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Comprehensive Annual Comprehensive Annual Fi i l R t Fi i l R t Financial Report Financial Report CITY OF FARMINGTON NEW MEXICO CITY OF FARMINGTON NEW MEXICO JULY 1, 2010 JULY 1, 2010 – JUNE 30, 2011 JUNE 30, 2011 ---PAGE BREAK--- Cover (clockwise from upper left): Kayakers on the Animas River, Connie Mack World Series at Ricketts Park, Fishing on the San Juan River, Road Apple Rally ---PAGE BREAK--- CITY OF FARMINGTON NEW MEXICO COMPREHENSIVE ANNUAL FINANCIAL REPORT For The Year Ended June 30, 2011 Prepared By: Administrative Services Department – Finance Division Eric D. Schlotthauer, Controller Sheree Wilson, Enterprise Accountant Sarah Talley, Staff Accountant II Krista Martin, Staff Accountant II Paul McGee, Staff Accountant I With Special Thanks To: Steve Ellison, Budget Officer Teresa Emrich, Financial Analyst ---PAGE BREAK--- Printing by Garrison Graphics Pictures courtesy of the Parks, Recreation, and Cultural Affairs Department and the Farmington Convention and Visitors Bureau ---PAGE BREAK--- TABLE OF CONTENTS Page INTRODUCTORY SECTION Transmittal Letter i Certificate of Achievement for Excellence in Financial Reporting vii Organizational Chart viii List of Principal Officials ix City of Farmington Map x Four Corners Area Map xi FINANCIAL SECTION Independent Auditor’s Report 1 Management’s Discussion and Analysis 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 15 Statement of Activities 16 Fund Financial Statements: Balance Sheet – Governmental Funds 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 Fund 20 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Gross Receipts Tax Streets Fund 21 Statement of Net Assets – Proprietary Funds 22 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds 24 Statement of Cash Flows – Proprietary Funds 25 Notes to the Financial Statements 27 Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet – Nonmajor Governmental Funds 55 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds 59 ---PAGE BREAK--- Page Special Revenue Funds: Gross Receipts Tax Parks Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 63 Park Development Fees Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 64 Library Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 65 Parks/Recreation Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 66 Museum Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 67 Lodgers Tax Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 68 State Police Protection Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 69 Region II Narcotics Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 70 COPS Program Grant Fund: Schedule of Revenues, Expenditures and Changes In Fund Balances – Budget and Actual 71 Law Enforcement Block Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 72 State Fire Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 73 Penalty Assessment Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 74 ---PAGE BREAK--- Page Capital Projects Funds: Community Development Grant Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 75 Governmental Capital Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 76 Airport Construction Grant Projects Funds: Schedule of Revenues, Expenditures and Changes In Fund Balances – Budget and Actual 77 Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 78 Business-Type Funds: Internal Service Fund: Health Insurance Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 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 Capital Assets Used in the Operation of Governmental Funds: Comparative Schedules by Source 87 Schedule by Function and Activity 88 Schedule of Changes by Function and Activity 89 ---PAGE BREAK--- Page STATISTICAL SECTION (Unaudited) Schedule Financial Trends: Net Assets by Component 1 92 Changes in Net Assets 2 93 Fund Balance, Governmental Funds 3 95 Changes in Fund Balances, Governmental Funds 4 96 Revenue Capacity: Electric Kilowatt Sales and Revenue 5 97 Electric Rates by Customer Type 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 Rates 10 102 Taxable Gross Receipts Payers by Industry 11 103 Assessed Value and Estimated Actual Value of Taxable Property 12 104 Direct and Overlapping Property Tax Rates 13 105 Principal Property Tax Payers 14 106 Property Tax Levies and Collections 15 107 Debt Capacity: Ratios of Outstanding Debt by Type 16 108 Direct and Overlapping Governmental Activities Debt 17 109 Legal Debt Margin 18 110 Pledged-Revenue Coverage 19 111 Demographic and Economic Information: Demographic and Economic Status 20 112 Principal Employers 21 113 Operating Information: Full-time-Equivalent City Government Employees by Function / Program 22 114 Operating Indicators by Function / Program 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 119 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 121 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 123 Schedule of Findings and Questioned Costs 127 ---PAGE BREAK--- Page Report of Independent Auditors – PFC Schedule 141 Schedule of PFC Revenues and Disbursements 143 Notes to Schedule of PFC Revenues and Disbursements 144 Report of Independent Auditors on Compliance Requirements Applicable to the Passenger Facility Charge Program and on Internal Control over Compliance 145 PFC Program Audit Summary 147 Exit Conference 149 Other Information: Schedule of Pledged Collateral by Financial Institution 151 Schedule of Joint Powers Agreements 152 ---PAGE BREAK--- Frisbee Golf – Lions Wilderness Park ---PAGE BREAK--- INTRODUCTORY SECTION INTRODUCTORY SECTION ---PAGE BREAK--- ---PAGE BREAK--- ii 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 xi). The City was originally incorporated in 1901 and has a current land area of 33 square miles and serves a population of 45,877. The government is empowered to levy a property tax on both real and personal property located within its boundaries. However, the majority of City revenue is generated by a local option and state shared Gross Receipts Tax (GRT) collected by the New Mexico Taxation and Revenue Department on most business services and sales of tangible personal property. A portion of the State’s share of this tax (1.225%) plus local municipal option components are then distributed back to the municipality by the Department on a basis. As of July 1, 2011, the total in-city GRT rate is 7.125% and includes the City’s local option taxes in the amount of 1.1875%. Together with the 1.225% State share, the City’s tax rate amounts to 2.4125%. Another 1.125% in local option tax authority is available to the City, but to date has not been imposed. The City of Farmington has operated under the council/manager form of government since 1965. Policy-making and legislative authority are vested in a governing council consisting of the mayor and four council members. The City Council’s responsibilities include adopting ordinances, adopting the budget, appointing committees, and appointing the City Manager, City Clerk, and the City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, overseeing the day-to-day operations of the City, and appointing directors of the various departments. The Council is elected on a non-partisan basis. Council members serve four- year staggered terms, with two Council members elected every two years. The Mayor is elected to serve a four-year term. The four Council members are elected by district and the Mayor is elected at large. The City of Farmington provides a full range of services including police and fire protection; the construction, operation, and maintenance of electric, water, and wastewater systems; the construction and maintenance of highways, streets, parks, and other infrastructure; and recreational activities, libraries, museums and cultural events. The annual budget serves as the foundation for the City of Farmington’s financial planning and control. All departments of the City of Farmington are required to submit requests for appropriation to the City Manager on or before the last day in February each year. The City Manager evaluates department requests and subsequently develops a proposed budget. The City Manager presents the proposed budget to the Council for review prior to May 10. The City Council is required to hold public hearings on the proposed budget and to adopt a preliminary budget by June 1 and a final budget no later than July 31 of each year. The City of Farmington’s fiscal year begins July 1 of each year and ends on June 30. The appropriated budget is prepared according to fund, function (e.g. public safety), and department (e.g. police). Department directors may make transfers of appropriations within a fund and between their divisions. Transfers of appropriations between funds, however, require the special approval of the City Council. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, 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. ---PAGE BREAK--- iii Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when considered from the broader perspective of the specific environment within which the City of Farmington operates. Local economy. The local economy has historically been based on the natural resource extractive industry, two large coal-fired electric generating stations, and Farmington’s geographical position as a regional retail center catering to a retail trade market population base of more than 350,000. Historically, the local economy has fluctuated in cycles that correspond to the price of oil and particularly natural gas. From 2003 to 2008, the economy remained strong as the price of natural gas remained on the high end of the historical spectrum. However, in the fall of 2008, with the national economy in recession, declining natural gas prices led to a weakening in the local economy. Natural gas prices have continued to remain low during FY2011 although gross receipts tax (GRT) in FY2011 increased by 3.9% from the prior fiscal year. Relative to the FY2011 budget process and because it was unclear when an end to the downturn that began in FY2009 would take place, the budget for FY2011 focused on reducing expenditures and enhancing revenue wherever possible. In FY2011 thirty-five positions, vacant from attrition or reorganization, were left unfilled for a savings in excess of one million dollars. Other expenditure areas such as travel, computer equipment, fleet vehicles and supplies were also reduced by over one million dollars. To enhance revenue in the general fund, the Payment In Lieu of Taxes from the electric utility was increased from 5% to 7.5% which generated an additional $900,000 in revenue. Consequently, these adjustments to the FY2011 budget accomplished management’s objective to maintain basic services at existing levels. Not coincidently, this objective received the highest priority during public input sessions where citizens voiced their desire to maintain existing services to the fullest extent possible. For the long term, this approach requires additional revenue in the future to cover those expenditures that were deferred during FY2011. To this end the City Council adopted a Dividend Policy with regard to the City’s electric utility. It is a common practice for municipal electric utilities to pay a dividend to the municipality’s general fund as a return on the investment made by the City into the electric utility. The City’s policy provides that, in accordance with New Mexico state law, the City may transfer excess funds from the utility to the general fund subsequent to the utility covering its operation and maintenance expenses and debt service costs. Given the comparably low rates of the Farmington Electric Utility System and the desire to adequately maintain and/or expand the electric infrastructure, the adopted Dividend Policy provides that 40% of the operating net income of the electric utility be transferred to the general fund. In FY2011 and prior to a formal policy adoption, the City Council authorized a dividend of $5.8 million. As a comparison, the utility dividend budgeted in FY2012 as per the adopted policy will result in a transfer to the general fund of $8.1 million or approximately 16% of the total revenue budget. During FY2004, the U.S. Office of Management and Budget designated Farmington as the central city of the Farmington-San Juan County Metropolitan Statistical Area. 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. Having been designated a Metropolitan Statistical Area for several years now, Farmington continues to participate in a national urban cost of living survey. 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 98% of the national average. ---PAGE BREAK--- iv Farmington, NM was the 18th most secure small community in the nation in which to live according to a 2008 study by the Farmers Insurance Group of Companies. The ranking is based on crime statistics, extreme weather, risk of natural disasters, housing depreciation, foreclosures, air quality, life expectancy, and job loss numbers. The survey reveals much about how local governments and citizens work together to make their communities a desirable choice for individuals and families to live, work, and grow. The designation reflects the high quality of life in Farmington that its citizens have come to realize and enjoy. Residents and visitors in the City of Farmington enjoy 61 parks covering 1,855 acres and strategically located across the community. Farmington boasts numerous recreational facilities including 23 ball parks, 5 soccer complexes, 18 tennis courts, 3 swimming pools that include a state-of-the-art aquatics center, 2 interactive water areas, and a recreation center featuring several indoor playing courts. The City’s Piñon Hills Golf Course was recently honored by Golfweek Magazine as the fourth best Municipal Course in the country. As our locality and facilities continue to gain recognition, Farmington will host more national and regional events in baseball, softball, soccer, swimming, golf, mountain biking, and off-road rock climbing, as well as numerous conventions. Annually, during the month of August, the City of Farmington plays host to the Connie Mack World Series at Ricketts Park stadium which seats 6,300 fans. This national tournament for amateur baseball’s best 16 to 18 year-olds 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. The tournament, which began in Farmington in 1965, is the 3rd largest spectator - attended event in the state of New Mexico and provides a significant economic boost to the entire region. San Juan Regional Medical Center of Farmington is a 250 licensed–bed acute care hospital and related hospital facilities. is a community-governed hospital founded in 1910 that continues to be the largest employer in the region with 1,500 employees. As a Level III Trauma Center, seeks to meet the healthcare needs of the whole community through a very broad range of medical, surgical and rehabilitation services. In August, 2006, the hospital completed a $70 million expansion and renovation project. 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 were also a part of the new addition. Twenty (20) additional private rooms were added in 2008 with the completion of the East Tower’s 5th floor. In 2003 San Juan County voters approved a $25-million, one-eighth cent gross receipts tax to help pay for the medical center expansion and renovation while funded the remainder of the project. In 2007, the City of Farmington issued $12 million in Hospital Revenue Bonds (San Juan Regional Medical Center, Inc. Project) which funded the renovation costs for the first floor of and the acquisition of a Linear Accelerator for cancer treatment. By means of a financing partnership between the City and the hospital, is obligated to repay the bonded debt. These projects are another example of the cooperation between various local governments that the County of San Juan is experiencing. The City of Farmington has an employed labor force of approximately 51,933, an increase of 2% compared to last year. The County unemployment rate was 8.3% at June 2011 compared to 10.2% for the same period in FY2010. Major employers include the regional medical center, four public school districts, a community college, a coal mining operation, two electrical power generation plants, two Wal-Mart superstores, Sam’s Club, and various oil and gas companies. Meanwhile, the weakening of the local economy is also impacting residential growth and creating a slowdown from the 1% per year growth of recent years. The precipitous downturn in oil and gas activity in San Juan County in late 2008 has continued to negatively impact many businesses within the region. As natural gas prices continue to remain low in FY2011, many oil and gas companies believe it is not worth drilling for natural gas in the Farmington region. One local drilling company that employed 850 workers in October, 2008, has reduced its workforce to 350 locally and also moved some of its workers to other more profitable oil ---PAGE BREAK--- v and gas regions outside of New Mexico. Contributing to the local unemployment rate was the layoff of 100 employees in December, 2009, at the Bloomfield Oil and Gas Refinery when Western Refining, Inc., owner of the processing facility, made cost cuts by transferring all Bloomfield, NM operations to its Gallup, NM facility. Due to a shortage in affordable crude supplies in the region, Western Refining, based out of El Paso, Texas, decided the consolidation of its Four Corners refineries in Bloomfield and Gallup would save the oil and gas company at least $25 million each year. During FY2011, the number of building permits increased 9.7% while the valuation of these building permits decreased $7.8 million or 10.5%. Last year the state passed new legislation requiring building permits for all roof replacements which is reflected in the increase in the number of building permits. The decrease in the value of permits shows that new housing construction is still diminishing due to the continual economic downturn in the area. Gross receipts taxes (GRT) relative to construction dropped 6.3% in FY2011 compared to the prior year. Retail GRT, the largest industry sector in terms of GRT, increased by $149,000 in FY2011 or .75%. GRT comprises 73% of the City’s general fund total revenue sources. Long-term financial planning. The design phase for capital projects such as Fire Station #7 and a regional animal shelter have been completed, but are temporarily on hold as funding sources continue to be developed. However, a higher ending cash balance in the general fund for FY2011 will allow for approximately $3.5 million in capital improvement spending during FY2012, pending City Council approval. In 2004, the City completed its wastewater treatment plant expansion phases I and II which were 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 in July, 2026. The treatment plant’s capacity was 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 planned expansion phase III is scheduled to begin in FY2012 and will add redundancy and future capacity. The plant’s existing chemical disinfection system will be upgraded to a state of the art UV disinfection system which will reduce chemical costs and discharge of chemicals into the San Juan River. Construction for this expansion project is estimated at $5.5 million with funding to be provided by another NMED low interest, 20-year loan through the State’s Clean Water Revolving Fund Program. The electric utility’s municipal structure keeps customer user rates very reasonable and Farmington customers enjoy the lowest electric rates in the region. A typical Farmington customer’s electric billing will be 28% less than a customer of a nearby electric cooperative who uses the same amount of kilowatt hours. As part of the plan to ensure a secure, reliable, and economical power source for utility customers, the electric utility completed an evaluation of various options for new generation and, after the successful completion of several bond defeasances, has significantly reduced outstanding debt in recent years. In FY2004, the electric utility initiated construction of a new $59 million, 60 megawatt, gas-fired electric power plant with construction funded from existing cash reserves. The new plant went into operation in May, 2005. In FY2005, 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 95 foot platform ladder trucks and three 75 foot aerial ladder trucks. ---PAGE BREAK--- ---PAGE BREAK--- vii ---PAGE BREAK--- Citizens of Farmington Citizens of Farmington City Attorney Burnham Claims Legal City Attorney Burnham Claims Legal Mayor and Council Roberts, Darnell, Fischer, McCulloch, Sandel Mayor and Council Roberts, Darnell, Fischer, McCulloch, Sandel City Clerk Fuhrman Archives Business Registration City Clerk Fuhrman Archives Business Registration Administration City Manager Mayes Administration City Manager Mayes Human Resources Mayes (Interim) Employee Benefits Personnel Payroll Insurance Workplace Safety Police Westall Administration Special Operations Traffic Control School Crossing Guards Detectives Patrol Code Compliance Fire Page Information Technology Friedman Enterprise Systems Computer Operations Help Desk GIS Administrative Services Mason Administration Purchasing Finance Operations Utility/Enterprise Warehouse Accounting Operations Community Development Holton Administration Development Services Planning Metro. Planning Org. Building Inspection Metro. Redev. Area Public Works Smaka Administration Solid Waste City Engineering Water/Waste Water Admin. Traffic Engineering Water Rights Streets Storm Water Survey Construction Inspection Government Relations General Services Campbell (Interim) Administration Farmington Indian Center Print Shop Community Services Airport/Transit Building & Maintenance Building Support Vehicle Maintenance Electric Utility Grantham-Richards Administration Electric Meter Shop Animas Power Plant Electric Relay Shop Bluffview Power Plant Navajo Dam Power Plant Electric Engineering San Juan No. 4 Electric Construction Transmission & Distribution System Control Center Parks, Recreation & Cultural Affairs Bowman Administration Museum System Animal Shelter/Park Ranger Parks Operations Aquatic Facilities Recreation Center Civic Center Recreation Programs Sandstone Production Golf Courses Senior Citizen Center Sycamore Center City of Farmington – Organizational Chart City of Farmington – Organizational Chart Municipal Judges Liese & Rowland Municipal Judges Liese & Rowland Library Administration Homeland Security Fire Marshalls Operations Customer Care Community Services Assistant City Manager Campbell viii ---PAGE BREAK--- ix CITY OF FARMINGTON Principal Officials June 30, 2011 MAYOR Tommy Roberts CITY COUNCIL Dan Darnell Mary Fischer Gayla McCulloch Jason Sandel CITY MANAGER Robert Mayes ASSISTANT CITY MANAGER Robert Campbell ADMINISTRATIVE SERVICES DIRECTOR H. Andrew Mason COMMUNITY DEVELOPMENT DIRECTOR Mary Holton ELECTRIC UTILITY DIRECTOR Maude Grantham-Richards FIRE CHIEF Terry Page GENERAL SERVICES DIRECTOR Robert Campbell (Interim) HUMAN RESOURCES DIRECTOR Robert Mayes (Interim) INFORMATION TECHNOLOGY DIRECTOR Richard Friedman PARKS & RECREATION DIRECTOR Jeffrey Bowman POLICE CHIEF Kyle Westall PUBLIC WORKS DIRECTOR Jeffrey Smaka CONTROLLER Eric Schlotthauer ---PAGE BREAK--- MAP COURTESY OF FARMINGTON CONVENTION & VISITORS BUREAU x ---PAGE BREAK--- xi ---PAGE BREAK--- PRCA movie night – Ricketts Park xii ---PAGE BREAK--- FINANCIAL SECTION FINANCIAL SECTION ---PAGE BREAK--- ͳ REPORTOFINDEPENDENTAUDITORS ͵ͲǡʹͲͳͳǡ ---PAGE BREAK--- ʹ GovernmentAuditingStandards ǡ Ǧͳ͵͵ǡ Audits of States, Local Governments, and NonǦProfit ͳǡʹͲͳͳ ---PAGE BREAK--- Management Discussion and Analysis Management Discussion and Analysis ---PAGE BREAK--- Management’s Discussion and Analysis As management of the City of Farmington, we offer readers of the City of Farmington’s financial statements this narrative overview and analysis of the financial activities of the City of Farmington for the fiscal year ended June 30, 2011. 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 x The assets of the City of Farmington exceeded its liabilities at the close of FY2011 by $520,677,462 (net assets). Of this amount, $111,617,771 (unrestricted net assets) may be used to meet the City’s ongoing obligations. x As of June 30, 2011, the City of Farmington’s governmental funds reported combined ending fund balances of $36,859,738, an increase of $10,594,218 or 40.3% in comparison with the prior year. A total of $18,449,727 (unassigned fund balance) is available for spending at the City’s discretion. x At the end of the current fiscal year, unassigned fund balance for the general fund was $18,449,727, or 37.5 % of the total general fund expenditures. x The City’s total net debt decreased by $6,659,032, or 18.5% during the current fiscal year. Overview of Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Farmington’s basic financial statements. The City of Farmington’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Farmington’s financial condition, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City of Farmington’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Farmington is improving or deteriorating. The statement of activities presents information showing how the City of Farmington’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods uncollected taxes and earned but unused vacation leave, etc). 3 ---PAGE BREAK--- Both government-wide financial statements distinguish functions of the City of Farmington that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Farmington include general government, police, fire, parks, recreation, cultural affairs, community development, public works, highways, streets and airport operations. The business-type activities of the City of Farmington include electric, water, wastewater, sanitation and golf operations. The government-wide financial statements can be found on pages 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 eighteen (18) individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and gross receipts tax streets fund, both of which are considered to be major funds. Data from the other sixteen (16) 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 55-62). The City of Farmington adopts an annual appropriated budget for each of its funds. Budgetary comparative statements have been provided for these funds to demonstrate compliance with these budgets. 4 ---PAGE BREAK--- The basic governmental fund financial statements can be found on pages 17-21 of this report. Proprietary funds. The City of Farmington maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business- type activities in the government-wide financial statements. The City of Farmington uses enterprise funds to account for its electric, water, wastewater, sanitation and golf operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Farmington’s various functions. The City of Farmington uses an internal service fund to account for its self-funded health insurance operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the electric, water, wastewater, sanitation and golf operations and are found on pages 81-85 of this report. Fund data for the internal service fund is provided on page 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- 51 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 $520,677,462 at the close of FY2011. The largest portion of the City of Farmington’s net assets ($401,185,288 or 77.1%) reflects its investment in capital assets land, buildings, machinery, equipment, and infrastructure), less any related debt used to acquire those assets that is still outstanding. The City of Farmington uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Farmington’s investment in its capital assets is reported net of related debt, it should be noted that the resources required to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 5 ---PAGE BREAK--- Governmental Business-type Activities Activities FY2011 FY2010 FY2011 FY2010 FY2011 FY2010 Current and other assets 43,613,410 $ 32,701,555 $ 101,491,107 $ 91,614,776 $ 145,104,517 $ 124,316,331 $ Capital assets 98,320,657 102,859,288 331,602,090 327,857,607 429,922,747 430,716,895 Total assets 141,934,067 135,560,843 433,093,197 419,472,383 575,027,264 555,033,226 Long-term liabilities outstanding 12,968,881 13,864,286 24,107,073 29,697,850 37,075,954 43,562,136 Other liabilities 3,187,112 2,681,022 14,086,736 11,038,472 17,273,848 13,719,494 Total liabilities 16,155,993 16,545,308 38,193,809 40,736,322 54,349,802 57,281,630 Net assets: Invested in capital assets, net of related debt 91,574,976 94,776,714 309,610,312 299,184,651 401,185,288 393,961,365 Restricted 2,630,553 4,195,660 5,243,850 3,657,082 7,874,403 7,852,742 Unrestricted 31,572,545 20,043,161 80,045,226 75,894,328 111,617,771 95,937,489 Total net assets 125,778,074 $ 119,015,535 $ 394,899,388 $ 378,736,061 $ 520,677,462 $ 497,751,596 $ Total City of Farmington's Net Assets Another portion of the City of Farmington’s net assets ($7,874,403 or 1.5%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($111,617,771 or 21.4%) 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 $22,925,866 during the current fiscal year. Almost all of this increase represents the degree to which increases in ongoing revenues have exceeded similar increases in ongoing expenses, most attributable to the utility systems. Governmental activities. Governmental activities increased the City of Farmington’s net assets by $6,762,539. Key elements of the change in net assets are as follows: 6 ---PAGE BREAK--- Governmental Business-type Activities Activities FY2011 FY2010 FY2011 FY2010 FY2011 FY2010 Revenues: Program revenues: Charges for services 10,942,333 $ 10,424,975 $ 116,624,604 $ 120,057,935 $ 127,566,937 $ 130,482,910 $ Operating grants and Contributions 6,243,941 4,090,058 6,282,404 12,949,631 12,526,345 17,039,689 Capital grants and Contributions 3,442,981 4,228,018 - - 3,442,981 4,228,018 General revenues: Property taxes 1,806,123 1,556,401 - - 1,806,123 1,556,401 GRT taxes 47,605,170 44,760,879 - - 47,605,170 44,760,879 Other taxes 2,443,271 2,698,332 1,258,718 - 3,701,989 2,698,332 Other 1,906,016 2,188,423 1,071,740 1,324,627 2,977,756 3,513,050 Total revenues 74,389,835 69,947,086 125,237,466 134,332,193 199,627,301 204,279,279 Expenses: General Government 29,114,460 25,732,424 - - 29,114,460 25,732,424 Police 15,021,697 14,918,275 - - 15,021,697 14,918,275 Fire 8,665,126 8,808,809 - - 8,665,126 8,808,809 Parks, rec & cultural affairs 13,714,785 13,349,714 - - 13,714,785 13,349,714 Community development 10,800,128 8,425,359 - - 10,800,128 8,425,359 Electric - - 77,933,334 75,094,411 77,933,334 75,094,411 Water - - 8,662,030 8,540,615 8,662,030 8,540,615 Wastewater - - 5,674,564 5,263,247 5,674,564 5,263,247 Sanitation - - 5,318,445 4,393,018 5,318,445 4,393,018 Golf - - 1,468,586 1,285,065 1,468,586 1,285,065 Other 328,280 377,304 - - 328,280 377,304 Total expenses 77,644,476 71,611,885 99,056,959 94,576,356 176,701,435 166,188,241 Increase in net assets before transfers (3,254,641) (1,664,799) 26,180,507 39,755,837 22,925,866 38,091,038 Transfers 10,017,180 14,406,807 (10,017,180) (14,406,807) - - Increase in net assets 6,762,539 12,742,008 16,163,327 25,349,030 22,925,866 38,091,038 Net assets - 7/01/10 119,015,535 106,273,527 378,736,061 353,387,031 497,751,596 459,660,558 Net assets - 6/30/11 125,778,074 $ 119,015,535 $ 394,899,388 $ 378,736,061 $ 520,677,462 $ 497,751,596 $ Total City of Farmington's Changes in Net Assets Total accrued gross receipts tax (GRT) increased by $2,844,291 or 6.4%. This was due to an overall increase in receipts from the retail trade and manufacturing sectors. Operating grants increased $2,153,883 mainly due to a Federal Emergency Management Agency (FEMA) grant ($2,192,574) received to assist the City in repairing the damage from a flood in August, 2010. Capital grants and contributions decreased $785,037 during the year. This was due to an overall decrease in federal American Recovery and Reinvestment Act (ARRA) funding mainly in the general fund. Charges for services increased $517,358 or 4.9% due mainly to an increase in stop loss payments ($706,000) and a decrease in Red Apple subsidies ($158,000). The decrease 7 ---PAGE BREAK--- in Red Apple subsidies was due to the timing in draw down payments from the Federal Transit Administration (FTA). A large payment ($159,000) was received in July, 2011. Transfers decreased $4,389,627 mainly due to the large increase in transfers in the prior year from the consolidation of the airport in the general fund ($9,295,156) and an increase in FY2011 transfers from the electric fund to the general fund ($4,217,000). Total expenses increased $6,032,591 or 8.4% during the year mainly due to: utility expenses paid for by the electric utility being recognized in the governmental funds ($878,900), an increase in incurred but not reported (IBNR) estimates due to rising liability costs ($497,600), increases in health claims ($1,360,335), and increased debt service payments ($394,900). Community Development had more expenses capitalized ($1,736,000) resulting in lower expenses shown in FY2010 and depreciation increased ($601,000) in FY2011. Business-type activities. Business-type activities increased the City of Farmington’s net assets by $16,163,327, accounting for 70.5% of the total growth in the government’s net assets. Key financial elements of the past fiscal year are as follows: x Operating expenses are 84% of operating revenues, resulting in $18,662,031 in operating income. x Total electric revenue decreased $4.8 million or 4.7%. Residential, commercial and industrial sales were up $2.1 million, combined. The power cost adjustment (PCA) decreased a net total of $3.8 million. Billed revenues for the PCA decreased $321,713 but, per FASB 71, revenues were decreased an additional $3.5 million for the regulatory liability. As a result, Electric sales to customers were down $1.9 million. x Total water revenue decreased $4.6 million or 24%. Water sales to customers increased by $572,729 due to an increase in water rates and increases in renewal and replacement fees for water infrastructure improvements. A majority of the decrease in revenue was due to a $6.4 million decrease in grants received from the Bureau of Reclamation and the State of New Mexico. x Total wastewater revenue increased by $304,287 or 4% during the year. A majority of this increase was due to the receipt of construction contributions from the BLM (Bureau of Land Mangement) for the construction of a new sewer line. Also wastewater sales increased due to increases in wastewater rates and increases in renewal and replacement fees for wastewater infrastructure improvements. x Total sanitation revenue increased $81,137 or 1.6% mainly due to higher demand for sanitation services. x Investment earnings for business-type activities were $1,071,740, a 19.1% decrease over FY2010 due to an overall decrease in interest rates. 8 ---PAGE BREAK--- 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, 2011, the City of Farmington’s governmental funds reported combined ending fund balances of $36,859,738, an increase of $10,594,218 in comparison with the prior year. Approximately 50% of this total amount or $18,449,727 constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it is nonspendable ($600,102), restricted ($2,642,207), committed ($13,434,068), or assigned ($1,733,634). The general fund is the chief operating fund of the City of Farmington. At the end of the current fiscal year, unassigned fund balance of the general fund was $18,449,727, while total fund balance was $19,049,829. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 37.5% of total general fund expenditures, while total fund balance represents 38.8% of that same amount. The fund balance of the City of Farmington’s general fund increased $6,118,345 or 47.3% during the current fiscal year. The total increase in general fund revenue was $848,506 or 1.9%. This is due in part by a $2,247,036 increase in GRT due to an increase in retail sales. Franchise fees are down $34,761 or 5.4% due to the continual decrease in natural gas prices which affects the revenue from both our local gas service companies and the City’s oil and gas royalties. Investment earnings in the general fund increased $25,746 due to the City having more funds to invest even though interest rates continue to decline. Intergovernmental revenue decreased $676,396 due to a decrease in cigarette taxes of $75,600 (the state now keeps all cigarette tax proceeds) and a reduction in ARRA funding ($718,144). Property taxes increased $141,727 due to an increase in assessed Farmington property values. Fines are down $287,898 presumably due to less traffic in the area attributed to the loss of oil workers and a general slowing of the economy keeping people from outlying areas coming to town to shop. Miscellaneous revenue declined $455,907 mainly due to a one-time payment of $384,200 for a FY2010 Public Service of New Mexico (PNM) bond refunding fee and the sale of property ($41,800), also in FY2010. Total general fund expenditures increased $1,783,736 or 3.8% over the prior year. Key elements of this change were: utility expenses paid for by the electric utility being recognized in the general fund this year ($878,900), an increase in IBNR estimates in the Legal division due to rising liability costs ($497,600) and increases in police ammunition ($112,900) and wage and special duty costs ($245,160). Aside from expenditures that were non-utility related, total costs rose only $904,836 or 1.9% 9 ---PAGE BREAK--- reflecting management’s efforts to keep general fund costs near FY2010 levels. As shown above, total general fund revenues increased 1.9% Total revenue from incoming transfers in the general fund increased by $5,005,918 due mainly to an increase in revenue transfers from the electric utility ($5,782,636) generated from the implementation of a new dividend policy, and a decrease in transfers to the governmental capital projects fund ($919,177). Since overall general fund revenues rose only transfers to the governmental capital projects fund were not made in FY2011. Other key governmental-type funds include the GRT streets fund and GRT parks fund. Both of these funds are funded primarily with gross receipt tax revenue earmarked specifically for streets, public works, and parks activities. Revenues in the GRT streets fund increased $2,531,733 due mostly to a FEMA grant ($2,102,566) received to assist in the cleanup from the August 2010 flood and an increase in GRT ($447,941) generated by an increase in retail sales. The GRT parks fund had an increase of $83,190 due to an increase in GRT ($149,314), a FEMA grant ($27,590), and a decrease in miscellaneous funding caused by a one-time revenue in FY2010 of $88,810 for light fixtures at City parks. Total operating revenues in the governmental funds (not including the general fund) increased $2,515,793, or 13.5%, the main reason being the FEMA grant discussed in the preceding paragraph. Other funds that saw increases were the parks gifts and grants fund ($320,055) due to an increase in local donations for various city parks and projects; the animal shelter; and Sandstone Production’s summer theatre, and the governmental capital projects fund ($780,390) due solely to a pass-through grant from the state for improvements to the family crisis center building. Governmental funds that showed decreases were the recreation fund ($42,908) due to the elimination of this fund since the state stopped passing on revenue from the cigarette taxes collected in Farmington and the library gifts and grants fund ($260,240) mainly due to the receipt of bonds proceeds from the state dedicated to libraries in FY2010 and that funding was not repeated in FY2011. Expenditures in the governmental funds (not including the general fund) decreased $4,117,602 or 18.7% during FY2011. Key elements of this decrease are: GRT streets fund projects expenditures were larger in FY2010 due to several large projects, such as North Foothills development ($2,063,300), San Juan Blvd. sidewalks ($562,200), Cutler repaving ($717,400), and micro-surfacing various streets ($250,700). The law enforcement block grant fund decreased ($214,782) due to a decrease in ARRA funding. The COPS program grant fund increased during FY2011 due to an increase in ARRA funding which funded five fulltime police officers. The state fire fund also showed an increase in expenditures ($236,079) due to increased purchases to replace aging protective gear. 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 $67,887,608 in the electric utility system, $5,189,197 in the water utility system, $5,806,716 in the wastewater utility system, and $1,161,705 in combined net assets for the other propriety funds (sanitation 10 ---PAGE BREAK--- and golf courses). The total growth in net assets was $9,618,313 in the electric fund, $5,246,221 in the water fund, $1,861,156 in the wastewater fund, and a decline of $562,363 in the other funds combined. Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Farmington’s business-type activities. Budgetary Highlights After the dramatic FY2010 decline of 17.5% in the GRT, this past year saw a welcomed increase of 3.9% (on a cash basis). This increase hopefully signaled the end of the decline and the start of a new upward trend. However, even with this modest increase, the total level of GRT was basically at FY2005 levels which represent a yearly loss of over $6 million from the average over the past five years. This level is also significantly below the twenty-five year average growth trend of With the considerable drop in natural gas prices, the actual result for FY2011 is indicative that the setbacks the local economy has suffered have run their course. For this reason the GRT budget for FY2012 will be set at essentially the same level as the actual results for FY2011. With a higher degree of uncertainty as to actual revenue levels, the budget for FY2012 will be even more closely monitored than in prior years. On the expenditure side, the original general fund budget of $49,332,343 was increased to $49,686,180 during FY2011. This adjustment increase was made to reflect increasing revenue throughout the year. As a result of actions adopted as part of the FY2011 budget an extensive expenditure reduction strategy was put into effect. First, a city-wide pay freeze was instituted. Second, 45 vacant positions were frozen. Third, an across the board 2% reduction in operating costs was instituted. Fourth, a 10% reduction in all hours worked by temporary employees was made. Fifth, all non- essential capital expenditures were postponed until revenue was stabilized. Sixth, transfers from the electric utility were increased. Although difficult to accomplish, this effort resulted in actual FY2011 general fund expenditures being held to prior year levels. The combination of increasing revenue and flat expenditure levels led to a favorable ending cash balance of $15,034,259 (cash basis), which was $6.4 million greater than the prior year. This large cash balance will allow for monies to be transferred to a capital projects fund for capital projects and allow a complete budget for many maintenance items that were “deferred” during the revenue downturn of FY2010. During the year, four separate budget revisions were made to the original FY2011 expenditure budget. These adjustments totaled $12,168,457 and equaled 5.6% of the original total budget. The number of revisions is indicative of the ongoing budget process during the year of controlling expenditures to adjust to available revenue. The largest percentage increase in expenditures during the year was in the enterprise funds as a result of capital projects that were started the previous year but not completed until last year. There were also several increases for grant awards that were made during the year and the health fund required a large adjustment as both revenue and expenditures were higher than anticipated. For FY2011, the general fund budget had two overriding issues to be addressed. The first issue involved creating an accurate revenue projection in light of sharply declining GRT revenue in FY2010. The second issue was the need to create a balanced budget. 11 ---PAGE BREAK--- Because of the sharp drop in revenue during FY2010, the preliminary projections reflected the idea that the worst was over and that, at a minimum, revenue would quit declining. This turned out to be very accurate as GRT revenue continued declining the first third of the current year and then turned around and achieved a small percentage gain for the year. To achieve a balanced budget, a thorough review of all expenditures was undertaken. With the objective to maintain existing services, every general government departmental budget was reviewed to determine where expenditures could be reduced without affecting service delivery. Although many cost items were deferred, the combination of these deferrals and keeping personnel costs under control by not awarding raises and reviewing vacant positions before rehire, led to the creation of a balanced budget for FY2011. For FY2011, capital projects took a backseat to maintaining current operations. Both the new animal shelter and fire Station as well as other capital projects had some funding allocated but were basically put on hold. However, additional funds will be required for the completion of both projects and the source for operating funds to staff both facilities is as yet undetermined. Another capital project in the planning stage is a bridge over the Animas River which will connect north and south on the east side of the city. The budget for FY2011 did continue the implementation of previously adopted water and wastewater projects that were funded by a renewal and replacement fee that was added to water and wastewater bills to ensure that adequate infrastructure be in place for service delivery. Two large water projects were undertaken during the year. The Navajo Reach Project was a federally funded project designed to facilitate the delivery of water to the Navajo Nation. The second large project was the flood clean-up effort, funded by FEMA, that sought to repair the damage from a flood event that struck the east end of town. These projects required adjustments to the adopted budget. The most favorable budget highlight for the year was the revenue/expenditure actual to actual comparison for the general fund at the end of the year. With actual revenue, including transfers, recovering nicely from the prior year’s decline and actual expenditures maintained at prior year levels the result was a $5.8 million surplus. With this surplus and with revenue projected to remain constant, the prospect for “catching up” on deferred items is favorable which in turn means that service provision levels are certain to meet citizen expectations. 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, 2011 was $429,922,747 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system improvements, utility systems, machinery and equipment, park facilities, roads, highways, and bridges. The business-type capital assets accounted for $331,602,090 or 77.1% of the total City of Farmington capital assets. The total increase in the business- type investment in capital assets for the current fiscal year was $3,744,483 or 1.1%. The governmental activities investment in capital assets accounted for $98,320,657 or 22.9% of all capital assets owned by the City. The total decrease in governmental activities investment in capital assets for the current year was $4,538,631 or 4.4%. 12 ---PAGE BREAK--- Major capital asset investment activities during the current fiscal year included the following: Governmental Business-type Activities Activities FY2011 FY2010 FY2011 FY2010 FY2011 FY2010 Land 26,893,367 $ 26,893,367 $ 3,984,334 $ 3,984,334 $ 30,877,701 $ 30,877,701 $ Land rights - - 954,359 998,731 954,359 998,731 Buildings 28,651,008 29,575,233 65,302,459 61,890,222 93,953,467 91,465,455 Improvements 12,130,819 11,171,843 69,980,207 63,805,764 82,111,026 74,977,607 Equipment 9,186,573 10,449,999 153,174,815 150,272,689 162,361,388 160,722,688 Infrastructure 19,106,098 15,601,285 - - 19,106,098 15,601,285 Construction in progress 2,352,792 9,167,561 38,205,916 46,905,867 40,558,708 56,073,428 Total 98,320,657 $ 102,859,288 $ 331,602,090 $ 327,857,607 $ 429,922,747 $ 430,716,895 $ Total City of Farmington's Capital Assets (net of depreciation) Capital expenditures for the electric utility system will average approximately $14,050,080 per year over the next five fiscal years. Some large projects included in the FY2012 capital budget are the transformer shop addition ($3,500,000), customer work order system ($2,776,000) and Vista substation upgrade ($2,887,800). 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 $5,137,943 per year, totaling $25,689,716 for fiscal years 2012 through 2016. During FY2011, the City of Farmington implemented the fifth of five planned annual rate increases including 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 FY2004 the City placed in service a new wastewater treatment plant. Funding came from a $14,178,191 loan obtained from the New Mexico Environment Department (NMED). Capital expenditures for FY2012 are budgeted at $2,750,000 for treatment and $2,103,706 for the collection system. During FY2011, the wastewater fund implemented the fifth of five planned annual rate increases including a 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 39-40 of this report. Long-term debt. At the end of the current fiscal year, the City of Farmington had total bonded debt outstanding of $16,820,000. Of this amount, $6,680,000 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 13 ---PAGE BREAK--- than the special funds that are specifically pledged for their payment under the terms of the bond ordinance. The remainder of the City’s debt is secured solely by specified revenue sources. The City of Farmington’s total net debt decreased $6,659,032 or 18.5% during FY2011. FY2011 FY2010 FY2011 FY2010 FY2011 FY2010 Sales tax bonds 6,680,000 $ 7,995,000 $ - $ - $ 6,680,000 $ 7,995,000 $ NMED loan - - 11,376,818 11,970,694 11,376,818 11,970,694 NMFA loan - - 1,054,844 - 1,054,844 - Revenue bonds - - 10,140,000 15,945,000 10,140,000 15,945,000 Total 6,680,000 $ 7,995,000 $ 22,571,662 $ 27,915,694 $ 29,251,662 $ 35,910,694 $ City of Farmington's Outstanding Debt Activities Activities Governmental Business-type Total $Ͳ $10 $15 $20 $25 $30 Governmental BusinessͲtype Millions Outstanding Debt FY2010 FY2011 Credit ratings. Standard & Poor’s Rating Group and Moody’s Investors Service have assigned the most recent bond issuance the insured ratings of AAA and Aaa, respectively. The underlying ratings, however, are AA- and A1, respectively. These ratings have not changed significantly in comparison to prior ratings. Debt limitation. Article IX, Section 13 of the State Constitution limits the powers of the City to incur general obligation debt in an aggregate amount, including existing indebtedness, not to exceed four percent of the value of the taxable property in the City as shown by the last preceding general assessments. The City may, however, contract debt in excess of such limitation for the construction or purchase of a system for supplying water or a sewer system for the City. Based on the 2011 assessed valuation of $982,911,834, the City’s general obligation debt limit is $39,316,473. The City presently has no general obligation bonds outstanding. For more detailed information on the City’s debt, see pages 43-46 in the Notes to the Financial Statements. Requests for Information This financial report is designed to provide a general overview of the City of Farmington’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Controller, 800 Municipal Drive, Farmington, NM 87401. 14 ---PAGE BREAK--- Basic Financial Statements Basic Financial Statements ---PAGE BREAK--- Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents $ 30,040,963 $ 73,821,058 $ 103,862,021 Receivables (net, where applicable, of allowances for uncollectibles): 610,249 6,753,449 7,363,698 Accrued unbilled revenues - 6,037,897 6,037,897 Special assessments 653 - 653 Intergovernmental receivable 12,215,812 245,193 12,461,005 Internal balances 77,843 (77,843) - Inventories 256,764 5,298,231 5,554,995 Prepaids 250,752 110,280 361,032 Deferred charges 67,788 95,848 163,636 Restricted reserve investment account 92,586 - 92,586 Restricted assets Temporarily restricted: Cash and equivalents - 9,206,994 9,206,994 Capital assets (not being depreciated): Land 26,893,367 3,984,334 30,877,701 Construction in progress 2,352,792 38,205,916 40,558,708 Capital assets (net of accumulated depreciation): Land rights - 954,359 954,359 Buildings 28,651,008 65,302,459 93,953,467 Improvements other than buildings 12,130,819 69,980,207 82,111,026 Equipment 9,186,573 153,174,815 162,361,388 Infrastructure 19,106,098 - 19,106,098 Total assets 141,934,067 433,093,197 575,027,264 LIABILITIES Accounts payable and other current liabilities 1,678,924 5,672,889 7,351,813 Wages and benefits payable 1,418,891 448,888 1,867,779 Other accrued liabilities 14,444 1,212,131 1,226,575 Accrued claims liabilities - 130,750 130,750 Retainage deposits payable 63,199 - 63,199 Unearned revenue - 2,601,120 2,601,120 Accrued interest payable 11,654 57,814 69,468 Customer deposits - 3,963,144 3,963,144 Non-current liabilities: Due within one year 3,487,836 7,529,910 11,017,746 Due in more than one year 9,481,045 16,577,163 26,058,208 Total liabilities 16,155,993 38,193,809 54,349,802 NET ASSETS Invested in capital assets, net of related debt 91,574,976 309,610,312 401,185,288 Restricted for: Police 2,483 - 2,483 Fire 594,946 - 594,946 Lodgers promotion 337,879 - 337,879 Capital projects 1,671,588 - 1,671,588 Debt service 23,657 5,243,850 5,267,507 Unrestricted 31,572,545 80,045,226 111,617,771 Total net assets $ 125,778,074 $ 394,899,388 $ 520,677,462 The notes to the financial statements are an integral part of this statement. CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets June 30, 2011 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 $ 29,114,460 $ 8,866,978 $ 2,121,805 $ 990,620 $ (17,135,057) $ - $ (17,135,057) Police 15,021,697 1,185,576 1,093,430 - (12,742,691) - (12,742,691) Fire 8,665,126 - 740,716 - (7,924,410) - (7,924,410) Parks, recreation, cultural affairs 13,714,785 838,839 185,474 - (12,690,472) - (12,690,472) Public works 10,800,128 50,940 2,102,516 2,452,361 (6,194,311) - (6,194,311) Interest on long-term debt 328,280 - - - (328,280) - (328,280) Total governmental activities 77,644,476 10,942,333 6,243,941 3,442,981 (57,015,221) - (57,015,221) Business-type activities: Electric 77,933,334 91,451,673 4,361,540 - - 17,879,879 17,879,879 Water 8,662,030 12,897,358 1,570,758 - - 5,806,086 5,806,086 Wastewater 5,674,564 6,163,722 350,106 - - 839,264 839,264 Sanitation 5,318,445 5,092,625 - - - (225,820) (225,820) Golf 1,468,586 1,019,226 - - - (449,360) (449,360) Total business-type activities 99,056,959 116,624,604 6,282,404 - - 23,850,049 23,850,049 Total government $ 176,701,435 $ 127,566,937 $ 12,526,345 $ 3,442,981 (57,015,221) 23,850,049 (33,165,172) General revenues: Property taxes 1,806,123 - 1,806,123 Sales taxes 47,605,170 - 47,605,170 Franchise taxes 614,627 - 614,627 Gasoline taxes 882,502 - 882,502 Lodger's taxes 946,142 - 946,142 Environmental taxes - 1,258,718 1,258,718 Miscellaneous 1,541,494 - 1,541,494 Unrestricted investment earnings 364,522 1,071,740 1,436,262 Transfers 10,017,180 (10,017,180) - Total general revenues and transfers 63,777,760 (7,686,722) 56,091,038 Change in net assets 6,762,539 16,163,327 22,925,866 Net assets - beginning 119,015,535 378,736,061 497,751,596 Net assets - ending $ 125,778,074 $ 394,899,388 $ 520,677,462 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, 2011 16 ---PAGE BREAK--- Gross Receipts Other Total Tax Governmental Governmental General Streets Funds Funds ASSETS: Pooled cash and investments $ 14,562,248 $ 9,867,213 $ 5,611,502 $ 30,040,963 Receivables (net, where applicable, of allowances for uncollectibles): 386,326 - 5,069 391,395 Special assessments 653 - - 653 Due from other funds 408,045 - 474,805 882,850 Inventories, at cost 256,764 - - 256,764 Prepaid items 250,752 - - 250,752 Restricted reserve investment account 92,586 - - 92,586 Intergovernmental 8,898,201 1,882,500 1,435,111 12,215,812 Total assets $ 24,855,575 $ 11,749,713 $ 7,526,487 $ 44,131,775 LIABILITIES AND FUND BALANCES: Liabilities: Accounts payable $ 705,172 $ 388,390 $ 585,362 $ 1,678,924 Wages and benefits payable 1,329,107 774 89,010 1,418,891 Other accrued expenditures 14,444 - - 14,444 Accrued claims payable 1,858,463 - - 1,858,463 Retainage/deposits payable 63,199 - - 63,199 Deferred revenue 1,835,361 44,125 169,439 2,048,925 Due to other funds - - 189,191 189,191 Total liabilities 5,805,746 433,289 1,033,002 7,272,037 Fund Balances: Nonspendable: Inventories and prepaids 507,516 - - 507,516 Restricted reserve investment 92,586 - - 92,586 Restricted to: Police - - 2,483 2,483 Fire - - 594,946 594,946 Lodgers promotion - - 337,879 337,879 Capital projects - - 1 671 588 1 671 588 CITY OF FARMINGTON, NEW MEXICO Balance Sheet Governmental Funds June 30, 2011 Capital projects 1,671,588 1,671,588 Debt service - - 35,311 35,311 Committed to: Police - - 103,727 103,727 Incarceration - - 18 18 Parks, recreation, cultural affairs - - 2,013,899 2,013,899 Public works - 11,316,424 - 11,316,424 Assigned to: Parks, recreation, cultural affairs - - 1,129,543 1,129,543 Library - - 97,888 97,888 Capital projects - - 506,203 506,203 Unassigned 18,449,727 - - 18,449,727 Total fund balances 19,049,829 11,316,424 6,493,485 36,859,738 Total liabilities and fund balances $ 24,855,575 $ 11,749,713 $ 7,526,487 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 98,320,657 Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. 2,048,925 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. (1,401,126) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (10,050,120) Net assets of governmental activities $ 125,778,074 The notes to the financial statements are an integral part of this statement. 17 ---PAGE BREAK--- Gross Receipts Other Total Tax Governmental Governmental General Streets Funds Funds REVENUES: Taxes: Property $ 1,637,361 $ - $ - $ 1,637,361 Gross receipts 37,535,166 7,552,503 2,517,501 47,605,170 Franchise 614,627 - - 614,627 Gasoline - 882,502 - 882,502 Lodger's - - 946,142 946,142 Licenses and permits 601,750 - 4,628 606,378 Intergovernmental 2,074,988 2,102,516 5,509,418 9,686,922 Charges for services 2,388,406 - 118,281 2,506,687 Fines 989,927 - 181,101 1,171,028 Special assessments 1,970 - - 1,970 Investment earnings 175,114 107,607 81,939 364,660 Miscellaneous 522,394 479 1,018,621 1,541,494 Total revenues 46,541,703 10,645,607 10,377,631 67,564,941 EXPENDITURES: Current: General government 19,113,656 - - 19,113,656 Police 13,493,339 - 1,399,469 14,892,808 Fire 7,841,376 - 438,282 8,279,658 Parks, recreation and cultural affairs 8,009,514 - 4,190,707 12,200,221 Public works 677,192 5,598,863 - 6,276,055 Debt service: Principal - - 1,315,000 1,315,000 Interest - - 330,393 330,393 Capital outlay: General government - - 770,941 770,941 Airport - - 990,802 990,802 Highways and streets - 838,038 1,980,331 2,818,369 Total expenditures 49,135,077 6,436,901 11,415,925 66,987,903 Excess (deficiency) of revenues over (under) expenditures (2,593,374) 4,208,706 (1,038,294) 577,038 OTHER FINANCING SOURCES (USES): Transfers in 10,105,556 - 2,037,337 12,142,893 Transfers out (1,393,837) (533,500) (198,376) (2,125,713) Total other financing sources (uses) 8,711,719 (533,500) 1,838,961 10,017,180 Net change in fund balances 6,118,345 3,675,206 800,667 10,594,218 Fund balances-beginning 12,931,484 7,641,218 5,692,818 26,265,520 Fund balances- ending $ 19,049,829 $ 11,316,424 $ 6,493,485 $ 36,859,738 CITY OF FARMINGTON, NEW MEXICO Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2011 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) $ 10,594,218 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. (4,538,631) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 168,762 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. 1,283,868 The net revenue/expense of certain activities of internal service funds is reported with governmental activities. (745,678) Change in net assets of governmental activities (page 16) $ 6,762,539 For the Year Ended June 30, 2011 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 $ 1,557,200 $ 1,557,200 $ 1,636,283 $ 79,083 Gross receipts tax 33,084,676 33,084,676 36,982,207 3,897,531 Franchise taxes 600,000 600,000 621,369 21,369 Licenses and permits 565,100 565,100 601,680 36,580 Intergovernmental 1,623,000 1,686,134 1,836,524 150,390 Charges for services 2,132,630 2,132,630 2,058,679 (73,951) Fines 1,203,250 1,203,250 1,095,536 (107,714) Special assessments - - 1,970 1,970 Investment earnings 127,500 127,500 175,114 47,614 Miscellaneous 328,500 328,500 570,083 241,583 Total revenues 41,221,856 41,284,990 45,579,445 4,294,455 EXPENDITURES: Current: General government: Council 257,855 257,855 264,018 (6,163) Municipal court 2,206,707 2,206,707 2,019,253 187,454 Administrative 9,648,185 9,789,701 8,553,599 1,236,102 Legal 1,026,947 1,026,947 712,787 314,160 Administrative services 460,874 465,594 314,176 151,418 General services 4,694,001 4,689,054 5,198,505 (509,451) Community Development 1,259,017 1,264,307 1,224,576 39,731 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO General Fund Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis Community Development 1,259,017 1,264,307 1,224,576 39,731 Total general government 19,553,586 19,700,165 18,286,914 1,413,251 Public safety: Police 13,334,130 13,550,894 13,498,870 52,024 Fire 7,943,691 7,868,721 7,830,047 38,674 Total public safety 21,277,821 21,419,615 21,328,917 90,698 Public works 855,032 861,250 660,665 200,585 Parks, recreation and cultural affairs 7,645,904 7,705,150 7,825,742 (120,592) Total expenditures 49,332,343 49,686,180 48,102,238 1,583,942 Excess (deficiency) of revenues over (under) expenditures (8,110,487) (8,401,190) (2,522,793) 5,878,397 OTHER FINANCING SOURCES (USES): Transfers in 9,107,362 9,107,362 10,105,556 998,194 Transfers out (996,875) (996,875) (1,393,837) (396,962) Total other financing sources and uses 8,110,487 8,110,487 8,711,719 601,232 Net change in fund balances - (290,703) 6,188,926 $ 6,479,629 RECONCILIATION TO GAAP BASIS: Change in receivables 169,757 Change in intergovernmental 792,502 Change in accrued payables (1,032,840) (70,581) GAAP BASIS CHANGE IN FUND BALANCES: 6,118,345 Fund balances-beginning 12,931,484 12,931,484 12,931,484 Fund balances-ending $ 12,931,484 $ 12,640,781 $ 19,049,829 The notes to the financial statements are an integral part of this statement. 20 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Gross receipts taxes $ 6,660,745 $ 6,660,745 $ 7,441,497 $ 780,752 Intergovernmental - - 1,669,825 1,669,825 Gasoline taxes 865,000 865,000 804,964 (60,036) Investment earnings 150,000 150,000 107,607 (42,393) Miscellaneous 2,000 2,000 479 (1,521) Total revenues 7,677,745 7,677,745 10,024,372 2,346,627 EXPENDITURES: Current: Public Works 6,399,239 6,589,239 5,440,387 1,148,852 Capital Outlay: Highways and streets 3,950,000 3,950,000 721,718 3,228,282 Total expenditures 10,349,239 10,539,239 6,162,105 4,377,134 Excess (deficiency) of revenues over (under) expenditures (2,671,494) (2,861,494) 3,862,267 6,723,761 OTHER FINANCING SOURCES (USES): Transfers out (533,500) (533,500) (533,500) - Net change in fund balances (3,204,994) (3,394,994) 3,328,767 $ 6,723,761 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 621,234 Change in accounts payable (274,795) 346,439 GAAP BASIS CHANGE IN FUND BALANCES 3,675,206 Fund balances-beginning 7,641,218 7,641,218 7,641,218 Fund balances-ending $ 4,436,224 $ 4,246,224 $ 11,316,424 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax Streets Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 21 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Totals Fund ASSETS Current assets: Pooled cash and investments $ 62,462,259 $ 4,799,683 $ 5,098,150 $ 1,459,266 $ 1,700 $ 73,821,058 $ - Accounts receivable (net of allowance for doubtful accounts) 4,777,889 1,077,140 609,397 278,105 10,918 6,753,449 218,854 Accrued unbilled revenues 4,950,447 666,099 236,879 184,472 - 6,037,897 - Intergovernmental receivable - 245,193 - - - 245,193 - Inventories 5,283,444 13,418 1,369 - - 5,298,231 - Prepaid items 82,509 10,962 13,645 - 3,164 110,280 - Restricted cash, cash equivalents and investments 7,014,869 734,880 1,457,245 - - 9,206,994 - Total current assets 84,571,417 7,547,375 7,416,685 1,921,843 15,782 101,473,102 218,854 Noncurrent assets: Deferred charges 76,599 16,529 2,720 - - 95,848 - Capital assets: CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets Proprietary Funds June 30, 2011 Business-type Activities Enterprise Funds Capital assets: Land and land rights 3,546,554 1,654,325 479,388 23,341 100,000 5,803,608 - Building and system 69,529,667 14,008,573 23,989,482 80,640 1,045,237 108,653,599 - Improvements other than buildings 60,892,905 38,044,286 14,467,951 14,839 2,934,615 116,354,596 - Machinery and equipment 269,739,374 9,558,265 3,551,062 101,099 832,249 283,782,049 - Construction in progress 22,490,515 13,677,469 2,037,932 - - 38,205,916 - Less accumulated depreciation (169,588,844) (31,455,361) (17,600,821) (181,621) (2,371,031) (221,197,678) - Total capital assets (net of accumulated depreciation) 256,610,171 45,487,557 26,924,994 38,298 2,541,070 331,602,090 - Total noncurrent assets 256,686,770 45,504,086 26,927,714 38,298 2,541,070 331,697,938 - Total assets $ 341,258,187 $ 53,051,461 $ 34,344,399 $ 1,960,141 $ 2,556,852 $ 433,171,040 $ 218,854 22 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Totals Fund LIABILITIES Current liabilities: Current liabilites payable from unrestricted assets: Accounts payable $ 4,576,238 $ 390,053 $ 85,104 $ 549,272 $ 72,222 $ 5,672,889 $ - Compensated absences 527,129 4,915 4,915 - 22,000 558,959 - Due to other funds - - - - 77,843 77,843 615,816 Other accrued expenses 1,504,425 121,261 5,440 86 29,807 1,661,019 - Accrued claims payable 31,000 49,000 50,000 - 750 130,750 1,004,164 Deferred revenue 2,599,680 1,440 - - - 2,601,120 - Capital lease payable - current - - - - 34,400 34,400 - Accrued interest payable 46,203 9,970 1,641 - - 57,814 - Revenue bonds payable 5,054,653 1,090,727 179,478 - - 6,324,858 - NMED loan - - 611,693 - - 611,693 - Total current liabilities payable from unrestricted assets 14,339,328 1,667,366 938,271 549,358 237,022 17,731,345 1,619,980 . Current liabilities payable from restricted assets 3,667,796 295,348 - - - 3,963,144 - Total current liabilities 18,007,124 1,962,714 938,271 549,358 237,022 21,694,489 1,619,980 Noncurrent liabilities: (net of unamortized discounts) Revenue bonds payable (net of unamortized discounts and deferred amount on refunding) 3,401,041 733,899 120,762 - - 4,255,702 - NMED loan - - 10,765,125 - - 10,765,125 - NMFA loan - 1,054,844 - - - 1,054,844 - Compensated absences 460,864 8,344 8,344 - 23,940 501,492 - Total noncurrent liabilities 3,861,905 1,797,087 10,894,231 - 23,940 16,577,163 - Total liabilities 21,869,029 3,759,801 11,832,502 549,358 260,962 38,271,652 1,619,980 NET ASSETS Invested in capital assets, net of related debt 248,154,477 43,662,931 15,247,936 38,298 2,506,670 309,610,312 - Restricted for debt service 3,347,073 439,532 1,457,245 - - 5,243,850 - Unrestricted 67,887,608 5,189,197 5,806,716 1,372,485 (210,780) 80,045,226 (1,401,126) Total net assets $ 319,389,158 $ 49,291,660 $ 22,511,897 $ 1,410,783 $ 2,295,890 $ 394,899,388 $ (1,401,126) The notes to the financial statements are an integral part of this statement. Proprietary Funds June 30, 2011 Business-type Activities Enterprise Funds Statement of Net Assets CITY OF FARMINGTON, NEW MEXICO 23 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Totals Fund Operating revenues: Charges for sales and services: Electric $ 90,970,119 $ - $ - $ - $ - $ 90,970,119 $ - Water - 12,889,963 - - - 12,889,963 - Wastewater - - 6,163,636 - - 6,163,636 - Sanitation - - - 4,999,188 - 4,999,188 - Golf course - - - - 1,019,300 1,019,300 - Health - - - - - - 6,656,270 Other revenues 481,554 7,395 86 93,437 (74) 582,398 - Total operating revenues 91,451,673 12,897,358 6,163,722 5,092,625 1,019,226 116,624,604 6,656,270 Operating expenses: Salaries and fringe benefits 9,944,245 467,427 282,316 2,638 646,804 11,343,430 - Purchased power, fuel and chemicals 37,443,044 - - - - 37,443,044 - Other operating expenses 17,367,920 6,314,249 3,651,330 5,311,060 607,665 33,252,224 7,401,810 Depreciation and amortization 12,602,306 1,753,159 1,361,466 4,747 202,197 15,923,875 - Total operating expenses 77,357,515 8,534,835 5,295,112 5,318,445 1,456,666 97,962,573 7,401,810 Operating income (loss) 14,094,158 4,362,523 868,610 (225,820) (437,440) 18,662,031 (745,540) Nonoperating revenues (expenses): Intergovernmental-environmental tax - - 1,258,718 - - 1,258,718 - Investment earnings 899,712 78,660 68,927 24,171 270 1,071,740 (138) Revenue from grants 36,416 352,584 - - - 389,000 - Interest expense (575,819) (127,195) (379,452) - (11,920) (1,094,386) - Total nonoperating revenues (expenses) 360,309 304,049 948,193 24,171 (11,650) 1,625,072 (138) Income (loss) before transfers 14,454,467 4,666,572 1,816,803 (201,649) (449,090) 20,287,103 (745,678) Capital contributions 4,325,124 1,218,174 350,106 - - 5,893,404 - Transfers in - - - - 88,376 88,376 - Transfers out (9,161,278) (638,525) (305,753) - - (10,105,556) - Change in net assets 9,618,313 5,246,221 1,861,156 (201,649) (360,714) 16,163,327 (745,678) Total net assets-beginning 309,770,845 44,045,439 20,650,741 1,612,432 2,656,604 378,736,061 (655,448) Total net assets-ending $ 319,389,158 $ 49,291,660 $ 22,511,897 $ 1,410,783 $ 2,295,890 $ 394,899,388 $ (1,401,126) 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, 2011 24 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Totals Fund CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/users $ 94,126,109 $ 13,573,687 $ 6,124,766 $ 5,092,603 $ 1,016,189 $ 119,933,354 $ 6,799,703 Payments to suppliers (55,142,565) (6,512,411) (3,653,390) (5,272,482) (589,737) (71,170,585) (7,483,460) Payments to employees (9,743,740) (463,605) (281,492) (2,630) (649,722) (11,141,189) - Net cash provided (used) by operating activities 29,239,804 6,597,671 2,189,884 (182,509) (223,270) 37,621,580 (683,757) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds (9,161,278) (638,525) (305,753) - - (10,105,556) 615,816 Transfer from other funds - - - - 88,376 88,376 - Advances from other funds - - - - 77,843 77,843 - Operating grants 36,416 352,584 - - - 389,000 - Intergovernmental-envrionmental tax - - 1,258,718 - - 1,258,718 - Net cash provided (used) by capital and related financing activities (9,124,862) (285,941) 952,965 - 166,219 (8,291,619) 615,816 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt - 1,054,844 - - - 1,054,844 - Capital contributions 4,325,124 1,218,174 350,106 - - 5,893,404 - Acquisition and construction of capital assets (12,211,002) (5,673,748) (1,808,555) 24,947 - (19,668,358) - Principal paid on capital debt (4,822,891) (1,040,717) (765,125) - - (6,628,733) - Interest paid on capital debt (575,819) (127,195) (379,452) - (11,920) (1,094,386) - Capital lease payment - - - - (52,445) (52,445) - Net cash provided (used) by capital and related financing activities (13,284,588) (4,568,642) (2,603,026) 24,947 (64,365) (20,495,674) - CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received 899,712 78,660 68,927 24,171 270 1,071,740 (138) Net increase (decrease) in cash and cash equivalents 7,730,066 1,821,748 608,750 (133,391) (121,146) 9,906,027 (68,079) Cash and cash equivalents - beginning 61,747,062 3,712,815 5,946,645 1,592,657 122,846 73,122,025 68,079 Cash and cash equivalents - ending $ 69,477,128 $ 5,534,563 $ 6,555,395 $ 1,459,266 $ 1,700 $ 83,028,052 $ - 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, 2011 25 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2011 Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Totals Fund Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) $ 14,094,158 $ 4,362,523 $ 868,610 $ (225,820) $ (437,440) $ 18,662,031 $ (745,540) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation and amoritzation 12,602,306 1,753,159 1,361,466 4,747 202,197 15,923,875 - (Increase) decrease in accounts receivable (1,128,250) 706,682 (35,008) (10,007) (3,037) (469,620) 143,433 (Increase) decrease in accrued unbilled revenues (474,470) (63,005) (3,948) 9,985 - (531,438) - (Increase) decrease in regulatory asset 1,564,358 - - - - 1,564,358 - (Increase) decrease in inventories (696,655) 27,194 6,272 - - (663,189) - (Increase) decrease in prepaid items (632) 657 1,653 - 56 1,734 - (Increase) decrease in deferred charges 2,639,645 10,064 1,419 - - 2,651,128 - Increase (decrease) in other accrued expenses 171,510 (2,435) (205) 8 (2,918) 165,960 - Increase (decrease) in accrued claims payable 5,000 14,000 5,000 - (250) 23,750 (52,529) Increase (decrease) in customer deposits 113,118 31,212 - - - 144,330 - Increase (decrease) in accounts payable 349,716 (242,380) (15,375) 38,578 18,122 148,661 (29,121) Total adjustments 15,145,646 2,235,148 1,321,274 43,311 214,170 18,959,549 61,783 Net cash provided (used) by operating activities $ 29,239,804 $ 6,597,671 $ 2,189,884 $ (182,509) $ (223,270) $ 37,621,580 $ (683,757) The notes to the financial statements are an integral part of this statement. Enterprise Funds Business-type Activities 26 ---PAGE BREAK--- Notes to the Financial Statements Notes to the Financial Statements ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO NOTES TO FINANCIAL STATEMENTS June 30, 2011 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Farmington, (City), New Mexico, which was incorporated in 1901, has a population of 45,877 living within an area of 33 square miles. The City operates under a Council/Manager form of government. Four councilors are elected from designated districts with the Mayor serving at large. This reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the City's financial statements to be misleading or incomplete. The City had no blended or discrete component units during the fiscal year ended June 30, 2011. B. Government-wide and fund financial statements The government-wide financial statements the statement of net assets and the statement of activities) report information on all of the activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Indirect costs are not allocated to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement focus, basis of accounting and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 27 ---PAGE BREAK--- Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Derived tax revenues (gross receipts taxes and gas taxes) are recognized when the underlying transaction takes place. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The general fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The gross receipts tax-streets fund accounts for the City's share of gross receipts tax that is legally restricted to the maintenance of streets and storm drainage. The government reports the following major proprietary funds: The electric fund accounts for the activities of the City’s electric utility. The water fund accounts for the activities of the City’s water utility. The wastewater fund accounts for the activities of the City’s wastewater utility. The sanitation fund accounts for the activities of the City’s sanitation utility. The golf fund accounts for the activities of the City’s two golf courses. Additionally, the government reports the following fund type: The internal service fund accounts for health insurance services provided to City employees on a cost reimbursement basis. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. 28 ---PAGE BREAK--- As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government’s electric, water, wastewater, and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided 2) operating grants and contributions and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds and internal service funds are charges to customers for sales and services. The utilities also recognize as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is City policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, liabilities and net assets or equity 1. Deposits and investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. For purposes of the statement of cash flows for the proprietary funds, the City considers all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. State statutes authorize the government to invest in obligations of the U.S. Treasury, U.S. Securities, repurchase agreements, Certificates of Deposits, and the State Treasurer’s Investment Pool. Investments for the government are reported at fair value. The State Treasurer’s Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. 2. Receivables and payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” the current portion of interfund loans) or “advances to/from other funds” the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds”. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” 29 ---PAGE BREAK--- Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All trade receivables are shown net of an allowance for uncollectibles. Trade accounts in excess of 180 days comprise the trade accounts receivable allowance for uncollectibles. Property taxes are levied and collected by San Juan County. The County remits to the City amounts collected for the applicable portion of the property taxes in the month following the date of receipt. The City recognizes property taxes as revenue on the modified accrual basis. Oil and gas taxes received from the County are recognized as revenue when received by the City. Property taxes are levied as of January 1st on property values assessed on the same date. The tax levy is payable in two installments, November 10th and May 10th. The property taxes are considered delinquent and subject to lien, penalty, and interest, 30 days after the date on which they are due. 3. Inventories and prepaid items All inventories are valued at cost using the weighted-average method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Regulatory Liability The City’s electric utility enterprise fund has regulatory activities whose rates are determined based on cost of service (power cost adjustment - PCA). Revenues are recognized based on the PCA when the costs are incurred but will be billed and collected in the future to recover such costs, and a regulatory asset is recorded. The liability (unearned revenue) is recorded on the statement of net assets ($2,599,680 as of June 30, 2011) and the related reduction in revenue is recorded on the statement of activities ($4,164,039 for the year ended June 30, 2011). 5. Restricted assets Certain proceeds of enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. The "revenue bond current debt service" account is used to segregate resources accumulated for debt service payments over the next twelve months. The "revenue bond renewal, replacement, and contingency" account is used to report resources set aside to meet unexpected contingencies or to fund asset renewals and replacements. Customer deposits, as well as customer overpayments, are also classified as restricted assets. The deposits and overpayments remain the property of the customers, and the restricted account reports these assets separately from current assets available for operations to demonstrate the fiduciary relationship with the customers. 6. Capital assets Capital assets, which include property, plant, equipment, and infrastructure assets roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if 30 ---PAGE BREAK--- purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Such assets, including infrastructure, have higher limits that must be met before they are capitalized. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Computer software costs, whether externally purchased or developed in-house, shall be capitalized if the total cost of the software equals or exceeds $5,000 and has a life of at least two years. Library books are not capitalized. Property, plant, and equipment of the primary government are depreciated using the straight line method over the following estimated useful lives and capitalization thresholds: Estimated Threshold Useful Life Buildings and structures $ 10,000 7 - 45 years Improvements other than buildings $ 10,000 5 - 75 years Infrastructure $ 50,000 3 - 50 years Personal property $ 5,000 5 - 45 years 7. Compensated absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Accrued sick leave over 520 hours (728 hours for fire shift personnel) may be converted to vacation time at the conversion ratio of three sick days to one vacation day at any time. A liability for accrued convertible sick leave is reported in the proprietary funds. A liability for these amounts is reported in the governmental funds only if they have matured unused reimbursable leave still outstanding following an employee’s resignation or retirement). Payments of accrued compensated absences are made upon employee termination and usually are paid from either the general or electric fund. 8. Long-term obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. 9. Fund Balance As of June 30, 2011, fund balances of the governmental funds are classified as follows: Nonspendable — amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact. Restricted — amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments. 31 ---PAGE BREAK--- Committed — amounts that can be used only for specific purposes determined by a formal action of City Council. City Council is the highest level of decision-making authority for the City. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by City Council. Assigned — amounts that are constrained by the City’s intent to use them for a specific purpose, but are neither restricted or committed. The City has not established a policy regarding the assignment of funds, so this category of fund balance represents the residual amounts not otherwise reported as unspendable, restricted, or committed in governmental funds outside of the general fund. Unassigned — all other spendable amounts. As of June 30, 2011, fund balances are composed of the following: General Fund Gross Receipts Tax Streets Fund Nonmajor Governmental Funds Total Governmental Funds Nonspendable: Inventories/prepaids $ 507,516 $ - $ - $ 507,516 Restricted reserve investment 92,586 - - 92,586 Restricted: Police - - 2,483 2,483 Fire - - 594,946 594,946 Lodgers promotion - - 337,879 337,879 Capital projects - - 1,671,588 1,671,588 Debt service - - 35,311 35,311 Committed: Police - - 103,727 103,727 Incarceration - - 18 18 Parks, rec, cultural affairs - - 2,013,899 2,013,899 Public Works - 11,316,424 - 11,316,424 Assigned: Parks, rec, cultural affairs - - 1,129,543 1,129,543 Library - - 97,888 97,888 Capital projects - - 506,203 506,203 Unassigned 18,449,727 - - 18,449,727 Total fund balances $ 19,049,829 $ 11,316,424 $ 6,493,485 $ 36,859,738 10. Net Assets In the government-wide financial statements and proprietary fund financial statements, net assets are reported in three categories: net assets invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. Restricted net assets represent net assets restricted by parties outside of the City (such as creditors, grantors, contributors, laws and regulations of other governments). The City’s restricted net assets in the government-wide financial statements are $7,874,406 as of June 30, 2011. 11. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that 32 ---PAGE BREAK--- affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets The governmental fund balance sheet includes a reconciliation between fund balance-total governmental funds and net assets-governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that “long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of this $10,050,120 difference are as follows: Bonds payable $ 6,680,000 Bond premium (to be amortized over the life of the debt) 65,681 Issuance costs (to be amortized over the life of the debt) (67,788) Accrued interest payable 11,654 Compensated absences payable 3,360,573 Net adjustment to reduce fund balance-total governmental funds to arrive at net assets- governmental activities $ 10,050,120 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 $4,538,631 are as follows: Capital outlay $ 4,565,768 Depreciation (8,716,617) Loss on disposals and other (387,782) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ (4,538,631) Another element of that reconciliation states that “the issuance of long-term debt bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities”. Details of this $1,283,868 are as follows: 33 ---PAGE BREAK--- Principal repayments $ 1,315,000 Amortization of bond premium 21,893 Amortization of issuance costs (22,597) Accrued interest 2,113 Compensated absences (32,541) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 1,283,868 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 $745,678 difference are as follows: Internal service charges for services $ 6,656,132 Internal service operating expenses (7,401,810) Net adjustment to decrease net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ (745,678) III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information Annual budgets are adopted for all funds. All budgets are prepared on a basis other than generally accepted accounting principles (Non-GAAP basis), excluding encumbrances. All annual appropriations lapse at fiscal year end. Carryover funds must be appropriated in the budget of the subsequent fiscal year. Because the budget process in the State of New Mexico requires that the beginning cash balance be appropriated in the budget of the subsequent fiscal year, such appropriated balance is legally restricted and is therefore presented as a reserved portion of fund balance. Actual expenditures may not exceed the budget on a fund basis. Budgets may be amended by City Council ordinance with approval by the State Department of Finance and Administration. City department heads may make transfers of appropriations within a fund. The legal level of budgetary control is the fund level. Increases or decreases of appropriations between funds require the approval of the governing council. Because the Non-GAAP basis of accounting is not generally accepted accounting method for governmental and propriety funds, differences result from budgeting for various items. Reconciliations between the budget basis (Non-GAAP) and GAAP basis are provided in the budgetary schedules. The City follows the following procedures in establishing the budgetary data reflected in the financial statements: 1. In April or May the City Manager submits to the Council a proposed preliminary operating budget for the fiscal year commencing the following July 1st. The budget includes proposed expenditures and the means of financing them. The budget is prepared by fund, department, and function. 2. In late June, after there has been an opportunity for public comment, the City Council adopts the budget as finalized. 3. By the end of July, the Local Government Division of the State Department of Finance and Administration approves the final budget. 34 ---PAGE BREAK--- 4. After the budget is adopted, any supplemental appropriations must be approved by the City Council. Encumbrance accounting is employed by the City. Encumbrances purchase orders, contracts) outstanding at year-end are carried forward to the new fiscal year and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. The City had the following encumbrances outstanding at June 30, 2011 General Fund $ 179,821 Gross Receipts Tax Streets Fund 3,951,654 Lodgers Tax Fund 401 Region II Narcotics Fund 43 State Fire Fund 436,455 Community Development Capital Projects Fund 25,722 Airport Grant Capital Projects Fund 172,941 Electric Utility Fund 3,672,577 Water Utility Fund 2,216,829 Wastewater Utility Fund 446,242 Golf Course Fund 357 Health Fund 28,314 Total Encumbrances $ 11,131,356 B. Excess of expenditures over appropriations Expenditures for all funds were within budgeted appropriations for FY2011. C. Deficit Fund Equity As of June 30, 2011, the health insurance internal service fund had a deficit net asset balance of $(1,401,126). This deficit is equal to accrued payables of $1,619,980 less cash and receivables totaling $218,854. The net asset balance decreased by $(745,678) over FY2010. In FY2008, the retirees participating in the City of Farmington’s health plan were transferred to the New Mexico Retiree Health Care Authority. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and investments Cash and investments Governmental activities $ 30,040,963 Business activities 73,821,058 Restricted cash and investments Business activities 9,206,994 Reserve investment account 92,586 Total cash and investments $113,161,601 35 ---PAGE BREAK--- As of June 30, 2011, the City had the following investments: Investment Type Fair Value Weighted Average Maturity (Years) Money markets $ 3,684,818 0.08 Certificates of deposit 39,103,727 0.91 State treasurer’s pool 11,862,360 0.10 State treasurer’s pool - reserved 92,586 N/A Federal agency securities 56,213,777 3.93 Total Fair Value $ 110,957,268 Portfolio weighted average maturity 2.82 Interest rate risk. Interest rate risk is the risk that interest rate variations may adversely affect the fair value of an investment. An acceptable method for reporting interest rate risk is weighted average maturity (WAM). The State Treasurer’s Office uses this method for reporting purposes for the Local Government Investment Pool. The weighted average maturity at June 30, 2011 was 36 days for the Local Government Investment Pool. In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the weighted average maturity of its investment portfolio to less than five years. Concentration of Credit Risk. The City had investments at June 30, 2011, with more than 5 percent of the total in securities of the federal agency securities. These investments represented 51 percent, respectively, of total investments. 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. The City’s investment policy requires that the bank deposits be 50% collateralized and repurchase agreements be 102% collateralized. As of June 30, 2011, the City was in compliance with state statute. The City’s carrying amount of deposits as of June 30, 2011 was $40,416,621 and the bank balance was $42,963,203. Of the bank balance, $1,250,000 was covered by federal depository insurance, $29,090,390 was collateralized with securities held by the pledging financial institution’s trust department or agent in the City’s name, and $12,622,813 was uncollateralized, and subject to custodial credit risk. Custodial credit risk – investments. In the case of investments, this is the risk that in the event of a failure of the counter-party, the City will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The City does not have any investments at June 30, 2011 that are exposed 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 36 ---PAGE BREAK--- 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, 2011. The State Treasurer Local Government Investment Pool (LGIP) is not SEC registered. Section 6-10-10 I, NMSA 1978, empowers the State Treasurer, with the advice and consent of the State Board of Finance, to invest money held in the short-term investment fund in securities that are issued by the United States government or by its departments or agencies and are either direct obligations of the United States or are backed by the full faith and credit of the United States government or are agencies sponsored by the United States government. The Local Government Investment Pool investments are monitored by the same investment committee and the same policies and procedures that apply to all other state investments. The pool does not have unit shares. Per Section 6-10-10.1F, NMSA 1978, at the end of each month all interest earned is distributed by the State Treasurer to the contributing entities in amounts directly proportionate to the respective amounts deposited in the fund and the length of time the amounts were invested. Participation in the local government investment pool is voluntary. The LGIP has been rated by Standard & Poor’s and has received an AAAm rating. A portion of the City’s investment in the State Treasurer’s pool ($92,586) is shown as restricted on the City’s financial statements. The LGIP was invested in the Reserve Primary Fund at September 15, 2008. On September 16, 2008, the Reserve Primary Fund’s net assets fell below $1.00 and holdings in the fund were frozen. Since that date 98.7% of the City’s investment in the Reserve 37 ---PAGE BREAK--- Primary Fund has been returned. We anticipate receiving the balance of these funds but since a portion of these funds are being held for pending litigation we cannot accurately estimate the full amount to be returned. B. Receivables Receivables as of June 30, 2011 are as follows: Intergovernmental receivables are made up of the following amounts in the general and special revenue funds: gross receipts taxes $8,372,085, property taxes $1,834,520, federal and state grants $1,590,459, franchise taxes $131,441, lodger’s taxes $165,645 and other taxes $121,662. In the internal service health fund there is $218,854 in accounts receivable, $204,567 of which is for a stop loss payment due. Revenues of the utilities are reported net of uncollectible amounts. Total uncollectible amounts related to revenues of the current period are as follows: Uncollectibles related to electric sales $ 53,520 Uncollectibles related to water sales 14,792 Uncollectibles related to wastewater charges 8,083 Uncollectibles related to sanitation charges 7,177 Total uncollectibles of the current fiscal year $ 83,572 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received but not yet earned. The City reported no unearned revenue during the year. At the end of the current fiscal year, deferred revenue reported in the governmental funds was as follows: Unavailable Taxes $ 2,048,925 General Special Revenue Enterprise Total Receivables: Accounts Receivable $ 386,326 $ 5,069 $ 7,390,277 $ 7,781,672 Unbilled Revenue - - 6,037,897 6,037,897 Special Assessments 653 - - 653 Intergovernmental 8,898,201 3,317,611 245,193 12,461,005 Gross Receivables 9,285,180 3,322,680 13,673,367 26,281,227 Less: Allowance for Uncollectibles - - (636,828) (636,828) Net Total Receivables: $ 9,285,180 $ 3,322,680 $ 13,036,539 $ 25,644,399 38 ---PAGE BREAK--- C. Capital assets Capital asset activity for the year ended June 30, 2011 was as follows: Balance Balance Governmental activities July 1, 2010 Transfers Additions Deletions June 30, 2011 Non-Depreciable Assets: Land 26,893,367 $ - $ - $ - $ 26,893,367 $ Construction in progress 9,167,561 - 3,663,959 (10,478,728) 2,352,792 Total Non-Depreciable Assets 36,060,928 - 3,663,959 (10,478,728) 29,246,159 Depreciable Assets: Buildings 62,509,044 (436,940) 1,161,918 (24,895) 63,209,127 Improvements other than buildings 21,032,435 267,965 2,481,191 (18,855) 23,762,736 Equipment 29,710,681 - 1,327,195 (817,027) 30,220,849 Infrastructure 55,438,835 168,975 6,410,233 (616,937) 61,401,106 Total Depreciable Assets 168,690,995 - 11,380,537 (1,477,714) 178,593,818 Total Governmental Assets 204,751,923 - 15,044,496 (11,956,442) 207,839,977 Accumulated Depreciation: Buildings (32,933,811) - (1,647,313) 23,005 (34,558,119) Improvements other than buildings (9,860,592) 149,966 (1,940,146) 18,855 (11,631,917) Equipment (19,260,682) - (2,550,520) 776,926 (21,034,276) Infrastructure (39,837,550) (149,966) (2,578,638) 271,146 (42,295,008) Total Accumulated Depreciation (101,892,635) - (8,716,617) 1,089,932 (109,519,320) Net Governmental Assets 102,859,288 $ - $ 6,327,879 $ (10,866,510) $ 98,320,657 $ Balance Balance Business-type activities July 1, 2010 Transfers Additions Deletions June 30, 2011 Non-Depreciable Assets: Land 3,984,334 $ - $ - $ - $ 3,984,334 $ Construction in progress 46,905,867 - 17,809,909 (26,509,860) 38,205,916 Total Non-Depreciable Assets 50,890,201 - 17,809,909 (26,509,860) 42,190,250 Depreciable Assets: Land Rights 1,818,782 - 492 - 1,819,274 Buildings 102,110,947 - 6,542,652 - 108,653,599 Improvements other than buildings 106,755,479 - 9,636,481 (37,364) 116,354,596 Equipment 271,878,281 - 12,173,775 (270,007) 283,782,049 Total Depreciable Assets 482,563,489 - 28,353,400 (307,371) 510,609,518 Total Business-type Assets 533,453,690 - 46,163,309 (26,817,231) 552,799,768 Accumulated Depreciation: Land Rights (820,051) - (44,864) - (864,915) Buildings (40,220,725) - (3,130,415) - (43,351,140) Improvements other than buildings (42,949,715) - (3,656,797) 232,123 (46,374,389) Equipment (121,605,592) - (9,271,649) 270,007 (130,607,234) Total Accumulated Depreciation (205,596,083) - (16,103,725) 502,130 (221,197,678) Net Business-type Assets 327,857,607 $ - $ 30,059,584 $ (26,315,101) $ 331,602,090 $ 39 ---PAGE BREAK--- Enterprise Assets – by fund In 1988, the City entered into a lease agreement to lease land for the Pinon Hills Golf Course from San Juan College for $10. The lease expires in the year 2087, at which time the land, including improvements, will be returned to San Juan College. Depreciation expense was charged to functions / programs of the government as follows: Construction commitments The City has two active material construction projects as of June 30, 2011; the Animas waterline project and the Farmington Reach Navajo Municipal pipeline project. At year end, the City’s commitment with contractors was as follows: Project To Date Commitment Animas waterline $ 2,471,979 $ 2,552,902 Farmington Reach 7,155,202 7,951,082 $ 9,627,181 $ 10,503,984 Governmental activities: General government $ 999,722 Airport 1,039,969 Police 571,095 Fire 691,905 Parks, recreation, cultural affairs 2,361,171 Public works/Community development 479,624 Highways and streets 2,573,131 Total depreciation expense - governmental activities $ 8,716,617 Business-type activities: Electric $ 12,746,037 Water 1,784,174 Wastewater 1,366,570 Sanitation 4,747 Golf 202,197 Total depreciation expense - business-type activities $ 16,103,725 Electric Water Wastewater Sanitation Golf Land and land Rights 3,546,554 $ 1,654,325 $ 479,388 $ 23,341 $ 100,000 $ Buildings and Structures 69,529,667 14,008,573 23,989,482 80,640 1,045,237 Improvements other Than buildings 60,892,905 38,044,286 14,467,951 14,839 2,934,615 Equipment 269,739,374 9,558,265 3,551,062 101,099 832,249 Total 403,708,500 63,265,449 42,487,883 219,919 4,912,101 Less accumulated Depreciation (169,588,844) (31,455,361) (17,600,821) (181,621) (2,371,031) Construction in progress 22,490,515 13,677,469 2,037,932 - - Net Assets 256,610,171 $ 45,487,557 $ 26,924,994 $ 38,298 $ 2,541,070 $ 40 ---PAGE BREAK--- D. Interfund receivables, payables and transfers The composition of other accrued liabilities as of June 30, 2011 is as follows: Governmental Health Other Accrued Liabilities Funds Fund Total Taxes $ 556 $ - $ 556 Intergovernemental 1,388 - 1,388 Court collections 12,500 - 12,500 Total $ 14,444 $ - $ 14,444 The composition of other accrued expenses as of June 30, 2011 is as follows: Other Accrued Expenses Electric Water Wastewater Sanitation Golf Total Wages & benefits 410,151 $ 8,027 $ 5,440 $ 86 $ 25,184 $ 448,888 $ Gross receipts taxes 464,837 97,128 - - 4,623 566,588 Water conservation fee - 16,106 - - - 16,106 Compensating taxes 39,365 - - - - 39,365 Ad valorem taxes 300,000 - - - - 300,000 Franchise taxes 239,987 - - - - 239,987 PNM deferred credits 20,388 - - - - 20,388 Billed customer deposits 29,697 - - - - 29,697 Total 1,504,425 $ 121,261 $ 5,440 $ 86 $ 29,807 $ 1,661,019 $ The composition of interfund balances as of June 30, 2011 is as follows: Due from other funds Due to other funds Major Fund: General fund $ 408,045 $ - Nonmajor governmental funds: Gross receipts tax parks fund 77,843 - Region II narcotics grant fund - 108,310 COPS program grant fund - 80,881 Governmental capital projects fund 396,962 - Major proprietary funds: Golf fund - 77,843 Internal Service funds: Health insurance fund - 615,816 $ 882,850 $ 882,850 Federal and state grants Region II and COPS grants) are normally reimbursement oriented; therefore, the payable represents the unreimbursed expenditures at year end. A portion of the payable for the Internal Service fund also represents accounts receivable at year end. All other interfund transactions represent cash transfers for operating purposes. 41 ---PAGE BREAK--- Interfund transfers for the year ended June 30, 2011 are as follows: Fund Financial Statements – Transfers Governmental Funds In Out General fund – operating transfer to airport construction grant projects fund $ - $ 24,375 General fund – operating transfer to debt service fund - 942,500 General fund – operating transfer to region II fund - 30,000 General fund – operating transfer to governmental capital projects fund - 396,962 General fund – operating transfer from electric/water/wastewater 10,105,556 - GRT streets fund – operating transfer to debt service fund - 533,500 GRT parks fund – operating transfer to golf fund - 88,376 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 Governmental capital projects fund – operating transfer from general fund 396,962 - Airport construction grant projects fund – operating transfer from general fund 24,375 - Debt service fund – operating transfer from GRT streets fund 533,500 - Debt service fund – operating transfer from general fund 942,500 - Debt service fund – operating transfer from state fire grant fund 110,000 - Total governmental funds transfers 12,142,893 $ 2,125,713 Net governmental funds transfers $ 10,017,180 Business-type funds Electric utility fund – operating transfer to general fund $ - $ 9,161,278 Water utility fund – operating transfer to general fund - 638,525 Wastewater utility fund – operating transfer to general fund - 305,753 Golf fund – operating transfer from GRT parks fund 88,376 - Total business-type funds transfers $ 88,376 10,105,556 Net business-type transfers $ 10,017,180 E. Leases Operating Leases The City leases equipment (police and an AS/400 mainframe computer) under noncancelable operating leases. The future minimum lease payments for these leases are as follows: Year Ending Amount 2012 $ 173,069 2013 87,485 2014 5,914 Total $ 266,468 42 ---PAGE BREAK--- Capital Leases The City has entered into a lease agreement for turf equipment for the golf courses. The turf equipment is valued at $492,085. This agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the inception date. The assets acquired through this capital lease are as follows: The future minimum lease obligation and the net present value of those minimum lease payments as of June 30, 2011 were as follows: 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, 2011 no general obligation bonds had been issued. Revenue bonds The City also has the capacity and has issued Sales Tax Revenue Bonds whereby the City has pledged income derived from the Gross Receipts Tax to pay the required debt service on the bonds. During FY2002, the City redeemed the outstanding balance on the 1993 Sales Tax Revenue Bond issue in the amount of $395,000. With the issuance of the 2001 Sales Tax Revenue Improvement and Refunding Bonds the City provided for the refunding of the previously issued 1994 Sales Tax Revenue Bonds and issued an additional $11 million dollars for the purpose of completing construction of a new library and several major street projects. In FY2005, the City issued $5,725,000 of Series 2005 Sales Tax Revenue Bonds to provide funds to construct, furnish, equip and improve fire-fighting facilities and acquire and rehabilitate fire-fighting equipment. On December 17, 2002 the City issued $44,390,000 of 2002A utility revenue bonds and $2,280,000 Year Ending Golf Course Turf Equipment June 30, 2012 $ 35,556 Total minimum lease payments 35,556 Less: amount representing interest (1,156) Payments $ 34,400 Business Asset Activities Machinery and equipment $ 492,085 Less: accumulated depreciation (492,085) Total $ - 43 ---PAGE BREAK--- of 2002B utility revenue bonds to refund $47,150,000 of 1992 utility revenue bonds. The estimated present value benefit of refunding the 1992 bonds is $6,342,865. The transaction resulted in an accounting loss of $2,959,014. Revenue bonds outstanding as of June 30, 2011 are as follows: Interest Rates General Govt Electric Water Wastewater Total Governmental Activities Sales Tax Bonds 2001 4.00 - 5.00% 3,040,000 $ - $ - $ - $ 3,040,000 $ Sales Tax Bonds 2005 3.50 - 4.00% 3,640,000 - - - 3,640,000 Business Activities Serial Bonds 2002 3.50 - 5.00% - 8,103,609 1,748,653 287,738 10,140,000 Total 6,680,000 $ 8,103,609 $ 1,748,653 $ 287,738 $ 16,820,000 $ Annual debt service requirements to maturity for revenue bonds are as follows: For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond proceeds are reported as other financing source net of the applicable premium or discount. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. For proprietary fund types, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount, whereas issuance costs are reported as deferred charges. Deferred amounts on refunding (the difference between the reacquisition price and the net carrying amount of the old debt) are amortized as a component of interest expense. The unamortized portion of the deferred amount is reported as a deduction from revenue bonds payable. The 2002A Utility Revenue bonds are secured by and are payable solely from the net revenues derived by the City from the utility system (electric, water and wastewater utility funds), after payment of operating and maintenance expenses. Payment is also secured by an insurance policy issued by Financial Guaranty Insurance Company. The Policy is non-cancelable, and the premium was paid at the time of delivery of the bonds. There are a number of limitations and restrictions Year Ending June 30 Principal Interest Principal Interest Principal Interest Principal Interest 2012 $ 1,370,000 $ 279,692 $ 4,870,957 $ 369,621 $ 1,051,088 $ 79,759 $ 172,955 $ 13,124 2013 1,420,000 225,680 3,232,652 126,073 697,565 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 $ 6,680,000 $ 960,352 $ 8,103,609 $ 495,694 $ 1,748,653 $ 106,964 $ 287,738 $ 17,601 General Govt. Electric Water Wastewater 44 ---PAGE BREAK--- contained in the bond indenture. As of June 30, 2011, the City was in compliance with all significant limitations and restrictions. New Mexico Environment Department Loan. In FY2007, the City entered into a loan agreement with the New Mexico Environment Department for a $14.1 million, 3% loan for expansion of the wastewater treatment plant. The NMED loan repayment schedule is as follows: Year Ending June 30 Principal Interest 2012 $ 611,693 $ 341,305 2013 630,043 322,954 2014 648,945 304,052 2015 668,413 284,584 2016 688,465 264,532 2017-2021 3,764,811 1,000,174 2022-2026 4,364,448 400,538 Total $ 11,376,818 $ 2,918,139 New Mexico Finance Authority Loan. In January 2010, the City entered into a loan and subsidy agreement with the New Mexico Finance Authority for $2,109,688, for improving approximately 13,900 feet of existing waterline in the City’s Water Utility System. Of this amount 50% of the amount is forgiven and the amount repayable is $1,054,844 at a 1% interest rate plus a 0.25% administrative fee. As of June 30, 2011, the City has received $812,405 in draw down payments and accrued $242,439. The repayment of the loan should begin in FY2012 once the final disbursement of $242,439 is received. Per the agreement, the City has two years after the closing date to submit the final disbursement. The NMFA loan repayment schedule is as follows: Year Ending Administrative June 30 Principal Interest Fee 2012 $ 47,892 $ 7,914 $ 2,637 2013 48,372 7,555 2,517 2014 48,860 7,189 2,396 2015 49,350 6,823 2,274 2016 49,844 6,453 2,151 2017-2021 256,817 26,581 8,860 2022-2026 269,952 16,755 5,585 2027-2031 283,757 6,427 2,143 Total $ 1,054,844 $ 85,697 $ 28,563 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, 2011 were made as scheduled from the trust funds. The trust 45 ---PAGE BREAK--- accounts and the defeased bonds are not included in the City's financial statements. As of June 30, 2011, the following outstanding bonds are considered defeased (amounts in thousands): Series 1992 Original issue amount $ 49,205 Retired prior to fiscal year (35,550) Retired during the year ended 2011 (7,125) Balance of principal remaining $ 6,530 Interest payments made during year ended June 30, 2011 $ 785 Changes in Long-term Liabilities During the year ended June 30, 2011, the following changes occurred in long-term liabilities: Beginning Ending Due within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: 2001 Sales tax revenue bonds $ 3,975,000 $ - $ (935,000) $ 3,040,000 $ 970,000 2005 Sales tax revenue bonds 4,020,000 - (380,000) 3,640,000 400,000 Premium on bonds 87,574 - (21,893) 65,681 21,894 Total bonds payable 8,082,574 - (1,336,893) 6,745,681 1,391,894 Claims and judgments 2,453,680 7,500,881 (7,091,934) 2,862,627 1,927,913 Compensated absences 3,328,032 1,855,789 (1,823,248) 3,360,573 168,029 Total long-term liabilities Governmental activities $ 13,864,286 $ 9,356,670 $(10,252,075) $ 12,968,881 $ 3,487,836 Business-type activities: Bonds payable: Series 2002A $ 15,945,000 $ - $ (5,805,000) $ 10,140,000 $ 6,095,000 Premium on bonds 670,417 - (229,857) 440,560 229,858 Total bonds payable 16,615,417 - (6,034,857) 10,580,560 6,324,858 NMED loan 11,970,694 - (593,876) 11,376,818 611,693 NMFA loan - 1,054,844 - 1,054,844 - Capital leases 86,845 - (52,445) 34,400 34,400 Compensated absences 1,024,894 594,516 (558,959) 1,060,451 558,959 Total long-term liabilities Business-type activities $ 29,697,850 $ 1,649,360 $ (7,240,137) $ 24,107,073 $ 7,529,910 46 ---PAGE BREAK--- G. Restricted Assets The following is a summary of restricted assets as of June 30, 2011: Enterprise Funds Electric Water Wastewater Total Revenue bond current debt service $ 438,533 $ 94,630 $ 15,571 $ 548,734 NMED loan debt service reserves - - 1,384,921 1,384,921 Revenue bond renewal, replacement and contingency account 1,598,345 344,902 56,753 2,000,000 Debt service reserves 1,310,195 - - 1,310,195 Customer deposits/overpayments 3,667,796 295,348 - 3,963,144 Total restricted assets $ 7,014,869 $ 734,880 $ 1,457,245 $ 9,206,994 V. OTHER INFORMATION A. Risk Management The government is exposed to various risks of loss related to torts, theft, property damage, errors and omissions, and natural disasters for which the government has designed a self insurance program in conjunction with commercial insurance coverage. The amount of settlement has not exceeded insurance coverage for the past three fiscal years. The self insured retention for excess liability coverage is $500,000. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of payments, and other economic and social factors. Changes in the balances of claims liabilities during the past two years are as follows: June 30, 2010 June 30, 2011 Health Risk Mgmt Health Risk Mgmt Unpaid claims, beginning of fiscal year 848,503 $ 1,243,342 $ 1,056,693 $ 1,396,987 $ Incurred claims and changes in estimate 4,212,982 1,199,910 5,580,942 1,919,939 Claim payments (4,004,792) (1,046,265) (5,633,471) (1,458,463) Unpaid claims, end of fiscal year 1,056,693 $ 1,396,987 $ 1,004,164 $ 1,858,463 $ Due within one year 1,004,164 $ 923,749 $ City management’s estimates of current portion are based on historical data. 47 ---PAGE BREAK--- B. Contingent liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the government expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of City counsel that resolution of these matters will not have a material adverse effect on the financial condition of the government. 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 FY2011, the City made no contributions to the Authority. Complete financial statements for the Consolidated Communications Authority can be obtained from San Juan County, New Mexico. Joint Powers Agreement for the San Juan Water Commission. The City is a participant with the cities of Aztec and Bloomfield, the County of San Juan, and the San Juan Rural Waters Users Association in a joint powers agreement to create a countywide entity responsible for water planning and use. Much of the impetus to form the Commission came from the Animas La Plata water project and the subsequent need to develop methods to equitably share the related costs and benefits. In addition to this specific project the Commission is also authorized to acquire additional water rights and provide for the equitable distribution of such water. The Commission is financed by a San Juan County mill levy on real and personal property of approximately 3 mills. During FY2011, the City did not make any financial contribution to the Commission. Complete financial statements may be obtained by contacting the San Juan Water Commission. Natural Gas Purchase Agreement. In November 2009, the City entered into a 30 year natural gas purchase agreement with the New Mexico Municipal Energy Acquisition Authority (NMMEAA) for approximately 85% of its historical requirements. Under this agreement the City will purchase gas at an index price less a discount. The discount is derived from a prepaid gas arrangement between NMMEAA and the Royal Bank of Canada (RBC). The variable discount is derived from the difference between taxable and non-taxable interest rate indices. The City’s only obligation is to purchase gas from NMMEAA. The City has no obligation to purchase gas that is not needed, no exposure to any bond risk associated with the transaction between NMMEAA and RBC, and no exposure to paying greater than index for gas. The City anticipates annual savings of approximately $912,500 per year under this agreement. D. Employee Retirement Systems and Plans Pension Plan – Public Employees Retirement Association Plan Description. Substantially all of the City of Farmington’s full-time employees participate in a public employee retirement system authorized under the Public Employees Retirement Act (Chapter 10, Article 11, NMSA 1978). The Public Employees Retirement Association (PERA) is the administrator of the plan, which is a cost-sharing multiple-employer defined benefit retirement plan. The plan provides for retirement benefits, disability benefits, survivor benefits and cost-of-living adjustments to plan members and beneficiaries. PERA issues a separate, publicly available financial report that includes financial statements and required supplementary information for the 48 ---PAGE BREAK--- plan. That report may be obtained by writing to PERA, P.O. Box 2123, Santa Fe, NM 87504-2123. The report is also available on PERA’s website at www.pera.state.nm.us. Funding Policy. Plan members are required to contribute from 9.15% to 16.30%, depending upon the plan municipal general, municipal police, municipal fire, municipal detention officer) of their gross salary. The City of Farmington is required to contribute from 9.15% to 21.25% (depending upon the plan) of the gross covered salary. The contribution requirements of plan members and the City of Farmington are established in State statute under Chapter 10, Article 11, NMSA 1978. The requirements may be amended by acts of the legislature. The City of Farmington’s contributions to PERA for the fiscal years ending June 30, 2011, 2010, and 2009 were $8,778,923, $8,953,674, and $8,916,669, respectively, which equal the amount of the required contributions for each fiscal year. E. Post-Employment Benefits – State Retiree Health Care Plan Plan Description. The City of Farmington, at the beginning of FY2008, began contributions to the New Mexico Retiree Health Care Fund, a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the New Mexico Retiree Health Care Authority The provides health care insurance and prescription drug benefits to retired employees of participating New Mexico government agencies, their spouses, dependents, and surviving spouses and dependents. The Board was established by the Retiree Health Care Act (Chapter 10, Article 7C, NMSA 1978). The Board is responsible for establishing and amending benefit provisions of the healthcare plan and is also authorized to designate optional and/or voluntary benefits like dental, vision, supplemental life insurance, and long-term care policies. Eligible retirees are: 1) retirees who make contributions to the fund for at least five years prior to retirement and whose eligible employer during that period of time made contributions as a participant in the plan on the person’s behalf unless that person retires before the employer’s effective date, in which the event the time period required for employee and employer contributions shall become the period of time between the employer’s effective date and the date of retirement; 2) retirees defined by the Act who retired prior to July 1, 1990; 3) former legislators who served at least two years; and 4) former governing authority members who served at least four years. The issues a publicly available stand-alone financial report that includes financial statements and required supplementary information for the postemployment healthcare plan. That report and further information can be obtained by writing to the Retiree Health Care Authority at 4308 Carlisle NE, Suite 104, Albuquerque, NM 87107. Funding Policy. The Retiree Health Care Act (Section 10-7C-13 NMSA 1978) authorizes the Board to establish the premium contributions that retirees are required to pay for healthcare benefits. Each participating retiree pays a premium according to a service based subsidy rate schedule for the medical plus basic life plan plus an additional participation fee of five dollars if the eligible participant retired prior to the employer’s effective date or is a former legislator or former governing authority member. Former legislators and governing authority members are required to pay 100% of the insurance premium to cover their claims and the administrative expenses of the plan. The premium rate schedule can be obtained from the or viewed on their website at The Retiree Health Care Act (Section 10-7C-15 NMSA 1978) is the statutory authority that establishes the required contributions of participating employers and their employees. During the fiscal year ended June 30, 2011, the statute required each participating employer to contribute 1.666% of each participating employee’s annual salary; each participating employee is required to contribute .8333% of their salary. For employees who are not members of an enhanced retirement plan the contribution rates will be: 49 ---PAGE BREAK--- Fiscal Year Employer Contribution Rate Employee Contribution Rate FY2012 1.834% .917% FY2013 2.000% 1.000% For employees who are members of an enhanced retirement plan (state police and adult correctional officer coverage plan 1; municipal police member coverage plans 3, 4 and 5; municipal fire member coverage plan 3, 4 and 5; municipal detention officer member coverage plan 1; and members pursuant to the Judicial Retirement Act [10-12B-1 NMSA 1978]), during the fiscal year ended June 30, 2011, the statute required each participating employer to contribute 2.084% of each participating employee’s annual salary, and each participating employee was required to contribute 1.042% of their salary. In the fiscal years ending June 30, 2012 and June 30, 2013 the contributions rates for both employees and employers will rise as follows: Fiscal Year Employer Contribution Rate Employee Contribution Rate FY2012 2.292% 1.146% FY2013 2.500% 1.250% Also, employers joining the program after January 1, 1998 are also required to make a surplus- amount contribution to the based on one of two formulas at agreed-upon intervals. The plan is financed on a pay-as-you-go basis. The employer, employee and retiree contributions are required to be remitted to the on a basis. The statutory requirements for the contributions can be changed by the New Mexico State Legislature. The City of Farmington's contributions to the for the year ended June 30, 2011, 2010 and 2009 were $725,751, $512,041 and $512,664, respectively, which equals the required contributions for the year. F. Undivided Interest in San Juan Unit No. 4. On November 17, 1981, the City acquired an 8.475% undivided interest in Unit No. 4 of the San Juan Electric Generating Station located in San Juan County, New Mexico. Unit No. 4 is owned 8.475% by the City and 91.525% by the Public Service Company of New Mexico ("PNM") and others. The unit became operational April 27, 1982. Unit No. 4 provides electricity to the co-owners and to other unrelated parties. The City's pro rata portions of the operations are reported in the accompanying statement of revenues and expenses of the electric utility fund. The operating agreement between the City and PNM provides that PNM and other owners are entitled to receive energy from the Unit on a pro rata basis. Maintenance and operating costs, other than fuel costs, are also shared on a pro rata basis. Fuel costs are paid by PNM and the other owners, including the City, in proportion to their share of energy scheduled and produced from the Unit. PNM has an option to purchase up to 50% of the City's capacity entitlement and associated energy in Unit No. 4. PNM must give eight years notice of its intent to purchase (no notice has been given). The investment is reported at the amount of the City's equity in the underlying net assets of the unit and is included in the electric utility capital assets. 50 ---PAGE BREAK--- In 1992, a study was conducted by an engineering firm to estimate the cost of decommissioning the plant. This study was updated in 2003 and agreed to the previous estimate. The City is analyzing the effect of this study on its financial statements. G. Contracted Water and Wastewater Services. In January, 2008, the City entered into an agreement with CH2M Hill-OMI to provide water and wastewater services to the City of Farmington. The company operates and maintains the water and wastewater facilities. The contract expires in December, 2015. The company is responsible for operating expenditures, as well as repairs and replacements up to $2,000. The City paid approximately $5.9 million for contracted services for the year ended June 30, 2011. 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, 2011 was $995,000,000. 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 the City of Farmington or a charge against its general or taxing powers. 51 ---PAGE BREAK--- Tubing down the Animas River 52 ---PAGE BREAK--- Nonmajor Governmental Funds Nonmajor Governmental Funds ---PAGE BREAK--- NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes, or to facilitate the management of financial resources internally "designated" for specific purposes. Special revenue funds are authorized by the City Council. Gross Receipts Tax Parks Fund - City Ordinance 81-702 established this fund to account for the City's 1/4% share of gross receipts tax that is legally restricted to the maintenance of parks. Park Development Fees Fund - City Council Resolutions 887, dedication of recreation space, and 910, land subdivision regulations - recreation space, established this fund to account for fees collected from developers for the purchase of land and development of parks. Library Gifts and Grants Fund - City management established this fund to account for state and county gifts and grants restricted for the purchase of library books and other educational library needs. Parks/Recreation Gifts and Grants Fund - City management established this fund to account for state grants restricted to expenditures for local beautification purposes and expenditures for leisure activities of senior citizens. Museum Gifts and Grants Fund - City management established this fund to account for state grants restricted to expenditures for museum purposes. Lodgers Tax Fund - State statute 3-38-15N.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 Grant Fund - City management established this fund to account for state grants restricted for the purchase of police equipment and other approved police needs. Region II Narcotics Grant Fund- City management established this fund to account for federal grants restricted to expenditures for approved police needs. COPS Program Grant Fund – City management established this fund to account for federal grants restricted to expenditures for approved police needs. Law Enforcement Block Grant Fund - City management established this fund to account for federal grants restricted to expenditures for approved police needs (City Council Resolution # 2001-1013 53 ---PAGE BREAK--- State Fire Grant Fund - City management established this fund to account for state grants restricted for the purchase of fire fighting equipment and other approved fire department needs. Penalty Assessment Fund - City management established this fund to account for traffic fine revenues and disbursements according to City Code 19-84. Capital Projects Funds Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Community Development Grant Projects Fund - This fund is used to account for community improvements throughout the City funded primarily by federal and state grants. Governmental Capital Projects Fund – This fund is used to account for capital projects that are funded with transfers from the general fund. Airport Construction Grant Projects Fund – This fund is used to account for airport capital projects funded primarily by federal and state grants. Debt Service Fund The debt service fund is used to account for the accumulation of resources and payment of revenue bond principal and interest from gross receipts tax sources. 54 ---PAGE BREAK--- (Continued) Gross Parks/ Receipts Park Library Recreation Tax Development Gifts and Gifts and Parks Fees Grants Grants ASSETS: Pooled cash and investments $ 1,177,487 $ 359,377 $ 97,888 $ 931,650 Accounts receivable - - - 5,069 Intergovernmental receivable 442,716 - - 13,072 Due from other funds 77,843 - - - Total assets $ 1,698,046 $ 359,377 $ 97,888 $ 949,791 LIABILITIES: Accounts payable $ 51 $ - $ - $ 25 Deferred revenue - - - - Accrued wages payable 43,473 - - 3,306 Due to other funds - - - - Total liabilities 43,524 - - 3,331 FUND BALANCES: Restricted to: Police - - - - Fire - - - - Lodgers promotion - - - - Capital projects - - - - Debt service - - - - Committed to: Police - - - - Incarceration - - - - Parks, recreation, cultural affairs 1,654,522 359,377 - - Assigned to: Parks, recreation, cultural affairs - - - 946,460 Library - - 97,888 - Capital projects - - - - Total fund balances 1,654,522 359,377 97,888 946,460 Total liabilities and fund balances $ 1,698,046 $ 359,377 $ 97,888 $ 949,791 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2011 The notes to the financial statements are an integral part of this statement. 55 ---PAGE BREAK--- (Continued) State Museum Police Region II COPS Gifts and Lodgers Protection Narcotics Program Grants Tax Grant Grant Grant ASSETS: Pooled cash and investments $ 180,462 $ 299,701 $ - $ 121,815 $ - Accounts receivable - - - - - Intergovernmental receivable 2,929 165,645 - 158,239 94,614 Due from other funds - - - - - Total assets $ 183,391 $ 465,346 $ - $ 280,054 $ 94,614 LIABILITIES: Accounts payable $ 308 $ 53,248 $ - $ 57,727 $ - Deferred revenue - 53,174 - - 3,315 Accrued wages payable - 21,045 - 8,155 10,418 Due to other funds - - - 108,310 80,881 Total liabilities 308 127,467 - 174,192 94,614 FUND BALANCES: Restricted to: Police - - - 2,135 - Fire - - - - - Lodgers promotion - 337,879 - - - Capital projects - - - - - Debt service - - - - - Committed to: Police - - - 103,727 - Incarceration - - - - - Parks, recreation, cultural affairs - - - - - Assigned to: Parks, recreation, cultural affairs 183,083 - - - - Library - - - - - Capital projects - - - - - Total fund balances 183,083 337,879 - 105,862 - Total liabilities and fund balances $ 183,391 $ 465,346 $ - $ 280,054 $ 94,614 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2011 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 ASSETS: Pooled cash and investments $ 13,298 $ 671,302 $ 15,422 $ 3,868,402 Accounts receivable - - - 5,069 Intergovernmental receivable - 23,644 - 900,859 Due from other funds - - - 77,843 Total assets $ 13,298 $ 694,946 $ 15,422 $ 4,852,173 LIABILITIES: Accounts payable $ - $ - $ 15,404 $ 126,763 Deferred revenue 12,950 100,000 - 169,439 Accrued wages payable - - - 86,397 Due to other funds - - - 189,191 Total liabilities 12,950 100,000 15,404 571,790 FUND BALANCES: Restricted to: - - - - Police 348 - - 2,483 Fire - 594,946 - 594,946 Lodgers promotion - - - 337,879 Capital projects - - - - Debt service - - - - Committed to: Police - - - 103,727 Incarceration - - 18 18 Parks, recreation, cultural affairs - - - 2,013,899 Assigned to: Parks, recreation, cultural affairs - - - 1,129,543 Library - - - 97,888 Capital projects - - - - Total fund balances 348 594,946 18 4,280,383 Total liabilities and fund balances $ 13,298 $ 694,946 $ 15,422 $ 4,852,173 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2011 The notes to the financial statements are an integral part of this statement. 57 ---PAGE BREAK--- Community Airport Total Development Governmental Construction Total Nonmajor Grant Capital Grant Capital Debt Governmental Projects Projects Projects Projects Service Funds ASSETS: Pooled cash and investments $ 1,595,051 $ 109,241 $ 3,497 $ 1,707,789 $ 35,311 $ 5,611,502 Accounts receivable - - - - - 5,069 Intergovernmental receivable 318,768 - 215,484 534,252 - 1,435,111 Due from other funds - 396,962 - 396,962 - 474,805 Total assets $ 1,913,819 $ 506,203 $ 218,981 $ 2,639,003 $ 35,311 $ 7,526,487 LIABILITIES: Accounts payable $ 317,603 $ - $ 140,996 $ 458,599 $ - $ 585,362 Deferred revenue - - - - - 169,439 Accrued wages payable 2,613 - - 2,613 - 89,010 Due to other funds - - - - - 189,191 Total liabilities 320,216 - 140,996 461,212 - 1,033,002 FUND BALANCES: Restricted to: Police - - - - - 2,483 Fire - - - - - 594,946 Lodgers promotion - - - - - 337,879 Capital projects 1,593,603 - 77,985 1,671,588 - 1,671,588 Debt service - - - - 35,311 35,311 Committed to: Police - - - - - 103,727 Incarceration - - - - - 18 Parks, recreation, cultural affairs - - - - - 2,013,899 Assigned to: Parks, recreation, cultural affairs - - - - - 1,129,543 Library - - - - - 97,888 Capital projects - 506,203 - 506,203 - 506,203 Total fund balances 1,593,603 506,203 77,985 2,177,791 35,311 6,493,485 Total liabilities and fund balances $ 1,913,819 $ 506,203 $ 218,981 $ 2,639,003 $ 35,311 $ 7,526,487 Capital Projects CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2011 The notes to the financial statements are an integral part of this statement. 58 ---PAGE BREAK--- (Continued) Parks/ Gross Park Library Recreation Receipts Tax Development Gifts and Gifts and Parks Fees Grants Grants REVENUES: Taxes: Gross receipts tax $ 2,517,501 $ - $ - $ - Lodger's taxes - - - - Licenses and permits - 4,628 - - Intergovernmental 27,590 - 46,817 141,579 Charges for services - - - - Fines - - - - Investment earnings 14,453 4,750 2,491 11,565 Donations - - 10,493 557,140 Miscellaneous 2,213 1 252 297,950 Total revenues 2,561,757 9,379 60,053 1,008,234 EXPENDITURES: Current: Police operations - - - - Fire operations - - - - Parks, recreation and cultural affairs 1,996,039 - 177,403 690,198 Debt Service: Principal - - - - Interest - - - - Capital outlay: General government - - - - Airport - - - - Highways and streets - - - - Total expenditures 1,996,039 - 177,403 690,198 Excess (deficiency) of revenues over (under) expenditures 565,718 9,379 (117,350) 318,036 OTHER FINANCING SOURCES (USES): Transfers in - - - - Transfers out (88,376) - - - Total other financing sources (uses) (88,376) - - - Net change in fund balances 477,342 9,379 (117,350) 318,036 Fund balances-beginning 1,177,180 349,998 215,238 628,424 Fund balances-ending $ 1,654,522 $ 359,377 $ 97,888 $ 946,460 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2011 The notes to the financial statements are an integral part of this statement. 59 ---PAGE BREAK--- (Continued) State Museum Police Region II COPS Gifts and Lodgers Protection Narcotics Program Grants Tax Grant Grant Grant REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - Lodger's taxes - 946,142 - - - Licenses and permits - - - - - Intergovernmental 16,305 - 105,000 539,477 352,584 Charges for services 75,374 42,907 - - - Fines - - - - - Investment earnings 2,407 4,730 - 1,470 - Donations 21,617 - - - - Miscellaneous 632 839 1,169 77,763 - Total revenues 116,335 994,618 106,169 618,710 352,584 EXPENDITURES: Current: Police operations - - 122,267 642,423 352,584 Fire operations - - - - - Parks, recreation and cultural affairs 99,249 1,227,818 - - - Debt Service: Principal - - - - - Interest - - - - - Capital outlay: General government - - - - - Airport - - - - - Highways and streets - - - - - Total expenditures 99,249 1,227,818 122,267 642,423 352,584 Excess (deficiency) of revenues over (under) expenditures 17,086 (233,200) (16,098) (23,713) - OTHER FINANCING SOURCES (USES): Transfers in - - - 30,000 - Transfers out - - - - - Total other financing sources (uses) - - - 30,000 - Net change in fund balances 17,086 (233,200) (16,098) 6,287 - Fund balances-beginning 165,997 571,079 16,098 99,575 - Fund balances-ending $ 183,083 $ 337,879 $ - $ 105,862 $ - Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2011 The notes to the financial statements are an integral part of this statement. 60 ---PAGE BREAK--- (Continued) Law Enforcement State Total Block Fire Penalty Special Grant Grant Assessment Revenue REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ 2,517,501 Lodger's taxes - - - 946,142 Licenses and permits - - - 4,628 Intergovernmental 96,369 740,716 - 2,066,437 Charges for services - - - 118,281 Fines - - 181,101 181,101 Investment earnings 563 12,102 - 54,531 Donations - - - 589,250 Miscellaneous 322 305 342 381,788 Total revenues 97,254 753,123 181,443 6,859,659 EXPENDITURES: Current: Police operations 100,770 - 181,425 1,399,469 Fire operations - 438,282 - 438,282 Parks, recreation and cultural affairs - - - 4,190,707 Debt Service: Principal - - - - Interest - - - - Capital outlay: General government - - - - Airport - - - - Highways and streets - - - - Total expenditures 100,770 438,282 181,425 6,028,458 Excess (deficiency) of revenues over (under) expenditures (3,516) 314,841 18 831,201 OTHER FINANCING SOURCES (USES): Transfers in - - - 30,000 Transfers out - (110,000) - (198,376) Total other financing sources (uses) - (110,000) - (168,376) Net change in fund balances (3,516) 204,841 18 662,825 Fund balances-beginning 3,864 390,105 - 3,617,558 Fund balances-ending $ 348 $ 594,946 $ 18 $ 4,280,383 Special Revenue CITY OF FARMINGTON, NEW MEXICO Nonmajor Governmental Funds For the Year Ended June 30, 2011 Combining Statement of Revenues, Expenditures and Changes in Fund Balances The notes to the financial statements are an integral part of this statement. 61 ---PAGE BREAK--- Community Airport Total Development Governmental Construction Total Nonmajor Grant Capital Grant Capital Debt Governmental Projects Projects Projects Projects Service Funds REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - $ 2,517,501 Lodger's taxes - - - - - 946,142 Licenses and permits - - - - - 4,628 Intergovernmental 1,671,970 780,391 990,620 3,442,981 - 5,509,418 Charges for services - - - - - 118,281 Fines - - - - - 181,101 Investment earnings 15,796 1,556 - 17,352 10,056 81,939 Donations - - - - - 589,250 Miscellaneous 47,583 - - 47,583 - 429,371 Total revenues 1,735,349 781,947 990,620 3,507,916 10,056 10,377,631 EXPENDITURES: Current: Police operations - - - - - 1,399,469 Fire operations - - - - - 438,282 Parks, recreation and cultural affairs - - - - - 4,190,707 Debt Service: Principal - - - - 1,315,000 1,315,000 Interest - - - - 330,393 330,393 Capital outlay: General government - 770,941 - 770,941 - 770,941 Airport - - 990,802 990,802 - 990,802 Highways and streets 1,980,331 - - 1,980,331 - 1,980,331 Total expenditures 1,980,331 770,941 990,802 3,742,074 1,645,393 11,415,925 Excess (deficiency) of revenues over (under) expenditures (244,982) 11,006 (182) (234,158) (1,635,337) (1,038,294) OTHER FINANCING SOURCES (USES): Transfers in - 396,962 24,375 421,337 1,586,000 2,037,337 Transfers out - - - - - (198,376) Total other financing sources (uses) - 396,962 24,375 421,337 1,586,000 1,838,961 Net change in fund balances (244,982) 407,968 24,193 187,179 (49,337) 800,667 Fund balances-beginning 1,838,585 98,235 53,792 1,990,612 84,648 5,692,818 Fund balances-ending $ 1,593,603 $ 506,203 $ 77,985 $ 2,177,791 $ 35,311 $ 6,493,485 Capital Projects CITY OF FARMINGTON, NEW MEXICO Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2011 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: Gross receipts taxes $ 2,220,248 $ 2,220,248 $ 2,480,499 $ 260,251 Intergovernmental - - 27,590 27,590 Investment earnings 10,000 10,000 14,453 4,453 Miscellaneous 7,000 7,000 2,213 (4,787) Total revenues 2,237,248 2,237,248 2,524,755 287,507 EXPENDITURES: Current: Parks, Recreation and Cultural Affairs 2,511,755 2,600,131 2,022,417 577,714 Excess (deficiency) of revenues over (under) expenditures (274,507) (362,883) 502,338 $ 865,221 OTHER FINANCING SOURCES (USES): Transfers out - - (88,376) (88,376) Net change in fund balances (274,507) (362,883) 413,962 $ 776,845 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 37,002 Change in accounts payable 26,378 63,380 GAAP BASIS CHANGE IN FUND BALANCES 477,342 Fund balances-beginning 1,177,180 1,177,180 1,177,180 Fund balances-ending $ 902,673 $ 814,297 $ 1,654,522 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax Parks Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis 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: Licenses and permits $ 10,000 $ 10,000 $ 4,628 $ (5,372) Investment earnings 8,000 8,000 4,750 (3,250) Miscellaneous - - 1 1 Total revenues 18,000 18,000 9,379 (8,621) EXPENDITURES: Current: Parks, recreation and cultural affairs 100,000 100,000 - 100,000 Excess (deficiency) of revenues over (under) expenditures (82,000) (82,000) 9,379 $ 91,379 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable - GAAP BASIS CHANGE IN FUND BALANCES 9,379 Fund balances-beginning 349,998 349,998 349,998 Fund balances-ending $ 267,998 $ 267,998 $ 359,377 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Park Development Fees Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis 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 $ 30,000 $ 30,000 $ 46,817 $ 16,817 Investment earnings 4,000 4,000 2,490 (1,510) Donations 17,500 17,500 10,494 (7,006) Miscellaneous 700 700 252 (448) Total revenues 52,200 52,200 60,053 7,853 EXPENDITURES: Current: Parks, recreation and cultural affairs 70,000 177,500 177,403 97 Excess (deficiency) of revenues over (under) expenditures (17,800) (125,300) (117,350) $ 7,950 ADJUSTMENTS TO GAAP: Change in accounts payable - GAAP BASIS CHANGE IN FUND BALANCES (117,350) Fund balances-beginning 215,238 215,238 215,238 Fund balances-ending $ 197,438 $ 89,938 $ 97,888 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Library Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Non-GAAP Budgetary Basis Budget to Actual 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: Intergovernmental $ 29,000 $ 29,000 $ 133,943 $ 104,943 Investment earnings 9,000 9,000 11,565 2,565 Donations 231,200 365,500 559,190 193,690 Miscellaneous 108,750 285,750 292,901 7,151 Total revenues 377,950 689,250 997,599 308,349 EXPENDITURES: Current: Parks, recreation and cultural affairs 351,829 697,729 640,198 57,531 Excess (deficiency) of revenues over (under) expenditures 26,121 (8,479) 357,401 $ 365,880 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 10,635 Change in accounts payable (50,000) (39,365) GAAP BASIS CHANGE IN FUND BALANCES 318,036 Fund balances-beginning 628,424 628,424 628,424 Fund balances-ending $ 654,545 $ 619,945 $ 946,460 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Parks/Recreation Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis 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 $ 22,000 $ 22,000 $ 13,376 $ (8,624) Charges for Services 63,400 63,400 75,374 11,974 Investment earnings - - 2,407 2,407 Donations 26,000 26,000 21,617 (4,383) Miscellaneous 9,600 9,600 632 (8,968) Total revenues 121,000 121,000 113,406 (7,594) EXPENDITURES: Current: Parks, recreation and cultural affairs 122,500 122,500 99,249 23,251 Excess (deficiency) of revenues over (under) expenditures (1,500) (1,500) 14,157 $ 15,657 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 2,929 GAAP BASIS CHANGE IN FUND BALANCES 17,086 Fund balances-beginning 165,997 165,997 165,997 Fund balances-ending $ 164,497 $ 164,497 $ 183,083 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Museum Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 67 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Lodger's taxes $ 1,040,000 $ 1,068,400 $ 1,068,354 $ (46) Charges for Services - 43,000 42,907 (93) Investment earnings 8,000 8,000 4,730 (3,270) Miscellaneous 8,100 8,100 839 (7,261) Total revenues 1,056,100 1,127,500 1,116,830 (10,670) EXPENDITURES: Current: Parks, recreation and cultural affairs 1,103,443 1,203,943 1,201,992 1,951 Excess (deficiency) of revenues over (under) expenditures (47,343) (76,443) (85,162) $ (8,719) ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (122,212) Change in accounts payable (25,826) (148,038) GAAP BASIS CHANGE IN FUND BALANCES (233,200) Fund balances-beginning 571,079 571,079 571,079 Fund balances-ending $ 523,736 $ 494,636 $ 337,879 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Lodgers Tax Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 68 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 100,000 $ 105,000 $ 105,000 $ - Miscellaneous 700 1,200 1,169 (31) Total revenues 100,700 106,200 106,169 (31) EXPENDITURES: Current: Police operations 100,700 122,273 122,267 6 Excess (deficiency) of revenues over (under) expenditures - (16,073) (16,098) $ (25) ADJUSTMENTS TO GAAP: Change in accounts payable - GAAP BASIS CHANGE IN FUND BALANCES (16,098) Fund balances-beginning 16,098 16,098 16,098 Fund balances-ending $ 16,098 $ 25 $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO State Police Protection Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis 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 $ 537,000 $ 814,932 $ 572,338 $ (242,594) Investment earnings - - 1,470 1,470 Miscellaneous 22,000 22,000 88,402 66,402 Total revenues 559,000 836,932 662,210 (174,722) EXPENDITURES: Current: Public safety 589,000 731,800 642,423 89,377 Excess (deficiency) of revenues over (under) expenditures (30,000) 105,132 19,787 (85,345) OTHER FINANCING SOURCES (USES): Transfers in 30,000 30,000 30,000 - Net change in fund balances - 135,132 49,787 $ (85,345) ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (43,500) GAAP BASIS CHANGE IN FUND BALANCES 6,287 Fund balances-beginning 99,575 99,575 99,575 Fund balances-ending $ 99,575 $ 234,707 $ 105,862 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Region II Narcotics Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 70 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 262,031 $ 396,377 $ 301,033 $ (95,344) EXPENDITURES: Current: Public safety 262,031 362,031 358,178 3,853 Excess (deficiency) of revenues over (under) expenditures - 34,346 (57,145) $ (91,491) ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 51,551 Change in accounts payable 5,594 57,145 GAAP BASIS CHANGE IN FUND BALANCES - Fund balances-beginning - - - Fund balances-ending $ - $ 34,346 $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO COPS Program Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual Non-GAAP Budgetary Basis For the Year Ended June 30, 2011 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 $ 105,000 $ 105,000 $ 54,882 $ (50,118) Investment earnings - - 563 563 Miscellaneous - - 322 322 Total revenues 105,000 105,000 55,767 (49,233) EXPENDITURES: Current: Public safety 130,000 130,000 100,770 29,230 Excess (deficiency) of revenues over (under) expenditures (25,000) (25,000) (45,003) $ (20,003) ADJUSTMENTS TO GAAP: Change in deferred revenue 41,487 GAAP BASIS CHANGE IN FUND BALANCES (3,516) Fund balances-beginning 3,864 3,864 3,864 Fund balances-ending $ (21,136) $ (21,136) $ 348 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Law Enforcement Block Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 72 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 470,000 $ 602,778 $ 817,072 $ 214,294 Investment earnings 5,000 5,000 12,102 7,102 Miscellaneous 1,000 1,000 305 (695) Total revenues 476,000 608,778 829,479 220,701 EXPENDITURES: Current: Fire operations 362,238 818,016 438,282 379,734 Excess (deficiency) of revenues over (under) expenditures 113,762 (209,238) 391,197 600,435 OTHER FINANCING SOURCES (USES): Transfers out (110,000) (110,000) (110,000) - Net change in fund balances 3,762 (319,238) 281,197 $ 600,435 ADJUSTMENTS TO GAAP: Change in accounts payable (76,356) GAAP BASIS CHANGE IN FUND BALANCES 204,841 Fund balances-beginning 390,105 390,105 390,105 Fund balances-ending $ 393,867 $ 70,867 $ 594,946 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO State Fire Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 73 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Fines $ 205,000 $ 205,000 $ 181,101 $ (23,899) Miscellaneous 1,000 1,000 342 (658) Total Revenues 206,000 206,000 181,443 (24,557) EXPENDITURES: Current: Public safety 206,000 206,000 203,771 2,229 Excess (deficiency) of revenues over (under) expenditures - - (22,328) $ (22,328) ADJUSTMENTS TO GAAP: Change in accounts payable 22,346 GAAP BASIS CHANGE IN FUND BALANCES 18 Fund balances-beginning - - - Fund balances-ending $ - $ - $ 18 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Penalty Assessment Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 74 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 2,364,056 $ 3,722,874 $ 2,480,969 $ (1,241,905) Investment earnings 20,000 20,000 15,797 (4,203) Miscellaneous 500 500 47,582 47,082 Total revenues 2,384,556 3,743,374 2,544,348 (1,199,026) EXPENDITURES: Capital Outlay: Highways and Streets 2,409,345 3,768,163 1,662,728 2,105,435 Excess (deficiency) of revenues over (under) expenditures (24,789) (24,789) 881,620 $ 906,409 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (808,999) Change in accounts payable (317,603) (1,126,602) GAAP BASIS CHANGE IN FUND BALANCES (244,982) Fund balances-beginning 1,838,585 1,838,585 1,838,585 Fund balances-ending $ 1,813,796 $ 1,813,796 $ 1,593,603 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Community Development Grant Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 75 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ - $ 1,177,362 $ 780,391 $ (396,971) Investment earnings 4,000 4,000 1,556 (2,444) Total revenues 4,000 1,181,362 781,947 (399,415) EXPENDITURES: Capital Outlay: General Government - 780,400 780,391 9 Excess (deficiency) of revenues over (under) expenditures 4,000 400,962 1,556 (399,406) OTHER FINANCING SOURCES (USES): Transfers in - - 396,962 396,962 Net change in fund balances 4,000 400,962 398,518 $ (2,444) ADJUSTMENTS TO GAAP: Change in accounts payable 9,450 GAAP BASIS CHANGE IN FUND BALANCES 407,968 Fund balances-beginning 98,235 98,235 98,235 Fund balances-ending $ 102,235 $ 499,197 $ 506,203 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Governmental Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 76 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 950,625 $ 1,200,625 $ 1,106,356 $ (94,269) EXPENDITURES: Capital Outlay: Airport 975,000 1,226,600 1,226,534 66 Excess (deficiency) of revenues over (under) expenditures (24,375) (25,975) (120,178) (94,203) OTHER FINANCING SOURCES (USES): Transfers in 24,375 24,375 24,375 - Net change in fund balances - (1,600) (95,803) $ (94,203) ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (115,735) Change in accounts payable 235,731 119,996 GAAP BASIS CHANGE IN FUND BALANCES 24,193 Fund balances-beginning 53,792 53,792 53,792 Fund balances-ending $ 53,792 $ 52,192 $ 77,985 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Airport Construction Grant Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual Non-GAAP Budgetary Basis For the Year Ended June 30, 2011 The notes to the financial statements are an integral part of this statement. 77 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Investment earnings $ 10,000 $ 10,000 $ 10,056 $ 56 EXPENDITURES: Debt Service: Principal 1,315,000 1,315,000 1,315,000 - Interest 331,000 331,000 330,393 607 Total expenditures 1,646,000 1,646,000 1,645,393 607 Excess (deficiency) of revenues over (under) expenditures (1,636,000) (1,636,000) (1,635,337) 663 OTHER FINANCING SOURCES (USES): Transfers in 1,586,000 1,586,000 1,586,000 - Net change in fund balances (50,000) (50,000) (49,337) $ 663 ADJUSTMENTS TO GAAP: Change in receivables - GAAP BASIS CHANGE IN FUND BALANCES: (49,337) Fund balances-beginning 84,648 84,648 84,648 Fund balances-ending $ 34,648 $ 34,648 $ 35,311 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2011 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 78 ---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. 79 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for services $ 5,979,464 $ 6,970,655 $ 6,656,270 $ (314,385) Operating expenses: Costs of services 5,891,092 7,041,092 7,019,208 21,884 Operating income (loss) 88,372 (70,437) (362,938) (292,501) Nonoperating revenues (expenses): Investment earnings 2,500 2,500 (138) (2,638) Change in net assets 90,872 (67,937) (363,076) $ (295,139) RECONCILIATION TO GAAP BASIS: Change in accounts receivable (350,347) Change in accounts payable 29,121 Change in accrued claims payable (61,376) (382,602) GAAP BASIS CHANGE IN NET ASSETS (745,678) Total net assets-beginning (655,448) (655,448) (655,448) Total net assets-ending $ (564,576) $ (723,385) $ (1,401,126) CITY OF FARMINGTON, NEW MEXICO Budgeted Amounts For the Year Ended June 30, 2011 Schedule of Revenues, Expenses and Changes in Fund Net Assets Health Insurance Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 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 Utility Enterprise Fund For the Year Ended June 30, 2011 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Electric $ 87,700,614 $ 87,700,614 $ 90,970,119 $ 3,269,505 Other revenues 499,900 499,900 481,554 (18,346) Total operating revenues 88,200,514 88,200,514 91,451,673 3,251,159 Operating expenses: Salaries and fringe benefits 11,103,105 11,103,105 9,944,245 1,158,860 Purchased power, fuel and chemicals 44,988,123 44,988,123 37,443,044 7,545,079 Other operating expenses 11,457,475 16,829,805 17,367,920 (538,115) Capital outlay 26,428,023 21,891,318 10,589,058 11,302,260 Total operating expenses 93,976,726 94,812,351 75,344,267 19,468,084 Operating income (5,776,212) (6,611,837) 16,107,406 22,719,243 Nonoperating revenues (expenses): Investment earnings 1,367,891 1,367,891 899,712 (468,179) Revenue from grants - - 36,416 36,416 Interest expense (623,581) (623,581) (575,819) 47,762 Principal on debt service (4,639,196) (4,639,196) (4,639,196) - Total nonoperating revenues (expenses) (3,894,886) (3,894,886) (4,278,887) (384,001) Income (loss) before operating transfers (9,671,098) (10,506,723) 11,828,519 22,335,242 Capital contributions 2,000,000 2,000,000 4,325,124 2,325,124 Transfers out (8,157,304) (8,157,304) (9,161,278) (1,003,974) Change in net assets (15,828,402) (16,664,027) 6,992,365 $ 23,656,392 ADJUSTMENTS TO GAAP Depreciation (12,746,037) Amortization 143,731 Capital outlay capitalized 10,589,058 Principal on debt service 4,639,196 2,625,948 GAAP BASIS CHANGE IN NET ASSETS 9,618,313 Total net assets-beginning 309,770,845 309,770,845 309,770,845 Total net assets-ending $ 293,942,443 $ 293,106,818 $ 319,389,158 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 Utility Enterprise Fund For the Year Ended June 30, 2011 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Water $ 13,172,049 $ 13,172,049 $ 12,889,963 $ (282,086) Other revenues - - 7,395 7,395 Total operating revenues 13,172,049 13,172,049 12,897,358 (274,691) Operating expenses: Salaries and fringe benefits 631,936 631,936 467,427 164,509 Other operating expenses 6,933,431 6,933,431 6,314,249 619,182 Capital outlay 4,645,504 9,089,904 5,720,526 3,369,378 Total operating expenses 12,210,871 16,655,271 12,502,202 4,153,069 Operating income 961,178 (3,483,222) 395,156 3,878,378 Nonoperating revenues (expenses): Investment earnings 115,000 115,000 78,660 (36,340) Revenue from operating grants - 4,444,400 352,584 (4,091,816) Interest expense (134,813) (134,813) (127,195) 7,618 Principal on debt service (1,001,077) (1,001,077) (1,001,077) - Total nonoperating revenues (expenses) (1,020,890) 3,423,510 (697,028) (4,120,538) Income (loss) before operating transfers (59,712) (59,712) (301,872) (242,160) Capital contributions - - 1,218,174 1,218,174 Transfers out (648,900) (648,900) (638,525) 10,375 Change in net assets (708,612) (708,612) 277,777 $ 986,389 ADJUSTMENTS TO GAAP Depreciation (1,784,174) Amortization 31,015 Capital outlay capitalized 5,720,526 Principal on debt service 1,001,077 4,968,444 GAAP BASIS CHANGE IN NET ASSETS 5,246,221 Total net assets-beginning 44,045,439 44,045,439 44,045,439 Total net assets-ending $ 43,336,827 $ 43,336,827 $ 49,291,660 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 Utility Enterprise Fund For the Year Ended June 30, 2011 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Wastewater $ 5,954,995 $ 5,954,995 $ 6,163,636 $ 208,641 Other revenues 2,000 2,000 86 (1,914) Total operating revenues 5,956,995 5,956,995 6,163,722 206,727 Operating expenses: Salaries and fringe benefits 331,608 331,608 282,316 49,292 Other operating expenses 3,925,819 3,925,819 3,651,330 274,489 Capital outlay 2,929,588 4,360,538 1,769,978 2,590,560 Total operating expenses 7,187,015 8,617,965 5,703,624 2,914,341 Operating income (1,230,020) (2,660,970) 460,098 3,121,068 Nonoperating revenues (expenses): Intergovernmental-environmental tax 1,110,124 1,110,124 1,258,718 148,594 Investment earnings 204,000 204,000 68,927 (135,073) Revenue from operating grants - 203,000 - (203,000) Interest expense (380,482) (380,482) (379,452) 1,030 Principal on debt service (758,602) (758,602) (758,602) - Total nonoperating revenues (expenses) 175,040 378,040 189,591 (188,449) Income (loss) before operating transfers (1,054,980) (2,282,930) 649,689 2,932,619 Capital contributions - - 350,106 350,106 Transfers out (301,158) (301,158) (305,753) (4,595) Change in net assets (1,356,138) (2,584,088) 694,042 $ 3,278,130 ADJUSTMENTS TO GAAP Depreciation (1,366,570) Amortization 5,104 Capital outlay capitalized 1,769,978 Principal on debt service 758,602 1,167,114 GAAP BASIS CHANGE IN NET ASSETS 1,861,156 Total net assets-beginning 20,650,741 20,650,741 20,650,741 Total net assets-ending $ 19,294,603 $ 18,066,653 $ 22,511,897 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 Enterprise Fund For the Year Ended June 30, 2011 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Sanitation $ 5,261,456 $ 5,261,456 $ 4,999,188 $ (262,268) Other revenues 127,069 127,069 93,437 (33,632) Total operating revenues 5,388,525 5,388,525 5,092,625 (295,900) Operating expenses: Salaries and fringe benefits 2,593 2,593 2,638 (45) Other operating expenses 4,781,865 4,781,865 5,311,060 (529,195) Capital outlay 4,500,000 4,510,400 (21,040) 4,531,440 Total operating expenses 9,284,458 9,294,858 5,292,658 4,002,200 Operating income (3,895,933) (3,906,333) (200,033) 3,706,300 Nonoperating revenues (expenses): Investment earnings 30,000 30,000 24,171 (5,829) NMED Loan 3,000,000 3,000,000 - (3,000,000) Total nonoperating revenues (expenses) 3,030,000 3,030,000 24,171 (3,005,829) Change in net assets (865,933) (876,333) (175,862) $ 700,471 ADJUSTMENTS TO GAAP Depreciation (4,747) Capital outlay capitalized (21,040) (25,787) GAAP BASIS CHANGE IN NET ASSETS (201,649) Total net assets-beginning 1,612,432 1,612,432 1,612,432 Total net assets-ending $ 746,499 $ 736,099 $ 1,410,783 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 Courses Enterprise Fund For the Year Ended June 30, 2011 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Golf $ 1,336,955 $ 1,336,955 $ 1,019,300 $ (317,655) Other revenues - - (74) (74) Total operating revenues 1,336,955 1,336,955 1,019,226 (317,729) Operating expenses: Salaries and fringe benefits 705,072 705,072 646,804 58,268 Other operating expenses 491,883 644,883 607,665 37,218 Capital outlay 153,000 - - - Total operating expenses 1,349,955 1,349,955 1,254,469 95,486 Operating income (13,000) (13,000) (235,243) (222,243) Nonoperating revenues (expenses): Investment earnings 13,000 13,000 270 (12,730) Interest expense - - (11,920) (11,920) Total nonoperating revenues (expenses) 13,000 13,000 (11,650) (24,650) Income (loss) before operating transfers - - (246,893) (246,893) Transfer in - 88,376 88,376 - Change in net assets - 88,376 (158,517) $ (246,893) ADJUSTMENTS TO GAAP Depreciation (202,197) GAAP BASIS CHANGE IN NET ASSETS (360,714) Total net assets-beginning 2,656,604 2,656,604 2,656,604 Total net assets-ending $ 2,656,604 $ 2,744,980 $ 2,295,890 The notes to the financial statements are an integral part of this statement. 85 ---PAGE BREAK--- Golfing at Piñon Hills Golf Course 86 ---PAGE BREAK--- Capital Assets- Governmental Funds Capital Assets- Governmental Funds ---PAGE BREAK--- 2011 2010 Governmental funds capital assets: Land $ 26,893,367 $ 26,893,367 Buildings 63,209,127 62,509,044 Improvements other than buildings 23,762,736 21,032,435 Machinery and equipment 30,220,849 29,710,681 Infrastructure 61,401,106 55,438,835 Construction In Progress 2,352,792 9,167,561 Total governmental funds capital assets $ 207,839,977 $ 204,751,923 Investments in governmental funds capital assets by source: General fund $ 62,368,590 $ 69,180,212 Special revenue fund 105,721,189 100,501,437 Capital projects funds 37,508,494 32,954,728 Donations 2,241,704 2,115,546 Total governmental funds capital assets $ 207,839,977 $ 204,751,923 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Comparative Schedules By Source June 30, 2011 and 2010 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 $ - $ - $ 33,693 $ - $ - $ 37,693 Judicial - - - 140,032 - - 140,032 Operations center - - - 436,271 - - 436,271 Fleet maintenance - - - 586,504 - - 586,504 Stores - 38,467 270,135 260,234 - - 568,836 Finance administration - - - 6,520 - - 6,520 Personnel administration - - - 206,200 - - 206,200 Purchasing - - - 64,806 - - 64,806 Law enforcement - - - 22,210 - - 22,210 Administrative services 1,283,660 12,211,284 37,057 1,583,238 - 750,876 15,866,115 Planning and zoning - - - 52,403 - - 52,403 Data processing - 50,347 - 974,414 - 34,977 1,059,738 Total general government 1,287,660 12,300,098 307,192 4,366,525 - 785,853 19,047,328 PUBLIC SAFETY: Police 532,769 3,632,229 77,532 5,988,864 - - 10,231,394 Fire 60,098 3,401,561 33,151 7,327,079 - 30,144 10,852,033 Inspection - - - 188,791 - - 188,791 Traffic - - - 501,165 2,984,751 252,705 3,738,621 Total public safety 592,867 7,033,790 110,683 14,005,899 2,984,751 282,849 25,010,839 PUBLIC WORKS/COMMUNITY DEVELOPMENT: Streets 16,156,420 33,970 2,704,184 2,247,830 38,755,208 1,003,462 60,901,074 Bridges & Storm Drains - - 451,953 11,799 19,170,379 99,765 19,733,896 Administration 1,092,506 142,924 63,362 36,891 490,768 (108,797) 1,717,654 Survey - - - 140,975 - - 140,975 Engineering - - - 125,585 - - 125,585 Total public works/community development 17,248,926 176,894 3,219,499 2,563,080 58,416,355 994,430 82,619,184 CULTURE AND RECREATION: Parks and recreation 3,959,105 19,328,098 10,410,411 5,504,600 - 91,361 39,293,575 Civic center 92,174 3,184,154 - 353,596 - - 3,629,924 Senior citizens center 250,627 1,276,019 37,161 210,040 - - 1,773,847 Museum 1,057,979 4,819,473 134,173 166,897 - - 6,178,522 Animal shelter 132,393 399,911 - 279,265 - 463,391 1,274,960 Total culture and recreation 5,492,278 29,007,655 10,581,745 6,514,398 - 554,752 52,150,828 LIBRARIES 1,391,668 8,686,494 106,000 1,117,272 - - 11,301,434 AIRPORT 879,968 6,004,196 9,437,617 1,653,675 - (265,092) 17,710,364 Total governmental funds capital assets $ 26,893,367 $ 63,209,127 $ 23,762,736 $ 30,220,849 $ 61,401,106 $ 2,352,792 $ 207,839,977 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, 2011 88 ---PAGE BREAK--- Capital Assets Capital Assets Function and Activity June 30, 2010 Additions Deductions Net Transfers June 30, 2011 GENERAL GOVERNMENT: Legislative $ 37,693 $ - $ - $ - $ 37,693 Judicial 140,032 - - - 140,032 Operations center 466,816 796,776 (827,321) - 436,271 Fleet maintenance 921,607 - (365,591) 30,488 586,504 Stores 563,389 9,558 (4,111) - 568,836 Finance administration 6,520 - - - 6,520 Personnel administration 279,553 - (73,353) - 206,200 Purchasing 67,158 - - (2,352) 64,806 Law enforcement 22,210 - - - 22,210 Administrative services 14,605,766 858,120 (68,782) 471,011 15,866,115 Planning and zoning 24,822 - - 27,581 52,403 Data processing 1,003,968 55,770 - - 1,059,738 Total general government 18,139,534 1,720,224 (1,339,158) 526,728 19,047,328 PUBLIC SAFETY: Police 9,833,874 442,206 (16,550) (28,136) 10,231,394 Fire 10,577,466 319,935 (30,198) (15,170) 10,852,033 Inspection 188,791 - - - 188,791 Traffic 3,580,007 280,662 (122,048) - 3,738,621 Total public safety 24,180,138 1,042,803 (168,796) (43,306) 25,010,839 PUBLIC WORKS/ COMMUNITY DEVELOPMENT Streets 66,706,586 1,086,961 (7,305,605) 413,132 60,901,074 Bridges and storm drains 12,898,317 6,895,212 (59,633) - 19,733,896 Administration 2,683,708 54,320 (99,755) (920,619) 1,717,654 Survey 140,975 - - - 140,975 Engineering 125,585 - - - 125,585 Total public works/ 82,555,171 8,036,493 (7,464,993) (507,487) 82,619,184 community development CULTURE AND RECREATION: Parks and recreation 38,953,743 1,019,437 (718,220) 38,615 39,293,575 Civic center 3,629,924 - - - 3,629,924 Senior citizens center 1,724,674 204,840 (155,667) - 1,773,847 Museum 6,186,289 - (7,767) - 6,178,522 Animal shelter 1,265,183 24,327 - (14,550) 1,274,960 Total culture and recreation 51,759,813 1,248,604 (881,654) 24,065 52,150,828 LIBRARIES 11,111,034 190,400 - - 11,301,434 AIRPORT 17,006,233 2,805,972 (2,101,841) - 17,710,364 Total general fixed assets $ 204,751,923 $ 15,044,496 $ (11,956,442) $ - $ 207,839,977 Accumulated depreciation $ 101,892,635 $ 8,716,617 $ (1,089,932) $ - $ 109,519,320 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity For the Year Ended June 30, 2011 89 ---PAGE BREAK--- “Annie Get Your Gun”—Sandstone Productions 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. Page Financial Trends 92 These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity 97 These schedules contain information to help the reader assess the City’s most significant revenue sources - gross receipts tax and electricity sales. Also included are property tax schedules. Debt Capacity 108 These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information 112 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. Operating Information 114 The schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. 91 ---PAGE BREAK--- City of Farmington Schedule 1 Net Assets by Component Last Ten Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Restated Restated Restated 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 $ 74,066,951 $ 82,050,200 $ 94,776,714 $ 91,574,976 $ Restricted 2,689,505 2,678,373 2,422,104 3,514,726 4,219,427 4,491,602 4,599,840 4,085,917 4,195,660 2,630,553 Unrestricted 28,039,208 20,619,682 20,610,228 25,149,317 24,559,417 22,873,893 21,548,521 20,137,410 20,043,161 31,572,545 Total governmental activities net assets 86,403,221 $ 87,259,065 $ 87,811,882 $ 94,929,515 $ 103,118,148 $ 102,366,428 $ 100,215,312 $ 106,273,527 $ 119,015,535 $ 125,778,074 $ 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 $ 240,380,428 $ 263,888,952 $ 290,777,764 $ 299,184,651 $ 309,610,312 $ Restricted 3,450,823 2,643,773 2,648,557 2,564,255 2,615,937 2,914,976 3,139,945 3,438,741 3,657,082 5,243,850 Unrestricted 33,466,317 41,559,635 18,361,816 16,535,576 30,290,166 45,749,953 54,174,692 59,170,526 75,894,328 80,045,226 Total business-type activities net assets 182,612,835 $ 196,180,133 $ 215,440,447 $ 234,489,961 $ 260,531,374 $ 289,045,357 $ 321,203,589 $ 353,387,031 $ 378,736,061 $ 394,899,388 $ 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 $ 340,276,555 $ 372,827,964 $ 393,961,365 $ 401,185,288 $ Restricted 6,140,328 5,322,146 5,070,661 6,078,981 6,835,364 7,406,578 7,739,785 7,524,658 7,852,742 7,874,403 Unrestricted 61,505,525 62,179,317 38,972,044 41,684,893 54,849,583 68,623,846 77,309,002 79,307,936 95,937,489 111,617,771 Total primary government net assets 269,016,056 $ 283,439,198 $ 303,252,329 $ 329,419,476 $ 363,649,522 $ 391,411,785 $ 421,418,901 $ 459,660,558 $ 497,751,596 $ 520,677,462 $ Source: City of Farmington CAFRs Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. In 2007, a prior period adjustment was made to adjust capital outlay in the Airport fund. In 2008, a prior period adjustment was made to adjust general fund accumulated depreciation and accrued compensated absences. In 2009, a prior period adjustment was made to adjust governmental and business-type net assets. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. Fiscal Year 92 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Ten Fiscal Years (continued) (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Expenses Governmental activities: General government 17,921,350 $ 17,191,605 $ 23,996,456 $ 21,153,411 $ 21,649,221 $ 24,470,791 $ 24,773,909 $ 30,738,756 $ 25,732,424 $ 29,114,460 $ Police 9,137,433 10,251,979 10,341,396 11,351,590 12,356,592 15,029,695 16,405,749 14,551,370 14,918,275 15,021,697 Fire 4,661,223 4,906,661 5,468,824 5,470,572 6,466,886 7,606,467 8,702,072 9,461,309 8,808,809 8,665,126 Parks, recreation, cultural affairs 9,232,612 8,392,730 9,284,623 9,497,875 11,105,380 13,769,347 15,479,059 8,959,793 13,349,714 13,714,785 Community development/Public works 7,359,539 7,395,603 5,727,834 7,481,297 8,511,853 10,776,798 11,857,265 2,144,831 8,425,359 10,800,128 Interest on long term debt 378,265 560,368 483,230 421,480 588,521 511,126 468,360 423,713 377,304 328,280 Total governmental activities expenses 48,690,422 48,698,946 55,302,363 55,376,225 60,678,453 72,164,224 77,686,414 66,279,772 71,611,885 77,644,476 Business-type activities: Electric 63,434,816 68,903,423 65,214,544 72,914,727 65,152,992 66,341,885 79,473,997 75,669,922 75,094,411 77,933,334 Water 6,096,326 7,180,833 6,785,002 6,944,219 6,992,577 7,207,259 6,854,699 7,670,708 8,540,615 8,662,030 Wastewater 3,203,574 3,488,296 4,127,386 4,983,626 4,690,385 5,274,284 5,227,357 5,066,171 5,263,247 5,674,564 Sanitation 3,345,147 3,358,430 3,493,487 3,625,722 3,815,728 4,002,806 4,130,295 4,404,269 4,393,018 5,318,445 Golf 1,076,241 1,060,103 1,198,867 1,209,293 1,217,011 1,164,683 1,312,463 1,331,765 1,285,065 1,468,586 Airport 1,422,951 1,563,162 2,008,715 1,871,508 1,812,263 1,604,506 1,557,946 1,639,916 - - Total business-type activities expenses 78,579,055 85,554,247 82,828,001 91,549,095 83,680,956 85,595,423 98,556,757 95,782,751 94,576,356 99,056,959 Total primary government expenses 127,269,477 $ 134,253,193 $ 138,130,364 $ 146,925,320 $ 144,359,409 $ 157,759,647 $ 176,243,171 $ 162,062,523 $ 166,188,241 $ 176,701,435 $ 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 $ 7,008,648 $ 6,420,991 $ 8,003,589 $ 8,866,978 $ Police 14,457 15,132 74,215 198,017 39,903 1,266,550 1,366,974 1,483,251 1,518,646 1,185,576 Parks, recreation, cultural affairs 546,488 530,669 552,114 545,461 703,731 888,618 831,845 884,964 844,503 838,839 Community development/Public works 69,040 68,155 77,390 75,116 101,605 95,485 86,766 67,296 58,237 50,940 Operating grants and contributions 1,526,052 1,276,299 2,674,803 2,238,291 2,929,307 2,600,396 3,623,209 4,242,763 4,090,058 6,243,941 Capital grants and contributions - - - - - - - - 4,228,018 3,442,981 Total governmental activities program revenues 6,471,105 6,782,533 8,463,732 8,076,824 9,153,891 11,757,322 12,917,442 13,099,265 18,743,051 20,629,255 Business-type activities: Charges for services: Electric 78,835,548 79,130,644 84,158,287 91,152,321 89,801,858 91,704,560 102,193,403 97,122,636 94,173,433 91,451,673 Water 7,997,027 7,073,545 7,515,514 7,338,869 7,991,740 8,688,421 10,783,517 11,052,694 12,324,629 12,897,358 Wastewater 3,824,407 4,239,721 4,489,948 4,751,802 5,071,951 5,214,261 6,240,272 6,910,478 7,445,521 6,163,722 Sanitation 3,350,941 3,392,079 3,538,632 3,692,937 3,889,876 4,051,998 4,228,681 4,774,637 5,007,853 5,092,625 Golf 859,042 933,981 1,042,176 1,088,137 1,121,313 1,113,328 1,146,652 1,167,456 1,106,499 1,019,226 Airport 541,523 564,237 596,765 599,306 594,199 601,675 540,360 464,337 - - Operating grants and contributions 4,207,905 1,151,196 916,477 880,654 927,492 1,227,869 1,585,215 5,826,268 12,949,631 6,282,404 Capital grants and contributions 1,211,547 1,025,342 154,309 625,693 794,531 495,436 2,617,273 1,050,875 - - Total business-type activities program revenues 100,827,940 97,510,745 102,412,108 110,129,719 110,192,960 113,097,548 129,335,373 128,369,381 133,007,566 122,907,008 Total primary government program revenues 107,299,045 $ 104,293,278 $ 110,875,840 $ 118,206,543 $ 119,346,851 $ 124,854,870 $ 142,252,815 $ 141,468,646 $ 151,750,617 $ 143,536,263 $ Source: City of Farmington CAFRs Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. Fiscal Year In 2009, Community Development was seperated from Public works. For reporting purposes, Community development expenses and revenues are reported together in 2009 and prior years. Beginning in 2010, only Public works expenses and revenues are reported and Community Development data is combined with General government. 93 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Ten Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net (Expenses)/Revenues Governmental activities (42,219,317) $ (41,916,413) $ (46,838,631) $ (47,299,401) $ (51,524,562) $ (60,406,902) $ (64,768,972) $ (53,180,507) $ (52,868,834) $ (57,015,221) $ Business-type activities 22,248,885 11,956,498 19,584,107 18,580,624 26,512,004 27,502,125 30,778,616 32,586,630 38,431,210 23,850,049 Total primary governmental activities expenses (19,970,432) $ (29,959,915) $ (27,254,524) $ (28,718,777) $ (25,012,558) $ (32,904,777) $ (33,990,356) $ (20,593,877) $ (14,437,624) $ (33,165,172) $ 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 $ 54,401,730 $ 52,406,771 $ 44,760,879 $ 47,605,170 $ Property taxes 922,002 930,112 985,836 1,043,064 1,121,723 1,235,064 1,330,285 1,550,503 1,556,401 1,806,123 Franchise taxes 2,551,995 2,601,794 715,022 720,748 1,594,098 1,045,698 992,050 865,346 649,388 614,627 Other taxes 1,716,477 1,724,672 1,884,994 1,873,736 1,942,024 1,944,810 2,124,381 1,992,189 2,048,944 1,828,644 Other revenue 3,010,951 3,769,728 3,584,543 3,507,135 2,996,953 1,199,675 1,386,242 1,789,230 1,782,477 1,541,494 Unrestricted investment earnings 963,133 635,745 429,108 471,993 858,611 1,064,838 962,448 701,039 405,946 364,522 Loss on disposition (1,902,219) (1,904,487) - - - - - (1,381,262) - - Transfers 415 (132,000) 1,440,853 1,754,818 1,925,566 1,346,115 1,420,720 1,923,630 14,406,807 10,017,180 Total governmental activities 43,184,891 42,772,257 47,391,448 52,505,846 59,713,195 59,655,182 62,617,856 59,847,446 65,610,842 63,777,760 Business-type activities: Environmental taxes - - - - - - - - - 1,258,718 Unrestricted investment earnings 1,435,925 1,478,800 1,117,060 790,027 1,454,975 2,357,973 2,800,336 2,128,575 1,324,627 1,071,740 Loss on disposition - - - - - - - (1,013,059) - - Transfers (415) 132,000 (1,440,853) (1,754,818) (1,925,566) (1,346,115) (1,420,720) (1,923,630) (14,406,807) (10,017,180) Total business-type activities 1,435,510 1,610,800 (323,793) (964,791) (470,591) 1,011,858 1,379,616 (808,114) (13,082,180) (7,686,722) Total primary government 44,620,401 $ 44,383,057 $ 47,067,655 $ 51,541,055 $ 59,242,604 $ 60,667,040 $ 63,997,472 $ 59,039,332 $ 52,528,662 $ 56,091,038 $ Change in Net Assets Governmental activities 965,574 $ 855,844 $ 552,817 $ 5,206,445 $ 8,188,633 $ (751,720) $ (2,151,116) $ 6,666,939 $ 12,742,008 $ 6,762,539 $ Business-type activities 23,684,395 13,567,298 19,260,314 17,615,833 26,041,413 28,513,983 32,158,232 31,778,516 25,349,030 16,163,327 Total primary government 24,649,969 $ 14,423,142 $ 19,813,131 $ 22,822,278 $ 34,230,046 $ 27,762,263 $ 30,007,116 $ 38,445,455 $ 38,091,038 $ 22,925,866 $ Source: City of Farmington CAFRs Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. In 2011, the city has moved Environmental taxes from program revenues to business-type activities. Fiscal Year 94 ---PAGE BREAK--- City of Farmington Fund Balances, Governmental Funds Last Ten Fiscal Years Schedule 3 (modified accrual basis of accounting) General Fund Fiscal Year Reserved Unreserved Nonspendable Unassigned Total 2002 2,282,737 $ 11,618,472 $ - $ - $ 13,901,209 $ 2003 2,256,852 11,452,345 - - 13,709,197 2004 2,000,000 12,126,852 - - 14,126,852 2005 3,393,756 13,069,276 - - 16,463,032 2006 4,138,050 14,594,072 - - 18,732,122 2007 4,386,101 12,808,778 - - 17,194,879 2008 4,439,851 8,187,413 - - 12,627,264 2009 4,160,353 7,311,344 - - 11,471,697 2010 4,307,676 8,623,808 - - 12,931,484 2011 - - 600,102 18,449,727 19,049,829 All Other Governmental Funds Fiscal Year Reserved Unreserved Restricted Committed Assigned Total 2002 406,768 $ 15,475,010 $ - $ - $ - $ 15,881,778 $ 2003 421,521 8,325,643 - - - 8,747,164 2004 422,104 8,483,376 - - - 8,905,480 2005 283,833 12,415,332 - - - 12,699,165 2006 287,735 10,113,568 - - - 10,401,303 2007 310,848 10,293,948 - - - 10,604,796 2008 328,475 14,881,860 - - - 15,210,335 2009 81,902 14,721,397 - - - 14,803,299 2010 84,648 13,249,388 - - - 13,334,036 2011 - - 2,642,207 13,434,068 1,733,634 17,809,909 Source: City of Farmington CAFRs Note: In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. In 2011, the city implemented GASB Statement 54, which changed the classfications of fund balances in the governmental funds. Prior year amounts have not been restated for the implementation of Statement 54. 95 ---PAGE BREAK--- City of Farmington Schedule 4 Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Revenues Taxes 41,112,611 $ 40,403,271 $ 41,936,943 $ 46,771,900 $ 53,932,065 $ 56,044,554 $ 58,848,446 $ 56,705,030 $ 48,954,845 $ 51,685,802 $ Licenses and permits 556,573 605,478 602,971 819,869 951,280 765,694 794,169 618,877 693,743 606,378 Intergovernmental 1,761,181 1,869,860 2,674,803 2,238,291 2,929,307 2,600,396 3,623,207 4,242,763 8,318,076 9,686,922 Charges for services 852,738 978,022 1,170,531 1,365,408 1,840,336 1,637,437 1,769,334 1,749,034 2,557,192 2,506,687 Fines 1,265,848 1,403,928 1,602,721 1,418,646 1,133,053 1,222,171 1,341,297 1,431,718 1,491,288 1,171,028 Special assessments 77,800 72,337 61,327 46,859 36,370 39,943 18,591 6,667 600 1,970 Investment earnings 960,773 634,552 425,731 469,012 858,611 1,064,838 962,448 701,039 402,421 364,660 Miscellaneous 875,603 1,341,924 1,317,524 1,221,761 876,250 1,199,675 1,386,242 1,789,230 1,782,477 1,541,494 Total revenues 47,463,127 47,309,372 49,792,551 54,351,746 62,557,272 64,574,708 68,743,734 67,244,358 64,200,642 67,564,941 Expenditures Current General government 12,937,208 12,757,384 13,801,711 15,247,239 18,478,746 18,715,493 18,153,620 18,766,806 16,970,629 17,895,393 Police 9,499,112 10,359,890 10,690,905 10,647,826 12,606,701 14,678,179 15,536,666 14,636,567 14,588,008 14,892,808 Fire 4,491,634 4,719,878 5,416,395 5,097,630 5,872,350 7,265,724 8,298,829 8,654,998 8,281,693 8,279,658 Parks, recreation and cultural affairs 10,917,165 15,061,168 10,285,641 10,482,092 11,128,612 12,765,857 14,551,969 13,828,963 11,795,902 12,200,221 Community development 7,946,575 7,116,935 6,357,491 7,186,770 7,182,068 7,262,150 7,147,609 1,336,120 1,100,251 1,218,263 Public works - - - - - - - 1,049,097 5,510,298 6,276,055 Debt service Principal 1,360,000 1,815,000 1,900,000 1,965,000 1,060,000 1,130,000 1,180,000 1,225,000 1,270,000 1,315,000 Interest 378,265 560,368 483,230 421,480 588,521 512,905 470,217 425,643 379,342 330,393 Arbitrage rebate 34,387 - - - - - - - - - Bond issuance costs 70,733 - - - - - - - - - Capital outlay 1,579,147 1,505,876 1,722,060 4,653,660 6,844,613 4,924,265 4,787,620 10,807,397 9,425,646 4,580,112 Total expenditures 49,214,226 53,896,499 50,657,433 55,701,697 63,761,611 67,254,573 70,126,530 70,730,591 69,321,769 66,987,903 Excess of revenues over (under) expenditures (1,751,099) (6,587,127) (864,882) (1,349,951) (1,204,339) (2,679,865) (1,382,796) (3,486,233) (5,121,127) 577,038 Other Financing Sources (Uses) Operating transfers in 960,119 104,810 2,539,337 2,856,182 3,000,104 3,288,811 7,168,448 7,935,092 7,798,162 12,142,893 Operating transfers out (1,220,341) (844,310) (1,098,484) (1,101,365) (1,824,537) (1,942,696) (5,747,728) (6,011,462) (2,686,511) (2,125,713) 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 10,404,395 (739,500) 1,440,853 7,479,817 1,175,567 1,346,115 1,420,720 1,923,630 5,111,651 10,017,180 Net change in fund balance 8,653,296 $ (7,326,627) $ 575,971 $ 6,129,866 $ (28,772) $ (1,333,750) $ 37,924 $ (1,562,603) $ (9,476) $ 10,594,218 $ Debt service as a percentage of noncapital expenditures 4.5% 5.8% 5.4% 5.1% 3.3% 2.7% 2.6% 3.0% 3.7% 3.2% Source: City of Farmington CAFRs Notes: In 2009, the city separated public works from community development. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. 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 2002 437,063,198 21,206,468 $ 342,471,521 29,184,137 $ 204,910,713 17,762,166 $ 984,445,432 68,152,771 $ 2003 490,068,660 24,593,325 351,385,467 30,891,854 213,197,135 18,692,226 1,054,651,262 74,177,405 2004 504,889,336 28,194,450 362,458,230 31,193,172 221,192,493 18,937,000 1,088,540,059 78,324,622 2005 498,093,821 28,445,687 378,001,503 33,376,202 223,336,276 19,829,050 1,099,431,600 81,650,939 2006 537,362,745 26,418,370 415,275,503 34,213,205 236,844,321 19,789,570 1,189,482,569 80,421,145 2007 551,421,402 27,422,114 429,127,945 36,550,017 248,119,606 21,419,197 1,228,668,953 85,391,328 2008 512,182,632 28,575,487 439,341,791 39,610,098 262,763,630 23,886,685 1,214,288,053 92,072,270 2009 490,347,580 30,035,752 441,145,350 42,395,101 264,384,359 25,663,036 1,195,877,289 98,093,889 2010 417,626,366 25,322,092 433,338,579 40,087,647 272,352,709 25,726,777 1,123,317,654 91,136,516 2011 431,217,761 26,310,371 428,923,446 39,524,535 271,478,836 25,481,033 1,131,620,043 91,315,939 Change 2002-2011 -1.3% 24.1% 25.2% 35.4% 32.5% 43.5% 15.0% 34.0% Source: Farmington Electric Utility System * Totals changed due to corrections made for classifications. Residential included Street Lighting, which should be included with Commercial. Industrial included Wholesale but was taken out. Wholesales is not included in any of the totals. Total * Industrial * Commercial * Residential 97 ---PAGE BREAK--- City of Farmington Schedule 6 Electric Rates by Customer Type As of June 30, 2011 Type of Customer Industrial $7.00/kW for demand charge $0.040/kWh first 500 per kW of billing demand is the energy charge $0.0310/kWh for all energy in excess of 500 per kW of billing demand Commercial General Service $4.50 Customer charge $0.0875/kWh first 400 kWh $0.0865/kWh additional kWh Large General Service $7.75/kW for demand charge $0.0540/kWh first 500 per kW of billing demand is the energy charge $0.040/kWh for all energy in excess of 500 kWh per kW of billing demand Residential $3.00 Customer charge $0.08/kWh first 200 kWh $0.0765/kWh additional kWh Street Lighting $7.75 100 W sodium 7/94 $11.75 100 W sodium 8/94 $14.00 250 W sodium 7/94 $14.75 250 W sodium 8/94 $7.75 175 W mercury $14.00 400 W mercury Source: Farmington Electric Utility System 98 ---PAGE BREAK--- City of Farmington Schedule 7 Electric Principal Revenue Payers Current Year and Nine Years Ago Percentage of Percentage of Customer Revenue Rank Revenue Revenue Rank Revenue Enterprise Field Services/EPFS 20,349,086 $ 1 22.28% - $ - - Transwestern Pipeline/Paragon/Enron 4,778,728 2 5.23% - - - Val Verde Gas Gathering, LP 2,769,206 3 3.03% - - - San Juan Regional Medical Center 1,660,435 4 1.82% 900,405 6 1.32% Praxair, Inc. 1,629,221 5 1.78% - - - Burlington Resources Oil & Gas / ConocoPhillips 1,056,329 6 1.16% 5,277,868 2 7.74% Wal-Mart/Sam's Club 1,044,202 7 1.14% 595,331 8 0.87% Western Refining Southwest, Inc. 948,881 8 1.04% 1,754,563 4 2.57% Farmington Municipal Schools 922,396 9 1.01% 790,553 7 1.16% San Juan College 904,582 10 0.99% 1,041,353 5 1.53% El Paso Field Services - - - 15,837,819 1 23.24% Enron Capital & Trade - - - 1,760,481 3 2.58% BHP Billiton - - - 504,692 9 0.74% Animas Valley Mall - - - 461,943 10 0.68% Total 36,063,066 $ 39.49% 28,925,008 $ 42.44% Source: Farmington Electric Utility System 2011 2002 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 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 2008 54,401,730 1,330,285 992,050 2,124,381 58,848,446 2009 52,406,771 1,440,724 865,346 1,992,189 56,705,030 2010 44,760,879 1,495,634 649,388 2,048,944 48,954,845 2011 47,605,170 1,637,361 614,627 1,828,644 51,685,802 Change 2002-2011 32.5% 77.6% -75.9% 6.5% 25.7% Source: City of Farmington CAFRs 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 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Agriculture 208 $ 2,002 $ 2,461 $ 2,726 $ 2,769 $ 3,325 $ 3,284 $ (2,519) $ 609 $ 612 $ Mining 125,093 108,454 122,936 133,973 192,806 222,893 185,838 163,216 113,859 121,889 Construction 97,131 98,292 90,069 118,025 142,174 124,428 121,996 157,749 117,169 109,321 Manufacturing 40,120 27,001 33,015 50,656 78,377 69,509 86,755 79,094 57,270 73,713 Trans/Comm/Utility 48,676 24,178 15,481 20,096 33,026 26,547 32,545 30,259 24,207 22,033 Wholesale Trade 103,921 76,836 85,158 113,951 160,468 197,225 164,098 163,014 99,166 97,962 Retail Trade 667,453 668,134 653,535 673,785 634,152 717,121 753,122 772,111 675,796 676,094 Information and Cultural - - 25,225 44,094 43,293 51,774 51,018 53,838 55,436 57,180 Finance/Ins/Real Estate 22,102 21,467 20,539 21,001 26,338 30,878 34,686 33,594 39,232 46,227 Services 365,188 365,245 464,410 507,610 506,892 537,818 580,933 601,162 502,840 579,917 Government - - 2,240 1,920 - - - - - - Unclassified 84 75,713 35,955 40,682 39,669 1,486 14,923 8,359 8,883 6,880 Undisclosed 24,705 33,493 30,835 28,708 26,503 26,258 28,647 31,054 28,235 29,402 Total 1,494,681 $ 1,500,815 $ 1,581,859 $ 1,757,227 $ 1,886,467 $ 2,009,262 $ 2,057,845 $ 2,090,931 $ 1,722,702 $ 1,821,230 $ 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 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. 101 ---PAGE BREAK--- City of Farmington Schedule 10 Direct and Overlapping Gross Receipts Tax Rates Last Ten Fiscal Years Fiscal Year State GRT City Share of State GRT City Direct Rate San Juan County Total City GRT 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% 2008 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2009 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2010 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2011 3.9000% 1.2250% 1.1875% 0.8125% 7.1250% 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 5 0.18% 612 $ 0.03% - 0.00% 208 $ 0.01% Mining 68 2.50% 121,889 6.69% 56 2.45% 125,093 8.37% Construction 251 9.21% 109,321 6.00% 205 8.98% 97,131 6.50% Manufacturing 100 3.67% 73,713 4.05% 69 3.02% 40,120 2.68% Trans/Comm/Utility 38 1.40% 22,033 1.21% 90 3.94% 48,676 3.26% Wholesale Trade 174 6.39% 97,962 5.38% 138 6.04% 103,921 6.95% Retail Trade 600 22.03% 676,094 37.12% 631 27.63% 667,453 44.66% Information and Cultural 79 2.90% 57,180 3.14% - 0.00% - 0.00% Finance/Ins/Real Estate 124 4.55% 46,227 2.54% 75 3.28% 22,102 1.48% Services 1,259 46.22% 579,917 31.84% 1,012 44.31% 365,188 24.43% Government - 0.00% - 0.00% - 0.00% - 0.00% Unclassified 23 0.84% 6,880 0.38% - 0.00% 84 0.01% Undisclosed 3 0.11% 29,402 1.61% 8 0.35% 24,705 1.65% Total 2,724 100.00% 1,821,230 $ 100.00% 2,284 100.00% 1,494,681 $ 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. Data has been suppressed for purposes of taxpayer confidentiality. Information is suppressed when too few taxpayers are included in a category. Although the figures in the table have been derived from "NM_FR003-500 Local Gov't Distribution Summary" issued by the state, the state suppresses revenue information in certain categories if the release of information would compromise the confidentiality of an individual taxpayer. Accordingly, the "Taxable Gross Receipts Tax" totals in this table will differ from those in other tables. Beginning with the 1st Quarter of FY 2004, the State changed the gross receipts tax classification system in the report NM_FR003-500 Local Gov't Distribution Summary from the Standard Industrial Classification format to the North American Industrial Classification format. Effective January 2005, state legislation removed state gross receipts tax from groceries and healthcare, and held municipal gross receipts tax "harmless". Fiscal Year 2011 Fiscal Year 2002 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 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% 2008 556,752,058 354,591,302 88,159,370 68,326,659 931,176,071 1.457 1.879 2,796,324,538 33.3% 2009 593,088,155 431,154,946 86,031,112 88,515,732 1,021,758,481 1.438 1.908 3,068,343,787 33.3% 2010 597,619,324 368,371,078 82,532,302 92,000,870 956,521,834 1.457 1.950 2,872,437,940 33.3% 2011 638,666,041 483,155,959 75,061,549 213,971,715 982,911,834 1.419 2.128 2,951,687,189 33.3% 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 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 2008 1.457 - 1.457 1.250 6.567 9.725 3.283 0.600 22.882 2009 1.438 - 1.438 1.150 6.312 9.644 3.156 0.600 22.300 2010 1.457 - 1.457 1.530 6.425 9.673 3.212 0.600 22.897 2011 1.419 - 1.419 1.362 6.267 9.620 3.133 0.600 22.401 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 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 2008 1.879 - 1.879 1.250 8.500 9.902 4.500 0.600 26.631 2009 1.908 - 1.908 1.150 8.500 9.915 4.500 0.600 26.573 2010 1.950 - 1.950 1.530 8.500 9.921 4.500 0.600 27.001 2011 2.128 - 2.128 1.362 8.500 9.923 4.500 0.600 27.013 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 Principal Property Tax Payers Current Year and Nine Years Ago Percentage of Percentage of Taxable Total City Taxable Taxable Total City Taxable Taxpayer Assessed Value Rank Assessed Value Assessed Value Rank Assessed Value Animas Valley Land and Water 17,933,371 $ 1 1.8% - $ - - Animas Valley Mall, LLC 9,662,751 2 1.0% 19,819,989 1 3.4% San Juan Regional Medical Center 3,927,199 3 0.4% - - - Plaza Farmington II LLC 3,641,859 4 0.4% - - - Burlington Resources Oil and Gas LP. 3,315,327 5 0.3% 6,047,748 3 1.0% Wal-Mart/Sam's Club 3,293,093 6 0.3% 16,293,264 2 2.8% San Juan Development Corporation 3,247,441 7 0.3% 5,899,221 4 1.0% Dugan Production Corp 2,767,661 8 0.3% - - - Lowe's Home Centers, Inc. 2,639,290 9 0.3% - - - PI Farmington Incorporated 2,325,787 10 0.2% - - 0.0% SW Farmington Incorporated (The Inn) - - - 5,460,993 5 0.9% Farmington Hotel Assets - - - 4,985,352 6 0.9% Hwy 550 LLC - - - 4,747,851 7 0.8% Citizens Bank - - - 4,519,032 8 0.8% San Juan Associates (San Juan Plaza) - - - 4,301,337 9 0.7% Target Corporation - - - 3,890,277 10 0.7% Total 52,753,779 $ 5.4% 75,965,064 $ 13.2% Source: San Juan County Assessor. 2011 2002 106 ---PAGE BREAK--- City of Farmington Schedule 15 Property Tax Levies and Collections Last Ten Calendar Years Calendar Year Taxes Levied for the Fiscal Year Amount Percentage of Levy Collections in Subsequent Years Amount Percentage of Levy 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% 2007 1,320,436 1,257,590 95% 36,247 1,293,837 98% 2008 1,439,218 1,363,140 95% 41,035 1,404,175 98% 2009 1,565,793 1,415,035 90% 45,082 1,460,117 93% 2010 1,647,620 1,568,062 95% 54,986 1,623,048 99% Source: San Juan County Treasurer Notes: Taxes are levied and collected by the County Treasurer and distributed to all taxing jurisdictions. The tax rate is requested by the City Council and set by the New Mexico Department of Finance and Administration. The State allows the rate to be set at 5% in excess of the requirements to allow for delinquencies. Collected Within the Fiscal Year of the Levy Total Collections to Date 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 NMFA Loan Capital Leases Total Primary Government Percentage of Personal Income Per Capita 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 4.5% 1,322 2008 - N/A N/A 10,490,000 26,810,000 13,107,058 - 250,269 50,657,327 3.9% 1,194 2009 - N/A N/A 9,265,000 21,470,000 12,547,273 - 136,302 43,418,575 3.0% 1,018 2010 - N/A N/A 7,995,000 15,945,000 11,970,694 - 86,845 35,997,539 2.5% 829 2011 - N/A N/A 6,680,000 10,140,000 11,376,818 1,054,844 34,400 29,286,062 1.9% 638 Source: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 20 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year. Business-type Activities 108 ---PAGE BREAK--- City of Farmington Schedule 17 Direct and Overlapping Governmental Activities Debt As of June 30, 2011 Governmental Unit Debt Outstanding Estimated Percentage Applicable Estimated Share of Direct and Overlapping Debt San Juan County - $ 30.320% - $ Farmington Public Schools 42,112,332 100.000% 42,112,332 San Juan College 17,190,000 30.322% 5,212,352 Subtotal Overlapping Debt 47,324,684 City direct debt 6,680,000 Total direct and overlapping debt 54,004,684 $ 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 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Assessed Valuations Assessed Value 523,010,566 $ 577,578,600 $ 602,018,135 $ 650,930,835 $ 699,255,163 $ 808,339,099 $ 862,849,412 $ 933,242,749 $ 864,520,964 $ 768,940,119 $ Add back - exempt property 53,434,815 56,984,789 59,092,903 61,710,344 61,449,809 67,559,512 68,326,659 88,515,732 92,000,870 213,971,715 Total Assessed Value 576,445,381 634,563,389 661,111,038 712,641,179 760,704,972 875,898,611 931,176,071 1,021,758,481 956,521,834 982,911,834 Legal Debt Margin Debt limitation - 4 % of total assessed value 23,057,815 25,382,536 27,134,479 28,505,647 30,428,199 35,035,944 37,247,043 40,870,339 38,260,873 39,316,473 Debt applicable to limitation: Total bonded debt 70,855,000 64,210,000 57,190,000 55,480,000 49,650,000 43,615,000 37,300,000 30,735,000 23,940,000 16,820,000 Less: Revenue bonds (70,855,000) (64,210,000) (57,190,000) (55,480,000) (49,650,000) (43,615,000) (37,300,000) (30,735,000) (23,940,000) (16,820,000) Total net debt applicable to limitation - - - - - - - - - - Legal Debt Margin 23,057,815 $ 25,382,536 $ 27,134,479 $ 28,505,647 $ 30,428,199 $ 35,035,944 $ 37,247,043 $ 40,870,339 $ 38,260,873 $ 39,316,473 $ Excludes centrally assessed property. Source: Details regarding the city's revenue bonds can be found in the notes to the financial statements. See Schedule 12 for assessed valuation amounts. Fiscal Year 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 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 2008 121,977,607 77,084,567 44,893,040 5,135,000 1,421,305 6.85 27,625,198 1,180,000 470,217 16.74 2009 117,183,511 73,688,514 43,494,997 5,340,000 1,215,905 6.63 26,612,158 1,225,000 425,643 16.12 2010 115,238,191 73,490,029 41,748,162 5,525,000 1,029,005 6.37 22,729,574 1,270,000 379,342 13.78 2011 111,560,052 76,368,976 35,191,076 5,805,000 752,755 5.37 24,173,905 1,315,000 330,393 14.69 Source: City of Farmington CAFRs and Budgets 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 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 1,276,390,000 29,275 33.6 10,257 83.6% 19.7% 4.3% 2007 42,425 1,300,368,675 30,651 33.6 10,253 83.6% 19.7% 3.4% 2008 42,637 1,425,354,910 33,430 33.6 10,467 83.6% 19.7% 4.0% 2009 43,412 1,441,799,344 33,212 33.6 10,517 85.4% 20.3% 7.6% 2010 45,877 1,552,340,049 33,837 33.6 10,646 84.0% 19.7% 9.6% Sources: Statistical information prior to 2003 was obtained from City of Farmington Community Development mid-year staff estimate. Demographic information acquired from Bureau of Business and Economic Research, University of New Mexico, U.S. Census Bureau, and San Juan Economic Development Services. School enrollment provided by Farmington Municipal Schools as of the 40 day census. Unemployment information obtained from the New Mexico Department of Workforce Solutions. Calendar Year 112 ---PAGE BREAK--- City of Farmington Schedule 21 Principal Employers Current Year and Ten Years Ago Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment San Juan Regional Medical Center 1,487 1 2.6% 776 4 1.5% Farmington Public Schools 1,129 2 2.0% 1,090 2 2.1% Central Consolidated Schools 1,068 3 1.9% 1,128 1 2.2% BHP Billiton/New Mexico Coal 1,015 4 1.8% 854 3 1.7% City of Farmington 771 5 1.4% 655 5 1.3% San Juan County 701 6 1.2% 448 9 0.9% Conoco Phillips 659 7 1.2% - - - Arizona Public Service 504 8 0.9% 565 7 1.1% San Juan College 494 9 0.9% - - - Bloomfield Municipal Schools 470 10 0.8% 492 8 1.0% Public Service Co of NM - - - 567 6 1.1% Aztec Schools - - - 415 10 0.8% Total 8,298 14.7% 6,990 13.5% Source: San Juan Economic Development Service and the Farmington Chamber of Commerce; City of Farmington Program Budget - Staffing Analysis Section Note: Statistical data is representative of entire county as City data is not available. In 2009, this schedule was changed to a ten year variance to be in accordance with GASB Statement 44. 2011 2002 113 ---PAGE BREAK--- City of Farmington Schedule 22 Full-time-Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General Government Administration 37.5 37.5 37.5 38.5 39.5 40.5 72.5 79.5 77.5 70.5 Administrative Services 30.0 31.0 31.0 31.0 31.0 32.0 31.0 29.0 29.0 29.0 General Services 37.5 43.5 42.5 41.5 42.5 52.5 52.5 58.0 58.0 53.0 Police 147.5 148.5 148.5 148.5 159.5 172.5 174.5 165.5 165.0 165.0 Fire 73.0 73.0 73.0 73.0 82.0 96.0 96.0 95.0 95.0 91.0 Parks, Recreation and Cultural Affairs 107.0 112.0 114.0 114.0 118.0 124.0 104.0 106.0 106.0 96.0 Community Development 20.0 21.0 22.0 24.0 27.0 26.0 26.0 22.0 20.0 19.0 Public Works 47.0 47.0 46.0 46.0 46.0 48.0 49.0 50.0 50.0 46.0 Electric 133.0 135.0 135.0 144.0 146.0 166.0 177.0 178.0 172.0 175.0 Human Resources 10.0 10.0 10.0 10.0 11.0 11.0 12.0 12.0 12.0 11.0 Water/Wastewater 4.0 7.0 7.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Golf 8.0 8.0 8.0 8.0 7.0 7.0 7.0 7.0 7.0 7.0 Total Employees 654.5 673.5 674.5 686.5 717.5 783.5 809.5 810.0 799.5 770.5 Source: City of Farmington Program Budget - Staffing Analysis Section, past ten years Note: Full-time-Equivalent includes all approved budgeted positions. In 2009, public works was separated from community development. For comparative purposes, the number of full time equivalents for each department was allocated retroactively. In 2010, airport was combined with general services. For comparative purposes, the number of full time equivalents for each department was allocated retroactively. Budgeted Full-Time-Equivalent Employees as of June 30 114 ---PAGE BREAK--- City of Farmington Schedule 23 Operating Indicators by Function/Program Last Ten Fiscal Years 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General Government Total number of business registration/licenses 2,549 2,576 2,730 2,680 2,739 2,839 3,926 4,212 3,848 3,660 Police Police reports 8,429 7,177 6,512 6,636 6,254 6,500 6,770 7,723 7,894 6,731 Arrests 5,472 5,118 4,523 4,400 3,814 3,787 4,113 6,882 6,274 5,418 Traffic citations 23,475 26,147 22,274 17,473 16,263 18,982 24,449 24,586 27,372 13,058 Fire Fire alarm responses 886 804 772 700 888 760 927 954 991 1,295 Total responses 4,195 4,160 4,746 4,885 5,457 5,825 6,386 6,347 6,058 6,988 Parks and Recreation Parks and recreation participants 320,048 310,076 304,701 299,248 309,546 305,279 349,042 438,179 494,845 606,384 Library Library Visits 289,280 247,983 327,505 410,690 427,831 436,629 503,148 517,452 530,119 468,455 Circulation 279,452 280,022 392,221 490,717 517,654 468,998 489,126 513,588 530,918 506,247 Number of computer users 54,184 55,656 67,532 69,403 117,516 120,483 125,210 131,295 126,215 102,443 Museum Patrons 47,281 57,782 52,314 64,572 75,427 71,332 65,784 97,003 81,366 108,156 Community Development Summary plats 49 43 38 89 77 71 66 63 54 54 Building permits issued 1,382 1,339 1,443 1,554 1,494 1,539 1,334 1,225 1,194 1,310 Permit valuation (in 41,087,054 47,827,308 54,288,877 76,647,366 99,406,673 68,119,054 82,560,865 66,119,298 49,316,168 44,138,834 Asphalt placed (sq.ft.) 106,852 96,798 123,514 83,727 132,216 88,582 103,006 129,349 139,464 119,745 Concrete placed (cu.yd.) 1,071 1,032 756 698 441 727 574 174 438 338 Electric Meter connections 8,608 9,201 9,478 9,265 9,387 8,769 8,484 7,956 8,329 7,650 Meter reads 567,942 558,859 554,291 561,898 541,090 559,121 510,751 505,471 512,488 517,339 Water/Wastewater Water treated (millions of gallons) 4,534 4,452 4,057 3,366 3,842 4,029 4,346 4,512 4,630 4,409 Effluent treated (millions of gallons) 1,772 1,832 1,781 1,858 1,881 2,057 1,906 1,894 1,845 1,864 New water meter installations 177 176 205 304 373 342 262 158 156 116 Golf Golf course participants 58,466 54,388 58,399 60,999 71,689 60,455 65,791 53,612 49,009 50,687 Airport Total enplanements 39,085 27,160 30,132 35,503 32,575 30,177 26,472 13,617 14,628 16,655 Transit Total Ridership 12,954 33,364 42,650 43,999 57,043 87,298 109,992 120,298 138,246 143,073 Source: Provided by various City Departments Note: Fluctuation in museum patronage is due to special exhibits. In 2011, Number of computer users was added. This item replaced Number of items in collection, which was not considered to be as meaningful of a measure. Data from fiscal years 2002 and 2003 was not available. In 2009, a full 12 months of participants in the newly opened Sycamore Park Community Center were included which resulted in the increase in participants when compared to previous years. In 2009, Civitan Golf Course was closed for remodel improvements which resulted in fewer golf course participants when compared to previous years. The 2008 concrete placed (cu. yd.) reported has been restated in 2009 to the correct figure. 115 ---PAGE BREAK--- City of Farmington Schedule 24 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Police Police stations 1 1 1 1 1 1 1 1 1 1 Sub-stations 3 3 3 3 3 3 4 4 4 4 Patrol vehicles 166 170 172 155 170 186 196 206 125 125 Fire stations 5 5 5 5 6 6 6 6 6 6 Parks and Recreation Developed acres 584 586 588 588 589 592 594 1,364 1,364 1,364 Undeveloped acres 1,275 1,273 1,282 1,289 1,288 1,285 1,283 309 309 309 Number of parks/facilities 76 77 79 80 80 80 80 87 88 88 Baseball/softball diamonds 24 24 24 25 25 24 24 23 23 23 Soccer/football fields 11 11 11 13 13 14 14 11 11 11 Number of golf courses 2 2 2 2 2 2 2 2 2 2 Community Development Streets (miles) 234 235 238 240 245 253 N/A 268 270 274 Highway (miles) 17 17 17 17 17 17 17 17 17 17 Streetlights 3,843 3,871 3,915 3,933 3,971 4,124 4,135 4,238 4,226 4,251 Traffic Signals 73 74 75 76 77 78 79 80 80 81 Water Water mains (miles) 310 318 325 330 336 336 340 340 340 340 Fire hydrants 1,866 2,010 2,154 2,296 2,360 2,400 2,470 2,500 2,511 2,556 Storage capacity (thousands of gallons) 24,300 24,300 24,300 24,300 24,300 24,300 24,300 24,860 24,860 26,860 Wastewater Sanitary sewers (miles) 191 195 199 203 207 275 272 275 275 275 Treatment capacity (thousands of gallons) 5,800 5,800 6,670 6,670 6,670 6,670 6,670 6,670 6,670 6,670 Transit - minibuses/vans 8 8 8 8 8 11 11 11 16 12 Source: Provided by various City Departments Note: The city implemented GASB Statement 34 infrastructure information in fiscal year 2002. In 2009, an audit of the number of streetlights was conducted and the figure was adjusted to actual. [a-b] In 2009, the number developed acres was redefined from previous years to include parks that are partially developed but still maintained by the Parks and Recreation Department. Conversely, this adjustment reduced the amount of undeveloped acres. In 2009, the number of parks/facilities was redefined to include all facilities maintained by the Parks and Recreation Department City-wide rather than just Parks and Recreation facilities. Fiscal Year 116 ---PAGE BREAK--- Single Audit Section Single Audit Section ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2011 Grantor / Pass-through CFDA ID Number Number PROGRAM NAME Expenditures DIRECT PROGRAMS U.S. Department of Housing and Urban 14.218-Community Development Block Grants/Entitlement Grants CDBG B-01-MC-35-0005 $ 744,150 U.S. Department of Justice 16.710-Recovery Act-Public Safety Partnership and Community Policing Grants COPS Grant - 2009RKWX0641 255,999 COPS Technology Grant - 2010CKWX0423 96,585 16.738-Edward Byrne Memorial Justice Assistance Grant Program 2009-DJ-BX-1498 8,047 2010-DJ-BX-0173 43,987 16.804-Recovery Act-Edward Byrne Memorial Justice Assistance Grant 2009-SB-B9-0036 44,336 Federal Bureau of Investigations FBI Cybercrime Task Force 1,014 Gang Task Force 53,841 U.S. Department of Transportation 20.106-Airport Improvement Program AIP Project No. 3-35-0016-030-2009 507,398 AIP Project No. 3-35-0016-031-2010 113,585 AIP Project No. 3-35-0016-032-2010 33,743 20.505-Metropolitan Transportation Planning Federal Transit - Metropolitan Transit Operations and Capital - Red Apple Transit 429,919 20.703-Interagency Hazardous Materials Public Sector 2010 DOT-Farmington Fire Department-Haz Mat Refresher 3,503 National Science Foundation 47.076-Education and Human Resources Science Theater Education Programming System 9,801 Department of Energy 81.128-Recovery Act-Energy Efficiency and Conservation Block Grant Program EECBG Award- DE-RW0000215 36,416 Department of Health and Human Services 93.243-Substance Abuse and Mental Health Services- Projects of Regional and National Significance 1H79TI023160-01 107,934 Executive Office of the President 95.001-High Intensity Drug Trafficking Area Grant G09SN0010A 10,393 G10SN0010A 167,255 G11SN0010A 3,206 Department of Homeland Security 97.036-Disaster Grants-Public Assistance FEMA-1936-DR-NM 2,192,574 97.044-Assistance to Firefighters Grant FEMA- Assistance to Firefighters Grant EMW-2009-FO-10008 144,252 PASS THROUGH PROGRAMS From the State of New Mexico Department of Public Safety U.S. Department of Justice 16.710-Public Safety Partnership and Community Policing Grants Region II Narcotics Task Force 08-COPS METH JAG-REGION II 11,784 09-COPS METH REGION II SFY11 37,965 117 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2011 Grantor / Pass-through CFDA ID Number Number PROGRAM NAME Expenditures PASS THROUGH PROGRAMS (continued) From the State of New Mexico Department of Public Safety (continued) 16.738-Edward Byrne Memorial Justice Assistance Grant Program Region II Narcotics Task Force DPSJAG09REGII 5,300 Region II Narcotics Task Force DPSJAG09REGII 32,800 Region II Narcotics Task Force DPSJAG09REGII 53,089 Region II Narcotics Task Force DPSJAG10REGII 111,738 16.804-Recovery Act-Edward Byrne Memorial Justice Assistance Grant Region II Narcotics Task Force RA-JAG-Region II SFY10 51,200 From the US Marshal Service U.S. Department of Justice 16.738-Edward Byrne Memorial Justice Assistance Grant Program U.S. Marshal Service 17,180 From the State of New Mexico Children, Youth and Families Department U.S. Department of Justice 16.727-Enforcing Underage Drinking Laws Program Office of Juvenile Justice and Delinquency Prevention Underage Drinking Laws Block Grant 10-690-9984-1 4,859 From the New Mexico Crime Victims Reparation Commission U.S. Department of Justice 16.588-Recovery Act-Violence Against Women Formula Grant 2009-EF-S6-0049 72,138 From the New Mexico Energy, Minerals and Natural Resources Department Department of Transportaion 20.219-Recreation Trails Program Federal Highway Administration (FHWA) EMNRD Contract #09-521-[PHONE REDACTED]-0199 23,356 From the New Mexico Environmental Department Department of Interior 15.510-Colorado Ute Indian Water Rights Settlement Act Bureau of Reclamation Water/Water System Improvements 08-FC-40-2659- Farmington Reach 894,995 Environmental Protection Agency 66.468-Recovery Act-Capitalization Grants for Drinking Water State Revolving Funds Office of Water Water/Water System Improvements Project #2314-ADW-Animas Waterline 97,015 From the New Mexico Department of Transportation Federal Transit Authority 20.505-Metropolitan Transportation Planning Federal Transit - Metropolitan Transit Operations MPO 214,874 Department of Transportation 20.608-Miniumum Penalties for Repeat Offenders for Driving While Intoxicated National Highway Traffic Safety (NHTSA) Operation DWI-11-AL-410-035 46,769 National Highway Traffic Safety (NHTSA) Operation DWI-10-AL-410-035 17,025 Impaired Driving Demonstration Program-DWI Officers 11-AL-FTE164-035 110,453 Department of Transportation 20.205-Highway Planning and Construction Federal Highway Administration (FHWA) Control# 5100090-Highway Safety Improvement Program 18,026 Control# F100010-East Pinon Hills Blvd Extension over Animas River (bridge) 45,925 Control#W500010-Safe Routes to School 5,202 Department of Transportation 20.205-Recovery Act-Highway Planning and Construction Control#ESF1070-Wildflower Widening Project 684,297 Total Federal Assistance $ 7,563,926 See accompanying notes to the Schedule of Expenditures of Federal Awards. 118 ---PAGE BREAK--- CITY OF FARMINGTON NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2011 Note 1 – Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Farmington and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 119 ---PAGE BREAK--- Vietnam Veterans Park 120 ---PAGE BREAK--- ͳʹͳ REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROLOVERFINANCIALREPORTING ANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOFFINANCIALSTATEMENTS PERFORMEDINACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS ͵Ͳǡ ʹͲͳͳǡ Government Auditing Standardsǡ InternalControlOverFinancialReporting material weakness ---PAGE BREAK--- ͳʹʹ ʹͲͳͳǦͲͳǡʹͲͳͳǦͲʹʹͲͳͳǦͲ͵Ǥ significant deficiency ComplianceandOtherMatters AuditingStandardsǤ ͳǡʹͲͳͳ ---PAGE BREAK--- ͳʹ͵ REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEWITHREQUIREMENTSTHATCOULD HAVEADIRECTANDMATERIALEFFECTONEACHMAJORPROGRAMANDONINTERNAL CONTROLOVERCOMPLIANCEINACCORDANCEWITHOMBCIRCULARAǦ133 Compliance OMB Circular AǦ133 Compliance Supplement Government Auditing Standardsǡ ǢOMBCircularAǦ133,AuditsofStates, LocalGovernments,andNonǦProfitOrganizationsǤ ͵ͲǡʹͲͳͳǤ ---PAGE BREAK--- ͳʹͶ ʹͲͳͳǦͲͶǡʹͲͳͳǦͲͷǡʹͲͳͳǦͲǡʹͲͳͳǦͲǤ InternalControlOverCompliance deficiencyininternalcontrolovercompliance Ǥmaterialweaknessininternalcontrolovercompliance material weaknessesǡ ---PAGE BREAK--- ͳʹͷ ͳǡʹͲͳͳ ---PAGE BREAK--- Animas River – Berg Park 126 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 I. SUMMARY OF AUDITOR’S RESULTS FINANCIAL STATEMENTS Type of auditor’s report issued: Unqualified Internal control over financial reporting: x Material weakness(es) identified? Yes No x Significant deficiencies identified? Yes None reported Non-compliance material to financial statements noted? Yes No FEDERAL AWARDS Internal control over major programs: x Material weakness(es) identified? Yes No x Significant deficiencies identified? Yes None reported Type of auditor’s report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? Yes No IDENTIFICATION OF MAJOR PROGRAMS CFDANumber NameofFederalProgramorCluster ͳͶǤʹͳͺ ͳͷǤͷͳͲ ͳǤͳͲ ͳǤͺͲͶȀͳǤ͵ͺ ʹͲǤͳͲ ʹͲǤʹͲͷȀʹͲǤʹͳͻ ȋ ʹͲǤͷͲͷ ͻǤͲ͵ 127 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 I. SUMMARY OF AUDITOR’S RESULTS (CONTINUED) Dollar threshold used to distinguish between type A and type B programs: $ 300,000 Auditee qualified as low-risk auditee? Yes No 128 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 B. FINANCIAL STATEMENTS FINDINGS 2011-01 RESTRICT PAYROLL ACCESS (SIGNIFICANT DEFICIENCY) Condition - During our review of access control listing for the accounting system, we noted that HR personnel who are in charge of updating the master data also have the ability to process payroll, being the designated backups. Criteria - ISACA’s Control Objectives for Information and related Technology (COBIT) framework, provides that to ensure system security (DS5), the City should confirm that user access rights to the system and data are in line with defined and documented business needs and that job requirements are attached to user identities. This means that access is granted on a need to know basis. Effect – The current set up increases risk of unauthorized access to the system. Cause – The City has been aware of the situation and was waiting until the City filled the vacant HR director position to address this. It was addressed after year-end. Recommendation – We recommend that the functions of master data update and payroll processing should be segregated. Assigned backups to process payroll should be personnel other than those who update the master data. Management response - There are currently two employees that have been trained to run payroll as part of the City's disaster recovery plan. These two employees will now serve as backup to the payroll analyst in all situations and all other HR personnel have had their authority for processing payroll removed by IT. 129 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 B. FINANCIAL STATEMENTS FINDINGS (CONTINUED) 2011-02 UPDATE AND TEST DISASTER RECOVERY PLAN (SIGNIFICANT DEFICIENCY) Condition - The Disaster Recovery Plan (Plan) is not comprehensive enough and initial testing in prior years has failed without follow up testing. Criteria - In accordance with ISACA’s Control Objectives for Information and related Technology (COBIT) 4.1 framework (DS4), to ensure continuous service, a Disaster Recovery Plan needs to be developed and tested to reduce impact of a major disruption on key business functions and processes. The plans should be based on risk understanding of potential business impacts and address requirements for resilience, alternative processing and recovery capability of all critical IT services. They should also cover usage guidelines, roles and responsibilities, procedures, communication processes, and the testing approach. Effect - The lack of a comprehensive Disaster Recovery Plan and absence of successful testing may pose questions as to the City’s ability to respond and recover its critical data and applications in the event of an unforeseen disaster. Cause - The City is still working on updating its Disaster Recovery Plan and working on a new test plan. Recommendation – We recommend that the Disaster Recovery Plan be comprehensive in scope covering organizational structure for continuity management, covering the roles, tasks and responsibilities of internal and service providers, their management and their customers, and the planning processes that creates the rules and structures to document, test and execute the disaster recovery and IT contingency plans. The Plan should also address items such as the identification of critical resources, noting key dependencies, the monitoring and reporting of the availability of critical resources, alternative processing, and the principles of backup and recovery. It would be prudent for the City to test the Disaster Recovery Plan again to ensure the viability of the plan and the timeliness of its execution. Management’s Response - IT staff is working with IBM and Mimix to strengthen the disaster recovery plan, and provide more seamless disaster recovery/failover. The “test” referred to in the audit was actually a series of outages on the AS400 130 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 B. FINANCIAL STATEMENTS FINDINGS (CONTINUED) 2011-02 UPDATE AND TEST DISASTER RECOVERY PLAN (CONTINUED) due to failing hardware experienced during the end of June and the beginning of July of 2010. During this time the City experienced several intermittent service interruptions on the AS400, until the hardware causing the service interruptions completely failed (a back-plane on one of the disk trays failed, until complete failure it appeared to be power supply failures). As a result of the last failure, the system was off line for approximately 6 hours while the back-plane was replaced. This series of events brought to light that our fail-over system, a second AS400 server housed off site, replicating the primary server, wasn’t capable of taking over as a temporary (1-24 hours) server, then immediately going back to the secondary role. Currently, the City has a comprehensive data backup system with real-time duplication of the production server on the secondary off site server. Additionally, daily tape backups are made and the tapes are stored off site. In the event of a major hardware failure at the primary site, the City would be able to move to the secondary server and have it up and fully functional within an estimated 24-48 hour period. Our documentation for such a scenario is lacking, due to the simple fact that there are so many possible variables; it is virtually impossible to accomplish such a monumental task with the current staffing levels. We do have comprehensive documentation for system back-up/restore procedure, and bringing the systems back on line, currently, we must rely on staff experience for bringing all the ancillary systems back on line as they are needed. We would prefer to have a fully functional, virtually seamless fail-over system. We are currently researching the possibilities and should we find the solution, to ensure true full fail-over capability, we have been advised that the City will need to do a live fail-over test, while under production, and run on the secondary system for at least a month. This test would need to be started on a Saturday to test production systems during off hours, with staff from all user departments actively entering data and using the system as they would on a regular work day. Live production would then ensue on Monday, and would continue for one full business cycle (one month) to ensure that all systems are functional. At this time, the City simply does not have the staff, the resources, or full complement of redundant software/hardware to accomplish a live production test of the fail-over system. 131 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 B. FINANCIAL STATEMENTS FINDINGS (CONTINUED) 2011-02 UPDATE AND TEST DISASTER RECOVERY PLAN (CONTINUED) In response to lessons learned during the 2010 server outages, the IT Department has begun moving the ancillary general network shares/storage and email systems off of the AS400. We recently moved email service from the AS400 to Google Apps for Government (guaranteed 99.9% up-time), and are in the process of moving the network shares/storage to multiple Windows servers running DFS that will provide real-time duplication and automatic fail-over access to data stores at multiple locations. These two changes diversify our critical services so that any one system becoming unavailable (the AS400) doesn't make such a dramatic impact on employee productivity. Additionally, it will make disaster recovery of the AS400 a much less complicated process than it is/was with all these systems embedded into a single server. The IT Department will be upgrading the operating system on the AS400 at the end of November 2011. After the operating system upgrade is completed, we will have a full evaluation of our current Mimix replication system to determine what steps, if any, can be taken to improve system fail-over to the offsite AS400 server. After completion of the Mimix evaluation and completion of the system changes noted above, the IT Department will begin to address the issues noted regarding a disaster recovery plan. 132 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 B. FINANCIAL STATEMENTS FINDINGS (CONTINUED) 2011-03 ERROR IN PAYROLL PROCESSING (SIGNIFICANT DEFICIENCY) Condition - During our testing of internal controls over the payroll process, it was found that there was an error in the way that the program figured out the calculated premium rate using the Fair Labor Standards Act (FLSA) method one. The error caused the City to underpay any police officer that had the stipend that was associated with “Traffic Officer.” The amount underpaid was caused by the computer not recognizing the stipend as regular pay within the method calculations. Criteria - According to the FLSA method one, the stipend should have been included in the calculation as regular pay; however, the “overtime” pay of the stipend was included instead of the regular stipend, which caused an under payment on each payroll check. Cause - An error in the initial setup of the calculation in the system caused the ongoing error to occur. The error is isolated only to those with the designation “Traffic Officer”, which is inclusive of approximately 9 individuals. Effect - The calculations are incorrect and thus individuals were paid incorrect amounts for the course of FY11. Although this is an exception, the effect is immaterial to the financial statements. Recommendation - The error was fixed the moment that it was recognized. However, there may need to be a periodic check on the calculation of pay amounts so that errors will be corrected in a timely manner. Management response - All current payroll codes have been verified for accuracy by the payroll analyst. Procedures are now in place to have the payroll analyst verify all new payroll codes set up in the Sungard system by HR business partners. 133 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 2011-04 PROCUREMENT, SUSPENSION AND DEBARMENT – DOCUMENTATION OF SEARCH OF VENDOR STATUS (SIGNIFICANT DEFICIENCY) Federal Program: All Major Programs Condition - The City was unable to provide supporting documentation that they performed procedures to verify that they entered into contracts with vendors that were not suspended or debarred prior to initiating these transactions. Our testing of these vendors did not indicate any evidence that the selected vendors were suspended or debarred. Criteria - Per 48 CFR 9.400, Suspension and Debarment are applicable for contracts exceeding $25,000. Under the regulations, the City is responsible to perform verification check for covered transactions, by checking EPLS (Excluded Parties List System). Questioned Costs – None. Effect - The programs are not in compliance with Circular A-133 requirements. Cause - The City had not established standard procedures and controls to ensure compliance with all OMB Circular A-133 compliance requirements. As a result, the City’s personnel are not aware of OMB Circular A-133 compliance requirements. Recommendation - We recommend the City formally document their due diligence conducted on vendors selected through the bidding process. This should be performed before the contract is awarded. Management response - The Purchasing staff became aware of this issue prior to the audit finding. A meeting was held on September 28, 2011, where the EPLS website (Excluded Parties List System) was previewed. The Federal compliance for suspension and debarment was discussed and direction was given to all Purchasing staff to check the EPLS website and print the results to include in the procurement file as documentation of due diligence in the contract award process. This new process has been implemented. 134 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) 2011-05 TIMELY SUBMISSION OF REQUIRED REPORT (SIGNIFICANT DEFICIENCY) Federal Program: U.S. Department of the Interior Colorado UTE Indian Water Rights Settlement Act – CFDA 15.510 Award Period, July 1, 2010 – June 30, 2011 Condition - During our testing of reporting requirements in single audit, we noted that the City did not submit timely required quarterly financial reports or a timely required annual performance report for the fiscal year ended June 30, 2011. Criteria - According to Cooperative Agreement No. 08-FC-40-2659 Design, Construction and Construction Oversight for the Farmington Reach of the Navajo Nation Municipal Pipeline, section 9, the City is required to submit, SF-269a Financial Status Report for each reporting period for which expenditures are being reported within 30 days following the end of the reporting period. Additionally, the City is required to submit, an annual program performance report within 90 days following the end of each year of the agreement. Questioned Costs - None Effect - The program is not in compliance with reporting requirements of the agreement and therefore not in compliance with OMB Circular A-133. Cause - There are inadequate controls in place to ensure all reporting requirements are met and compliance with OMB Circular A-133 is achieved. Recommendation - We recommend that the City review its processes and controls over reporting and assess the need for either strengthening existing controls or implementing new controls to ensure compliance with applicable reporting requirements and therefore compliance with OMB Circular A-133. Management response - One accountant in the Finance division is now totally dedicated to accounting for all City grants and will follow through on all grant reporting requirements. Procedures are now in place to ensure that all grant reports are filed in a timely manner. 135 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) 2011-06 SPECIAL TESTS AND PROVISIONS – PROJECT ACCOUNTING (SIGNIFICANT DEFICIENCY) Federal Program: U.S. Department of Homeland Security Public Assistance (Presidentially Declared Disasters) – CFDA 97.036 Award Period, July 1, 2010 – June 30, 2011 Condition – The projects associated with a work order were accumulated and compiled by project number. However, a majority of the expenses incurred during the year were accounted in various general ledger accounts that did not have a work order and were therefore not associated with a specific FEMA project. As projects were either completed or beginning to wrap up during the year it was difficult to determine the Federal portion of the expenses. Criteria – For large projects, the City must provide an accounting to the State of eligible costs. In submitting the accounting, the City is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provision of the FEMA Sub-grantee Agreement, and that payments for that project were made in accordance with 44 CFR section 13.21 payment provisions. Effect – The City is not in compliance with the federal requirements. Cause – Insufficient training, lack of experience with the grant requirements, and limited staffing may have led to this finding. Questioned Costs – Unknown Recommendation – We recommend the City develop a system or a separate general ledger account to track and accumulate total project costs. These costs should be disaggregated by project and agreed to the grant coordinator’s records to continually update the status of the FEMA related projects. This schedule should be regularly maintained and reconciled with the general ledger to ensure they agree. Further, this will allow the City to determine their match requirement on the completed projects as well as the Federal share to assist with reimbursement requests. 136 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) 2011-06 SPECIAL TESTS AND PROVISIONS – PROJECT ACCOUNTING (CONTINUED) Management Response– Procedures are now in place to assign specific project and/or work order numbers to all grant expenditures to ensure clarity and ease of determining match amounts and other grant requirements. 137 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2011 C. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) 2011-07 ALLOWABLE COSTS/COST PRINCIPLES (NON-COMPLIANCE) Federal Program: U.S. Department of Homeland Security Public Assistance (Presidentially Declared Disasters) – CFDA 97.036 Award Period, July 1, 2010 – June 30, 2011 Condition – Three transactions selected for testing included amounts based on encumbrances. The treatment of these expenditures was not consistent with how the City treated other similar expenditures. The amounts reported on the Schedule of Expenditures of Federal Awards should be based on actual costs. An adjustment was recorded by the City subsequent to year end to record these costs in the appropriate period. Criteria – According to Circular A-87 under subsection C.1 to be allowable under federal guidelines all costs must “be necessary and reasonable for proper and efficient performance and administration of Federal awards “be adequately documented” and “be consistent with policies, regulations, and procedures that comply uniformly to both Federal awards and other activities of the governmental unit.” Cause – Insufficient staff or inattention to grantor requirements may have contributed to this finding. Effect – For the aforementioned transactions the program’s allowable cost principle requirements were not followed. Questioned Costs – None Recommendation – We recommend the City develop a uniform method for recording expenses on FEMA related projects. These expenses should be based on actual expenses incurred consistent with the City’s policy. This policy should be circularized and communicated to the department heads to ensure the policy is enforced. In addition, all expenses included on the SEFA should be based on actual costs not estimates. Management’s Response – Procedures are now in place to ensure that all expenditures are uniformly reported on the Schedule of Expenditures of Federal Awards. 138 ---PAGE BREAK--- REPORT AND OTHER INFORMATION REQUIRED BY THE PASSENGER FACILITY CHARGE AUDIT GUIDE FOR PUBLIC AGENCIES 139 ---PAGE BREAK--- Rock crawling 140 ---PAGE BREAK--- 141 ReportofIndependentAuditors Government Auditing Standardsǡ Government Auditing Standardsǡ ---PAGE BREAK--- ͳͶʹ Government Auditing Standards ͳǡʹͲͳͳ ---PAGE BREAK--- PFC Revenue and Disbursement Schedule Four Corners Regional Airport FY-11 7/1/10 - 6/30/11 FY-10 Quarter 1 Quarter 2 Quarter 3 Quarter 4 FY-11 FY-11 Program Total Jul-Sept Oct-Dec Jan-Mar Apr-Jun Total Program Total Revenue Collections 452,326 $ 9,418 $ 10,846 $ 8,426 $ 10,323 $ 39,013 $ 491,339 $ Interest - - - - - - - Total Revenue 452,326 9,418 10,846 8,426 10,323 39,013 491,339 Disbursements Application 01 Proj. 1-A Runway Improvements 148,596 - - - - - 148,596 Proj. 1-B Taxiway Improvements 142,672 - - - - - 142,672 Proj. 1-C Apron Improvements 103,596 - - - - - 103,596 Proj. 1-D Drainage Improvements 57,462 6,611 - - - 6,611 64,073 Proj. 1-E Signage Improvements - 2,807 9,271 - - 12,078 12,078 Proj. 1-F Airfield Electrical Improvements - - 1,575 5,450 - 7,025 7,025 Proj. 1-G Security Improvements - - - 2,976 10,323 13,299 13,299 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 01 452,326 9,418 10,846 8,426 10,323 39,013 491,339 Total Disbursements 452,326 9,418 10,846 8,426 10,323 39,013 491,339 Net PFC Revenue (rev-disb.) PFC Account Balance - $ - $ - $ - $ - $ - $ - $ The schedule is on a cash basis. 143 ---PAGE BREAK--- CITYOFFARMINGTON FOURCORNERSREGIONALAIRPORT NOTESTOSCHEDULEOFPASSENGERFACILITYCHARGE REVENUESANDEXPENDITURES June30,2011 NOTE1. GENERAL ͳͲͳǦͷͲͺǡ ȋ ȋͳȌ ȋ͵Ȍ ʹͲͲ͵ǡ NOTE2. SCHEDULEOFPASSENGERFACILITYCHARGEREVENUES ANDEXPENDITURES ȋ ͳͶ ͳͷͺǤ 144 ---PAGE BREAK--- ͳͶͷ ReportofIndependentAuditorsonComplianceRequirements ApplicabletothePassengerFacilityChargeProgram AndonInternalControlOverCompliance PassengerFacilityChargeAuditGuideforPublicAgenciesǡ ͵Ͳǡ ʹͲͳͳǤ Government Auditing Standardsǡ ͵ͲǡʹͲͳͳǤ ---PAGE BREAK--- ͳͶ ͳǡʹͲͳͳ ---PAGE BREAK--- CITYOFFARMINGTON FOURCORNERSREGIONALAIRPORT PFCAUDITSUMMARY YEARENDEDJUNE30,2011 ͳǤ ʹǤ ͵Ǥ ͶǤ ͷͳͲͲǦͳʹǤ ͷǤ Ǥ Ǥ ͺǤ ͻǤ ͳͲǤ ͳͳǤ ͳʹǤ ͻǤ ͳ͵Ǥ ͳͲǤ ͳͶǤ 147 ---PAGE BREAK--- Ingredients ready for Chili Cook Off – Berg Park 148 ---PAGE BREAK--- CITY OF FARMINGTON EXIT CONFERENCE Year Ended June 30, 2011 An exit conference was held on November 17, 2011. In attendance were: For the City of Farmington: Tommy Roberts Mayor Robert Mayes City Manager Andy Mason Administrative Services Director Rich Friedman Information Technology Director Eric Schlotthauer Controller Sheree Wilson Enterprise Accountant Sarah Talley Staff Accountant II Krista Martin Staff Accountant II Paul McGee Staff Accountant I For Moss Adams, LLP (auditors): Chris Garner Senior Manager Jaime Rumbaoa Manager 149 ---PAGE BREAK--- PRCA mascot Ringo welcomes visitors to the Connie Mack World Series – Ricketts Park 150 ---PAGE BREAK--- OTHER INFORMATION OTHER INFORMATION ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF PLEDGED COLLATERAL For the Year Ended June 30, 2011 Citizens Four First Bank of Wells Vectra Corners Federal Farmington Fargo Bank Bank Bank City of Farmington Deposits Demand Deposit Accounts $ 1,679,412 $ 1,406,339 $ - $ - $ - Overnight Deposits - 2,773,726 - - - Certificate of Deposit 21,000,000 - 9,103,727 5,000,000 2,000,000 Sub-Total 22,679,412 4,180,065 9,103,727 5,000,000 2,000,000 Less FDIC insurance 250,000 250,000 250,000 250,000 250,000 Uninsured amount 22,429,412 3,930,065 8,853,727 4,750,000 1,750,000 Pledge Collateral Required 102 percent - overnight - 2,829,201 - - - 50 percent - deposits 11,214,706 578,170 4,426,864 2,375,000 875,000 Total Pledged Collateral Required 11,214,706 3,407,370 4,426,864 2,375,000 875,000 Pledged collateral 12,185,154 3,725,417 8,865,085 2,855,092 1,470,999 Excess of pledged collateral $ 970,448 $ 318,047 $ 4,438,222 $ 480,092 $ 595,999 Pledged collateral (market value) and location of each respective financial institution consists of the following: Location of collateral Dallas, TX Los Angeles San Francisco Los Angeles Los Angeles Federal Home Loan Bank cusip # 3133XYV93 07/17/13 $ 5,001,475 $ $ $ $ cusip # 3136F6YL7 12/25/12 1,367,454 cusip # 31371LPU7 04/01/14 505,812 cusip # 31396YXY3 12/15/20 1,106,731 cusip # 31394HYD7 05/15/16 172,008 cusip # 313372DQ4 01/27/21 4,031,675 cusip # 3133XFNL6 06/12/12 2,325,633 cusip # 3133XGJA3 03/21/12 529,460 cusip # 31337OL63 08/26/25 1,470,999 cusip # 3128X85D0 08/03/16 cusip # 3136FMJZ8 04/12/18 cusip # 3128X92T6 10/22/18 cusip # 3128JNVM4 01/01/37 694,394 cusip # 3128JL4T3 04/01/34 2,009,631 cusip # 3128JPXA3 02/01/39 365,648 FAMC cusip # 313172AG3 10/25/24 1,032,442 cusip # 31317GAZ0 04/25/17 246,605 cusip # 31317JAF8 07/25/18 3,498,125 cusip # 31318OAL5 08/25/24 1,018,241 FNMA cusip # 31412MYZ5 06/01/38 136,323 cusip # 31415LML8 08/01/38 887,258 cusip # 31418WB58 08/01/25 2,701,836 $ 12,185,154 $ 3,725,417 $ 8,865,085 $ 2,855,092 $ 1,470,999 151 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF JOINT POWERS AGREEMENTS For the Year Ended June 30, 2011 Participants Responsible Dates of Total Amount/ FY11 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/ - $ San Juan County San Juan County Communications up to $55,000/yr Communications Authority Authority Aztec, Bloomfield & Crime Stoppers Law Enforcement 07/01/05 through 06/30/14 $37,964/$15,025 15,025 $ City of Aztec San Juan County Aztec, Bloomfield, Water Water Issues 3/5/86 until termination $18.2m/32.46% - $ Water San Juan County Commission Commission San Juan Water Users Assoc. Aztec, Bloomfield, SJ County, San Juan County Police Training 8/07/96 until termination As needed 65,950 $ SJ College NM Dept. of Public Safety Criminal Justice San Juan College Training Authority San Juan County San Juan County Septage Station 12/16/94 through 12/16/14 $200,000/operating in-kind only City Aztec, Bloomfield, B.L.M. Trash Force Illegal Dumping 9/26/91 until termination As needed in-kind only City San Juan County N.M.Environment Dept. San Juan County City of Farmington Impact Fees 2/15/96 perpetual Fee for service - $ City Aztec, Bloomfield, All Participants Solid Waste 03/25/92 As required - $ City San Juan County NM Taxation & Revenue Tax & Revenue Taxpayer ID 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 until terminated $ 43,187 / $ 25,912 25,912 $ City San Juan County San Juan County Detention Center 12/16/04 to 6/30/10 $12,376,072/$1,371,248 1,371,248 $ San Juan County San Juan County San Juan County DWI Treatment Ctr 04/15/98 until terminated $3,796,050 / $440,000 440,000 $ San Juan County NM Energy, Minerals and Natural Resources Department (NMEMNRD) NMEMNRD Wildfire Firefighting 12/12/05 until terminated $119,292 / $119,292 119,292 $ NMEMNRD NMEMNRD City of Farmington Wilderness Trails 02/25/09 to 12/31/13 $47,890 / $24,234 24,234 $ NMEMNRD 152