenditures (1,670,681) (2,196,250) 1,100,785 3,297,035 OTHER FINANCING SOURCES (USES): Transfers out (74,000) (75,000) (75,000) - Net change in fund balances (1,744,681) (2,271,250) 1,025,785 3,297,035 Fund balances-beginning 3,233,624 3,233,624 3,233,624 - Fund balances-ending $ 1,488,943 $ 962,374 $ 4,259,409 $ 3,297,035 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, 2007 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 $ 60,000 $ 60,000 $ 33,145 $ (26,855) Investment earnings 12,000 12,000 14,766 2,766 Miscellaneous - - 11 11 Total revenues 72,000 72,000 47,922 (24,078) EXPENDITURES: Current: Parks, recreation and cultural affairs 60,000 210,000 42,593 167,407 Excess (deficiency) of revenues over (under) expenditures 12,000 (138,000) 5,329 143,329 Fund balances-beginning 347,954 347,954 347,954 - Fund balances-ending $ 359,954 $ 209,954 $ 353,283 $ 143,329 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, 2007 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 $ 47,000 $ 50,700 $ 55,803 $ 5,103 EXPENDITURES: Current: Parks, recreation and cultural affairs 47,000 50,700 50,651 49 Excess (deficiency) of revenues over (under) expenditures - - 5,152 5,152 Fund balances-beginning - - - - Fund balances-ending $ - $ - $ 5,152 $ 5,152 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, 2007 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 $ 125,000 $ 125,000 $ 22,723 $ (102,277) Investment earnings 14,000 14,000 13,889 (111) Donations 25,000 25,000 54,370 29,370 Miscellaneous - - 293 293 Total revenues 164,000 164,000 91,275 (72,725) EXPENDITURES: Current: Parks, recreation and cultural affairs 157,000 505,449 339,709 165,740 Excess (deficiency) of revenues over (under) expenditures 7,000 (341,449) (248,434) 93,015 Fund balances-beginning 428,958 428,958 428,958 - Fund balances-ending $ 435,958 $ 87,509 $ 180,524 $ 93,015 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, 2007 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 $ 21,000 $ 21,000 $ 25,359 $ 4,359 Investment earnings 17,000 17,000 19,045 2,045 Donations 92,600 132,600 333,610 201,010 Miscellaneous 129,300 259,300 171,944 (87,356) Total revenues 259,900 429,900 549,958 120,058 EXPENDITURES: Current: Parks, recreation and cultural affairs 264,429 698,368 655,595 42,773 Excess (deficiency) of revenues over (under) expenditures (4,529) (268,468) (105,637) 162,831 Fund balances-beginning 507,216 507,216 507,216 - Fund balances-ending $ 502,687 $ 238,748 $ 401,579 $ 162,831 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, 2007 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 $ - $ - $ 300 $ 300 Charges for Services 120,125 120,125 126,670 6,545 Investment earnings 1,000 1,000 2,241 1,241 Donations 27,500 27,500 13,390 (14,110) Miscellaneous - - 280 280 Total revenues 148,625 148,625 142,881 (5,744) EXPENDITURES: Current: Parks, recreation and cultural affairs 153,625 113,635 86,915 26,720 Excess (deficiency) of revenues over (under) expenditures (5,000) 34,990 55,966 20,976 Fund balances-beginning 8,474 8,474 8,474 - Fund balances-ending $ 3,474 $ 43,464 $ 64,440 $ 20,976 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, 2007 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 $ 1,027,000 $ 1,027,000 $ 1,100,489 $ 73,489 Investment earnings 16,000 16,000 21,170 5,170 Miscellaneous - - 881 881 Total revenues 1,043,000 1,043,000 1,122,540 79,540 EXPENDITURES: Current: Parks, recreation and cultural affairs 1,030,909 1,074,861 1,022,208 52,653 Excess (deficiency) of revenues over (under) expenditures 12,091 (31,861) 100,332 132,193 Fund balances-beginning 567,111 567,111 567,111 - Fund balances-ending $ 579,202 $ 535,250 $ 667,443 $ 132,193 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, 2007 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 $ 95,000 $ 89,400 $ 89,400 $ - Miscellaneous - 300 296 Total revenues 95,000 89,700 89,696 EXPENDITURES: Current: Police operations 92,400 91,038 90,632 406 Excess (deficiency) of revenues over (under) expenditures 2,600 (1,338) (936) 402 Fund balances-beginning 1,338 1,338 1,338 - Fund balances-ending $ 3,938 $ - $ 402 $ 402 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, 2007 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 $ 300,500 $ 395,500 $ 371,625 $ (23,875) Miscellaneous 7,000 7,000 1,053 (5,947) Total revenues 307,500 402,500 372,678 (29,822) EXPENDITURES: Current: Public safety 272,212 525,934 383,252 142,682 Excess (deficiency) of revenues over (under) expenditures 35,288 (123,434) (10,574) 112,860 OTHER FINANCING SOURCES: Transfers in 30,000 30,000 30,000 - Net change in fund balances 65,288 (93,434) 19,426 112,860 Fund balances-beginning 281,459 281,459 281,459 - Fund balances-ending $ 346,747 $ 188,025 $ 300,885 $ 112,860 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, 2007 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 $ 50,713 $ 50,713 $ - $ (50,713) Investment earnings - - 423 423 Total revenues 50,713 50,713 423 (50,290) EXPENDITURES: Current: Public safety 50,713 50,713 47,143 3,570 Excess (deficiency) of revenues over (under) expenditures - - (46,720) (46,720) Fund balances-beginning 50,713 50,713 50,713 - Fund balances-ending $ 50,713 $ 50,713 $ 3,993 $ (46,720) 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, 2007 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 $ 298,000 $ 308,095 $ 308,095 $ - Investment earnings 7,500 7,500 6,561 (939) Donations - - 2,000 2,000 Miscellaneous - - 449 449 Total revenues 305,500 315,595 317,105 1,510 EXPENDITURES: Current: Fire operations 195,500 205,595 180,787 24,808 Excess (deficiency) of revenues over (under) expenditures 110,000 110,000 136,318 26,318 OTHER FINANCING SOURCES (USES): Transfers out (110,000) (110,000) (110,000) - Net change in fund balances - - 26,318 26,318 Fund balances-beginning - - - - Fund balances-ending $ - $ - $ 26,318 $ 26,318 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, 2007 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 $ 155,000 $ 155,000 $ 151,837 $ (3,163) EXPENDITURES: Current: Public safety 155,000 155,000 151,837 3,163 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, 2007 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 $ 1,033,953 $ 1,033,953 $ 519,900 $ (514,053) Investment earnings 13,000 13,000 32,192 19,192 Miscellaneous - - 345 345 Total revenues 1,046,953 1,046,953 552,437 (494,516) EXPENDITURES: Capital Outlay: Highways and Streets 1,400,223 2,029,710 854,777 1,174,933 Excess (deficiency) of revenues over (under) expenditures (353,270) (982,757) (302,340) 680,417 OTHER FINANCING SOURCES: Transfers in 414,000 411,000 414,000 3,000 Net change in fund balances 60,730 (571,757) 111,660 683,417 Fund balances-beginning 851,221 851,221 851,221 - Fund balances-ending $ 911,951 $ 279,464 $ 962,881 $ 683,417 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, 2007 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 $ - $ - $ - $ - EXPENDITURES: Current: Parks, recreation and cultural affairs - 49,295 - 49,295 Excess (deficiency) of revenues over (under) expenditures - (49,295) - 49,295 Fund balances-beginning - - - - Fund balances-ending $ - $ (49,295) $ - $ 49,295 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, 2007 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 $ - $ 600 $ 275 $ (325) Miscellaneous - - 305 305 Total Revenues - 600 580 (20) EXPENDITURES: Capital Outlay: Public Safety - 617,684 63,779 553,905 Excess (deficiency) of revenues over (under) expenditures - (617,084) (63,199) 553,885 Fund balances-beginning 63,199 63,199 63,199 - Fund balances-ending $ 63,199 $ (553,885) $ - $ 553,885 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, 2007 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 $ - $ - $ 18,747 $ 18,747 Miscellaneous - - 492 492 Total revenues - - 19,239 19,239 EXPENDITURES: Capital Outlay: General Government 2,567,000 2,267,000 462,935 1,804,065 Excess (deficiency) of revenues over (under) expenditures (2,567,000) (2,267,000) (443,696) 1,822,812 OTHER FINANCING SOURCES (USES): Transfers in 2,567,000 2,567,000 743,696 (1,822,812) Transfers out - (300,000) (300,000) - Total other financing sources (uses) 2,567,000 2,267,000 443,696 (1,822,812) Net change in fund balances - - - - Fund balances-beginning - - - - Fund balances-ending $ - $ - $ - $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Governmental Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2007 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 $ 1,527,500 $ 1,527,500 $ 1,527,492 $ Investment earnings 16,000 16,000 28,526 12,526 Total revenues 1,543,500 1,543,500 1,556,018 12,518 EXPENDITURES: Debt Service: Principal 1,130,000 1,130,000 1,130,000 - Interest 512,905 512,905 512,905 - Total expenditures 1,642,905 1,642,905 1,642,905 - Excess (deficiency) of revenues over (under) expenditures (99,405) (99,405) (86,887) 12,518 OTHER FINANCING SOURCES: Transfers in 110,000 110,000 110,000 - Net change in fund balances 10,595 10,595 23,113 12,518 Fund balances-beginning 287,735 287,735 287,735 - Fund balances-ending $ 298,330 $ 298,330 $ 310,848 $ 12,518 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, 2007 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: Accounts receivable $ 122,294 Total assets 122,294 LIABILITIES: Current liabilities: Accounts Payable 57,632 Accrued claims payable 492,511 Due to other funds 209,929 Total liabilities 760,072 NET ASSETS: Unrestricted (637,778) Total net assets $ (637,778) CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets June 30, 2007 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 $ 4,414,518 $ 6,089,518 $ 5,491,681 $ (597,837) Operating expenses: Costs of services 4,414,518 6,086,135 5,802,427 283,708 Operating income (loss) - 3,383 (310,746) (314,129) Total net assets-beginning (327,032) (327,032) (327,032) - Total net assets-ending $ (327,032) $ (323,649) $ (637,778) $ (314,129) CITY OF FARMINGTON, NEW MEXICO Budgeted Amounts For the Year Ended June 30, 2007 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 $ 5,843,275 Payments to suppliers (5,754,711) Net cash provided by operating activities 88,564 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds (90,071) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received - Net increase (decrease) in cash and cash equivalents (1,507) Cash and cash equivalents, July 1 1,507 Cash and cash equivalents, June 30 $ - Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) $ (310,746) Adjustments to reconcile operating income to net cash provided (used) by operating activities: (Decrease) in accounts receivable 351,594 Increase in accounts payable 57,632 (Decrease) in accrued claims payable (9,916) Total adjustments 399,310 Net cash provided by operating activities $ 88,564 CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows For the Year Ended June 30, 2007 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, 2007 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Electric $ 90,837,698 $ 90,837,698 $ 91,199,674 $ 361,976 Other revenues 370,000 370,000 504,886 134,886 Total operating revenues 91,207,698 91,207,698 91,704,560 496,862 Operating expenses: Salaries and fringe benefits 9,513,284 9,513,284 8,718,838 794,446 Purchased power, fuel and chemicals 39,546,069 39,546,069 39,162,790 383,279 Other operating expenses 13,708,263 14,147,900 8,206,758 5,941,142 Capital outlay 27,158,460 29,399,221 5,994,410 23,404,811 Total operating expenses 89,926,076 92,606,474 62,082,796 30,523,678 Operating income 1,281,622 (1,398,776) 29,621,764 31,020,540 Nonoperating revenues (expenses): Investment earnings 660,000 660,000 1,920,523 1,260,523 Interest expense (1,327,141) (1,327,141) (1,311,596) 15,545 Principal on debt service (3,919,941) (3,919,941) (3,919,941) - Total nonoperating revenues (expenses) (4,587,082) (4,587,082) (3,311,014) 1,276,068 Income (loss) before operating transfers (3,305,460) (5,985,858) 26,310,750 32,296,608 Capital contributions - - 916,900 916,900 Transfers out (1,604,289) (1,604,289) (1,564,208) 40,081 Change in net assets (4,909,749) (7,590,147) 25,663,442 $ 33,253,589 ADJUSTMENTS TO GAAP Depreciation (9,085,634) Amortization 143,731 Capital outlay capitalized 5,994,410 Principal on debt service 3,919,941 972,448 GAAP BASIS CHANGE IN NET ASSETS 26,635,890 Total net assets-beginning 212,844,714 212,844,714 212,844,714 Total net assets-ending $ 207,934,965 $ 205,254,567 $ 239,480,604 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, 2007 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Water $ 8,275,727 $ 9,193,727 $ 8,685,765 $ (507,962) Other revenues 1,000 1,000 2,656 1,656 Total operating revenues 8,276,727 9,194,727 8,688,421 (506,306) Operating expenses: Salaries and fringe benefits 439,166 439,166 442,054 (2,888) Other operating expenses 5,005,545 4,978,894 5,019,570 (40,676) Capital outlay 1,492,556 2,804,217 1,568,783 1,235,434 Total operating expenses 6,937,267 8,222,277 7,030,407 1,191,870 Operating income 1,339,460 972,450 1,658,014 685,564 Nonoperating revenues (expenses): Investment earnings 67,800 67,800 118,339 50,539 Interest expense (285,238) (285,238) (283,880) 1,358 Principal on debt service (845,872) (845,872) (845,872) - Total nonoperating revenues (expenses) (1,063,310) (1,063,310) (1,011,413) 51,897 Income (loss) before operating transfers 276,150 (90,860) 646,601 737,461 Capital contributions 4,395 4,395 - (4,395) Transfers out (396,570) (318,570) (314,819) 3,751 Change in net assets (116,025) (405,035) 331,782 $ 736,817 ADJUSTMENTS TO GAAP Depreciation (1,492,770) Amortization 31,015 Capital outlay capitalized 1,568,783 Principal on debt service 845,872 952,900 GAAP BASIS CHANGE IN NET ASSETS 1,284,682 Total net assets-beginning 22,226,118 22,226,118 22,226,118 Total net assets-ending $ 22,110,093 $ 21,821,083 $ 23,510,800 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, 2007 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Wastewater $ 3,919,488 $ 4,357,488 $ 3,834,892 $ (522,596) Environmental tax 1,353,971 1,353,971 1,377,334 23,363 Other revenues 4,000 4,000 2,035 (1,965) Total operating revenues 5,277,459 5,715,459 5,214,261 (501,198) Operating expenses: Salaries and fringe benefits 225,049 225,049 235,560 (10,511) Other operating expenses 3,341,309 3,570,068 3,434,658 135,410 Capital outlay 1,601,000 2,055,183 635,367 1,419,816 Total operating expenses 5,167,358 5,850,300 4,305,585 1,544,715 Operating income 110,101 (134,841) 908,676 1,043,517 Nonoperating revenues (expenses): Investment earnings 57,800 115,800 278,483 162,683 Revenue from operating grants - 284,200 310,394 26,194 Interest expense (467,823) (467,823) (471,294) (3,471) Principal on debt service (668,254) (668,254) (666,838) 1,416 Total nonoperating revenues (expenses) (1,078,277) (736,077) (549,255) 186,822 Income (loss) before operating transfers (968,176) (870,918) 359,421 1,230,339 Capital contributions - - 575 575 Transfers out (195,974) (137,974) (112,088) 25,886 Change in net assets (1,164,150) (1,008,892) 247,908 $ 1,256,800 ADJUSTMENTS TO GAAP Depreciation (1,137,875) Amortization 5,103 Capital outlay capitalized 635,367 Principal on debt service 666,838 169,433 GAAP BASIS CHANGE IN NET ASSETS 417,341 Total net assets-beginning 15,460,136 15,460,136 15,460,136 Total net assets-ending $ 14,295,986 $ 14,451,244 $ 15,877,477 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, 2007 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Sanitation $ 3,809,786 $ 4,009,786 $ 3,999,078 $ (10,708) Other revenues 33,672 33,672 52,920 19,248 Total operating revenues 3,843,458 4,043,458 4,051,998 8,540 Operating expenses: Other operating expenses 3,816,909 4,043,748 3,997,032 46,716 Capital outlay 58,560 58,560 - 58,560 Total operating expenses 3,875,469 4,102,308 3,997,032 105,276 Operating income (32,011) (58,850) 54,966 113,816 Nonoperating revenues (expenses): Investment earnings 5,600 5,600 19,656 14,056 Change in net assets (26,411) (53,250) 74,622 $ 127,872 ADJUSTMENTS TO GAAP Depreciation (5,774) GAAP BASIS CHANGE IN NET ASSETS 68,848 Total net assets-beginning 380,415 380,415 380,415 Total net assets-ending $ 354,004 $ 327,165 $ 449,263 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, 2007 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Golf $ 1,123,617 $ 1,123,617 $ 1,111,493 $ (12,124) Other revenues - - 1,835 1,835 Total operating revenues 1,123,617 1,123,617 1,113,328 (10,289) Operating expenses: Salaries and fringe benefits 631,478 631,478 576,364 55,114 Other operating expenses 449,798 387,845 391,131 (3,286) Capital outlay 130,000 101,875 99,406 2,469 Total operating expenses 1,211,276 1,121,198 1,066,901 54,297 Operating income (87,659) 2,419 46,427 44,008 Nonoperating revenues (expenses): Investment earnings 11,000 11,000 13,074 2,074 Change in net assets (76,659) 13,419 59,501 $ 46,082 ADJUSTMENTS TO GAAP Depreciation (197,188) Capital outlay capitalized 99,406 (97,782) GAAP BASIS CHANGE IN NET ASSETS (38,281) Total net assets-beginning 2,580,179 2,580,179 2,580,179 Total net assets-ending $ 2,503,520 $ 2,593,598 $ 2,541,898 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, 2007 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Airport $ 683,249 $ 683,249 $ 600,325 $ (82,924) Other revenues 1,000 1,000 1,350 350 Total operating revenues 684,249 684,249 601,675 (82,574) Operating expenses: Salaries and fringe benefits 284,135 284,135 302,692 (18,557) Other operating expenses 583,625 500,498 369,863 130,635 Capital outlay 2,847,300 2,634,469 1,052,731 1,581,738 Total operating expenses 3,715,060 3,419,102 1,725,286 1,693,816 Operating income (loss) (3,030,811) (2,734,853) (1,123,611) 1,611,242 Nonoperating revenues (expenses): Investment earnings 10,000 10,000 7,898 (2,102) Revenue from operating grants 2,925,000 1,925,000 495,436 (1,429,564) Total nonoperating revenues (expenses) 2,935,000 1,935,000 503,334 (1,431,666) Income (loss) before operating transfers (95,811) (799,853) (620,277) 179,576 Operating transfers, in 100,000 645,000 645,000 - Change in net assets 4,189 (154,853) 24,723 $ 179,576 ADJUSTMENTS TO GAAP Depreciation (781,062) Capital outlay capitalized 1,052,731 271,669 GAAP BASIS CHANGE IN NET ASSETS 296,392 Total net assets-beginning 7,039,812 7,039,812 7,039,812 Total net assets-ending $ 7,044,001 $ 6,884,959 $ 7,336,204 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--- 2007 2006 Governmental funds capital assets: Land $ 25,780,126 $ 25,780,126 Buildings 49,439,083 47,365,169 Improvements other than buildings 11,247,960 9,948,950 Machinery and equipment 26,788,706 22,298,221 Infrastructure 56,112,352 54,801,172 Construction In Progress 6,565,378 10,991,978 Total governmental funds capital assets $ 175,933,605 $ 171,185,616 Investments in governmental funds capital assets by source: General fund $ 55,509,874 $ 59,996,762 Special revenue fund 98,113,359 95,401,522 Capital projects funds 21,361,169 14,632,269 Donations 949,203 1,155,063 Total governmental funds capital assets $ 175,933,605 $ 171,185,616 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Comparative Schedules By Source June 30, 2006 and 2007 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 $ - $ 40,332 $ - $ - $ 51,278 Judicial 80,000 830,416 - 165,301 - - 1,075,717 Operations center - - - 540,386 - - 540,386 Fleet maintenance - 4,468 - 420,152 - - 424,620 Stores - 21,264 191,159 361,640 - 90,766 664,829 Finance administration - 3,741 - 32,983 - - 36,724 Personnel administration - 35,366 - 26,757 - - 62,123 Purchasing - - - 79,970 - - 79,970 Law enforcement - - - 24,608 - - 24,608 Administrative services 1,105,313 7,801,290 53,545 1,014,596 - 121,391 10,096,135 Planning and zoning - - - 115,724 - - 115,724 Data processing - 31,020 - 940,119 - - 971,139 Total general government 1,189,313 8,734,511 244,704 3,762,568 - 212,157 14,143,253 PUBLIC SAFETY: Police 399,869 3,688,517 61,719 5,560,806 - 78,209 9,789,120 Fire 60,098 3,381,937 1,989 7,399,025 - 39,144 10,882,193 Inspection - - - 206,335 - - 206,335 Traffic - 6,656 - 452,994 2,029,606 - 2,489,256 Total public safety 459,967 7,077,110 63,708 13,619,160 2,029,606 117,353 23,366,904 PUBLIC WORKS: Streets 15,827,228 - 78,780 2,112,517 42,549,266 4,495,985 65,063,776 Bridges and storm drains - - - - 10,892,103 525,857 11,417,960 Administration 1,320,817 164,774 965,558 246,210 641,378 700,921 4,039,658 Survey - - - 112,912 - - 112,912 Engineering - - - 151,553 - 898 152,451 Total public works 17,148,045 164,774 1,044,338 2,623,192 54,082,747 5,723,661 80,786,757 CULTURE AND RECREATION: Parks and recreation 4,386,475 16,293,806 9,727,696 4,784,650 - 484,392 35,677,019 Civic center 92,174 3,103,362 6,047 442,180 - - 3,643,763 Senior citizens center 141,496 670,949 - 147,224 - 21,883 981,552 Museum 970,988 4,769,188 55,467 187,604 - 5,931 5,989,178 Total culture and recreation 5,591,133 24,837,305 9,789,210 5,561,658 - 512,206 46,291,512 LIBRARIES 1,391,668 8,625,383 106,000 1,222,128 - - 11,345,179 Total governmental funds capital assets $ 25,780,126 $ 49,439,083 $ 11,247,960 $ 26,788,706 $ 56,112,353 $ 6,565,377 $ 175,933,605 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, 2007 88 ---PAGE BREAK--- Capital Assets Capital Assets Function and Activity June 30, 2006 Additions Deductions Net Transfers June 30, 2007 GENERAL GOVERNMENT: Legislative $ 54,994 $ 7,638 $ (11,354) $ - $ 51,278 Judicial 1,087,254 - (113) (11,424) 1,075,717 Operations center 595,304 3,405 (77,288) 18,965 540,386 Fleet maintenance 440,551 18,272 (60,409) 26,206 424,620 Stores 587,805 115,473 (38,449) - 664,829 Finance administration 36,845 - (121) - 36,724 Personnel administration 116,238 - (1,958) (52,157) 62,123 Purchasing 85,446 - (5,476) - 79,970 Law enforcement 26,882 - (2,274) - 24,608 Administrative services 9,938,613 310,343 (220,527) 67,706 10,096,135 Planning and zoning 88,782 26,942 - - 115,724 Data processing 1,001,033 448,855 (478,749) - 971,139 Total general government 14,059,747 930,928 (896,718) 49,296 14,143,253 PUBLIC SAFETY: Police 9,647,195 384,277 (240,643) (1,709) 9,789,120 Fire 10,675,257 255,510 (48,574) - 10,882,193 Inspection 237,392 - (31,057) - 206,335 Traffic 2,489,256 - - - 2,489,256 Total public safety 23,049,100 639,787 (320,274) (1,709) 23,366,904 PUBLIC WORKS: Streets 64,129,451 984,767 (19,897) (30,545) 65,063,776 Bridges and storm drains 10,958,209 459,751 - - 11,417,960 Administration 2,635,472 1,423,329 - (19,143) 4,039,658 Survey 113,451 - (539) - 112,912 Engineering 134,048 5,996 (6,736) 19,143 152,451 Total public works 77,970,631 2,873,843 (27,172) (30,545) 80,786,757 CULTURE AND RECREATION: Parks and recreation 34,315,036 1,539,789 (142,614) (35,192) 35,677,019 Civic center 3,645,052 4,652 (10,741) 4,800 3,643,763 Senior citizens center 960,887 20,665 - - 981,552 Museum 5,909,896 79,282 - - 5,989,178 Total culture and recreation 44,830,871 1,644,388 (153,355) (30,392) 46,291,512 LIBRARIES 11,275,267 97,003 (27,091) - 11,345,179 Total general fixed assets $ 171,185,616 $ 6,185,949 $ (1,424,610) $ (13,350) $ 175,933,605 Accumulated depreciation $ 84,051,934 $ 6,493,949 $ (1,278,293) $ - $ 89,267,590 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, 2007 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 92 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 97 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 108 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 112 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 114 how the information in the City’s financial report relates to the services the City provides and the activities it performs. 91 ---PAGE BREAK--- City of Farmington Schedule 1 Net Assets by Component Last Six Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 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 $ 75,000,933 $ Restricted 2,689,505 2,678,373 2,422,104 3,514,726 4,219,427 4,491,602 Unrestricted 28,039,208 20,619,682 20,610,228 25,149,317 24,559,417 22,873,893 Total governmental activities net assets 86,403,221 $ 87,259,065 $ 87,811,882 $ 94,929,515 $ 103,118,148 $ 102,366,428 $ 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 $ 240,531,317 $ Restricted 3,450,823 2,643,773 2,648,557 2,564,255 2,615,937 2,914,976 Unrestricted 33,466,317 41,559,635 18,361,816 16,535,576 30,290,166 45,749,953 Total business-type activities net assets 182,612,835 $ 196,180,133 $ 215,440,447 $ 234,489,961 $ 260,531,374 $ 289,196,246 $ 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 $ 315,532,250 $ Restricted 6,140,328 5,322,146 5,070,661 6,078,981 6,835,364 7,406,578 Unrestricted 61,505,525 62,179,317 38,972,044 41,684,893 54,849,583 68,623,846 Total primary government net assets 269,016,056 $ 283,439,198 $ 303,252,329 $ 329,419,476 $ 363,649,522 $ 391,562,674 $ Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. Fiscal Year 92 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Six Fiscal Years (continued) (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 Expenses Governmental activities: General government 17,921,350 $ 17,191,605 $ 23,996,456 $ 21,153,411 $ 21,649,221 $ 24,470,791 $ Police 9,137,433 10,251,979 10,341,396 11,351,590 12,356,592 15,029,695 Fire 4,661,223 4,906,661 5,468,824 5,470,572 6,466,886 7,606,467 Parks, recreation, cultural affairs 9,232,612 8,392,730 9,284,623 9,497,875 11,105,380 13,769,347 Community development 7,359,539 7,395,603 5,727,834 7,481,297 8,511,853 10,776,798 Interest on long term debt 378,265 560,368 483,230 421,480 588,521 511,126 Total governmental activities expenses 48,690,422 48,698,946 55,302,363 55,376,225 60,678,453 72,164,224 Business-type activities: Electric 63,434,816 68,903,423 65,214,544 72,914,727 65,152,992 66,341,885 Water 6,096,326 7,180,833 6,785,002 6,944,219 6,992,577 7,207,259 Wastewater 3,203,574 3,488,296 4,127,386 4,983,626 4,690,385 5,274,284 Sanitation 3,345,147 3,358,430 3,493,487 3,625,722 3,815,728 4,002,806 Golf 1,076,241 1,060,103 1,198,867 1,209,293 1,217,011 1,164,683 Airport 1,422,951 1,563,162 2,008,715 1,871,508 1,812,263 1,453,617 Total business-type activities expenses 78,579,055 85,554,247 82,828,001 91,549,095 83,680,956 85,444,534 Total primary government expenses 127,269,477 $ 134,253,193 $ 138,130,364 $ 146,925,320 $ 144,359,409 $ 157,608,758 $ Program Revenues Governmental activities: Charges for services: General government 4,315,068 $ 4,892,278 $ 5,085,210 $ 5,019,939 $ 5,379,345 $ 6,906,273 $ Police 14,457 15,132 74,215 198,017 39,903 1,266,550 Parks, recreation, cultural affairs 546,488 530,669 552,114 545,461 703,731 888,618 Community development 69,040 68,155 77,390 75,116 101,605 95,485 Operating grants and contributions 1,526,052 1,276,299 2,674,803 2,238,291 2,929,307 2,600,396 Capital grants and contributions - - - - - - Total governmental activities program revenues 6,471,105 6,782,533 8,463,732 8,076,824 9,153,891 11,757,322 Business-type activities: Charges for services: Electric 78,835,548 79,130,644 84,158,287 91,152,321 89,801,858 91,704,560 Water 7,997,027 7,073,545 7,515,514 7,338,869 7,991,740 8,688,421 Wastewater 3,824,407 4,239,721 4,489,948 4,751,802 5,071,951 5,214,261 Sanitation 3,350,941 3,392,079 3,538,632 3,692,937 3,889,876 4,051,998 Golf 859,042 933,981 1,042,176 1,088,137 1,121,313 1,113,328 Airport 541,523 564,237 596,765 599,306 594,199 601,675 Operating grants and contributions 4,207,905 1,151,196 916,477 880,654 927,492 1,227,869 Capital grants and contributions 1,211,547 1,025,342 154,309 625,693 794,531 495,436 Total business-type activities program revenues 100,827,940 97,510,745 102,412,108 110,129,719 110,192,960 113,097,548 Total primary government program revenues 107,299,045 $ 104,293,278 $ 110,875,840 $ 118,206,543 $ 119,346,851 $ 124,854,870 $ 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 Six Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 Net (Expenses)/Revenues Governmental activities (42,219,317) $ (41,916,413) $ (46,838,631) $ (47,299,401) $ (51,524,562) $ (60,406,902) $ Business-type activities 22,248,885 11,956,498 19,584,107 18,580,624 26,512,004 27,653,014 Total primary governmental activities expenses (19,970,432) $ (29,959,915) $ (27,254,524) $ (28,718,777) $ (25,012,558) $ (32,753,888) $ 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 $ 51,818,982 $ Property taxes 922,002 930,112 985,836 1,043,064 1,121,723 1,235,064 Franchise taxes 2,551,995 2,601,794 715,022 720,748 1,594,098 1,045,698 Other taxes 1,716,477 1,724,672 1,884,994 1,873,736 1,942,024 1,944,810 Other revenue 3,010,951 3,769,728 3,584,543 3,507,135 2,996,953 1,199,675 Unrestricted investment earnings 963,133 635,745 429,108 471,993 858,611 1,064,838 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 1,346,115 Total governmental activities 43,184,891 42,772,257 47,391,448 52,505,846 59,713,195 59,655,182 Business-type activities: Unrestricted investment earnings 1,435,925 1,478,800 1,117,060 790,027 1,454,975 2,357,973 Transfers (415) 132,000 (1,440,853) (1,754,818) (1,925,566) (1,346,115) Total business-type activities 1,435,510 1,610,800 (323,793) (964,791) (470,591) 1,011,858 Total primary government 44,620,401 $ 44,383,057 $ 47,067,655 $ 51,541,055 $ 59,242,604 $ 60,667,040 $ Change in Net Assets Governmental activities 965,574 $ 855,844 $ 552,817 $ 5,206,445 $ 8,188,633 $ (751,720) $ Business-type activities 23,684,395 13,567,298 19,260,314 17,615,833 26,041,413 28,664,872 Total primary government 24,649,969 $ 14,423,142 $ 19,813,131 $ 22,822,278 $ 34,230,046 $ 27,913,152 $ Fiscal Year 94 ---PAGE BREAK--- City of Farmington Schedule 3 Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 General Fund Reserved 396,396 $ 439,874 $ 283,314 $ 229,464 $ 2,282,737 $ 2,256,852 $ 2,000,000 $ 3,393,756 $ 4,138,050 $ 4,386,101 $ Unreserved 6,070,883 13,198,488 15,117,685 12,733,806 11,618,472 11,452,345 12,126,852 13,069,276 14,594,072 12,808,778 Total general fund 6,467,279 $ 13,638,362 $ 15,400,999 $ 12,963,270 $ 13,901,209 $ 13,709,197 $ 14,126,852 $ 16,463,032 $ 18,732,122 $ 17,194,879 $ All Other Governmental Funds Reserved Debt service funds 395,732 $ 1,167,533 $ 1,109,110 $ 1,096,449 $ 406,768 $ 421,521 $ 422,104 $ 283,833 $ 287,735 $ 310,848 $ Unreserved, reported in Special revenue funds 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 9,331,067 Capital projects funds 2,167,676 1,073,947 407,657 3,781,016 12,602,816 5,196,626 3,256,176 5,462,764 914,420 962,881 Total all other governmental funds 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 $ 10,604,796 $ 95 ---PAGE BREAK--- City of Farmington Schedule 4 Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Revenues Taxes 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 $ 56,044,554 $ Licenses and permits 474,271 545,882 541,787 605,528 556,573 605,478 602,971 819,869 951,280 765,694 Intergovernmental 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 2,600,396 Charges for services 623,088 623,128 591,993 599,326 852,738 978,022 1,170,531 1,365,408 1,840,336 1,637,437 Fines 627,185 560,224 923,530 1,069,025 1,265,848 1,403,928 1,602,721 1,418,646 1,133,053 1,222,171 Special assessments 154,617 160,775 180,097 92,337 77,800 72,337 61,327 46,859 36,370 39,943 Investment earnings 1,321,363 1,154,620 966,600 1,052,525 960,773 634,552 425,731 469,012 858,611 1,064,838 Miscellaneous 871,754 434,654 746,565 688,425 875,603 1,341,924 1,317,524 1,221,761 876,250 1,199,675 Total revenues 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 64,574,708 Expenditures Current General government 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 18,715,493 Police 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 14,678,179 Fire 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 7,265,724 Parks, recreation and cultural affairs 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 12,765,857 Community development 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 7,262,150 Debt service Principal 850,000 895,000 865,000 955,000 1,360,000 1,815,000 1,900,000 1,965,000 1,060,000 1,130,000 Interest 447,492 401,243 393,364 284,653 378,265 560,368 483,230 421,480 588,521 512,905 Arbitrage rebate - - - - 34,387 - - - - - Bond issuance costs - - - - 70,733 - - - - - Capital outlay 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 4,924,265 Total expenditures 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 67,254,573 Excess of revenues over (under) expenditures 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) (2,679,865) Other Financing Sources (Uses) Operating transfers in 771,703 2,566,188 3,088,479 5,540,599 960,119 104,810 2,539,337 2,856,182 3,000,104 3,288,811 Operating transfers out (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) (1,942,696) 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 - (5,387) (580,962) (63,392) 10,404,395 (739,500) 1,440,853 7,479,817 1,175,567 1,346,115 Net change in fund balance 6,051,388 $ (1,122,540) $ (3,932,622) $ 600,788 $ 8,653,296 $ (7,326,627) $ 575,971 $ 6,129,866 $ (28,772) $ (1,333,750) $ Debt service as a percentage of noncapital expenditures 3.1% 3.2% 3.2% 3.4% 4.5% 5.8% 5.4% 5.1% 3.3% 2.7% Fiscal Year 96 ---PAGE BREAK--- City of Farmington Schedule 5 Electric Kilowatt Sales and Revenue Last Ten Fiscal Years Fiscal Year kWh Revenue kWh Revenue kWh Revenue kWh Revenue kWh Revenue 1998 307,576,761 17,491,591 $ 204,177,086 14,842,805 $ 176,709,661 14,331,248 $ 4,135,364 583,988 $ 692,598,872 47,249,632 $ 1999 463,066,631 23,838,389 219,432,395 15,569,568 184,228,457 14,849,680 4,285,934 650,231 871,013,417 54,907,868 2000 512,653,056 26,009,121 224,718,652 15,999,205 190,427,304 15,216,300 4,378,023 695,741 932,177,035 57,920,367 2001 529,567,195 30,918,518 233,569,781 17,018,831 200,550,981 16,332,643 4,473,852 727,302 968,161,809 64,997,294 2002 566,962,363 32,797,222 233,868,594 18,306,614 204,910,713 17,762,166 4,543,706 773,347 1,010,285,376 69,639,349 2003 615,590,823 36,550,084 239,246,447 19,300,034 213,197,135 18,692,226 4,525,518 791,085 1,072,559,923 75,333,429 2004 645,101,516 40,724,080 247,298,565 19,618,406 221,192,493 18,937,000 4,535,509 788,920 1,118,128,083 80,068,406 2005 645,609,668 42,070,709 259,647,378 21,142,537 223,336,276 19,829,050 4,514,936 802,834 1,133,108,258 83,845,130 2006 692,536,857 40,615,625 290,308,550 22,026,455 236,844,321 19,789,570 4,534,870 792,434 1,224,224,598 83,224,084 2007 681,029,013 39,851,660 299,061,397 23,517,486 248,119,606 21,419,197 4,638,648 831,099 1,232,848,664 85,619,442 Change 1998-2007 121.4% 127.8% 46.5% 58.4% 40.4% 49.5% 12.2% 42.3% 78.0% 81.2% Total General Large General Residential Street Lighting 97 ---PAGE BREAK--- City of Farmington Schedule 6 Electric Rates by Customer Type Type of Customer General Service $4.50 Customer charge $0.0875/kWh first 400 kWh $0.0865/kWh additional kWh Large General Service $7.75/kW for demand charge $0.0540/kWh first 500 per kW of billing demand is the energy charge $0.040/kWh for all energy in excess of 500 kWh per kW of billing demand Residential $3.00 Customer charge $0.08/kWh first 200 kWh $0.0765/kWh additional kWh Street Lighting Lamps $7.75 100 W sodium 7/94 $11.75 100 W sodium 8/94 $14.00 250 W sodium 7/94 $14.75 250 W sodium 8/94 $7.75 175 W mercury $14.00 400 W mercury Note: The City of Farmington Electric Utility has not implemented a rate increase in 10 years. 98 ---PAGE BREAK--- City of Farmington Schedule 7 Electric Principle Revenue Payers Current Year and Nine Years Ago Percentage of Percentage of Customer Revenue Rank Revenue Revenue Rank Revenue Enterprise Field Services/EPFS 19,254,578 $ 1 2.2% 1,751,160 $ 3 0.4% Transwestern Pipeline/Paragon/Enron 5,878,321 2 0.7% 1,336,250 4 0.3% TEPPCO Partners/Burlington Resources 1,879,939 3 0.2% 4,755,268 1 1.1% Giant Industries 1,834,195 4 0.2% 1,762,023 2 0.4% Praxair, Inc. 1,595,497 5 0.2% - - Duke Energy Field Services 1,321,946 6 0.2% - - San Juan Regional Medical Center 1,266,202 7 0.1% 691,952 5 0.2% Wal-Mart/Sam's Club 960,566 8 0.1% 409,301 8 0.1% San Juan College 920,959 9 0.1% 473,321 6 0.1% Animas Valley Mall 478,261 10 0.1% 434,431 7 0.1% Smith's Food & Drug - - 224,371 9 0.1% Western Gas Resources - - 147,571 10 0.0% Total 35,390,464 $ 4.0% 11,985,648 $ 2.8% 2007 1998 99 ---PAGE BREAK--- City of Farmington Schedule 8 Tax Revenues by Source, Governmental Funds Last Ten Fiscal Years Fiscal Year Gross Receipts Tax Property Tax Franchise Tax Other Taxes Total Taxes 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 2007 51,818,982 1,235,064 1,045,698 1,944,810 56,044,554 Change 1998-2007 59.6% 63.5% -70.2% 91.2% 48.5% 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. 100 ---PAGE BREAK--- City of Farmington Schedule 9 Taxable Gross Receipts by Industry Last Ten Fiscal Years (in thousands) Ending 6/30 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Agriculture 1,557 $ 1,724 $ 2,199 $ 12 $ 208 $ 2,002 $ 2,461 $ 2,726 $ 2,769 $ 3,325 $ Mining 62,599 71,688 100,802 117,792 125,093 108,454 122,936 133,973 192,806 222,893 Construction 80,477 77,766 96,788 74,984 97,131 98,292 90,069 118,025 142,174 124,428 Manufacturing 26,943 33,136 31,951 32,266 40,120 27,001 33,015 50,656 78,377 69,509 Trans/Comm/Utility 40,831 41,789 42,428 59,034 48,676 24,178 15,481 20,096 33,026 26,547 Wholesale Trade 88,739 83,114 84,959 101,477 103,921 76,836 85,158 113,951 160,468 197,225 Retail Trade 591,284 609,087 630,252 620,126 667,453 668,134 653,535 673,785 634,152 717,121 Information and Cultural - - - - - - 25,225 44,094 43,293 51,774 Finance/Ins/Real Estate 18,484 21,750 22,326 23,176 22,102 21,467 20,539 21,001 26,338 30,878 Services 237,056 265,693 298,995 302,388 365,188 365,245 464,410 507,610 506,892 537,818 Government - 216 - - - - 2,240 1,920 - - Unclassified - - - - 84 75,713 35,955 40,682 39,669 1,486 Undisclosed - - - 24,620 24,705 33,493 30,835 28,708 26,503 26,258 Total 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 $ 2,009,262 $ 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 the state and local options gross receipts tax (GRT) from the sales of food and most health care services, by allowing retail food outlets and medical service providers to deduct qualifying food and heath services from gross receipts reported to the NM Taxation and Revenue Department. However, municipalities and counties' are "held harmless" and are reimbursed the local option GRT on these nontaxable items from the State of New Mexico. The financing of this reimbursement is provided by an increase State GRT of Although the "taxable gross receipts" column does not include food sales and health care services, the amounts reported as GRT collected by the City does include these items. Fiscal Year 101 ---PAGE BREAK--- City of Farmington Schedule 10 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 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% 2007 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. 102 ---PAGE BREAK--- City of Farmington Schedule 11 Taxable Gross Receipts Payers by Industry Current Year and Nine Years Ago Ending 6/30 Number of Filers (12 Mth. Avg.) Percentage of Total Taxable Gross Receipts Percentage of Total Number of Filers (12 Mth. Avg.) Percentage of Total Taxable Gross Receipts Percentage of Total (thousands) (thousands) Agriculture 6 0.22% 3,325 $ 0.17% 1 0.05% 1,557 $ 0.14% Mining 68 2.46% 222,893 11.09% 48 2.29% 62,599 5.45% Construction 256 9.28% 124,428 6.19% 198 9.46% 80,477 7.01% Manufacturing 94 3.41% 69,509 3.46% 66 3.15% 26,943 2.35% Trans/Comm/Utility 45 1.63% 26,547 1.32% 86 4.11% 40,831 3.56% Wholesale Trade 184 6.67% 197,225 9.82% 136 6.50% 88,739 7.73% Retail Trade 629 22.80% 717,121 35.69% 595 28.43% 591,284 51.51% Information and Cultural 94 3.41% 51,774 2.58% - 0.00% - 0.00% Finance/Ins/Real Estate 103 3.73% 30,878 1.54% 66 3.15% 18,484 1.61% Services 1,257 45.56% 537,818 26.77% 889 42.47% 237,056 20.65% Government - 0.00% - 0.00% - 0.00% - 0.00% Unclassified 18 0.65% 1,486 0.07% - 0.00% - 0.00% Undisclosed 5 0.18% 26,258 1.31% 8 0.38% - 0.00% Total 2,759 100.00% 2,009,262 $ 100.00% 2,093 100.00% 1,147,970 $ 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 2007 Fiscal Year 1998 103 ---PAGE BREAK--- City of Farmington Schedule 12 Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Fiscal Year Residential Property Nonresidential Personal Less: Tax-Exempt Property Total Taxable Assessed Value Total Direct Residential Tax Rate Total Direct Non Residential Tax Rate Estimated Actual Taxable Value Taxable Assessed Value as a Percentage of Actual Taxable Value 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% 2007 518,861,269 343,707,380 80,889,474 67,559,512 875,898,611 1.434 1.824 2,630,326,159 33.3% Source: San Juan County Assessor's Office 104 ---PAGE BREAK--- City of Farmington Schedule 13 Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (rate per $1,000 of assessed value) Fiscal Year General Fund Debt Service Fund Total Direct Rate State County School District #5 San Juan College Secondary Vocational Total Direct and Overlapping Rates 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 2007 1.434 - 1.434 1.221 6.451 9.690 3.228 0.600 22.624 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 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 2007 1.824 - 1.824 1.221 8.500 9.853 4.500 0.600 26.498 Source: San Juan County Assessor's Office City of Farmington Residential Direct Rates City of Farmington Nonresidential Direct Rates Overlapping Rates Overlapping Rates 105 ---PAGE BREAK--- City of Farmington Schedule 14 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 30,902,144 $ 1 3.5% 7,507,225 $ 1 1.8% Qwest Corporation 21,965,059 2 2.5% 4,616,882 2 1.1% Burlington Resources 19,334,806 3 2.2% - - Alltel Communications 17,653,800 4 2.0% - - Wal-Mart/Sam's Club 12,012,845 5 - 4,084,424 4 1.0% PNM Gas Services 11,606,987 6 1.3% 1,719,428 10 0.4% Dugan Production Corporation 10,557,427 7 1.2% - - Plaza Farmington II LLC 9,214,262 8 1.1% - - PI Farmington Inc. 8,660,366 9 1.0% - - Target Corporation 8,141,818 10 0.9% - - Mesa Airlines - - 4,426,573 3 1.0% Production Operators, Inc. - - 3,417,939 5 0.8% Citizens Bank - - 2,604,834 6 0.6% First National Bank - - 2,422,428 7 0.6% SW Farmington Incorporated (The Inn) - - 2,189,670 8 0.5% El Paso Field Service - - 1,967,856 9 0.5% Total 150,049,514 $ 15.8% 34,957,259 $ 8.2% Source: San Juan County Treasurer. 2007 1998 106 ---PAGE BREAK--- City of Farmington Schedule 15 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 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% 2006 1,197,589 1,158,836 97% 43,328 1,202,164 100% 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 107 ---PAGE BREAK--- City of Farmington Schedule 16 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 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 2007 - N/A N/A 11,670,000 31,945,000 13,650,539 356,707 57,622,246 3.7% 1,322 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 20 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year. Business-type Activities 108 ---PAGE BREAK--- City of Farmington Schedule 17 Direct and Overlapping Governmental Activities Debt As of June 30, 2007 Governmental Unit Debt Outstanding Estimated Percentage Applicable Estimated Share of Direct and Overlapping Debt San Juan County - $ 30.32% - $ Farmington Public Schools 34,690,000 100.00% 34,690,000 San Juan College 24,858,649 30.32% 7,537,640 Subtotal Overlapping Debt 42,227,640 City direct debt 11,670,000 Total direct and overlapping debt 53,897,640 $ Source: Debt amounts are provided by each governmental unit 109 ---PAGE BREAK--- City of Farmington Schedule 18 Legal Debt Margin Information Last Ten Fiscal Years 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Assessed Valuations Assessed Value 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 $ 808,339,099 $ Add back - exempt property 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 67,559,512 Total Assessed Value 428,579,218 451,195,161 540,257,327 559,578,718 576,445,381 634,563,389 661,111,038 712,641,179 760,704,972 875,898,611 Legal Debt Margin Debt limitation - 4 % of total assessed value 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 35,035,944 Debt applicable to limitation: Total bonded debt 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 43,615,000 Less: Revenue bonds (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) (43,615,000) Total net debt applicable to limitation - - - - - - - - - - Legal Debt Margin 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 $ 35,035,944 $ Excludes centrally assessed property. Fiscal Year 110 ---PAGE BREAK--- City of Farmington Schedule 19 Pledged-Revenue Coverage Last Ten Fiscal Years Fiscal Year Utility Service Less: Operating Net Available Sales Tax Charges Expenses Revenue Principal Interest Coverage Revenue Principal Interest Coverage 1998 63,978,884 $ 32,428,756 $ 31,550,128 $ 6,465,000 $ 9,387,108 $ 1.99% 16,488,878 $ 310,000 $ 294,248 $ 27.29% 1999 70,945,775 39,720,550 31,225,225 5,252,551 7,518,423 2.45% 14,471,250 325,000 279,368 23.94% 2000 72,162,111 41,672,313 30,489,798 5,120,000 5,761,169 2.80% 15,761,881 340,000 263,118 26.13% 2001 95,338,525 52,772,478 42,566,047 5,385,000 3,625,288 4.72% 16,685,883 355,000 245,778 27.77% 2002 92,079,901 58,676,235 33,403,666 4,380,000 4,005,058 3.98% 18,241,261 965,000 368,188 13.68% 2003 91,914,248 61,217,128 30,697,120 4,350,000 2,726,755 4.34% 17,847,491 1,815,000 560,368 7.51% 2004 97,272,752 64,101,912 33,170,840 5,120,000 2,291,203 4.48% 19,474,684 1,900,000 483,230 8.17% 2005 104,017,779 73,226,886 30,790,893 5,470,000 2,048,221 4.10% 21,903,624 1,965,000 421,480 9.18% 2006 104,286,825 64,874,653 39,412,172 4,770,000 1,790,605 6.01% 25,021,449 1,060,000 588,522 15.18% 2007 107,924,587 65,220,228 42,704,359 4,905,000 1,647,505 6.52% 26,313,679 1,130,000 512,904 16.02% Utility Revenue Bonds Sales Tax Revenue bonds 111 ---PAGE BREAK--- City of Farmington Schedule 20 Demographic and Economic Status Last Ten Calendar Years Population Personal Income Per Capita Personal Income Median Age School Enrollment Percentage High School Graduate Percentage Bachelor's Degree Unemployment Rate 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 43,100 1,202,015,900 27,889 33.6 10,253 83.6% 19.7% 5.5% 2006 43,600 1,548,541,200 35,517 33.6 10,257 83.6% 19.7% 4.3% 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 112 ---PAGE BREAK--- City of Farmington Schedule 21 Principle Employers Current Year and Seven Years Ago Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment Farmington Public Schools 1,475 1 2.6% 1,090 2 2.2% San Juan Regional Medical Center 1,465 2 2.6% 776 4 1.6% Central Consolidated Schools 1,092 3 2.0% 1,128 1 2.3% BHP Billiton 1,000 4 1.8% 854 3 1.7% City of Farmington 794 5 1.4% 596 5 1.2% San Juan County 645 6 1.2% 448 9 0.9% Arizona Public Service 593 7 1.1% 565 7 1.1% San Juan College 540 8 1.0% 415 10 0.8% Conoco Philips 520 9 0.9% - - 0.0% Bloomfield Schools 486 10 0.9% 492 8 1.0% Public Service Company of New Mexico - - 0.0% 567 6 1.1% Total 8,610 10.1% 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. 2007 2000 113 ---PAGE BREAK--- City of Farmington Schedule 22 Full-time-Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 General Government Administration 33.0 34.5 36.5 36.5 37.5 37.5 37.5 38.5 39.5 40.5 Administrative Services 29.0 28.0 28.0 29.0 30.0 31.0 31.0 31.0 31.0 32.0 General Services 31.0 30.0 30.0 32.0 32.0 38.0 37.0 36.0 36.0 46.0 Police 146.2 135.2 140.5 143.5 147.5 148.5 148.5 148.5 159.5 172.5 Fire 71.0 71.0 73.0 73.0 73.0 73.0 73.0 73.0 82.0 96.0 Parks, Recreation and Cultural Affairs 94.5 94.5 96.5 103.5 107.0 112.0 114.0 114.0 118.0 124.0 Community Development 64.6 66.0 65.0 65.0 67.0 68.0 68.0 70.0 73.0 74.0 Electric 135.0 130.0 130.0 130.0 133.0 135.0 135.0 144.0 146.0 166.0 Human Resources 10.0 10.0 10.0 11.0 10.0 10.0 10.0 10.0 11.0 11.0 Water/Wastewater 2.0 2.0 3.0 3.0 4.0 7.0 7.0 8.0 8.0 8.0 Golf 9.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 7.0 7.0 Airport 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 6.5 6.5 Total Employees 630.8 614.7 626.0 640.0 654.5 673.5 674.5 686.5 717.5 783.5 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 30 114 ---PAGE BREAK--- City of Farmington Schedule 23 Operating Indicators by Function/Program Last Ten Fiscal Years Fiscal Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 General Government Total number of business registration/licenses 2,730 2,589 2,618 2,515 2,549 2,576 2,730 2,680 2,739 2,839 Police Police reports 7,153 6,605 7,462 8,213 8,429 7,177 6,512 6,636 6,254 6,500 Arrests 5,123 4,505 4,913 5,211 5,472 5,118 4,523 4,400 3,814 3,787 Traffic citations 13,554 18,291 27,219 23,898 23,475 26,147 22,274 17,473 16,263 18,982 Fire Fire alarm responses 1,013 782 938 1,033 886 804 772 700 888 760 Total responses 4,366 3,961 3,670 4,167 4,195 4,160 4,746 4,885 5,457 5,825 Parks and Recreation Parks and recreation participants 350,770 352,410 340,732 338,043 320,048 310,076 304,701 299,248 309,546 305,279 Library Patrons 343,207 337,569 322,209 307,982 289,280 247,983 327,505 410,690 427,831 436,629 Circulation 300,992 292,266 280,404 271,748 279,452 280,022 392,221 490,717 517,654 468,998 Number of volumes 176,316 165,235 194,222 207,270 165,195 174,689 162,653 174,381 187,431 186,966 Museum Patrons 11,749 38,277 60,350 53,544 47,281 57,782 52,314 64,572 75,427 71,332 Community Development Summary plats N/A N/A 36 54 49 43 38 89 77 71 Building permits issued 1,821 1,861 1,797 1,315 1,382 1,339 1,443 1,554 1,494 1,539 Permit valuation (in 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 68,119,054 Asphalt placed (sq.ft.) 108,412 96,973 81,722 125,456 106,852 96,798 123,514 83,727 132,216 88,582 Concrete placed (cu.yd.) 1,029 1,029 821 762 1,071 1,032 756 698 441 727 Electric Meter connections N/A 6,200 7,318 7,262 8,608 9,201 9,478 9,265 9,387 8,769 Meter reads N/A 600,084 611,911 576,928 567,942 558,859 554,291 561,898 541,090 559,121 Water/Wastewater Water treated (millions of gallons) N/A 4,062 4,011 4,100 4,534 4,452 4,057 3,366 3,842 4,029 Effluent treated (millions of gallons) N/A 1,824 1,790 1,779 1,772 1,832 1,781 1,858 1,881 2,057 New water meter installations N/A 216 221 191 177 176 205 304 373 342 Golf Golf course participants 81,564 78,408 70,626 62,274 58,466 54,388 58,399 60,999 71,689 60,455 Airport Total enplanements 75,495 63,774 63,403 62,459 39,085 27,160 30,132 35,503 32,575 30,177 Source: Provided by various City department Notes: A portion of 1998 was estimated based on the same quarters for FY99 and FY00. Fluctuation in museum patronage is due to special exhibits. 115 ---PAGE BREAK--- City of Farmington Schedule 24 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Police Police stations 1 1 1 1 1 1 1 1 1 1 Sub-stations N/A 3 4 3 3 3 3 3 3 3 Patrol vehicles 134 141 151 158 166 170 172 155 170 186 Fire stations 5 5 5 5 5 5 5 5 6 6 Parks and Recreation Developed acres 519 529 584 584 584 586 588 588 589 592 Undeveloped acres 1,078 1,740 1,275 1,275 1,275 1,273 1,282 1,289 1,288 1,285 Number of parks/facilities 59 59 70 71 76 77 79 80 80 80 Baseball/softball diamonds 24 24 24 24 24 24 24 25 25 24 Soccer/football fields 11 11 11 11 11 11 11 13 13 14 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 234 235 238 240 245 253 Highway (miles) N/A N/A N/A N/A 17 17 17 17 17 17 Streetlights N/A N/A N/A N/A 3,843 3,871 3,915 3,933 3,971 4,124 Traffic signals N/A N/A N/A N/A 73 74 75 76 77 78 Water Water mains (miles) N/A N/A N/A N/A 310 318 325 330 336 336 Fire hydrants N/A N/A N/A N/A 1,866 2,010 2,154 2,296 2,360 2,400 Storage capacity (thousands of gallons) N/A N/A N/A N/A 24,300 24,300 24,300 24,300 24,300 24,300 Wastewater Sanitary sewers (miles) N/A N/A N/A N/A 191 195 199 203 207 275 Treatment capacity (thousands of gallons) N/A N/A N/A N/A 5,800 5,800 6,670 6,670 6,670 6,670 Transit - minibuses/vans N/A N/A N/A 8 8 8 8 8 8 11 Source: Provided by various City department Note: The city implemented GASB Statement 34 infrastructure information in fiscal year 2002. Fiscal Year 116 ---PAGE BREAK--- Single Audit Section Single Audit Section ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2007 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 significant deficiencies relating to the audit of the financial statements 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 significant deficiencies 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 2007 Expenditure 14.228 – Community Development Block Grant $ 536,252 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The City was determined to be a low-risk auditee. 123 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- 128 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- PFC Revenue and Disbursement Schedule Four Corners Regional Airport FY-07 7/1/06 - 6/30/07 FY-06 Quarter 1 Quarter 2 Quarter 3 Quarter 4 FY-07 FY-07 Program Total1 Jul-Sept Oct-Dec Jan-Mar Apr-Jun Total Program Total Revenue Collections 236,713 $ 17,293 $ 20,383 $ 19,402 $ 16,336 $ 73,414 $ 310,127 $ Interest - - - - - - - Total Revenue 236,713 17,293 20,383 19,402 16,336 73,414 310,127 Disbursements Application 01 Proj. 1-A Runway Improvements 148,596 - - - - - 148,596 Proj. 1-B Taxiway Improvements 88,117 17,290 20,386 16,879 - 54,555 142,672 Proj. 1-C Apron Imporvements - - - 2,523 16,336 18,859 18,859 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 01 236,713 17,290 20,386 19,402 16,336 73,414 310,127 Total Disbursements 236,713 17,290 20,386 19,402 16,336 73,414 310,127 Net PFC Revenue (rev-disb.) PFC Account Balance - $ 3 $ $ - $ - $ - $ - $ 1 Starting FY07, schedule will be on a cash basis, changing from accrual. 131 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- 134 ---PAGE BREAK--- OTHER INFORMATION OTHER INFORMATION ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF PLEDGED COLLATERAL June 30, 2007 Citizens Bank of Bank of Wells America Farmington Fargo City of Farmington Deposits Demand Deposit Accounts $ - $ 304,902 $ 3,765,961 Overnight Deposits - - 3,017,647 Certificate of Deposit 4,000,000 25,100,000 30,000,000 Sub-Total 4,000,000 25,404,902 36,783,608 Less FDIC insurance 100,000 100,000 200,000 Uninsured amount 3,900,000 25,304,902 36,583,608 Pledge Collateral Required 102 percent - overnight - - 3,078,000 50 percent - deposits 1,950,000 12,652,451 16,782,981 Total Pledged Collateral Required 1,950,000 12,652,451 19,860,980 Pledged collateral 2,306,977 13,360,513 21,125,049 Excess of pledged collateral $ 356,977 $ 708,062 $ 1,264,069 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 # 31359MSL8 07/17/13 $ $ 4,732,800 $ cusip # 3136F6YL7 12/25/12 3,093,030 cusip # 31371LPU7 04/01/14 2,118,067 cusip # 31393APP6 12/25/32 869,645 cusip # 31394HYD7 05/15/16 1,562,911 cusip # 3133XAZX8 09/16/11 984,060 FNMS cusip # 31385XAZO 05/01/33 2,306,977 FHARM cusip # 31348T2F8 10/01/20 65,526 FNCL cusip # 31385HXE7 11/01/31 11,193 cusip # 31407HS80 02/01/36 136,025 cusip # 31407HZN9 05/01/36 13,566,534 cusip # 31408HBY0 03/01/36 290,263 cusip # 31409DUS0 04/01/36 2,119,456 cusip # 31409WAJ0 04/01/36 1,072,522 cusip # 00910954 02/01/37 3,176,468 G2SF cusip # 36202DUV1 10/20/32 42,176 GNSF cusip # 36225BEK0 05/15/29 551,730 cusip # 36225BEV6 06/15/29 31,026 cusip # 36225BKX5 09/15/29 36,775 cusip # 36225BM39 04/15/31 25,355 $ 2,306,977 $ 13,360,513 $ 21,125,049 135 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF JOINT POWERS AGREEMENTS June 30, 2007 Participants Responsible Dates of Total Amount/ FY07 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/ 30,398 $ 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 10,494 $ 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 $71,031/$65,888 65,888 $ 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 $ 24,467 / $ 16,554 16,554 $ City San Juan County San Juan County Detention Center 12/16/04 to 6/30/06 $10,346,459/$1,004,493 1,004,493 $ San Juan County San Juan County San Juan County DWI Treatment Ctr 04/15/98 to 12/31/06 $2,193,365/$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 $35,072 / $35,072 35,072 $ NMEMNRD NMEMNRD City of Farmington Wilderness Trails 01/09/06 to 11/30/09 $41,000 / $ 41,000 41,000 $ NMEMNRD 136