Document farmingtonnm_gov_doc_f005eb8b09

Comprehensive Annual Financial Report Comprehensive Annual Financial Report City of Farmington New Mexico July 1, 2007 - June 30, 2008 City of Farmington New Mexico July 1, 2007 - June 30, 2008 ---PAGE BREAK--- CITY OF FARMINGTON NEW MEXICO COMPREHENSIVE ANNUAL FINANCIAL REPORT For The Year Ended June 30, 2008 Prepared By: Administrative Services Department – Finance Division Eric D. Schlotthauer, Controller Sheree Wilson, Enterprise Accountant Sarah Talley, Staff Accountant II Teresa Emrich, Staff Accountant I With Special Thanks To: Steve Ellison, Budget Officer Molly Bondow, Financial Analyst ---PAGE BREAK--- Printing by City of Farmington Print Shop Brenda Keith, Print Shop Supervisor Brandy Sabo, Print Shop Technician ---PAGE BREAK--- TABLE OF CONTENTS Page INTRODUCTORY SECTION Transmittal Letter i Certificate of Achievement for Excellence in Financial 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 Net Assets – Proprietary Funds 21 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds 23 Statement of Cash Flows – Proprietary Funds 24 Notes to the Financial Statements 27 Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet – Nonmajor Governmental Funds 53 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds 57 Special Revenue Funds: Gross Receipts Tax Streets Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 61 ---PAGE BREAK--- Page Gross Receipts Tax Parks and Public Works Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 62 Park Development Fees Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 63 Recreation 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 Law Enforcement Block Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 71 State Fire Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 72 Penalty Assessment Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 73 ---PAGE BREAK--- Page Capital Projects Funds: Community Development Grant Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 74 Governmental Capital Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 75 Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 76 Business-Type Funds: Internal Service Fund: Health Insurance Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 79 Enterprise Funds: Electric Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 81 Water Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 82 Wastewater Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 83 Sanitation Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 84 Golf Courses Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 85 Airport Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets 86 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--- STATISTICAL SECTION (Unaudited) Schedule Page 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 118 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 119 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133 121 Schedule of Findings and Questioned Costs 123 ---PAGE BREAK--- Page Report on Compliance Applicable to the PFC Charge Program and on Internal Control Over Compliance in Accordance with the PFC Audit Guide for Public Agencies and on the Schedule of PFC Revenues and Disbursements 129 Schedule of PFC Revenues and Disbursements 131 PFC Program Audit Summary 132 Exit Conference 133 Other Information: Schedule of Pledged Collateral by Financial Institution 135 Schedule of Joint Powers Agreements 136 ---PAGE BREAK--- ---PAGE BREAK--- INTRODUCTORY SECTION INTRODUCTORY SECTION ---PAGE BREAK--- ---PAGE BREAK--- ii GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Farmington’s MD&A can be found immediately following the report of the independent auditors. Profile of the Government The City of Farmington is located in the northwest corner of the State of New Mexico in what is commonly called the Four Corners Area (see map on page xi). The City was originally incorporated in 1901 and has a current land area of 32.1 square miles and serves a population of 42,425. 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. The current total in-city GRT rate is 7.0% and includes the City’s local option taxes in the amount of 1.1875%. Together with the 1.225% State share, the City’s tax rate amounts to 2.4125%. Another 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 is responsible, among other things, for adopting ordinances, adopting the budget, appointing committees, and appointing the City Manager, City Clerk, and the City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, overseeing the day-to-day operations of the City, and appointing directors of the various departments. The Council is elected on a non-partisan basis. Council members serve four-year staggered terms, with two Council members elected every two years. The Mayor is elected to serve a four-year term. The four Council members are elected by district and the Mayor is elected at large. The City of Farmington provides a full range of services including police and fire protection; the construction, operation, and maintenance of multi-utility systems; the construction and maintenance of highways, streets, parks, and other infrastructure; and recreational activities, libraries, 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 March 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 ---PAGE BREAK--- iii governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on page 20 as part of the basic financial statements for the governmental funds. Budget to actual comparisons for all other funds are presented in the non-major governmental funds, internal service fund, and enterprise funds sections of this report. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when considered from the broader perspective of the specific environment within which the City of Farmington operates. Local economy. The local economy has historically been based on the natural resource extractive industry, two large coal-fired electric generating stations, and Farmington’s geographical position as a regional retail center catering to a regional population base of more than 225,000. Historically, the local economy has fluctuated in cycles that correspond to the price of oil and natural gas. In the last five years however, energy prices have dramatically increased and retail/services/tourism have continued to develop as major sources of revenue. During the past year, GRT revenue increased 3.6% and Lodgers Tax revenue was up 10.6% from the prior fiscal year. Electric utility operating revenue increased 11.4% over the prior year. Strong energy markets, continued construction activity, and an improving service sector are indicators that the local economy has improved over last year. GRT projections for the next fiscal year have been projected at a 4.8% growth factor which is a more modest growth level than the 9% historical average. Growth in retail sales are expected to continue as Wal-mart, the world’s largest retailer, opened a second store in Farmington in May, 2006. During FY 2004, the U.S. Office of Management and Budget designated Farmington as the central city of the Farmington-San Juan County Metropolitan Statistical Area. This designation qualifies Farmington for various federal entitlement programs and, more importantly, increases the visibility of Farmington in various national economic databases that should highlight the desirability of Farmington as a potential business location. Although just recently designated a Metropolitan Statistical Area, Farmington has participated in a national urban cost of living survey for many years. As a participant in this survey, Farmington is compared with about 400 other cities in the American Chamber of Commerce Researchers Association’s Cost of Living Index. This index measures six different cost of living components such as housing, transportation, and utilities and then rates each city in terms of the national average. In a recent survey, Farmington’s cost of living index was 100% of the national average. As our locality and facilities continue to gain recognition, Farmington will host more national and regional events in baseball, softball, soccer, swimming, mountain biking, and off-road rock climbing, as well as numerous conventions. In January 2004, the City, San Juan County, and other local agencies were successful in their bid to repeat as host to the rodeo. Two sites from Washington State were beat out by the City and County for the right to host the event in 2008 and 2009. This event is billed as the “World’s Largest Rodeo”. When the was held in San Juan County in July 2002 and 2003, more than 1,500 contestants participated and an average of 7,100 spectators attended each performance. As a result, more than $11 million was brought into the New Mexico economy. This event provided a boost to the local economy in 2008 and will continue to do so in 2009. ---PAGE BREAK--- iv The City of Farmington annually hosts the Connie Mack World Series which continues to be a popular and beneficial event for the local community. This national tournament for amateur baseball’s best 17 and 18 year-olds brings in 10 teams from across the country. The teams hail from regions throughout the contiguous United States as well as Puerto Rico and Canada. It is one of the largest spectator attended events in the State of New Mexico and provides a significant economic boost to the entire region. The World Series began in Farmington in 1965. San Juan Regional Medical Center of Farmington completed a $70 million expansion and renovation project in FY 2007. The East Tower expansion project of added 72 private patient rooms, 8 new operating suites, a recovery room, and several day surgery rooms. A new entrance, lobby, and public square are also a part of the new addition. A financing partnership between the hospital and the community is paying for the project, which includes renovation of the existing five-story facility following completion of the East Tower expansion. San Juan County voters approved a $25-million, one-eighth cent gross receipts tax in 2003 to help pay for the medical center expansion and renovation. is funding the remainder of the project. This expansion project is another example of the growth that the community of Farmington is experiencing. The region (which includes the City of Farmington and surrounding rural areas within the same county) has an employed labor force of approximately 56,289, a decrease of 1.2% over last year mostly attributable to a leveling off of oil and gas production. Major employers include a regional medical center, four public school districts, a community college, a coal mining operation, two electrical power generation plants, and two Wal- Mart superstores. Meanwhile, there continues to be a discernible trend toward steady residential growth of about 2% per year. Long-term financial planning. The construction of a new library was completed during FY 2003. This $9.7 million project was financed with $7.6 million of gross receipts tax revenue bonds issued in November, 2001 and the remaining balance from the General Fund’s existing cash reserves. A major project completed in FY 2004 was the wastewater treatment plant expansion, which was financed with a 3% $14.2 million loan from the New Mexico Environment Department (NMED). The first loan payment of $952,997 was made on July 1, 2007 and the final loan payment will be July, 2026. The treatment plant’s capacity has increased by 15% to meet a projected 6.67 mgd flow rate. In addition, reliability and flexibility have improved through the rehabilitation of the primary clarifiers and sludge drying beds as well as the capacity expansion of the disinfection process. The wastewater treatment plant’s next expansion phase, that will more efficiently treat three million gallons of waste per day, is scheduled for FY 2010. Design work for the project began in the fall of FY 2006. Construction for this expansion project will be budgeted in FY 2010 at an estimated cost of $11 million. It is anticipated the City will be working with the NMED on an additional low interest loan through the State Clean Water Revolving Fund Program. As part of the plan to ensure a secure, reliable, and economical power source for utility customers, the electric utility completed an evaluation of various options for new generation, and, after the successful completion of several bond defeasances, has significantly reduced outstanding debt. In FY 2004, the electric utility initiated construction of a new $59 million, 60 megawatt, gas-fired electric power plant with construction funded from existing cash reserves. The new plant went into operation in May, 2005. ---PAGE BREAK--- v In FY 2005, the City issued $5,725,000 of Series 2005 Sales Tax Revenue Bonds to construct, furnish, equip and improve fire-fighting facilities, and acquire and rehabilitate fire-fighting equipment. Fire Station 6, completed in July, 2006, provides much-needed response and emergency service coverage to the west side of the city. In addition to the new state-of-the-art fire station, the bond proceeds purchased two new 95 foot platform ladder trucks and three 75 foot aerial ladder trucks. Other long-term financial planning is incorporated into the City of Farmington’s Comprehensive Plan approved by the City Council in October, 2002. This plan was developed in a multi-stage process and provides the vision, goals, objectives, and actions necessary to direct the City’s progress over the next twenty years. It is an official public document that will serve as the guide for policy decisions relating to the physical, social, and economic growth of the community. In addition to providing goals and objectives, the plan assesses the opportunities and challenges facing the City and sets priorities for an implementation program that outlines specific actions and practical results. This document will serve as a planning guide for future financial capital investments. It is also currently serving as the springboard for development of a Metropolitan Redevelopment Area (MRA) covering all three downtown neighborhoods. Cash management policies and practices. Cash temporarily idle during the year was invested in certificates of deposits, obligations of the U.S. Treasury, overnight deposits, money market accounts, Federal agency securities, and the State Treasurer’s investment pool. The City earned interest revenue of $962,448 on all governmental investments including capital projects and internal service funds and $2,800,336 on all proprietary funds for the year ended June 30, 2008. The maturities of the investments range from overnight to 3 years. The City's investment policy seeks to minimize credit and market risks while maintaining a competitive yield on its portfolio. Accordingly, all investments were protected by federal depository insurance, adequate collateral, or the full faith and credit of the United States Government. The City’s investment policy was reviewed, updated and approved by the City Council in January, 2008. Risk management. The City continues to maintain a partially self-insured program for group health, workers' compensation, property, boiler and machinery, pollution, crime, and excess liability insurance. The workers compensation and general liability programs continued to be financially sound throughout FY 2008, while the health fund’s cash balance increased to $53,846 at June 30, 2008. Management will review the fiscal stability of the health insurance fund in FY 2009 and make appropriate modifications to the plan. Beginning January 1, 2008, the retirees participating in the City of Farmington’s health plan were transferred to the New Mexico Retiree Health Care Authority. This has reduced the amount of claims and has increased the health fund’s net asset balance by $182,249. The risk management and workers compensation funds were transferred to the general fund as separate divisions in the legal and human resources departments in FY 2004. Pension and other post-employment benefits. The City’s full time employees participate in a 401 defined benefit contributory retirement plan through the Public Employees’ Retirement Association (PERA) of the State of New Mexico. The plan is authorized under the Public Employees Retirement Act (Chapter 10, Article 11 NMSA 1978). PERA is the administrator of the plan, which is a cost-sharing, multiple-employer public employee retirement plan. Actual pension data for the State of New Mexico, as employer, is provided at the statewide level in a separately issued financial report of the PERA. ---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 Standley, Darnell, Fischer, Sandel, Sharpe Mayor and Council Standley, Darnell, Fischer, Sandel, Sharpe City Clerk Fuhrman Archives Business Registration City Clerk Fuhrman Archives Business Registration Asst. City Manager Campbell Asst. City Manager Campbell City Manager Mayes City Manager Mayes Human Resources Brooks Employee Benefits Personnel Payroll Insurance Safety Police Runnels Administration Communications Special Operations Detectives Traffic Control Patrol Grant Funds Code Compliance School Crossing Guards Fire Brown Administration Homeland Security Fire Marshall’s Office Operations Information Technology Friedman Enterprise Systems Library Management Systems Computer Operations Geographic Information Systems Administrative Services Mason Administration Purchasing Finance Operations Utility/Enterprise Warehouse Accounting Operations Community Development Sullivan Administration Planning Building Inspection Development Services MPO MRA Public Works Smaka (Acting) Administration City Engineering Traffic Engineering Streets Water/Waste Water Admin. Solid Waste Construction Inspection Survey Water Rights Storm Water Government Relations General Services Hunt Administration Farmington Indian Center Print Shop Community Services Transit Building & Maintenance Building Support Vehicle Maintenance Airport Electric Utility Grantham-Richards Administration Electric Meter Shop Animas Power Plant Electric Relay Shop Bluffview Power Plant Navajo Dam Power Plant Customer Service San Juan No. 4 Electric Construction Transmission & Distribution Electric Engineering 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 Downtown Association Sandstone Production Golf Courses Senior Citizen Center City of Farmington – Organizational Chart City of Farmington – Organizational Chart Municipal Judges Liese & Rowland Municipal Judges Liese & Rowland June 2008 Library viii ---PAGE BREAK--- CITY OF FARMINGTON Principal Officials June 30, 2008 MAYOR William Standley CITY COUNCIL Mary M. Fischer George Sharpe Dan Darnell Jason Sandel CITY MANAGER Robert Mayes ASSISTANT CITY MANAGER Robert Campbell ADMINISTRATIVE SERVICES DIRECTOR H. Andrew Mason COMMUNITY DEVELOPEMENT Michael Sullivan ELECTRIC UTILITY DIRECTOR Maude Grantham-Richards FIRE Troy Brown GENERAL SERVICES Rodney Hunt HUMAN RESOURCES Donna Brooks INFORMATION TECHNOLOGY Richard Friedman PARKS & RECREATION Jeffrey Bowman POLICE James Runnels PUBLIC WORKS Jeffrey Smaka CONTROLLER Eric D. Schlotthauer ix ---PAGE BREAK--- X MAP COURTESY OF FARMINGTON CONVENTION & VISTORS BUREAU ---PAGE BREAK--- xi MAP COURTESY OF FARMINGTON CONVENTION & VISITORS BUREAU ---PAGE BREAK--- xii ---PAGE BREAK--- FINANCIAL SECTION FINANCIAL SECTION ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- Management Discussion and Analysis Management Discussion and Analysis ---PAGE BREAK--- 3 Management’s Discussion and Analysis As management of the City of Farmington, we offer readers of the City of Farmington’s financial statements this narrative overview and analysis of the financial activities of the City of Farmington for the fiscal year ended June 30, 2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which starts on page i of this report. Financial Highlights  The assets of the City of Farmington exceeded its liabilities at the close of FY 2008 by $425,325,342 (net assets). Of this amount, $77,309,002 (unrestricted net assets) may be used to meet the City’s ongoing obligations.  As of June 30, 2008, the City of Farmington’s governmental funds reported combined ending fund balances of $27,837,599, an increase of $37,924, or 0.13% in comparison with the prior year. A total of $23,069,273 (unreserved fund balance) is available for spending at the City’s discretion.  At the end of the current fiscal year, unreserved fund balance for the general fund was $8,187,413, or 15.7 % of the total general fund expenditures.  The City’s total net debt decreased by $6,858,481, or 12% 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 ---PAGE BREAK--- 4 are reported in this statement for some items that will only result in cash flows in future fiscal periods uncollected taxes and earned but unused vacation leave, etc). Both government-wide financial statements distinguish functions of the City of Farmington that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Farmington include general government, police, fire, parks, recreation, cultural affairs, community development, highways, and streets. The business-type activities of the City of Farmington include electric, water, wastewater, sanitation, golf, and airport operations. The government- wide financial statements can be found on pages 15-16 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Farmington, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Farmington can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government- wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Farmington maintains seventeen (17) individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and debt service fund, both of which are considered to be major funds. Data from the other fifteen (15) 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 53-60). ---PAGE BREAK--- 5 The City of Farmington adopts an annual appropriated budget for each of its funds. Budgetary comparative statements have been provided for these funds to demonstrate compliance with these budgets. The basic governmental fund financial statements can be found on pages 17-20 of this report. Proprietary funds. The City of Farmington maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Farmington uses enterprise funds to account for its electric, water, wastewater, sanitation, golf, and airport operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Farmington’s various functions. The City of Farmington uses an internal service fund to account for its self-funded health insurance operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the electric, water, wastewater, sanitation, golf, and airport operations and are found on pages 81-86 of this report. Fund data for the internal service fund is provided on page 79 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 27-49 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 $425,325,342 at the close of FY 2008. The largest portion of the City of Farmington’s net assets (80%) reflects its investment in capital assets land, buildings, machinery, equipment, and infrastructure), less any related debt used to acquire those assets that is still outstanding. The City of Farmington uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Farmington’s investment in its capital assets is reported net of related debt, it should be noted that the resources required to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. ---PAGE BREAK--- 6 Governmental Business-type Activities Activities FY 2008 FY 2007 FY 2008 FY 2007 FY 2008 FY 2007 Restated Restated Current and other assets 33,952,594 $ 34,225,116 $ 86,936,461 $ 76,404,785 $ 120,889,055 $ 110,629,901 $ Capital assets 87,008,963 86,666,015 305,186,410 287,692,663 392,195,373 374,358,678 Total assets 120,961,557 120,891,131 392,122,871 364,097,448 513,084,428 484,988,579 Long-term liabilities outstanding 12,096,738 13,066,834 42,301,854 48,303,026 54,398,592 61,369,860 Other liabilities 4,743,066 5,457,869 28,617,428 26,749,065 33,360,494 32,206,934 Total liabilities 16,839,804 18,524,703 70,919,282 75,052,091 87,759,086 93,576,794 Net assets: Invested in capital assets, net of related debt 76,387,603 74,772,100 263,888,952 240,380,428 340,276,555 315,152,528 Restricted 4,599,840 4,491,602 3,139,945 2,914,976 7,739,785 7,406,578 Unrestricted 23,134,310 23,102,726 54,174,692 45,749,953 77,309,002 68,852,679 Total net assets 104,121,753 $ 102,366,428 $ 321,203,589 $ 289,045,357 $ 425,325,342 $ 391,411,785 $ Total City of Farmington's Net Assets Another portion of the City of Farmington’s net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($77,309,002) 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 $33,913,557 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 $1,755,325. Key elements of the change in net assets are as follows: ---PAGE BREAK--- 7 Governmental Business-type Activities Activities FY 2008 FY 2007 FY 2008 FY 2007 FY 2008 FY 2007 Revenues: Restated Restated Program revenues: Charges for services 9,294,233 $ 9,156,926 $ 125,132,885 $ 111,374,243 $ 134,427,118 $ 120,531,169 $ Operating grants and Contributions 3,623,209 2,600,396 1,585,215 1,227,869 5,208,424 3,828,265 Capital grants and Contributions - - 2,617,273 495,436 2,617,273 495,436 General revenues: Property taxes 1,330,285 1,235,064 - - 1,330,285 1,235,064 GRT taxes 54,401,730 51,818,982 - - 54,401,730 51,818,982 Other taxes 3,116,431 2,990,508 - - 3,116,431 2,990,508 Other 2,348,690 2,264,513 2,800,336 2,357,973 5,149,026 4,622,486 Total revenues 74,114,578 70,066,389 132,135,709 115,455,521 206,250,287 185,521,910 Expenses: General Government 24,439,831 24,470,791 - - 24,439,831 24,470,791 Police 15,834,320 15,029,695 - - 15,834,320 15,029,695 Fire 8,384,634 7,606,467 - - 8,384,634 7,606,467 Parks, rec & cultural affairs 14,714,271 13,769,347 - - 14,714,271 13,769,347 Community development 9,938,557 10,776,798 - - 9,938,557 10,776,798 Electric - - 79,473,997 66,341,885 79,473,997 66,341,885 Water - - 6,854,699 7,207,259 6,854,699 7,207,259 Wastewater - - 5,227,357 5,274,284 5,227,357 5,274,284 Sanitation - - 4,130,295 4,002,806 4,130,295 4,002,806 Golf - - 1,312,463 1,164,683 1,312,463 1,164,683 Airport - - 1,557,946 1,604,506 1,557,946 1,604,506 Other 468,360 511,126 - - 468,360 511,126 Total expenses 73,779,973 72,164,224 98,556,757 85,595,423 172,336,730 157,759,647 Increase in net assets before transfers 334,605 (2,097,835) 33,578,952 29,860,098 33,913,557 27,762,263 Transfers 1,420,720 1,346,115 (1,420,720) (1,346,115) - - Increase in net assets 1,755,325 (751,720) 32,158,232 28,513,983 33,913,557 27,762,263 Net assets - 7/01/07 - restated 102,366,428 103,118,148 289,045,357 260,531,374 391,411,785 363,649,522 Net assets - 6/30/08 104,121,753 $ 102,366,428 $ 321,203,589 $ 289,045,357 $ 425,325,342 $ 391,411,785 $ Total City of Farmington's Changes in Net Assets Gross receipts tax (GRT) increased by $2,582,748 or This was due to increased receipts from the retail trade and manufacturing sectors. Operating grants and contributions increased $1,022,813 or 39% during the year. This is due to increases in the CDBG grant, a new traffic grant, and increased transfers from the streets special revenue fund. ---PAGE BREAK--- 8 Expenses for police and fire increased $1,582,792 or 7% during the year. This is mainly due to a planned increase in police officers and additional staffing for a new fire station. Business-type activities. Business-type activities increased the City of Farmington’s net assets by $32,158,232, accounting for 94.8% of the total growth in the government’s net assets. Key financial elements of the past fiscal year are as follows:  Operating expenses are 77.3% of operating revenues, resulting in $28,408,764 in operating income.  Total electric revenue increased $10.9 million or 11.6%. Electric sales were up $10.4 million, and investment earnings increased 21.5% or $412,590. Surplus energy sales increased $1.8 million, commercial electric sales increased $883,249, and the power cost adjustment increased $8.1 million. Industrial sales decreased $1.2 million and wholesale revenues decreased $287,223.  Total water revenue increased $2.7 million or 30.2% due mainly to an increase in water rates, increases in renewal and replacement fees for water infrastructure improvements and a grant received from the State of New Mexico.  Total wastewater revenue increased by $712,834 or 12.3% during the year due to increases in wastewater rates and increases in renewal and replacement fees for wastewater infrastructure improvements.  Total sanitation revenue increased $183,957 or 4.5% mainly due to higher demand for sanitation services.  Investment earnings for business-type activities were $2,800,336, an 18.8% increase over FY 2007 due to increased interest rates and increasing cash reserves. Financial Analysis of the Government’s Funds As noted earlier, the City of Farmington uses fund accounting to ensure and demonstrate compliance with finance-related legal and contractual requirements. Governmental funds. The focus of the City of Farmington’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Farmington’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. ---PAGE BREAK--- 9 As of June 30, 2008, the City of Farmington’s governmental funds reported combined ending fund balances of $27,837,599, an increase of $37,924 in comparison with the prior year. Approximately 82.9% of this total amount or $23,069,273 constitutes unreserved fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed for debt service ($328,475), prepaid items ($168,486), and statutory reserves ($4,271,365). The general fund is the chief operating fund of the City of Farmington. At the end of the current fiscal year, unreserved fund balance of the general fund was $8,187,413, while total fund balance was $12,627,264. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 15.7% of total general fund expenditures, while total fund balance represents 24.2% of that same amount. The fund balance of the City of Farmington’s general fund decreased $4,567,615 or 26% during the current fiscal year. The total increase in general fund revenue was $1,837,324 due mostly to a 5% increase in gross receipts tax. Total general fund expenditures increased $1,781,112 or 3.5% over the prior year. Key elements of this increase were increased costs for jail fees ($581,392), expansion and additional staffing for the animal shelter/clinic ($237,353), additional staffing increases for wages/benefits for police ($1,097,623) and fire ($740,555). Offsetting these increases was a decrease in general government expenses ($561,873) or 3% mainly due to FY 2007 expenses being inflated by a one-time buy-in into the New Mexico Retiree Health Authority ($1,274,744). Other key governmental-type funds include the streets fund and parks & public works fund. Both of these funds are funded primarily with gross receipt tax revenue earmarked specifically for streets, parks, and public works activities. The streets fund is generally budgeted for full expenditure each fiscal year, but expenditures decreased by $1,130,446 or 18.2% in FY 2008 due to a decrease in streets projects. The parks & public works fund also is generally budgeted for full expenditure each fiscal year. However, the fund balance increased by $730,949 or 17.2% due to funds for budgeted construction projects not being expended during the fiscal year. Proprietary funds. The City of Farmington’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets at the end of the year amounted to $42,553,481 in the electric utility system, $3,975,964 in the water utility system, $6,913,122 in the wastewater utility system, and $732,125 in combined net assets for the other propriety funds (sanitation, golf course, and airport). The total growth in net assets was $24,413,916 in the electric fund, $4,083,696 in the water fund, $1,053,406 in the wastewater fund, and $2,607,214 in the other funds combined. The increase in the other proprietary funds was due primarily to a large airport grant that was received in FY 2008. Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Farmington’s business-type activities. ---PAGE BREAK--- 10 Budgetary Highlights FY 2008 was a favorable year for revenues as Gross Receipts Tax (GRT) proceeds increased by $2,002,373 or 5% from the prior year on a GAAP basis. This level reflects a continued flattening of the growth curve from FY 2007, when GRT increased 6.3% over the prior year. While still favorable, this level is below the twenty-five year average growth trend of In the general fund, which received approximately 84% of revenue from GRT, FY 2008 GRT revenue was $41,808,719 or 5% over FY 2007 actual revenue of $39,806,346. On the expenditure side, the original general fund budget of $52,259,426 was increased by $1.4 million to $53,620,004 during FY 2008. As the positive revenue trend continued in FY 2008, selected expenditures postponed in prior years were approved. This resulted in a 3.5% increase in actual FY 2008 expenditures over the prior year. The difference between the increase in revenue and the increase in expenditures was funded by cash reserves which decreased by $4,430,067 from the prior year. Most of this decrease resulted from the transfer of $3.5 million to the 408- General Government Capital Projects Fund for the construction of the Sycamore Park Community Center. This decrease in cash reserves will be carefully monitored to insure that only one-time expenditures are funded from cash balance and that projected revenue will be sufficient to cover normal operating expenditures. During the year, five separate revisions were made to the original FY 2008 budget. These adjustments totaled $1,360,578 and equaled 2.6% of the original total budget. Budget revisions in the general fund between the original and final budget for revenue and expenditures amounted to an increase of 0.7% and an increase of 2.6% respectively. In the governmental funds, the largest percentage increase in expenditures was in the General Government Capital Projects Fund. This was a result of the start of construction of the Sycamore Park Community Center. The Electric Enterprise Fund had a significant increase from original to final budget. This increase was necessary to facilitate a large increase in purchases of fuel and purchased power. In FY 2008, several General Fund budget issues were addressed. The first issue involved the planning for the hiring of personnel to staff the Sycamore Park Community Center. The second issue was the necessity of hiring additional staff in various departments. The last issue was to create a balanced budget. The last issue was addressed first by adjusting the expenditures to the projected level of revenue. Relative to staffing, $250,000 was earmarked for additional positions provided that adequate revenue would be received. If revenue levels were not sufficient, then no additional positions would be created. To do this, all general fund capital projects were budgeted to be transferred to the governmental capital projects fund when the project was ready to be started. Consequently, expenditures could be controlled by not initiating capital projects unless revenue was received at, or above, projected levels and operating expenditures were under budget. In fact, this strategy worked well as revenues were above projections, expenditures came in below projections, and design work on the Sycamore Park Community Center took longer than ---PAGE BREAK--- 11 expected. As a result of these situations, the projected ending cash balance budget of $6,395,459 was exceeded by $1,020,499 and the actual ending cash balance totaled $7,415,958. Due to growth in the northeast sector of the City, an additional fire station will be needed in the next few years. Another community project, the Sycamore Park Community Center, will be completed in the Fall of FY 2009. For FY 2009, both of these projects have funding allocated in the governmental capital projects fund and general fund. However, additional funds will be required for the completion of Fire Station #7 and the source for operating funds to staff the new station are as yet undetermined. Other capital projects in the planning stages are a regional animal shelter and a bridge over the Animas River which will connect north and south on the eastside of the city. The budget for FY 2008 was also affected by the implementation of new water and wastewater rates. Red Oak Consulting recommended the need to develop a revenue rate structure that would provide for the renewal and replacement of water and wastewater infrastructure. The rate adjustment was implemented and plans were made to start replacing the oldest and most deteriorated lines. This effort will continue in future years as the city upgrades it’s aging infrastructure and expands the system to new customers. A list of priority projects will be developed in FY 2009. The most favorable budget highlight for the year was the budget to actual comparison for the general fund at the end of the year. Actual revenue for the year was just short of the budget amount by $207,354 or and actual expenditures were under budget by $1,433,613 or 2.7%. These results left the cash balance in the general fund at $7,415,958 which is equal to 13.8% of the FY 2009 beginning budget. This balance provides additional flexibility in the FY 2009 budget and creates a significant “cushion” that allows for potential additional spending without creating negative financial consequences. 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, 2008 was $392,195,373 (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 $305,186,410 or 77.8% 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 $17,493,747 or 6.1%. The governmental activities investment in capital assets accounted for $87,008,963 or 22.2% of all capital assets owned by the City. The total increase in governmental activities investment in capital assets for the current year was $342,948 or 0.4%. Major capital asset investment activities during the current fiscal year included the following: ---PAGE BREAK--- 12 Governental Business-type Activities Activities (restated) (restated) FY 2008 FY 2007 FY 2008 FY 2007 FY 2008 FY 2007 Land 25,780,126 $ 25,780,126 $ 4,884,635 $ 5,958,417 $ 30,664,761 $ 31,738,543 $ Buildings and system 25,218,641 25,599,746 61,542,321 61,072,050 86,760,962 86,671,796 Improvements 6,695,957 6,831,034 55,567,185 54,873,106 62,263,142 61,704,140 Machinery & equipment 11,230,711 11,036,089 138,448,030 128,373,488 149,678,741 139,409,577 Infrastructure 13,737,841 10,853,642 - - 13,737,841 10,853,642 Construction in progress 4,345,687 6,565,378 44,744,239 37,415,602 49,089,926 43,980,980 Total 87,008,963 $ 86,666,015 $ 305,186,410 $ 287,692,663 $ 392,195,373 $ 374,358,678 $ Total City of Farmington's Capital Assets (net of depreciation) Capital expenditures for the electric utility system will average approximately $34,471,700 per year over the next five fiscal years. Some large projects included in the FY 2009 capital budget are the Bluffview substation ($1,750,000), the Hogback substation ($3,380,000), a waterline for the Bluffview plant ($2,800,000), and miscellaneous customer projects ($4,200,000). The City expects to fund these projects from electric customer-generated revenues. Capital expenditures for the water utility system scheduled in the current five-year capital improvements plan principally include upgrades and replacements of existing facilities to maintain the existing system and meet future demand requirements. Capital expenditures average $6,097,313 per year, totaling $30,486,566 for fiscal years 2009 through 2013. During FY 2008, the City of Farmington implemented the 2nd 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 FY 2004 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). An additional expansion of the wastewater treatment plant estimated to begin construction in FY 2010 is estimated to cost $11 million. During FY 2008, the wastewater fund implemented the 2nd 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 38-39 of this report. Long-term debt. At the end of the current fiscal year, the City of Farmington had total bonded debt outstanding of $37,300,000. Of this amount, $10,490,000 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 ---PAGE BREAK--- 13 the State and distributed to the City. Per the bond ordinance, interest may be earned on cash balances held by the City until debt payments are made. The bonds are not an indebtedness of the City within any constitutional or statutory provision or limitation and are not general obligations of the City. Consequently, the registered owners cannot look to the general fund or other fund for any payment that becomes due on the bonds other than the special funds that are specifically pledged for their payment under the terms of the bond ordinance. The remainder of the City’s debt is secured solely by specified revenue sources. The City of Farmington’s total net debt decreased $6,858,481 or 12% during FY 2008. FY 2008 FY 2007 FY 2008 FY 2007 FY 2008 FY 2007 Sales tax bonds 10,490,000 $ 11,670,000 $ - $ - $ 10,490,000 $ 11,670,000 $ NMED loan - - 13,107,058 13,650,539 13,107,058 13,650,539 Revenue bonds - - 26,810,000 31,945,000 26,810,000 31,945,000 Total 10,490,000 $ 11,670,000 $ 39,917,058 $ 45,595,539 $ 50,407,058 $ 57,265,539 $ City of Farmington's Outstanding Debt Activities Activities Governmental Business-type Total $10 $20 $30 $40 $50 Governmental Business‐type Millions Outstanding Debt FY2007 FY2008 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 2007 assessed valuation of $931,176,071, the City’s general obligation debt limit is $37,247,043. The City presently has no general obligation bonds outstanding. For more detailed information on the City’s debt, see pages 42-45 in the Notes to the Financial Statements. ---PAGE BREAK--- 14 Requests for Information This financial report is designed to provide a general overview of the City of Farmington’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Administrative Services Director, 800 Municipal Drive, Farmington, NM 87401. ---PAGE BREAK--- Basic Financial Statements Basic Financial Statements ---PAGE BREAK--- Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents $ 20,700,320 $ 39,227,081 $ 59,927,401 Receivables (net, where applicable, of allowances for uncollectibles): 285,585 5,934,943 6,220,528 Accrued unbilled revenues - 6,115,611 6,115,611 Special assessments 14,475 - 14,475 Intergovernmental receivable 12,384,773 546,563 12,931,336 Regulatory Asset - 5,900,410 5,900,410 Inventories 263,378 5,175,383 5,438,761 Prepaids 168,486 138,998 307,484 Deferred charges 135,577 245,871 381,448 Restricted assets Temporarily restricted: Cash and equivalents - 23,651,601 23,651,601 Capital assets (not being depreciated): Land and land rights 25,780,126 4,884,635 30,664,761 Capital assets (net of accumulated depreciation): Buildings and system 25,218,641 61,542,322 86,760,963 Improvements other than buildings 6,695,957 55,567,184 62,263,141 Machinery and equipment 11,230,711 138,448,030 149,678,741 Infrastructure 13,737,841 - 13,737,841 Construction in progress 4,345,687 44,744,239 49,089,926 Total assets 120,961,557 392,122,871 513,084,428 LIABILITIES Accounts payable and other current liabilities 1,317,874 6,120,650 7,438,524 Wages and benefits payable 1,035,253 241,396 1,276,649 Other accrued liabilities 15,546 1,379,041 1,394,587 Accrued claims liabilities 2,293,622 211,000 2,504,622 Retainage deposits payable 63,035 - 63,035 Unearned revenue - 1,696 1,696 Accrued interest payable 17,736 151,989 169,725 Customer deposits - 20,511,656 20,511,656 Non-current liabilities: Due within one year 1,298,769 6,674,175 7,972,944 Due in more than one year 10,797,969 35,627,679 46,425,648 Total liabilities 16,839,804 70,919,282 87,759,086 NET ASSETS Invested in capital assets, net of related debt 76,387,603 263,888,952 340,276,555 Restricted for: Debt service 328,475 3,139,945 3,468,420 Statutory reserve 4,271,365 - 4,271,365 Unrestricted 23,134,310 54,174,692 77,309,002 Total net assets $ 104,121,753 $ 321,203,589 $ 425,325,342 The notes to the financial statements are an integral part of this statement. CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets June 30, 2008 Primary Government 15 ---PAGE BREAK--- Changes in Net Assets Operating Capital Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Primary government: Governmental activities: General government $ 24,439,831 $ 7,008,648 $ 1,176,604 $ - $ (16,254,579) $ - $ (16,254,579) Police 15,834,320 1,366,974 426,177 - (14,041,169) - (14,041,169) Fire 8,384,634 - 409,189 - (7,975,445) - (7,975,445) Parks, recreation, cultural affairs 14,714,271 831,845 286,656 - (13,595,770) - (13,595,770) Community development 9,938,557 86,766 1,324,583 - (8,527,208) - (8,527,208) Interest on long-term debt 468,360 - - - (468,360) - (468,360) Total governmental activities 73,779,973 9,294,233 3,623,209 - (60,862,531) - (60,862,531) Business-type activities: Electric 79,473,997 102,193,403 1,056,745 - - 23,776,151 23,776,151 Water 6,854,699 10,783,517 524,913 - - 4,453,731 4,453,731 Wastewater 5,227,357 6,240,272 3,557 - - 1,016,472 1,016,472 Sanitation 4,130,295 4,228,681 - - - 98,386 98,386 Golf 1,312,463 1,146,652 - - - (165,811) (165,811) Airport 1,557,946 540,360 - 2,617,273 - 1,599,687 1,599,687 Total business-type activities 98,556,757 125,132,885 1,585,215 2,617,273 - 30,778,616 30,778,616 Total government $ 172,336,730 $ 134,427,118 $ 5,208,424 $ 2,617,273 (60,862,531) 30,778,616 (30,083,915) General revenues: Property taxes 1,330,285 - 1,330,285 Sales taxes 54,401,730 - 54,401,730 Franchise taxes 992,050 - 992,050 Gasoline taxes 860,117 - 860,117 Cigarette taxes 47,518 - 47,518 Lodger's taxes 1,216,746 - 1,216,746 Miscellaneous 1,386,242 - 1,386,242 Unrestricted investment earnings 962,448 2,800,336 3,762,784 Transfers 1,420,720 (1,420,720) - Total general revenues and transfers 62,617,856 1,379,616 63,997,472 Change in net assets 1,755,325 32,158,232 33,913,557 Net assets - beginning (restated) 102,366,428 289,045,357 391,411,785 Net assets - ending $ 104,121,753 $ 321,203,589 $ 425,325,342 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, 2008 16 ---PAGE BREAK--- Other Total Debt Governmental Governmental General Service Funds Funds ASSETS: Pooled cash and investments $ 7,415,958 $ 73,893 $ 13,156,623 $ 20,646,474 Receivables (net, where applicable, of allowances for uncollectibles): 31,003 254,582 - 285,585 Special assessments 14,475 - - 14,475 Due from other funds - - - - Inventories, at cost 205,391 - 57,987 263,378 Prepaid items 168,486 - - 168,486 Intergovernmental 9,737,819 - 2,646,954 12,384,773 Total assets 17,573,132 328,475 15,861,564 33,763,171 LIABILITIES AND FUND BALANCES: Liabilities: Accounts payable 552,682 - 765,192 1,317,874 Wages and benefits payable 991,132 - 44,121 1,035,253 Other accrued expenditures 15,546 - - 15,546 Accrued claims payable 1,784,247 - - 1,784,247 Retainage/deposits payable 63,035 - - 63,035 Deferred revenue 1,539,226 - 170,391 1,709,617 Total liabilities 4,945,868 - 979,704 5,925,572 Fund Balances: Reserved for: Debt service - 328,475 - 328,475 Prepaids 168,486 - - 168,486 Subsequent year's statutory reserve 4,271,365 - - 4,271,365 Unreserved, reported in: Designated for debt service 2,000,000 - - 2,000,000 General fund 6,187,413 - - 6,187,413 Special revenue funds - - 10,718,223 10,718,223 Capital project funds - - 4,163,637 4,163,637 Total fund balances 12,627,264 328,475 14,881,860 27,837,599 Total liabilities and fund balances $ 17,573,132 $ 328,475 $ 15,861,564 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 87,008,963 Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. 1,709,617 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. (455,529) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (11,978,897) Net assets of governmental activities $ 104,121,753 CITY OF FARMINGTON, NEW MEXICO Balance Sheet Governmental Funds June 30, 2008 The notes to the financial statements are an integral part of this statement. 17 ---PAGE BREAK--- Other Total Debt Governmental Governmental General Service Funds Funds REVENUES: Taxes: Property $ 1,330,285 $ - $ - $ 1,330,285 Gross receipts 41,808,719 1,527,492 11,065,519 54,401,730 Franchise 992,050 - - 992,050 Gasoline - - 860,117 860,117 Cigarette - - 47,518 47,518 Lodger's - - 1,216,746 1,216,746 Licenses and permits 731,563 - 62,606 794,169 Intergovernmental 1,089,283 - 2,533,924 3,623,207 Charges for services 1,683,200 - 86,134 1,769,334 Fines 1,150,760 - 190,537 1,341,297 Special assessments 18,591 - - 18,591 Investment earnings 445,487 30,352 486,609 962,448 Miscellaneous 508,003 - 878,239 1,386,242 Total revenues 49,757,941 1,557,844 17,427,949 68,743,734 EXPENDITURES: Current: General government 18,153,620 - - 18,153,620 Police 14,801,848 - 734,818 15,536,666 Fire 7,964,818 - 334,011 8,298,829 Parks, recreation and cultural affairs 8,319,100 - 6,232,869 14,551,969 Community development 2,502,536 - 4,645,073 7,147,609 Debt service: Principal - 1,180,000 - 1,180,000 Interest - 470,217 - 470,217 Capital outlay: General government - - 1,251,018 1,251,018 Highways and streets 444,469 - 3,092,133 3,536,602 Public safety - - - - Total expenditures 52,186,391 1,650,217 16,289,922 70,126,530 Excess (deficiency) of revenues over (under) expenditures (2,428,450) (92,373) 1,138,027 (1,382,796) OTHER FINANCING SOURCES (USES): Transfers in 2,455,751 110,000 4,602,697 7,168,448 Transfers out (4,594,916) - (1,152,812) (5,747,728) Total other financing sources (uses) (2,139,165) 110,000 3,449,885 1,420,720 Net change in fund balances (4,567,615) 17,627 4,587,912 37,924 Fund balances-beginning 17,194,879 310,848 10,293,948 27,799,675 Fund balances- ending $ 12,627,264 $ 328,475 $ 14,881,860 $ 27,837,599 CITY OF FARMINGTON, NEW MEXICO Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For theYear Ended June 30, 2008 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) $ 37,924 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. 342,948 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 242,848 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. 949,356 The net revenue/expense of certain activities of internal service funds is reported with governmental activities. 182,249 Change in net assets of governmental activities (page 16) $ 1,755,325 For the Year Ended June 30, 2008 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 $ 1,175,995 $ 1,175,995 $ 1,330,285 $ 154,290 Gross receipts tax 41,790,884 41,790,884 41,024,168 (766,716) Franchise taxes 1,025,000 1,025,000 992,050 (32,950) Licenses and permits 790,500 790,500 731,563 (58,937) Intergovernmental 1,121,700 1,481,700 1,074,103 (407,597) Charges for services 1,881,211 1,791,211 1,683,200 (108,011) Fines 980,800 980,800 1,150,760 169,960 Special assessments 23,050 23,050 18,591 (4,459) Investment earnings 540,000 540,000 445,487 (94,513) Miscellaneous 261,911 366,155 508,004 141,849 Total revenues 49,591,051 49,965,295 48,958,211 (1,007,084) EXPENDITURES: Current: General government: Council 313,566 316,940 299,936 17,004 Municipal court 1,582,157 1,832,394 1,878,057 (45,663) Administrative 9,672,406 9,499,303 8,919,037 580,266 Legal 1,157,363 1,157,658 1,061,523 96,135 Administrative services 832,963 835,000 712,187 122,813 General services 4,885,558 5,980,048 5,544,661 435,387 Total general government 18,444,013 19,621,343 18,415,401 1,205,942 Public safety: Police 14,037,888 14,014,578 14,906,025 (891,447) Fire 7,547,221 7,614,991 8,033,323 (418,332) Total public safety 21,585,109 21,629,569 22,939,348 (1,309,779) Community development: Streets 499,956 501,257 439,983 61,274 Other-unclassified 2,920,462 3,000,159 2,531,333 468,826 Total community development 3,420,418 3,501,416 2,971,316 530,100 Parks, recreation and cultural affairs 8,809,886 8,867,676 8,339,193 528,483 Total expenditures 52,259,426 53,620,004 52,665,258 954,746 Excess of revenues over expenditures (2,668,375) (3,654,709) (3,707,047) (52,338) OTHER FINANCING SOURCES (USES): Transfers in 2,667,008 2,667,008 2,455,751 (211,257) Transfers out (2,246,450) (4,655,481) (4,594,916) 60,565 Total other financing sources and uses 420,558 (1,988,473) (2,139,165) (150,692) Net change in fund balances (2,247,817) (5,643,182) (5,846,212) (203,030) RECONCILIATION TO GAAP BASIS: Changes in accrued receivables 784,550 Change in intergovernmental 15,180 Change in accrued payables 478,867 Fund balances-beginning 17,194,879 17,194,879 17,194,879 - Fund balances-ending $ 14,947,062 $ 11,551,697 $ 12,627,264 $ 1,075,567 The notes to the financial statements are an integral part of this statement. Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO General Fund Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2008 Budget to Actual Non-GAAP Budgetary Basis 20 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund ASSETS Current assets: Pooled cash and investments $ 29,661,526 $ 2,327,063 $ 6,319,516 $ 618,620 $ 300,356 $ - $ 39,227,081 $ 53,846 Accounts receivable (net of allowance for doubtful accounts) 4,174,180 951,046 565,380 220,168 14,948 9,221 5,934,943 - Accrued unbilled revenues 5,138,661 602,836 202,256 171,858 - - 6,115,611 - Intergovernmental receivable - 524,913 - - - 21,650 546,563 - Regulatory asset 5,900,410 - - - - - 5,900,410 - Inventories 4,848,804 315,228 11,351 - - - 5,175,383 - Prepaid items 87,696 13,399 17,992 - 3,685 16,226 138,998 - Restricted cash, cash equivalents and investments 22,375,519 648,732 627,350 - - - 23,651,601 - Total current assets 72,186,796 5,383,217 7,743,845 1,010,646 318,989 47,097 86,690,590 53,846 Noncurrent assets: Deferred charges 196,493 42,401 6,977 - - - 245,871 - Capital assets: Land and land rights 3,546,554 1,617,275 479,388 23,341 100,000 879,968 6,646,526 - Building and system 55,847,267 14,008,573 22,397,634 80,640 781,367 3,704,694 96,820,175 - Improvements other than buildings 47,384,591 28,869,951 11,229,223 14,839 2,473,353 17,760,228 107,732,185 - Machinery and equipment 234,558,971 8,235,752 2,323,173 101,099 1,025,263 1,370,464 247,614,722 - Construction in progress 38,849,496 2,281,996 732,022 - - 2,880,725 44,744,239 - Less accumulated depreciation (138,583,496) (27,022,669) (13,871,125) (167,288) (1,952,567) (16,774,292) (198,371,437) - Total capital assets (net of accumulated depreciation) 241,603,383 27,990,878 23,290,315 52,631 2,427,416 9,821,787 305,186,410 - Total noncurrent assets 241,799,876 28,033,279 23,297,292 52,631 2,427,416 9,821,787 305,432,281 - Total assets $ 313,986,672 $ 33,416,496 $ 31,041,137 $ 1,063,277 $ 2,746,405 $ 9,868,884 $ 392,122,871 $ 53,846 Business-type Activities Enterprise Funds CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets Proprietary Funds June 30, 2008 21 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund LIABILITIES Current liabilities: Current liabilites payable from unrestricted assets: Accounts payable $ 5,062,445 $ 609,649 $ 143,823 $ 488,698 $ 43,677 $ 13,754 $ 6,362,046 $ - Compensated absences 482,614 6,841 6,841 - 10,019 17,806 524,121 - Due to other funds - - - - - - - - Other accrued expenses 1,237,715 98,046 6,894 - 26,639 9,747 1,379,041 - Accrued claims payable 139,000 40,000 30,000 - 2,000 - 211,000 509,375 Deferred revenue - 1,696 - - - - 1,696 - Capital lease payable - current - - - - 250,269 - 250,269 - Accrued interest payable 121,465 26,211 4,313 - - - 151,989 - Revenue bonds payable 4,267,581 920,888 151,531 - - - 5,340,000 - NMED loan - - 559,785 - - - 559,785 - Total current liabilities payable from unrestricted assets 11,310,820 1,703,331 903,187 488,698 332,604 41,307 14,779,947 509,375 . Current liabilities payable from restricted assets 20,308,878 202,778 - - - - 20,511,656 - Total current liabilities 31,619,698 1,906,109 903,187 488,698 332,604 41,307 35,291,603 509,375 Noncurrent liabilities: (net of unamortized discounts) Revenue bonds payable (net of unamortized discounts and deferred amount on refunding) 18,061,404 3,897,412 641,315 - - - 22,600,131 - NMED loan - - 12,547,273 - - - 12,547,273 - Compensated absences 411,050 18,479 18,479 - 24,723 7,544 480,275 - Capital lease payable - - - - - - - - Total noncurrent liabilities 18,472,454 3,915,891 13,207,067 - 24,723 7,544 35,627,679 - Total liabilities 50,092,152 5,822,000 14,110,254 488,698 357,327 48,851 70,919,282 509,375 NET ASSETS Invested in capital assets, net of related debt 219,274,398 23,172,578 9,390,411 52,631 2,177,147 9,821,787 263,888,952 - Restricted for debt service 2,066,641 445,954 627,350 - - - 3,139,945 - Unrestricted 42,553,481 3,975,964 6,913,122 521,948 211,931 (1,754) 54,174,692 (455,529) Total net assets $ 263,894,520 $ 27,594,496 $ 16,930,883 $ 574,579 $ 2,389,078 $ 9,820,033 $ 321,203,589 $ (455,529) The notes to the financial statements are an integral part of this statement. Proprietary Funds June 30, 2008 Business-type Activities Enterprise Funds CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets 22 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund Operating revenues: Charges for sales and services: Electric $ 101,574,396 $ - $ - $ - $ - $ - $ 101,574,396 $ - Water - 10,708,854 - - - - 10,708,854 - Wastewater - - 6,190,440 - - - 6,190,440 - Sanitation - - - 4,154,595 - - 4,154,595 - Golf course - - - - 1,134,127 - 1,134,127 - Airport - - - - - 540,360 540,360 - Health - - - - - - - 5,370,842 Other revenues 619,007 74,663 49,832 74,086 12,525 - 830,113 - Total operating revenues 102,193,403 10,783,517 6,240,272 4,228,681 1,146,652 540,360 125,132,885 5,370,842 Operating expenses: Salaries and fringe benefits 9,515,925 437,077 264,429 - 624,710 315,172 11,157,313 - Purchased power fuel and chemicals 48 946 395 - - - - - 48 946 395 - 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, 2008 Purchased power, fuel and chemicals 48,946,395 - - - - - 48,946,395 - Other operating expenses 9,840,390 4,721,427 3,358,924 4,125,425 498,342 579,776 23,124,284 5,188,593 Depreciation and amortization 10,034,094 1,449,871 1,154,885 4,870 189,411 662,998 13,496,129 - Total operating expenses 78,336,804 6,608,375 4,778,238 4,130,295 1,312,463 1,557,946 96,724,121 5,188,593 Operating income (loss) 23,856,599 4,175,142 1,462,034 98,386 (165,811) (1,017,586) 28,408,764 182,249 Nonoperating revenues (expenses): Investment earnings 2,333,113 155,159 272,143 26,930 12,991 - 2,800,336 - Revenue from grants - 524,913 3,557 - - 2,617,273 3,145,743 - Interest expense (1,137,193) (246,324) (449,119) - - - (1,832,636) - Total nonoperating revenues (expenses) 1,195,920 433,748 (173,419) 26,930 12,991 2,617,273 4,113,443 - Income (loss) before transfers 25,052,519 4,608,890 1,288,615 125,316 (152,820) 1,599,687 32,522,207 182,249 Capital contributions 1,056,745 - - - - - 1,056,745 - Transfers in - - - - - 1,035,031 1,035,031 - Transfers out (1,695,348) (525,194) (235,209) - - - (2,455,751) - Change in net assets 24,413,916 4,083,696 1,053,406 125,316 (152,820) 2,634,718 32,158,232 182,249 Total net assets-beginning (restated) 239,480,604 23,510,800 15,877,477 449,263 2,541,898 7,185,315 289,045,357 (637,778) Total net assets-ending $ 263,894,520 $ 27,594,496 $ 16,930,883 $ 574,579 $ 2,389,078 $ 9,820,033 $ 321,203,589 $ (455,529) The notes to the financial statements are an integral part of this statement. 23 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/users $ 102,039,200 $ 10,019,656 $ 6,179,457 $ 4,238,555 $ 1,134,531 $ 999,502 $ 124,610,901 $ 5,493,136 Payments to suppliers (63,840,961) (4,964,313) (3,363,506) (4,133,883) (606,019) (951,135) (77,859,817) (5,439,290) Payments to employees (7,917,226) (416,569) (258,129) - (619,980) (304,876) (9,516,780) - Net cash provided by operating activities 30,281,013 4,638,774 2,557,822 104,672 (91,468) (256,509) 37,234,304 53,846 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds (1,695,348) (525,194) (235,209) - - - (2,455,751) - Transfer from other funds - - - - - 1,035,031 1,035,031 - Operating grants - 524,913 3,557 - - - 528,470 - Net cash provided (used) by capital and related financing activities (1,695,348) (281) (231,652) - - 1,035,031 (892,250) - CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2008 Business-type Activities Enterprise Funds CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital contributions 1,056,745 - - - - - 1,056,745 - Purchases of capital assets - - - - - (3,395,795) (3,395,795) - Capital grants - - - - - 2,617,273 2,617,273 - Acquisition and construction of capital assets (24,083,404) (2,861,614) (649,061) - - - (27,594,079) - Restricted assets (1,415,412) (4,129) (276,237) - - - (1,695,778) - Principal paid on capital debt (2,892,554) (925,473) (420,208) - - - (4,238,235) - Interest paid on capital debt (1,137,193) (246,324) (449,119) - - - (1,832,636) - Net cash provided (used) by capital and related financing activities (28,471,818) (4,037,540) (1,794,625) - - (778,522) (35,082,505) - CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received 2,333,113 155,159 272,143 26,930 12,991 - 2,800,336 - Net increase in cash and cash equivalents 2,446,960 756,112 803,688 131,602 (78,477) - 4,059,885 53,846 Cash and cash equivalents, July 1 49,590,085 2,219,683 6,143,178 487,018 378,833 - 58,818,797 - Cash and cash equivalents, June 30, 2008 $ 52,037,045 $ 2,975,795 $ 6,946,866 $ 618,620 $ 300,356 $ - $ 62,878,682 $ 53,846 The notes to the financial statements are an integral part of this statement. 24 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Courses Airport Totals Fund Reconciliation of operating income to net cash provided (used) by operating activities: Operating income (loss) $ 23,856,599 $ 4,175,142 $ 1,462,034 $ 98,386 $ (165,811) $ (1,017,586) $ 28,408,764 $ 182,249 Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 10,034,094 1,449,871 1,154,885 4,870 189,411 662,998 13,496,129 - (Increase) decrease in accounts receivable 128,212 (689,543) (34,201) 16,532 (12,121) 459,142 (131,979) 122,294 (Increase) in accrued unbilled revenues (322,380) (82,947) (28,033) (6,657) - - (440,017) - (Increase) in regulatory asset (4,688,219) - - - - - (4,688,219) - (Increase) in inventories (878,161) (168,542) - - - - (1,046,703) - Decrease in prepaid items 19,405 6,482 6,791 - 2,062 2,043 36,783 - Decrease in deferred revenue 39,965 8,629 1,419 - - - 50,013 - Increase in other accrued expenses 162,236 11,836 6,300 - 4,730 10,296 195,398 - (Decrease) in due to other funds - - - - - (253,860) (253,860) (209,929) Increase in accrued claims payable 26 850 28 000 5 000 59 850 16 864 Business-type Activities Enterprise Funds Increase in accrued claims payable 26,850 28,000 5,000 - - - 59,850 16,864 Increase in customer deposits 1,436,463 8,672 - - - - 1,445,135 - Increase (decrease) in accounts payable 465,949 (108,826) (16,373) (8,459) (3,301) (119,542) 209,448 (57,632) (Decrease) in capital lease - - - - (106,438) - (106,438) - Total adjustments 6,424,414 463,632 1,095,788 6,286 74,343 761,077 8,825,540 (128,403) Net cash provided by operating activities $ 30,281,013 $ 4,638,774 $ 2,557,822 $ 104,672 $ (91,468) $ (256,509) $ 37,234,304 $ 53,846 The notes to the financial statements are an integral part of this statement. 25 ---PAGE BREAK--- 26 ---PAGE BREAK--- Notes to the Financial Statements Notes to the Financial Statements ---PAGE BREAK--- 27 CITY OF FARMINGTON, NEW MEXICO NOTES TO FINANCIAL STATEMENTS June 30, 2008 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 42,425 living within an area of 32 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, 2008. 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. ---PAGE BREAK--- 28 Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Derived tax revenues (gross receipts taxes, cigarette taxes and gas taxes) are recognized when the underlying transaction takes place. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The general fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The debt service fund accounts for the servicing of general long term debt not being financed by proprietary funds. The government reports the following major proprietary funds: The electric fund accounts for the activities of the City’s electric utility. The water fund accounts for the activities of the City’s water utility. The wastewater fund accounts for the activities of the City’s wastewater utility. The sanitation fund accounts for the activities of the City’s sanitation utility. The golf fund accounts for the activities of the City’s two golf courses. The airport fund accounts for the activities of the City’s airport operations. Additionally, the government reports the following fund type: The internal service fund accounts for health insurance services provided to City employees on a cost reimbursement basis. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. ---PAGE BREAK--- 29 As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government’s electric, water, wastewater, and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided 2) operating grants and contributions and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds and internal service funds are charges to customers for sales and services. The utilities also recognize as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is City policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, liabilities and net assets or equity 1. Deposits and investments The government’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the government to invest in obligations of the U.S. Treasury, 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.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. ---PAGE BREAK--- 30 All trade receivables are shown net of an allowance for uncollectibles. Trade accounts in excess of 180 days comprise the trade accounts receivable allowance for uncollectibles. Property taxes are levied and collected by San Juan County. The County remits to the City amounts collected for the applicable portion of the property taxes in the month following the date of receipt. The City recognizes property taxes as revenue on the modified accrual basis. Oil and gas taxes received from the County are recognized as revenue when received by the City. Property taxes are levied as of January 1st on property values assessed on the same date. The tax levy is payable in two installments, November 10th and May 10th. The property taxes are considered delinquent and subject to lien, penalty, and interest, 30 days after the date on which they are due. 3. Inventories and prepaid items All inventories are valued at cost using the weighted-average method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Regulatory Asset 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 asset (regulatory asset) is recorded on the statement of net assets ($5,900,410 as of June 30, 2008) and the related revenue is recorded on the statement of activities ($4,688,219 for the year ended June 30, 2008). 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 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, ---PAGE BREAK--- 31 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 equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation, or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 10. Net Assets In the government-wide financial statements, restricted net assets are legally restricted by outside parties for a specific purpose. None of the City’s net assets are restricted as a result of enabling legislation adopted by the City. Invested in capital assets, net of related debt, represents the City’s investment in the book value of capital assets, less any outstanding debt that was issued to construct or acquire the capital asset. The City applies restricted resources when an expense is ---PAGE BREAK--- 32 incurred for purposes for which both restricted and unrestricted net assets are available. 11. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. E. Reserved fund balances The New Mexico Department of Finance and Administration (DFA) requires that 1/12th of the general fund budgeted expenditures ($4,271,365) be reserved for subsequent year expenditures to maintain an adequate cash flow until the next significant property tax collection. II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets The governmental fund balance sheet includes a reconciliation between fund balance-total governmental funds and net assets-governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that “long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of this $11,978,897 difference are as follows: Bonds payable $ 10,490,000 Bond premium (to be amortized over the life of the debt) 131,361 Issuance costs (to be amortized over the life of the debt) (135,577) Accrued interest payable 17,736 Compensated absences payable 1,475,377 Net adjustment to reduce fund balance-total governmental funds to arrive at net assets- governmental activities $ 11,978,897 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 $342,948 are as follows: Capital outlay $ 7,787,659 Depreciation (7,107,261) Loss on disposals and other (337,450) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 342,948 ---PAGE BREAK--- 33 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 $949,356 are as follows: Principal repayments $ 1,180,000 Amortization of bond premium 21,893 Amortization of issuance costs (22,597) Accrued interest 1,857 Compensated absences (231,797) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 949,356 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 $182,249 difference are as follows: Internal service charges for services $ 5,370,842 Internal service operating expenses (5,188,593) Net adjustment to decrease net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 182,249 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. ---PAGE BREAK--- 34 The City follows the following procedures in establishing the budgetary data reflected in the financial statements: 1. In April or May the City Manager submits to the Council a proposed preliminary operating budget for the fiscal year commencing the following July 1st. The budget includes proposed expenditures and the means of financing them. The budget is prepared by fund, department, and function. 2. In late June, after there has been an opportunity for public comment, the City Council adopts the budget as finalized. 3. By the end of July, the Local Government Division of the State Department of Finance and Administration approves the final budget. 4. After the budget is adopted, any supplemental appropriations must be approved by the City Council. Encumbrance accounting is employed by the City. Encumbrances purchase orders, contracts) outstanding at year-end are carried forward to the new fiscal year and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. The City had the following encumbrances outstanding at June 30, 2008: General Fund $ 136,928 Gross Receipts Tax Streets Fund 296,117 Gross Receipts Tax Parks & Public Works Fund 248,619 Library Gifts and Grant Fund 19 Parks Gifts and Grants Fund 128,778 Lodgers Tax Fund 627 Region II Narcotics Fund 8,909 State Fire Fund 41,566 Gross Receipts Tax Bond Proceeds Projects Fund 34,824 Governmental Capital Projects Fund 1,283,872 Electric Utility Fund 1,838,779 Water Utility Fund 277,641 Wastewater Utility Fund 283,705 Golf Course Fund 890 Airport Fund 642,064 Health Fund 192,824 Total Encumbrances $ 5,416,162 B. Excess of expenditures over appropriations For the year ended June 30, 2008, the airport fund shows a negative budget variance in expenses of $236,905. The revenue budget was increased during the year for the Airport Enterprise Fund to cover cash deficits from project expenditures. However, corresponding increases in budgeted expenses were not sufficient to cover the actual project costs. ---PAGE BREAK--- 35 C. Deficit Fund Equity As of June 30, 2008, the health insurance internal service fund had a deficit net asset balance of $(455,529). This deficit is equal to accrued payables of $509,375 less cash totaling $53,846. The net asset balance increased by $182,249 over FY 2007. During FY 2008, the retirees participating in the City of Farmington’s health plan were transferred to the New Mexico Retiree Health Care Authority. This reduced the amount of claims during FY 2008 and will have a positive effect on the health insurance fund’s net asset balance in the future. The health insurance fund also repaid an interfund loan of $209,929 to the general fund during FY2008. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and investments As of June 30, 2008, the City had the following investments: Investment Type Fair Value Weighted Average Maturity (Years) Repurchase Agreements $ 3,325,367 0.08 Certificates of Deposit 44,100,000 0.93 State Treasurer’s Pool 35,498,591 0.08 Federal agency securities 4,012,350 2.83 Total Fair Value $ 85,923,958 Portfolio weighted average maturity 0.64 Interest rate risk. In accordance with its investment policy, the City manages its exposure to interest rate risk by limiting the duration of investments to three years. Credit risk. As directed by State Statute 6-10-36, E. and excess funds may be invested in securities backed by the full faith and credit of the United States Government, such as treasury notes, bills and bonds; in securities of Agencies that are guaranteed by the United States Government; bonds or negotiable securities of the State of New Mexico or of any county, municipality or school district in the State of New Mexico which has a taxable valuation of real property for the last preceding year of at least one million dollars ($1,000,000) and has not defaulted in the payment of any interest or sinking fund obligation or failed to meet any bonds at maturity at any time within five years last preceding. Custodial credit risk – deposits. In the case of deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. State statute requires that the bank deposits be 50% collateralized and repurchase agreements be 102% collateralized. As of June 30, 2008, the City was in compliance with state statute. The City’s carrying amount of deposits as of June 30, 2008 was $41,142,008 and the bank balance was $48,655,827. Of the bank balance, $500,000 was covered by federal depository insurance, $34,277,369 was collateralized with securities held by the pledging financial institution’s trust department or agent in the City’s name, and $13,878,458 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, 2008 that are exposed to custodial credit risk. ---PAGE BREAK--- 36 Collateral. The following guidelines are used to determine the level of collateral required from each financial institution. These ratios are in agreement with those set by the State Board of Finance for the State of New Mexico. The City Council authorizes the City Manager or his/her designee to set a higher level of collateral required based on criteria other than the ratios below. In no case shall the requirements be less than 50%. Banking Institutions Percentage Level of Collateralization Required Ratios 50% 75% 100% Primary Capital Assets Above 6% 5% - 6% Less than 5% Net Operating Income Total Average Assets Above .60% .051% - .60% Less than .51% Non-Performing Loans Primary Capital Under 35% 35% - 49.9% Above 49.9% Savings and Loan Institutions Percentage Level of Collateralization Required Ratios 50% 75% 100% Net Worth Average Assets Above 3% 2% - 3% Less than 2% 4 Qtrs Avg Net Income Before Tax 4 Qtrs Avg Assets Above - Less than 2 Consecutive Quarters of After Tax Losses Yes 3 Consecutive Quarters of After Tax Losses Yes Only securities backed by the full faith and credit of the United States Government will be accepted as collateral. The City may make an exception and accept as collateral securities from a governmental entity within the State of New Mexico as described by State Statute 6-10-16, B. All securities pledged as collateral shall be held by a third-party financial institution approved by the City Manager or his/her designee. Any change in the institution holding the collateral must have prior approval of the City Manager or his/her designee. The City has investments in the State Treasurer external investment pool (the Local Government Investment Pool). The investments are valued at fair value based on quoted market prices as of June 30, 2008. 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 ---PAGE BREAK--- 37 distributed by the State Treasurer to the contributing entities in amounts directly proportionate to the respective amounts deposited in the fund and the length of time the amounts were invested. Participation in the local government investment pool is voluntary. The LGIP has been rated by Standard & Poor’s and has received an AAAm rating. B. Receivables Receivables as of June 30, 2008 are as follows: Intergovernmental receivables are made up of the following amounts in the general and special revenue funds: gross receipts taxes $9,762,089, property taxes $1,539,226, federal and state grants $ 485,327, franchise taxes $181,955, lodger’s taxes $283,409 and other taxes $132,767. 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 $ 83,290 Uncollectibles related to water sales 10,109 Uncollectibles related to wastewater charges 5,978 Uncollectibles related to sanitation charges 4,555 Total uncollectibles of the current fiscal year $ 103,932 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received but not yet earned. The City reported no unearned revenue during the year. At the end of the current fiscal year, deferred revenue reported in the governmental funds was as follows: Unavailable Taxes $ 1,709,617 General Special Revenue Debt Service Enterprise Total Receivables: Accounts Receivable $ 31,003 $ - $ 254,582 $ 6,428,665 $ 6,714,250 Unbilled Revenue - - - 6,115,611 6,115,611 Special Assessments 14,475 - - - 14,475 Intergovernmental 9,737,819 2,646,954 - 546,563 12,931,336 Gross Receivables 9,783,297 2,646,954 254,582 13,090,839 25,775,672 Less: Allowance for Uncollectibles - - - (493,722) (493,722) Net Total Receivables: $ 9,783,297 $ 2,646,954 $ 254,582 $ 12,597,117 $ 25,281,950 ---PAGE BREAK--- 38 C. Capital assets Capital asset activity for the year ended June 30, 2008 was as follows: Balance Balance Governmental activities July 1, 2007 Transfers Additions Deletions June 30, 2008 Non-Depreciable Assets: Land 25,780,126 $ - $ - $ - $ 25,780,126 $ Construction in progress 6,565,378 - 4,578,149 (6,797,840) 4,345,687 Total Non-Depreciable Assets 32,345,504 - 4,578,149 (6,797,840) 30,125,813 Depreciable Assets: Buildings 49,439,083 - 1,415,201 (59,302) 50,794,982 Improvements other than buildings 11,247,960 - 737,541 (3,594) 11,981,907 Equipment 26,788,706 (12,000) 2,812,712 (1,631,596) 27,957,822 Infrastructure 56,112,352 - 4,793,897 - 60,906,249 Total Depreciable Assets 143,588,101 (12,000) 9,759,351 (1,694,492) 151,640,960 Total Governmental Assets 175,933,605 (12,000) 14,337,500 (8,492,332) 181,766,773 Accumulated Depreciation: Buildings (23,839,337) - (1,780,732) 43,728 (25,576,341) Improvements other than buildings (4,416,926) - (872,618) 3,594 (5,285,950) Equipment (15,752,617) 12,000 (2,544,213) 1,557,719 (16,727,111) Infrastructure (45,258,710) - (1,909,698) - (47,168,408) Total Accumulated Depreciation (89,267,590) 12,000 (7,107,261) 1,605,041 (94,757,810) Net Governmental Assets 86,666,015 $ - $ 7,230,239 $ (6,887,291) $ 87,008,963 $ Balance Balance Business-type activities July 1, 2007 Transfers Additions Deletions June 30, 2008 Non-Depreciable Assets: Restated Land 4,881,987 $ - $ 2,648 $ - $ 4,884,635 $ Construction in progress 37,415,602 - . 23,311,900 (15,983,263) 44,744,239 Total Non-Depreciable Assets 42,297,589 - 23,314,548 (15,983,263) 49,628,874 Depreciable Assets: Land Rights 1,761,891 - - - 1,761,891 Buildings 94,645,272 - 2,174,903 - 96,820,175 Improvements other than buildings 104,257,722 - 3,647,822 (173,359) 107,732,185 Equipment 230,291,025 (38,786) 17,844,399 (481,916) 247,614,722 Total Depreciable Assets 430,955,910 (38,786) 23,667,124 (655,275) 453,928,973 Total Business-type Assets 473,253,499 (38,786) 46,981,672 (16,638,538) 503,557,847 Accumulated Depreciation: Land Rights (685,461) - (44,862) - (730,323) Buildings (33,573,222) - (2,736,199) - (36,309,421) Improvements other than buildings (49,384,616) - (3,145,997) 365,612 (52,165,001) Equipment (101,917,537) 38,786 (7,748,916) 460,975 (109,166,692) Total Accumulated Depreciation (185,560,836) 38,786 (13,675,974) 826,587 (198,371,437) Net Business-type Assets 287,692,663 $ - $ 33,305,698 $ (15,811,951) $ 305,186,410 $ ---PAGE BREAK--- 39 Enterprise Assets – by fund Electric Water Wastewater Sanitation Golf Airport Land and land Rights 3,546,554 $ 1,617,275 $ 479,388 $ 23,341 $ 100,000 $ 879,968 $ Buildings and Structures 55,847,267 14,008,573 22,397,634 80,640 781,367 3,704,694 Improvements other Than buildings 47,384,591 28,869,951 11,229,223 14,839 2,473,353 17,760,228 Equipment 234,558,971 8,235,752 2,323,173 101,099 1,025,263 1,370,464 Total 341,337,383 52,731,551 36,429,418 219,919 4,379,983 23,715,354 Less accumulated Depreciation (138,583,496) (27,022,669) (13,871,125) (167,288) (1,952,567) (16,774,292) Construction in progess 38,849,496 2,281,996 732,022 - - 2,880,725 Net Assets 241,603,383 $ 27,990,878 $ 23,290,315 $ 52,631 $ 2,427,416 $ 9,821,787 $ In 1988, the City entered into a lease agreement to lease land for the Pinon Hills Golf Course from San Juan College for $10. The lease expires in the year 2087, at which time the land, including improvements, will be returned to San Juan College. Depreciation expense was charged to functions / programs of the government as follows: Construction commitments The City has an active construction project as of June 30, 2008. The project is the building of the new Sycamore Park. At year end, the City’s commitment with contractors was as follows: Project To Date Commitment Southside Community Center $ 1,436,264 $ 2,248,823 Governmental activities: General government $ 593,684 Police 637,256 Fire 770,957 Parks, recreation, cultural affairs 2,856,817 Community development 524,260 Highways and streets 1,724,287 Total depreciation expense - governmental activities $ 7,107,261 Business-type activities: Electric $ 10,177,825 Water 1,480,885 Wastewater 1,159,988 Sanitation 4,869 Golf 189,410 Airport 662,997 Total depreciation expense - business-type activities $ 13,675,974 ---PAGE BREAK--- 40 D. Interfund receivables, payables and transfers The composition of accrued claims and other accrued liabilities as of June 30, 2008 is as follows: Governmental Health Accrued Claims Payable Funds Fund Total Health/WorkComp/Liability Claims 1,784,247 $ 509,375 $ 2,293,622 $ Other Accrued Liabilities Taxes 775 - 775 Intergovernemental 1,034 - 1,034 Court collections 13,167 - 13,167 Compensated absences 570 - 570 15,546 - 15,546 Total 1,799,793 $ 509,375 $ 2,309,168 $ The composition of other accrued expenses as of June 30, 2008 is as follows: Other Accrued Expenses Electric Water Wastewater Golf Airport Total Wages & benefits 291,949 $ 7,767 $ 5,963 $ 20,578 $ 9,747 $ 336,004 $ Gross receipts taxes 453,091 75,537 - 6,061 - 534,689 Water conservation fee - 14,742 - - - 14,742 Mainline extension/impact fee - - 931 - - 931 Compensating taxes 51,829 - - - - 51,829 Ad valorem taxes 210,000 - - - - 210,000 Franchise taxes 170,912 - - - - 170,912 PNM deferred credits 39,123 - - - - 39,123 Billed customer deposits 20,811 - - - - 20,811 Total 1,237,715 $ 98,046 $ 6,894 $ 26,639 $ 9,747 $ 1,379,041 $ ---PAGE BREAK--- 41 The composition of interfund balances as of June 30, 2008 is as follows: Transfers Governmental Funds In Out General fund – operating transfer to airport fund $ - $ 1,035,031 General fund – operating transfer to region II fund - 30,000 General fund – operating transfer (pilt) from electric/water/ww 2,455,751 - General fund – transfer to general government capital projects - 3,529,885 GRT street fund – operating transfer to community development projects fund - 1,042,812 Region II fund – matching funds for grant from general fund 30,000 State fire grant fund – matching funds for fire station to debt - 110,000 Community development grant projects fund – operating transfer grt streets fund 1,042,812 - General government capital projects fund – from general fund 3,529,885 - Debt service fund – operating transfer from state fire fund 110,000 - Total governmental funds transfers 7,168,448 $ 5,747,728 Net governmental funds transfers $ 1,420,720 Business-type funds Electric utility fund – operating transfer (pilt) to general fund $ - $ 1,695,348 Water utility fund – operating transfer (pilt) to general fund - 525,194 Wastewater utility fund – operating transfer (pilt) to general fund - 235,209 Airport fund – operating transfer from general fund 1,035,031 - Total business-type funds transfers $ 1,035,031 2,455,751 Net business-type transfers $ 1,420,720 E. Leases Capital Leases The City has entered into two lease agreements for golf carts and turf equipment for the golf courses. The golf carts are valued at $198,305 and the turf equipment is valued at $ 381,092. Both of these agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the inception date. The assets acquired through this capital lease are as follows: Business Asset Activities Machinery and equipment $ 579,397 Less: accumulated depreciation (405,578) Total $ 173,819 ---PAGE BREAK--- 42 The future minimum lease obligation and the net present value of those minimum lease payments as of June 30, 2008 were as follows: Year Ending Golf Carts Golf Course Turf Equipment June 30, 2009 $ 114,980 $ 146,625 Total minimum lease payments 114,980 146,625 Less: amount representing interest (5,906) (5,430) payments $ 109,074 $ 141,195 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, 2008 no general obligation bonds had been issued. Revenue bonds The City also has the capacity and has issued Sales Tax Revenue Bonds whereby the City has pledged income derived from the Gross Receipts Tax to pay the required debt service on the bonds. During FY 2002, the City redeemed the outstanding balance on the 1993 Sales Tax Revenue Bond issue in the amount of $395,000. With the issuance of the 2001 Sales Tax Revenue Improvement and Refunding Bonds the City provided for the refunding of the previously issued 1994 Sales Tax Revenue Bonds and issued an additional $11 million dollars for the purpose of completing construction of a new library and several major street projects. In FY 2005, the City issued $5,725,000 of Series 2005 Sales Tax Revenue Bonds to provide funds to construct, furnish, equip and improve fire-fighting facilities and acquire and rehabilitate fire-fighting equipment. On December 17, 2002 the City issued $44,390,000 of 2002A utility revenue bonds and $2,280,000 of 2002B utility revenue bonds to refund $47,150,000 of 1992 utility revenue bonds. The estimated present value benefit of refunding the 1992 bonds is $6,342,865. The transaction resulted in an accounting loss of $2,959,014. ---PAGE BREAK--- 43 Revenue bonds outstanding as of June 30, 2008 are as follows: Interest Rates General Govt Electric Water Wastewater Total Governmental Activities Sales Tax Bonds 2001 4.00 - 5.00% 5,740,000 $ - $ - $ - $ 5,740,000 $ Sales Tax Bonds 2005 3.25 - 4.00% 4,750,000 - - - 4,750,000 Business Activities Serial Bonds 2002 3.50 - 5.00% - 21,425,815 4,623,409 760,776 26,810,000 Total 10,490,000 $ 21,425,815 $ 4,623,409 $ 760,776 $ 37,300,000 $ Annual debt service requirements to maturity for revenue bonds are as follows: For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond proceeds are reported as other financing source net of the applicable premium or discount. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. For proprietary fund types, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount, whereas issuance costs are reported as deferred charges. Deferred amounts on refunding (the difference between the reacquisition price and the net carrying amount of the old debt) are amortized as a component of interest expense. The unamortized portion of the deferred amount is reported as a deduction from revenue bonds payable. The 2002A Utility Revenue bonds are secured by and are payable solely from the net revenues derived by the City from the utility system (electric, water and wastewater utility funds), after payment of operating and maintenance expenses. Payment is also secured by an insurance policy issued by Financial Guaranty Insurance Company. The Policy is non-cancelable, and the premium was paid at the time of delivery of the bonds. There are a number of limitations and restrictions contained in the bond indenture. As of June 30, 2008, the City was in compliance with all significant limitations and restrictions. Year Ending June 30 Principal Interest Principal Interest Principal Interest Principal Interest 2009 $ 1,225,000 $ 425,643 $ 4,267,581 $ 971,718 $ 920,888 $ 209,684 $ 151,531 $ 34,503 2010 1,270,000 379,342 4,415,428 822,352 952,791 177,453 156,781 29,200 2011 1,315,000 330,393 4,639,197 601,581 1,001,077 129,813 164,726 21,361 2012 1,370,000 279,692 4,870,957 369,621 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 $ 10,490,000 $ 2,095,730 $ 21,425,815 $ 2,891,345 $ 4,623,409 $ 623,914 $ 760,776 $102,665 General Govt. Electric Water Wastewater ---PAGE BREAK--- 44 New Mexico Environment Department Loan. In August 2000, the City entered into a loan agreement with the New Mexico Environment Department for a $9.8 million, 3% loan for expansion of the wastewater treatment plant. On September 9, 2002 the loan amount was increased to $13 million. As of June 30, 2008, the City has received $12,830,162 in draw down payments and accrued $1,348,029 in construction interest. Repayment of the loan, which includes payments plus construction interest, began on June 30, 2007, one year after completion of the expansion. The NMED loan repayment schedule is as follows: Year Ending June 30 Principal Interest 2009 $ 559,785 $ 393,212 2010 576,579 376,418 2011 593,876 359,121 2012 611,693 341,305 2013 630,043 322,954 2014-2018 3,445,335 1,319,650 2019-2023 3,994,089 770,897 2024-2026 2,695,658 163,333 Total $ 13,107,058 $ 4,046,890 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, 2008 were made as scheduled from the trust funds. The trust accounts and the defeased bonds are not included in the City's financial statements. As of June 30, 2008, the following outstanding bonds are considered defeased (amounts in thousands): Series 1983 B Series 1992 Original issue amount $ 37,950 $ 49,205 Retired prior to fiscal year (35,970) (16,195) Retired during the year ended 2008 (1,980) (6,130) Balance of principal remaining $ - $ 26,880 Interest payments made during year ended June 30, 2008 $ 195 $ 1,898 ---PAGE BREAK--- 45 Changes in Long-term Liabilities During the year ended June 30, 2008, the following changes occurred in long-term liabilities: G. Restricted Assets The following is a summary of restricted assets as of June 30, 2008: Enterprise Funds Electric Water Wastewater Total Revenue bond current debt service $ 468,296 $ 101,052 $ 16,628 $ 585,976 NMED loan debt service reserves - - 553,969 553,969 Revenue bond renewal, replacement and contingency account 1,598,345 344,902 56,753 2,000,000 Customer deposits/overpayments 20,308,878 202,778 - 20,511,656 Total restricted assets $ 22,375,519 $ 648,732 $ 627,350 $ 23,651,601 Beginning Ending Due within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: 2001 Sales tax revenue $ 6,570,000 $ - $ (830,000) $ 5,740,000 $ 865,000 2005 Sales tax revenue 5,100,000 - (350,000) 4,750,000 360,000 Premium on bonds 153,254 - (21,893) 131,361 - Total bonds payable 11,823,254 - (1,201,893) 10,621,361 1,225,000 Compensated absences 1,243,580 1,817,586 (1,585,789) 1,475,377 73,769 Total long-term liabilities Governmental activities $ 13,066,834 $ 1,817,586 $ (2,787,682) $ 12,096,738 $ 1,298,769 Business-type activities: Bonds payable: Series 2002A $ 31,945,000 $ - $ (5,135,000) $ 26,810,000 5,340,000 Premium on bonds 1,359,989 - (229,858) 1,130,131 - Total bonds payable 33,304,989 - (5,364,858) 27,940,131 5,340,000 NMED loan 13,650,539 - (543,481) 13,107,058 559,785 Capital leases 356,707 - (106,438) 250,269 250,269 Compensated absences 990,791 537,724 (524,119) 1,004,396 524,121 Total long-term liabilities Business-type activities $ 48,303,026 $ 537,724 $ (6,538,896) $ 42,301,854 $ 6,674,175 ---PAGE BREAK--- 46 V. OTHER INFORMATION A. Risk Management The government is exposed to various risks of loss related to torts, theft, property damage, errors and omissions, and natural disasters for which the government has designed a self insurance program in conjunction with commercial insurance coverage. The amount of settlement has not exceeded insurance coverage for the past three fiscal years. Effective November 11, 2002, the self insured retention for excess liability coverage was increased from $250,000 to $500,000. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of payments, and other economic and social factors. Changes in the balances of claims liabilities during the past three years are as follows: June 30, 2006 June 30, 2007 June 30, 2008 Health Risk Mgmt Health Risk Mgmt Health Risk Mgmt Unpaid claims, beginning of fiscal year 718,182 $ 1,508,352 $ 502,427 $ 1,075,404 $ 492,511 $ 1,486,607 $ Incurred claims and changes in estimate 2,974,866 398,126 4,206,951 822,406 3,770,657 595,287 Claim payments (3,190,621) (831,074) (4,216,867) (411,203) (3,753,793) (297,647) Unpaid claims, end of fiscal year 502,427 $ 1,075,404 $ 492,511 $ 1,486,607 $ 509,375 $ 1,784,247 $ B. Contingent liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the government expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of City counsel that resolution of these matters will not have a material adverse effect on the financial condition of the government. C. Jointly governed organizations Joint Powers Agreement for Consolidated Communications Authority. The City is a participant with San Juan County, the City of Aztec and the City of Bloomfield in a joint powers agreement to build, maintain, and operate a centralized communications system for dispatch and emergency response. The City was obligated to contribute $55,000 per year until the Capital Equipment Fund reached a balance of $250,000. Thereafter, the City is obligated to contribute 44% of an amount necessary to maintain that balance. During FY 2008, no contribution from the City was made to the Authority. Complete financial statements for the Consolidated Communications Authority can be obtained from San Juan County, New Mexico. ---PAGE BREAK--- 47 Joint Powers Agreement for the San Juan Water Commission. The City is a participant with the cities of Aztec and Bloomfield, the County of San Juan, and the San Juan Rural Waters Users Association in a joint powers agreement to create a countywide entity responsible for water planning and use. Much of the impetus to form the Commission came from the Animas La Plata water project and the subsequent need to develop methods to equitably share the related costs and benefits. In addition to this specific project the Commission is also authorized to acquire additional water rights and provide for the equitable distribution of such water. The Commission is financed by a San Juan County mill levy on real and personal property of approximately 3 mills. During FY 2008 the City did not make any financial contribution to the Commission. Complete financial statements may be obtained by contacting the San Juan Water Commission. 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 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 state general, state hazardous duty, state police and adult correctional officers, 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, 2008, 2007, and 2006 were $8,556,921, $7,805,193, and $7,278,096, 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 FY 2008, 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. ---PAGE BREAK--- 48 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. The statute requires each participating employer to contribute 1.3% of each participating employee’s annual salary; each participating employee is required to contribute .65% of their salary. Employers joining the program after 1/1/98 are also required to make a surplus-amount contribution to the based on one of two formulas at agreed-upon intervals. In June of 2007, the City remitted $1,638,662 in employer surplus contributions. 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, 2008 were $446,992 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. ---PAGE BREAK--- 49 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 $4.6 million for contracted services for the year ended June 30, 2008. 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, 2008 was $1,383,025,000. 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. I. Prior Period Adjustment In FY 2007, the City over-reported capital outlay by $150,889 in the Airport fund. In the work order system, outside services were recorded twice causing an overstatement of construction in progress. This error was discovered in FY 2008 resulting in a prior period adjustment. Information provided below restates the applicable portion of the Notes to the Financial Statements. Since the misstatement affected construction in progress only, there was no effect on accumulated depreciation or depreciation expense. June 30, 2007 June 30, 2007 (As Reported) Correction (As Restated) Business-type activities Non-Depreciable Assets: Construction in progress 37,566,491 $ (150,889) $ 37,415,602 $ Nets assets 289,196,246 $ (150,889) $ 289,045,357 $ Enterprise Assets-by fund - Airport Construction in Progress 2,206,089 $ (150,889) $ 2,055,200 $ Nets assets 7,336,204 $ (150,889) $ 7,185,315 $ ---PAGE BREAK--- 50 ---PAGE BREAK--- Nonmajor Governmental Funds Nonmajor Governmental Funds ---PAGE BREAK--- NONMAJOR GOVERNMENTAL FUND Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes, or to facilitate the management of financial resources internally "designated" for specific purposes. Special revenue funds are authorized by the City Council. Gross Receipts Tax Streets Fund - City Ordinance 606 established this fund to account for the City's share of gross receipts tax that is legally restricted to the maintenance of streets and storm drainage. Gross Receipts Tax Parks and Public Works Fund - City Ordinance 81-702 established this fund to account for the City's 1/4% share of gross receipts tax that is legally restricted to the maintenance of streets and parks. Parks Development Fees Fund - City Council Resolutions 887, dedication of recreation space, and 910, land subdivision regulations - recreation space, established this fund to account for fees collected from developers for the purchase of land and development of parks. Recreation Fund - City management established this fund to account for the City's share of a state cigarette tax legally restricted for parks and recreation expenditures (approved by City Council Resolution # 2001-1013). Library Gifts and Grants Fund - City management established this fund to account for state and county gifts and grants restricted for the purchase of library books and other educational library needs. Parks/Recreation Gifts and Grants Fund - City management established this fund to account for state grants restricted to expenditures for local beautification purposes and expenditures for leisure activities of senior citizens. Museum Gifts and Grants Fund - City management established this fund to account for state grants restricted to expenditures for museum purposes. Lodgers Tax Fund - State statute 3-38-15N.M.S.A. and City Ordinance 480 established this fund to account for the City-imposed tax restricted for tourism and promotion. One-fourth of the revenues are restricted to tourism and promotion and three-fourths of the revenues are restricted for promotional facilities. State Police Protection Fund - City management established this fund to account for state grants restricted for the purchase of police equipment and other approved police needs. Region II Narcotics Grant Fund- City management established this fund to account for federal grants restricted to expenditures for approved police needs. 51 ---PAGE BREAK--- 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). 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. Governmental Capital Projects Fund – This fund is used to account for capital projects that are funded with transfers from the general fund. Debt Service Fund The debt service fund is used to account for the accumulation of resources and payment of revenue bond principal and interest from gross receipts tax sources. 52 ---PAGE BREAK--- (Continued) Gross Gross Receipts Receipts Tax Park Library Tax Parks and Development Gifts and Streets Public Works Fees Recreation Grants ASSETS: Pooled cash and investments $ 2,305,026 $ 4,445,495 $ 359,364 $ - $ 127,981 Inventory - 57,987 - - - Intergovernmental receivable 1,683,008 518,146 - 4,199 - Total assets 3,988,034 5,021,628 359,364 4,199 127,981 LIABILITIES: Accounts payable 204,845 4 - - - Deferred revenue 46,707 - - - - Accrued wages payable - 31,266 - - - Total liabilities 251,552 31,270 - - - FUND BALANCES: Unreserved - designated for subsequent years 3,736,482 4,990,358 359,364 4,199 127,981 Unreserved - - - - - Total fund balances 3,736,482 4,990,358 359,364 4,199 127,981 Total liabilities and fund balances $ 3,988,034 $ 5,021,628 $ 359,364 $ 4,199 $ 127,981 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2008 The notes to the financial statements are an integral part of this statement. 53 ---PAGE BREAK--- (Continued) Parks/ State Recreation Museum Police Region II Gifts and Gifts and Lodgers Protection Narcotics Grants Grants Tax Grant Grant ASSETS: Pooled cash and investments $ 354,023 $ 66,800 $ 564,354 $ 17,002 $ 202,441 Inventory - - - - - Intergovernmental receivable 34,185 4,878 283,409 - 119,129 Total assets 388,208 71,678 847,763 17,002 321,570 LIABILITIES: Accounts payable 17 446 - - 76,368 Deferred revenue - - 60,837 - - Accrued wages payable 2,568 - 2,249 - 6,483 Total liabilities 2,585 446 63,086 - 82,851 FUND BALANCES: Unreserved - designated for subsequent years 385,623 71,232 784,677 17,002 238,719 Unreserved - - - - - Total fund balances 385,623 71,232 784,677 17,002 238,719 Total liabilities and fund balances $ 388,208 $ 71,678 $ 847,763 $ 17,002 $ 321,570 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2008 The notes to the financial statements are an integral part of this statement. 54 ---PAGE BREAK--- (Continued) Law Enforcement State Total Block Fire Penalty Special Grant Grant Assessment Revenue ASSETS: Pooled cash and investments $ 65,427 $ - $ 38,089 $ 8,546,002 Inventory - - - 57,987 Intergovernmental receivable - - - 2,646,954 Total assets 65,427 - 38,089 11,250,943 LIABILITIES: Accounts payable - - 38,083 319,763 Deferred revenue 62,847 - - 170,391 Accrued wages payable - - - 42,566 Total liabilities 62,847 - 38,083 532,720 FUND BALANCES: Unreserved - designated for subsequent years 2,580 - 6 10,718,223 Unreserved - - - - Total fund balances 2,580 - 6 10,718,223 Total liabilities and fund balances $ 65,427 $ - $ 38,089 $ 11,250,943 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2008 The notes to the financial statements are an integral part of this statement. 55 ---PAGE BREAK--- Community Total Development Governmental Total Nonmajor Grant Captial Capital Governmental Projects Projects Projects Funds ASSETS: Pooled cash and investments $ 1,826,413 $ 2,784,208 $ 4,610,621 $ 13,156,623 Inventory - - - 57,987 Intergovernmental receivable - - - 2,646,954 Total assets 1,826,413 2,784,208 4,610,621 15,861,564 LIABILITIES: Accounts payable - 445,429 445,429 765,192 Deferred revenue - - - 170,391 Accrued wages payable 1,555 - 1,555 44,121 Total liabilities 1,555 445,429 446,984 979,704 FUND BALANCES: Unreserved - designated for special revenue purposes - - - 10,718,223 Unreserved - designated for capital projects 1,824,858 2,338,779 4,163,637 4,163,637 Total fund balances 1,824,858 2,338,779 4,163,637 14,881,860 Total liabilities and fund balances $ 1,826,413 $ 2,784,208 $ 4,610,621 $ 15,861,564 Capital Projects CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2008 The notes to the financial statements are an integral part of this statement. 56 ---PAGE BREAK--- (Continued) Gross Gross Receipts Receipts Tax Park Library Tax Parks and Development Gifts and Streets Public Works Fees Recreation Grants REVENUES: Taxes: Gross receipts tax $ 5,828,616 $ 5,236,903 $ - $ - $ - Gasoline taxes 860,117 - - - - Cigarette taxes - - - 47,518 - Lodger's taxes - - - - - Licenses and permits - - 62,606 - - Intergovernmental - 100,000 - - 87,321 Charges for services - - - - - Fines - - - - - Investment earnings 110,552 187,024 15,828 - 8,176 Donations - - - - 20,317 Miscellaneous 1,401 8,256 30 - 686 Total revenues 6,800,686 5,532,183 78,464 47,518 116,500 EXPENDITURES: Current: Police operations - - - - - Fire operations - - - - - Parks, recreation and cultural affairs - 3,708,230 72,383 48,471 169,043 Community development 3,552,069 1,093,004 - - - Capital outlay: Highways and streets 1,536,962 - - - - Total expenditures 5,089,031 4,801,234 72,383 48,471 169,043 Excess (deficiency) of revenues over (under) expenditures 1,711,655 730,949 6,081 (953) (52,543) OTHER FINANCING SOURCES (USES): Transfers in - - - - - Transfers out (1,042,812) - - - - Total other financing sources (uses) (1,042,812) - - - - Net change in fund balances 668,843 730,949 6,081 (953) (52,543) Fund balances-beginning 3,067,639 4,259,409 353,283 5,152 180,524 Fund balances-ending $ 3,736,482 $ 4,990,358 $ 359,364 $ 4,199 $ 127,981 Special Revenue CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2008 The notes to the financial statements are an integral part of this statement. 57 ---PAGE BREAK--- (Continued) Parks/ State Recreation Museum Police Region II Gifts and Gifts and Lodgers Protection Narcotics Grants Grants Tax Grant Grant REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - Gasoline taxes - - - - - Cigarette taxes - - - - - Lodger's taxes - - 1,216,746 - - Licenses and permits - - - - - Intergovernmental 166,171 20,484 - 94,200 318,750 Charges for services - 86,134 - - - Fines - - - - - Investment earnings 19,862 3,425 21,738 - - Donations 379,807 42,622 - - - Miscellaneous 382,391 392 3,040 256 37,825 Total revenues 948,231 153,057 1,241,524 94,456 356,575 EXPENDITURES: Current: Police operations - - - 77,856 448,741 Fire operations - - - - - Parks, recreation and cultural affairs 964,187 146,265 1,124,290 - - Community development - - - - - Capital outlay: Highways and streets - - - - - Total expenditures 964,187 146,265 1,124,290 77,856 448,741 Excess (deficiency) of revenues over (under) expenditures (15,956) 6,792 117,234 16,600 (92,166) OTHER FINANCING SOURCES (USES): Transfers in - - - - 30,000 Transfers out - - - - - Total other financing sources (uses) - - - - 30,000 Net change in fund balances (15,956) 6,792 117,234 16,600 (62,166) Fund balances-beginning 401,579 64,440 667,443 402 300,885 Fund balances-ending $ 385,623 $ 71,232 $ 784,677 $ 17,002 $ 238,719 Special Revenue CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2008 The notes to the financial statements are an integral part of this statement. 58 ---PAGE BREAK--- (Continued) Law Enforcement State Total Block Fire Penalty Special Grant Grant Assessment Revenue REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ 11,065,519 Gasoline taxes - - - 860,117 Cigarette taxes - - - 47,518 Lodger's taxes - - - 1,216,746 Licenses and permits - - - 62,606 Intergovernmental 13,227 409,188 - 1,209,341 Charges for services - - - 86,134 Fines - - 190,537 190,537 Investment earnings 2,581 8,106 - 377,292 Donations - - - 442,746 Miscellaneous - 399 469 435,145 Total revenues 15,808 417,693 191,006 15,993,701 EXPENDITURES: Current: Police operations 17,221 - 191,000 734,818 Fire operations - 334,011 - 334,011 Parks, recreation and cultural affairs - - - 6,232,869 Community development - - - 4,645,073 Capital outlay: Highways and streets - - - 1,536,962 Total expenditures 17,221 334,011 191,000 13,483,733 Excess (deficiency) of revenues over (under) expenditures (1,413) 83,682 6 2,509,968 OTHER FINANCING SOURCES (USES): Transfers in - - - 30,000 Transfers out - (110,000) - (1,152,812) Total other financing sources (uses) - (110,000) - (1,122,812) Net change in fund balances (1,413) (26,318) 6 1,387,156 Fund balances-beginning 3,993 26,318 - 9,331,067 Fund balances-ending $ 2,580 $ - $ 6 $ 10,718,223 Special Revenue CITY OF FARMINGTON Nonmajor Governmental Funds For the Year Ended June 30, 2008 Combining Statement of Revenues, Expenditures and Changes in Fund Balances The notes to the financial statements are an integral part of this statement. 59 ---PAGE BREAK--- Community Total Development Governmental Total Nonmajor Grant Capital Capital Governmental Projects Projects Projects Funds REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ 11,065,519 Gasoline taxes - - - 860,117 Cigarette taxes - - - 47,518 Lodger's taxes - - - 1,216,746 Licenses and permits - - - 62,606 Intergovernmental 1,324,583 - 1,324,583 2,533,924 Charges for services - - - 86,134 Fines - - - 190,537 Investment earnings 49,737 59,580 109,317 486,609 Donations - - - 442,746 Miscellaneous 16 332 348 435,493 Total revenues 1,374,336 59,912 1,434,248 17,427,949 EXPENDITURES: Current: Police operations - - - 734,818 Fire operations - - - 334,011 Parks, recreation and cultural affairs - - - 6,232,869 Community development - - - 4,645,073 Capital outlay: General government - 1,251,018 1,251,018 1,251,018 Highways and streets 1,555,171 - 1,555,171 3,092,133 Public safety - - - - Total expenditures 1,555,171 1,251,018 2,806,189 16,289,922 Excess (deficiency) of revenues over (under) expenditures (180,835) (1,191,106) (1,371,941) 1,138,027 OTHER FINANCING SOURCES (USES): Transfers in 1,042,812 3,529,885 4,572,697 4,602,697 Transfers out - - - (1,152,812) Total other financing sources (uses) 1,042,812 3,529,885 4,572,697 3,449,885 Net change in fund balances 861,977 2,338,779 3,200,756 4,587,912 Fund balances-beginning 962,881 - 962,881 10,293,948 Fund balances-ending $ 1,824,858 $ 2,338,779 $ 4,163,637 $ 14,881,860 Capital Projects CITY OF FARMINGTON Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2008 The notes to the financial statements are an integral part of this statement. 60 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Gross receipts taxes $ 5,248,241 $ 5,248,241 $ 5,202,757 $ (45,484) Gasoline taxes 815,000 815,000 787,742 (27,258) Investment earnings 155,000 155,000 110,552 (44,448) Miscellaneous - - 1,401 1,401 Total revenues 6,218,241 6,218,241 6,102,452 (115,789) EXPENDITURES: Current: Community development 5,855,072 5,221,118 3,624,947 1,596,171 Capital Outlay: Highways and streets 2,300,000 2,755,866 2,115,222 640,644 Total expenditures 8,155,072 7,976,984 5,740,169 2,236,815 Excess (deficiency) of revenues over (under) expenditures (1,936,831) (1,758,743) 362,283 2,121,026 OTHER FINANCING SOURCES (USES): Transfers out (651,250) (1,042,812) (1,042,812) - Net change in fund balances (2,588,081) (2,801,555) (680,529) $ 2,121,026 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 705,515 Change in accounts payable 651,138 Change in deferred revenue (7,281) 1,349,372 GAAP BASIS CHANGE IN FUND BALANCES 668,843 Fund balances-beginning 3,067,639 3,067,639 3,067,639 Fund balances-ending $ 479,558 $ 266,084 $ 3,736,482 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, 2008 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 61 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Gross receipts taxes $ 5,781,741 $ 5,781,741 $ 5,732,533 $ (49,208) Intergovernmental - - 100,000 100,000 Investment earnings 150,000 150,000 187,024 37,024 Miscellaneous - - 8,256 8,256 Total revenues 5,931,741 5,931,741 6,027,813 96,072 EXPENDITURES: Current: Parks, Recreation and Cultural Affairs 3,248,255 4,166,037 3,856,902 309,135 Community development 4,824,689 3,731,412 1,274,693 2,456,719 Total expenditures 8,072,944 7,897,449 5,131,595 2,765,854 Excess (deficiency) of revenues over (under) expenditures (2,141,203) (1,965,708) 896,218 2,861,926 Net change in fund balances (2,141,203) (1,965,708) 896,218 $ 2,861,926 ADJUSTMENTS TO GAAP: Change in inventory (59,169) Change in intergovernmental receivable (436,461) Change in accounts payable 354,718 Change in accrued wages payable (24,357) (165,269) GAAP BASIS CHANGE IN FUND BALANCES 730,949 Fund balances-beginning 4,259,409 4,259,409 4,259,409 Fund balances-ending $ 2,118,206 $ 2,293,701 $ 4,990,358 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax Parks and Public Works Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2008 Budget to Actual Non-GAAP Budgetary Basis 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: Licenses and permits $ 35,000 $ 35,000 $ 62,606 $ 27,606 Investment earnings 18,000 18,000 15,828 (2,172) Miscellaneous - - 30 30 Total revenues 53,000 53,000 78,464 25,464 EXPENDITURES: Current: Parks, recreation and cultural affairs 90,000 90,000 72,383 17,617 Excess (deficiency) of revenues over (under) expenditures (37,000) (37,000) 6,081 $ 43,081 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable - GAAP BASIS CHANGE IN FUND BALANCES 6,081 Fund balances-beginning 353,283 353,283 353,283 Fund balances-ending $ 316,283 $ 316,283 $ 359,364 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, 2008 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: Cigarette taxes $ 51,000 $ 51,000 $ 48,471 $ (2,529) EXPENDITURES: Current: Parks, recreation and cultural affairs 51,000 51,000 48,471 2,529 Excess (deficiency) of revenues over (under) expenditures - - - $ - ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (953) GAAP BASIS CHANGE IN FUND BALANCES (953) Fund balances-beginning 5,152 5,152 5,152 Fund balances-ending $ 5,152 $ 5,152 $ 4,199 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Recreation Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2008 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 $ 105,000 $ 105,000 $ 87,321 $ (17,679) Investment earnings 14,000 14,000 8,176 (5,824) Donations 80,000 80,000 20,317 (59,683) Miscellaneous - - 686 686 Total revenues 199,000 199,000 116,500 (82,500) EXPENDITURES: Current: Parks, recreation and cultural affairs 318,500 318,500 169,043 149,457 Excess (deficiency) of revenues over (under) expenditures (119,500) (119,500) (52,543) $ 66,957 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable - GAAP BASIS CHANGE IN FUND BALANCES (52,543) Fund balances-beginning 180,524 180,524 180,524 Fund balances-ending $ 61,024 $ 61,024 $ 127,981 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Library Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual For the Year Ended June 30, 2008 Non-GAAP Budgetary Basis 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 $ 232,000 $ 1,003,103 $ 236,296 $ (766,807) Investment earnings 21,000 21,000 19,862 (1,138) Donations 172,200 172,200 379,807 207,607 Miscellaneous 135,050 135,050 382,391 247,341 Total revenues 560,250 1,331,353 1,018,356 (312,997) EXPENDITURES: Current: Parks, recreation and cultural affairs 534,201 1,332,930 973,624 359,306 Excess (deficiency) of revenues over (under) expenditures 26,049 (1,577) 44,732 $ 46,309 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (70,125) Change in accounts payable 9,342 Change in accrued wages payable 95 (60,688) GAAP BASIS CHANGE IN FUND BALANCES (15,956) Fund balances-beginning 401,579 401,579 401,579 Fund balances-ending $ 427,628 $ 400,002 $ 385,623 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Parks/Recreation Gifts and Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2008 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 $ - $ 19,000 $ 15,606 $ (3,394) Charges for Services 101,600 123,100 86,134 (36,966) Investment earnings 2,400 2,400 3,425 1,025 Donations 24,000 46,000 42,622 (3,378) Miscellaneous - - 392 392 Total revenues 128,000 190,500 148,179 (42,321) EXPENDITURES: Current: Parks, recreation and cultural affairs 89,000 151,608 146,110 5,498 Excess (deficiency) of revenues over (under) expenditures 39,000 38,892 2,069 $ (36,823) ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 4,878 Change in accounts payable (155) 4,723 GAAP BASIS CHANGE IN FUND BALANCES 6,792 Fund balances-beginning 64,440 64,440 64,440 Fund balances-ending $ 103,440 $ 103,332 $ 71,232 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, 2008 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 $ 1,000,000 $ 1,097,000 $ 1,198,809 $ 101,809 Investment earnings 22,000 22,000 21,738 (262) Miscellaneous - - 3,040 3,040 Total revenues 1,022,000 1,119,000 1,223,587 104,587 EXPENDITURES: Current: Parks, recreation and cultural affairs 1,035,754 1,132,877 1,122,250 10,627 Excess (deficiency) of revenues over (under) expenditures (13,754) (13,877) 101,337 $ 115,214 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 17,937 Change in deferred revenue (5,813) Change in accrued wages payable 3,773 15,897 GAAP BASIS CHANGE IN FUND BALANCES 117,234 Fund balances-beginning 667,443 667,443 667,443 Fund balances-ending $ 653,689 $ 653,566 $ 784,677 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, 2008 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 $ 92,400 $ 92,400 $ 94,200 $ 1,800 Miscellaneous - - 256 256 Total revenues 92,400 92,400 94,456 2,056 EXPENDITURES: Current: Police operations 92,400 92,400 77,856 14,544 Excess (deficiency) of revenues over (under) expenditures - - 16,600 $ 16,600 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable - GAAP BASIS CHANGE IN FUND BALANCES 16,600 Fund balances-beginning 402 402 402 Fund balances-ending $ 402 $ 402 $ 17,002 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, 2008 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 $ 396,500 $ 396,500 $ 326,058 $ (70,442) Miscellaneous 2,500 2,500 37,825 35,325 Total revenues 399,000 399,000 363,883 (35,117) EXPENDITURES: Current: Public safety 452,128 452,128 411,451 40,677 Excess (deficiency) of revenues over (under) expenditures (53,128) (53,128) (47,568) 5,560 OTHER FINANCING SOURCES: Transfers in 30,000 30,000 30,000 - Net change in fund balances (23,128) (23,128) (17,568) $ 5,560 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (7,308) Change in accounts payable (33,783) Change in accrued wages payable (3,507) (44,598) GAAP BASIS CHANGE IN FUND BALANCES (62,166) Fund balances-beginning 300,885 300,885 300,885 Fund balances-ending $ 277,757 $ 277,757 $ 238,719 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, 2008 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 $ - $ 76,070 $ 76,074 $ 4 Investment earnings - - 2,581 2,581 Total revenues - 76,070 78,655 2,585 EXPENDITURES: Current: Public safety - 80,063 17,221 62,842 Excess (deficiency) of revenues over (under) expenditures - (3,993) 61,434 $ 65,427 ADJUSTMENTS TO GAAP: Change in deferred revenue (62,847) GAAP BASIS CHANGE IN FUND BALANCES (1,413) Fund balances-beginning 3,993 3,993 3,993 Fund balances-ending $ 3,993 $ - $ 2,580 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, 2008 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 71 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 376,319 $ 409,188 $ 409,188 $ - Investment earnings 9,000 9,000 8,106 (894) Donations 1,000 1,000 - (1,000) Miscellaneous - - 399 399 Total revenues 386,319 419,188 417,693 (1,495) EXPENDITURES: Current: Fire operations 276,319 335,506 334,011 1,495 Excess (deficiency) of revenues over (under) expenditures 110,000 83,682 83,682 - OTHER FINANCING SOURCES (USES): Transfers out (110,000) (110,000) (110,000) - Net change in fund balances - (26,318) (26,318) $ - ADJUSTMENTS TO GAAP: Change in intergovernmental receivable - GAAP BASIS CHANGE IN FUND BALANCES (26,318) Fund balances-beginning 26,318 26,318 26,318 Fund balances-ending $ 26,318 $ - $ - 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, 2008 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: Fines $ 160,000 $ 190,500 $ 190,537 $ 37 Miscellaneous - - 469 469 Total Revenues 160,000 190,500 191,006 506 EXPENDITURES: Current: Public safety 160,000 190,500 180,494 10,006 Excess (deficiency) of revenues over (under) expenditures - - 10,512 $ 10,512 ADJUSTMENTS TO GAAP: Change in accounts payable (10,506) GAAP BASIS CHANGE IN FUND BALANCES 6 Fund balances-beginning - - - Fund balances-ending $ - $ - $ 6 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, 2008 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 73 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 2,438,750 $ 2,803,750 $ 1,412,487 $ (1,391,263) Investment earnings 28,000 28,000 49,737 21,737 Miscellaneous - - 16 16 Total revenues 2,466,750 2,831,750 1,462,240 (1,369,510) EXPENDITURES: Capital Outlay: Highways and Streets 3,171,415 4,238,353 1,563,298 2,675,055 Excess (deficiency) of revenues over (under) expenditures (704,665) (1,406,603) (101,058) 1,305,545 OTHER FINANCING SOURCES: Transfers in 651,250 1,042,812 1,042,812 - Net change in fund balances (53,415) (363,791) 941,754 $ 1,305,545 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (87,904) Change in accounts payable 8,563 Change in accrued wages payable (436) (79,777) GAAP BASIS CHANGE IN FUND BALANCES 861,977 Fund balances-beginning 962,881 962,881 962,881 Fund balances-ending $ 909,466 $ 599,090 $ 1,824,858 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, 2008 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: Investment earnings $ - $ - $ 59,580 $ 59,580 Miscellaneous - - 332 332 Total revenues - - 59,912 59,912 EXPENDITURES: Capital Outlay: General Government 2,116,450 3,590,450 866,154 2,724,296 Excess (deficiency) of revenues over (under) expenditures (2,116,450) (3,590,450) (806,242) 2,784,208 OTHER FINANCING SOURCES (USES): Transfers in 2,116,450 3,590,450 3,529,885 (60,565) Total other financing sources (uses) 2,116,450 3,590,450 3,529,885 (60,565) Net change in fund balances - - 2,723,643 $ 2,723,643 ADJUSTMENTS TO GAAP: Change in accounts payable (384,864) GAAP BASIS CHANGE IN FUND BALANCES: 2,338,779 Fund balances-beginning - - - Fund balances-ending $ - $ - $ 2,338,779 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, 2008 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: Gross receipts taxes $ 1,527,500 $ 1,527,500 $ 1,527,492 $ Investment earnings 23,500 23,500 30,352 6,852 Total revenues 1,551,000 1,551,000 1,557,844 6,844 EXPENDITURES: Debt Service: Principal 1,180,000 1,180,000 1,180,000 - Interest 470,217 470,217 470,217 - Total expenditures 1,650,217 1,650,217 1,650,217 - Excess (deficiency) of revenues over (under) expenditures (99,217) (99,217) (92,373) 6,844 OTHER FINANCING SOURCES: Transfers in 110,000 110,000 110,000 - Net change in fund balances 10,783 10,783 17,627 $ 6,844 ADJUSTMENTS TO GAAP: Change in receivables - - GAAP BASIS CHANGE IN FUND BALANCES: 17,627 Fund balances-beginning 310,848 310,848 310,848 Fund balances-ending $ 321,631 $ 321,631 $ 328,475 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, 2008 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 76 ---PAGE BREAK--- Internal Service Fund Internal Service Fund ---PAGE BREAK--- Internal Service Fund Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City on a cost reimbursement basis. Health Insurance Fund - This fund is used to account for the City's self insurance for employee health insurance claims. 77 ---PAGE BREAK--- 78 ---PAGE BREAK--- Non-GAAP Budgetary Basis Variance with Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for services $ 5,241,319 $ 5,241,319 $ 5,368,501 $ 127,182 Investment earnings - - 2,341 2,341 Total operating revenues 5,241,319 5,241,319 5,370,842 129,523 Operating expenses: Costs of services 5,241,319 5,241,319 5,244,286 (2,967) Operating income (loss) - - 126,556 $ 124,215 RECONCILIATION TO GAAP BASIS: Change in accrued payables 55,693 GAAP BASIS CHANGE IN NET ASSETS 182,249 CITY OF FARMINGTON, NEW MEXICO Budgeted Amounts For the Year Ended June 30, 2008 Schedule of Revenues, Expenses and Changes in Fund Net Assets Health Insurance Total net assets-beginning (637,778) (637,778) (637,778) Total net assets-ending $ (637,778) $ (637,778) $ (455,529) The notes to the financial statements are an integral part of this statement. 79 ---PAGE BREAK--- 80 ---PAGE BREAK--- Enterprise Funds Enterprise Funds ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Electric Fund For the Year Ended June 30, 2008 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Electric $ 105,911,605 $ 105,911,605 $ 101,574,396 $ (4,337,209) Other revenues 385,000 385,000 619,007 234,007 Total operating revenues 106,296,605 106,296,605 102,193,403 (4,103,202) Operating expenses: Salaries and fringe benefits 10,399,113 10,399,113 9,515,925 883,188 Purchased power, fuel and chemicals 49,289,055 49,289,055 48,946,395 342,660 Other operating expenses 9,920,074 10,026,358 9,840,390 185,968 Capital outlay 34,214,568 36,912,460 23,496,738 13,415,722 Total operating expenses 103,822,810 106,626,986 91,799,448 14,827,538 Operating income 2,473,795 (330,381) 10,393,955 10,724,336 Nonoperating revenues (expenses): Investment earnings 1,902,000 1,902,000 2,333,113 431,113 Interest expense (1,146,368) (1,146,368) (1,137,193) 9,175 Principal on debt service (4,103,751) (4,103,751) (4,103,751) - Total nonoperating revenues (expenses) (3,348,119) (3,348,119) (2,907,831) 440,288 Income (loss) before operating transfers (874,324) (3,678,500) 7,486,124 11,164,624 Capital contributions 105,000 105,000 1,056,745 951,745 Transfers out (1,892,586) (1,892,586) (1,695,348) 197,238 Change in net assets (2,661,910) (5,466,086) 6,847,521 $ 12,313,607 ADJUSTMENTS TO GAAP Depreciation (10,177,825) Amortization 143,731 Capital outlay capitalized 23,496,738 Principal on debt service 4,103,751 17,566,395 GAAP BASIS CHANGE IN NET ASSETS 24,413,916 Total net assets-beginning 239,480,604 239,480,604 239,480,604 Total net assets-ending $ 236,818,694 $ 234,014,518 $ 263,894,520 The notes to the financial statements are an integral part of this statement. 81 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Water Fund For the Year Ended June 30, 2008 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Water $ 10,255,594 $ 10,255,594 $ 10,708,854 $ 453,260 Other revenues 1,000 1,000 74,663 73,663 Total operating revenues 10,256,594 10,256,594 10,783,517 526,923 Operating expenses: Salaries and fringe benefits 570,739 570,739 437,077 133,662 Other operating expenses 5,288,653 5,315,144 4,721,427 593,717 Capital outlay 2,845,000 4,589,114 2,380,844 2,208,270 Total operating expenses 8,704,392 10,474,997 7,539,348 2,935,649 Operating income 1,552,202 (218,403) 3,244,169 3,462,572 Nonoperating revenues (expenses): Investment earnings 141,800 141,800 155,159 13,359 Revenue from operating grants - 1,325,000 524,913 (800,087) Interest expense (250,105) (250,105) (246,324) 3,781 Principal on debt service (885,535) (885,535) (885,535) - Total nonoperating revenues (expenses) (993,840) 331,160 (451,787) (782,947) Income (loss) before operating transfers 558,362 112,757 2,792,382 2,679,625 Capital contributions 4,395 4,395 - (4,395) Transfers out (524,422) (524,422) (525,194) (772) Change in net assets 38,335 (407,270) 2,267,188 $ 2,674,458 ADJUSTMENTS TO GAAP Depreciation (1,480,886) Amortization 31,015 Capital outlay capitalized 2,380,844 Principal on debt service 885,535 1,816,508 GAAP BASIS CHANGE IN NET ASSETS 4,083,696 Total net assets-beginning 23,510,800 23,510,800 23,510,800 Total net assets-ending $ 23,549,135 $ 23,103,530 $ 27,594,496 The notes to the financial statements are an integral part of this statement. 82 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Wastewater Fund For the Year Ended June 30, 2008 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Wastewater $ 5,470,565 $ 5,470,565 $ 4,751,471 $ (719,094) Environmental tax 1,445,435 1,445,435 1,438,969 (6,466) Other revenues 4,000 4,000 49,832 45,832 Total operating revenues 6,920,000 6,920,000 6,240,272 (679,728) Operating expenses: Salaries and fringe benefits 305,955 305,955 264,429 41,526 Other operating expenses 3,640,213 3,660,904 3,358,924 301,980 Capital outlay 3,309,000 3,942,240 652,156 3,290,084 Total operating expenses 7,255,168 7,909,099 4,275,509 3,633,590 Operating income (335,168) (989,099) 1,964,763 2,953,862 Nonoperating revenues (expenses): Investment earnings 307,800 307,800 272,143 (35,657) Revenue from operating grants - - 3,557 3,557 Interest expense (465,678) (465,678) (449,119) 16,559 Principal on debt service (673,366) (673,366) (689,195) (15,829) Total nonoperating revenues (expenses) (831,244) (831,244) (862,614) (31,370) Income (loss) before operating transfers (1,166,412) (1,820,343) 1,102,149 2,922,492 Capital contributions - - - - Transfers out (250,000) (250,000) (235,209) 14,791 Change in net assets (1,416,412) (2,070,343) 866,940 $ 2,937,283 ADJUSTMENTS TO GAAP Depreciation (1,159,988) Amortization 5,103 Capital outlay capitalized 652,156 Principal on debt service 689,195 186,466 GAAP BASIS CHANGE IN NET ASSETS 1,053,406 Total net assets-beginning 15,877,477 15,877,477 15,877,477 Total net assets-ending $ 14,461,065 $ 13,807,134 $ 16,930,883 The notes to the financial statements are an integral part of this statement. 83 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Sanitation Fund For the Year Ended June 30, 2008 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Sanitation $ 3,960,580 $ 4,094,580 $ 4,154,595 $ 60,015 Other revenues 34,816 34,816 74,086 39,270 Total operating revenues 3,995,396 4,129,396 4,228,681 99,285 Operating expenses: Other operating expenses 3,981,432 4,115,432 4,125,425 (9,993) Capital outlay 10,000 10,000 - 10,000 Total operating expenses 3,991,432 4,125,432 4,125,425 7 Operating income 3,964 3,964 103,256 99,292 Nonoperating revenues (expenses): Investment earnings 22,500 22,500 26,930 4,430 Change in net assets 26,464 26,464 130,186 $ 103,722 ADJUSTMENTS TO GAAP Depreciation (4,870) GAAP BASIS CHANGE IN NET ASSETS 125,316 Total net assets-beginning 449,263 449,263 449,263 Total net assets-ending $ 475,727 $ 475,727 $ 574,579 The notes to the financial statements are an integral part of this statement. 84 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Golf Fund For the Year Ended June 30, 2008 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Golf $ 1,191,163 $ 1,191,163 $ 1,134,127 $ (57,036) Other revenues - 13,000 12,525 (475) Total operating revenues 1,191,163 1,204,163 1,146,652 (57,511) Operating expenses: Salaries and fringe benefits 649,765 649,765 624,710 25,055 Other operating expenses 447,915 485,987 498,342 (12,355) Capital outlay 133,000 108,000 106,438 1,562 Total operating expenses 1,230,680 1,243,752 1,229,490 14,262 Operating income (39 517) (39 589) (82 838) (43 249) Operating income (39,517) (39,589) (82,838) (43,249) Nonoperating revenues (expenses): Investment earnings 9,000 9,000 12,991 3,991 Change in net assets (30,517) (30,589) (69,847) $ (39,258) ADJUSTMENTS TO GAAP Depreciation (189,411) Capital outlay capitalized 106,438 (82,973) GAAP BASIS CHANGE IN NET ASSETS (152,820) Total net assets-beginning 2,541,898 2,541,898 2,541,898 Total net assets-ending $ 2,511,381 $ 2,511,309 $ 2,389,078 The notes to the financial statements are an integral part of this statement. 85 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Airport Fund For the Year Ended June 30, 2008 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Airport $ 675,249 $ 582,249 $ 530,874 $ (51,375) Other revenues 1,000 1,000 9,486 8,486 Total operating revenues 676,249 583,249 540,360 (42,889) Operating expenses: Salaries and fringe benefits 317,106 317,106 315,172 1,934 Other operating expenses 512,415 512,415 579,776 (67,361) Capital outlay 2,487,000 3,300,156 3,471,634 (171,478) Total operating expenses 3,316,521 4,129,677 4,366,582 (236,905) Operating income (loss) (2,640,272) (3,546,428) (3,826,222) (279,794) Nonoperating revenues (expenses): Investment earnings 4,000 4,000 - (4,000) Revenue from operating grants 2,549,175 2,724,175 2,617,273 (106,902) Total nonoperating revenues (expenses) 2,553,175 2,728,175 2,617,273 (110,902) Income (loss) before operating transfers (87,097) (818,253) (1,208,949) (390,696) Operating transfers, in 100,000 1,035,031 1,035,031 - Change in net assets 12,903 216,778 (173,918) $ (390,696) ADJUSTMENTS TO GAAP Depreciation (662,998) Capital outlay capitalized 3,471,634 2,808,636 GAAP BASIS CHANGE IN NET ASSETS 2,634,718 Total net assets-beginning (restated) 7,185,315 7,185,315 7,185,315 Total net assets-ending $ 7,198,218 $ 7,402,093 $ 9,820,033 The notes to the financial statements are an integral part of this statement. 86 ---PAGE BREAK--- Capital Assets- Governmental Funds Capital Assets- Governmental Funds ---PAGE BREAK--- 2008 2007 Governmental funds capital assets: Land $ 25,780,126 $ 25,780,126 Buildings 50,794,982 49,439,083 Improvements other than buildings 11,981,907 11,247,960 Machinery and equipment 27,957,822 26,788,706 Infrastructure 60,906,249 56,112,352 Construction In Progress 4,345,687 6,565,378 Total governmental funds capital assets $ 181,766,773 $ 175,933,605 Investments in governmental funds capital assets by source: General fund $ 53,372,756 $ 55,509,874 Special revenue fund 104,798,367 98,113,359 Capital projects funds 22,027,018 21,361,169 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Comparative Schedules By Source June 30, 2007 and 2008 Donations 1,568,632 949,203 Total governmental funds capital assets $ 181,766,773 $ 175,933,605 87 ---PAGE BREAK--- Improvements Machinery Construction Other than and In Function and Activity Land Buildings Buildings Equipment Infrastructure Progress Total GENERAL GOVERNMENT: Legislative $ 4,000 $ 6,946 $ - $ 33,693 $ - $ - $ 44,639 Judicial - 3,117 - 155,901 - - 159,018 Operations center - - - 525,585 - - 525,585 Fleet maintenance - 4,469 - 778,658 - - 783,127 Stores - 21,264 281,925 349,289 - - 652,478 Finance administration - 3,741 - 32,983 - - 36,724 Personnel administration - 22,327 - 154,245 - - 176,572 Purchasing - - - 79,970 - - 79,970 Law enforcement - - 12,966 41,808 - - 54,774 Administrative services 1,185,313 9,264,990 65,153 981,024 56,675 11,553,155 Planning and zoning - - - 76,513 - - 76,513 Data processing - 31,020 - 767,859 - - 798,879 Total general government 1,189,313 9,357,874 360,044 3,977,528 - 56,675 14,941,434 PUBLIC SAFETY: Police 399,869 3,706,238 139,928 5,591,283 - 9,837,318 Fire 60,098 3,549,062 1,989 7,809,751 - 15,813 11,436,713 Inspection - - - 207,699 - - 207,699 Traffic - 6,656 - 525,278 2,287,540 - 2,819,474 Total public safety 459,967 7,261,956 141,917 14,134,011 2,287,540 15,813 24,301,204 PUBLIC WORKS: Streets 16,055,538 21,850 872,256 2,294,237 46,841,386 2,000,940 68,086,207 Bridges and storm drains - - - - 11,286,555 69,699 11,356,254 Administration 1,092,506 142,924 400,873 65,395 490,768 454,577 2,647,043 Survey - - - 112,912 - - 112,912 Engineering - - - 153,611 - 153,611 Total public works 17,148,044 164,774 1,273,129 2,626,155 58,618,709 2,525,216 82,356,027 CULTURE AND RECREATION: Parks and recreation 4,386,474 16,841,498 10,039,304 5,287,994 - 1,532,741 38,088,011 Civic center 92,174 3,103,362 6,047 448,165 - 10,943 3,660,691 Senior citizens center 141,497 670,948 - 204,118 - 188,299 1,204,862 Museum 970,989 4,769,187 55,466 167,965 - 16,000 5,979,607 Total culture and recreation 5,591,134 25,384,995 10,100,817 6,108,242 - 1,747,983 48,933,171 LIBRARIES 1,391,668 8,625,383 106,000 1,111,886 - - 11,234,937 Total governmental funds capital assets $ 25,780,126 $ 50,794,982 $ 11,981,907 $ 27,957,822 $ 60,906,249 $ 4,345,687 $ 181,766,773 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, 2008 88 ---PAGE BREAK--- Capital Assets Capital Assets Function and Activity June 30, 2007 Additions Deductions Net Transfers June 30, 2008 GENERAL GOVERNMENT: Legislative $ 51,278 $ - $ (6,639) $ 44,639 Judicial 1,075,717 - (9,400) (907,299) 159,018 Operations center 540,386 52,469 (66,567) (703) 525,585 Fleet maintenance 424,620 - (7,271) 409,177 826,526 Stores 664,829 90,766 (13,012) 661 743,244 Finance administration 36,724 - - - 36,724 Personnel administration 62,123 134,332 (45,366) 3,155 154,244 Purchasing 79,970 - - - 79,970 Law enforcement 24,608 12,966 - 17,200 54,774 Administrative services 10,096,135 190,307 (160,937) 856,772 10,982,277 Planning and zoning 115,724 - (39,212) 76,512 Data processing 971,139 35,777 (186,287) (1,052) 819,577 Total general government 14,143,253 516,617 (528,052) 371,272 14,503,090 PUBLIC SAFETY: Police 9,789,120 616,728 (384,606) (188,844) 9,832,398 Fire 10,882,193 692,119 (133,443) (4,156) 11,436,713 Inspection 206,335 21,262 - (19,897) 207,700 Traffic 2,489,256 349,131 (201,603) - 2,636,784 Total public safety 23,366,904 1,679,240 (719,652) (212,897) 24,113,595 PUBLIC WORKS: Streets 65,063,776 2,353,369 (307,228) (31,617) 67,078,300 Bridges and storm drains 11,417,960 73,185 (591) - 11,490,554 Administration 4,039,658 325,228 - (15,963) 4,348,923 Survey 112,912 - - - 112,912 Engineering 152,451 15,011 (12,953) - 154,509 Total public works 80,786,757 2,766,793 (320,772) (47,580) 83,185,198 CULTURE AND RECREATION: Parks and recreation 35,677,019 2,504,765 (209,343) (109,488) 37,862,953 Civic center 3,643,763 16,928 (43) - 3,660,648 Senior citizens center 981,552 258,508 (13,307) 1,226,745 Museum 5,989,178 16,000 (25,571) - 5,979,607 Total culture and recreation 46,291,512 2,796,201 (234,965) (122,795) 48,729,953 LIBRARIES 11,345,179 28,808 (139,050) - 11,234,937 Total general fixed assets $ 175,933,605 $ 7,787,659 $ (1,942,491) $ (12,000) $ 181,766,773 Accumulated depreciation $ 89,267,590 $ 7,107,261 $ (1,605,041) $ (12,000) $ 94,757,810 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity For the fiscal year ended June 30, 2008 89 ---PAGE BREAK--- 90 ---PAGE BREAK--- STATISTICAL SECTION STATISTICAL SECTION ---PAGE BREAK--- STATISTICAL SECTION This part of the City of Farmington’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Financial Trends Page These schedules contain trend information to help the reader understand how the 92 City’s financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the City’s most 97 significant revenue sources - gross receipts tax and electricity sales. Also included are property tax schedules. Debt Capacity These schedules present information to help the reader assess the affordability of 108 the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader 112 understand the environment within which the City’s financial activities take place. Operating Information The schedules contain service and infrastructure data to help the reader understand 114 how the information in the City’s financial report relates to the services the City provides and the activities it performs. 91 ---PAGE BREAK--- City of Farmington Schedule 1 Net Assets by Component Last Seven Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 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 $ 76,387,603 $ Restricted 2,689,505 2,678,373 2,422,104 3,514,726 4,219,427 4,491,602 4,599,840 Unrestricted 28,039,208 20,619,682 20,610,228 25,149,317 24,559,417 22,873,893 23,134,310 Total governmental activities net assets 86,403,221 $ 87,259,065 $ 87,811,882 $ 94,929,515 $ 103,118,148 $ 102,366,428 $ 104,121,753 $ Business-type activities Invested in capital assets, net of related debt 145,695,695 $ 151,976,725 $ 194,430,074 $ 215,390,130 $ 227,625,271 $ 240,531,317 $ 263,888,952 $ Restricted 3,450,823 2,643,773 2,648,557 2,564,255 2,615,937 2,914,976 3,139,945 Unrestricted 33,466,317 41,559,635 18,361,816 16,535,576 30,290,166 45,749,953 54,174,692 Total business-type activities net assets 182,612,835 $ 196,180,133 $ 215,440,447 $ 234,489,961 $ 260,531,374 $ 289,196,246 $ 321,203,589 $ 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 $ Restricted 6,140,328 5,322,146 5,070,661 6,078,981 6,835,364 7,406,578 7,739,785 Unrestricted 61,505,525 62,179,317 38,972,044 41,684,893 54,849,583 68,623,846 77,309,002 Total primary government net assets 269,016,056 $ 283,439,198 $ 303,252,329 $ 329,419,476 $ 363,649,522 $ 391,562,674 $ 425,325,342 $ Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. Fiscal Year 92 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Seven Fiscal Years (continued) (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 Expenses Governmental activities: General government 17,921,350 $ 17,191,605 $ 23,996,456 $ 21,153,411 $ 21,649,221 $ 24,470,791 $ 24,439,831 $ Police 9,137,433 10,251,979 10,341,396 11,351,590 12,356,592 15,029,695 15,834,320 Fire 4,661,223 4,906,661 5,468,824 5,470,572 6,466,886 7,606,467 8,384,634 Parks, recreation, cultural affairs 9,232,612 8,392,730 9,284,623 9,497,875 11,105,380 13,769,347 14,714,271 Community development 7,359,539 7,395,603 5,727,834 7,481,297 8,511,853 10,776,798 9,938,557 Interest on long term debt 378,265 560,368 483,230 421,480 588,521 511,126 468,360 Total governmental activities expenses 48,690,422 48,698,946 55,302,363 55,376,225 60,678,453 72,164,224 73,779,973 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 Water 6,096,326 7,180,833 6,785,002 6,944,219 6,992,577 7,207,259 6,854,699 Wastewater 3,203,574 3,488,296 4,127,386 4,983,626 4,690,385 5,274,284 5,227,357 Sanitation 3,345,147 3,358,430 3,493,487 3,625,722 3,815,728 4,002,806 4,130,295 Golf 1,076,241 1,060,103 1,198,867 1,209,293 1,217,011 1,164,683 1,312,463 Airport 1,422,951 1,563,162 2,008,715 1,871,508 1,812,263 1,453,617 1,557,946 Total business-type activities expenses 78,579,055 85,554,247 82,828,001 91,549,095 83,680,956 85,444,534 98,556,757 Total primary government expenses 127,269,477 $ 134,253,193 $ 138,130,364 $ 146,925,320 $ 144,359,409 $ 157,608,758 $ 172,336,730 $ 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 $ Police 14,457 15,132 74,215 198,017 39,903 1,266,550 1,366,974 Parks, recreation, cultural affairs 546,488 530,669 552,114 545,461 703,731 888,618 831,845 Community development 69,040 68,155 77,390 75,116 101,605 95,485 86,766 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 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 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 Water 7,997,027 7,073,545 7,515,514 7,338,869 7,991,740 8,688,421 10,783,517 Wastewater 3,824,407 4,239,721 4,489,948 4,751,802 5,071,951 5,214,261 6,240,272 Sanitation 3,350,941 3,392,079 3,538,632 3,692,937 3,889,876 4,051,998 4,228,681 Golf 859,042 933,981 1,042,176 1,088,137 1,121,313 1,113,328 1,146,652 Airport 541,523 564,237 596,765 599,306 594,199 601,675 540,360 Operating grants and contributions 4,207,905 1,151,196 916,477 880,654 927,492 1,227,869 1,585,215 Capital grants and contributions 1,211,547 1,025,342 154,309 625,693 794,531 495,436 2,617,273 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 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 $ Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. Fiscal Year 93 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Seven Fiscal Years (accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 Net (Expenses)/Revenues Governmental activities (42,219,317) $ (41,916,413) $ (46,838,631) $ (47,299,401) $ (51,524,562) $ (60,406,902) $ (60,862,531) $ Business-type activities 22,248,885 11,956,498 19,584,107 18,580,624 26,512,004 27,653,014 30,778,616 Total primary governmental activities expenses (19,970,432) $ (29,959,915) $ (27,254,524) $ (28,718,777) $ (25,012,558) $ (32,753,888) $ (30,083,915) $ 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 $ Property taxes 922,002 930,112 985,836 1,043,064 1,121,723 1,235,064 1,330,285 Franchise taxes 2,551,995 2,601,794 715,022 720,748 1,594,098 1,045,698 992,050 Other taxes 1,716,477 1,724,672 1,884,994 1,873,736 1,942,024 1,944,810 2,124,381 Other revenue 3,010,951 3,769,728 3,584,543 3,507,135 2,996,953 1,199,675 1,386,242 Unrestricted investment earnings 963,133 635,745 429,108 471,993 858,611 1,064,838 962,448 Loss on sale of capital assets (1,902,219) (1,904,487) - - - - - Transfers 415 (132,000) 1,440,853 1,754,818 1,925,566 1,346,115 1,420,720 Total governmental activities 43,184,891 42,772,257 47,391,448 52,505,846 59,713,195 59,655,182 62,617,856 Business-type activities: Unrestricted investment earnings 1,435,925 1,478,800 1,117,060 790,027 1,454,975 2,357,973 2,800,336 Transfers (415) 132,000 (1,440,853) (1,754,818) (1,925,566) (1,346,115) (1,420,720) Total business-type activities 1,435,510 1,610,800 (323,793) (964,791) (470,591) 1,011,858 1,379,616 Total primary government 44,620,401 $ 44,383,057 $ 47,067,655 $ 51,541,055 $ 59,242,604 $ 60,667,040 $ 63,997,472 $ Change in Net Assets Governmental activities 965,574 $ 855,844 $ 552,817 $ 5,206,445 $ 8,188,633 $ (751,720) $ 1,755,325 $ Business-type activities 23,684,395 13,567,298 19,260,314 17,615,833 26,041,413 28,664,872 32,158,232 Total primary government 24,649,969 $ 14,423,142 $ 19,813,131 $ 22,822,278 $ 34,230,046 $ 27,913,152 $ 33,913,557 $ Fiscal Year 94 ---PAGE BREAK--- City of Farmington Schedule 3 Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 General Fund Reserved 439,874 $ 283,314 $ 229,464 $ 2,282,737 $ 2,256,852 $ 2,000,000 $ 3,393,756 $ 4,138,050 $ 4,386,101 $ 4,439,851 $ Unreserved 13,198,488 15,117,685 12,733,806 11,618,472 11,452,345 12,126,852 13,069,276 14,594,072 12,808,778 8,187,413 Total general fund 13,638,362 $ 15,400,999 $ 12,963,270 $ 13,901,209 $ 13,709,197 $ 14,126,852 $ 16,463,032 $ 18,732,122 $ 17,194,879 $ 12,627,264 $ All Other Governmental Funds Reserved Debt service funds 1,167,533 $ 1,109,110 $ 1,096,449 $ 406,768 $ 421,521 $ 422,104 $ 283,833 $ 287,735 $ 310,848 $ 328,475 $ Unreserved, reported in Special revenue funds 7,976,337 2,998,790 2,870,143 2,872,194 3,129,017 5,227,200 6,952,568 9,199,148 9,331,067 10,718,223 Capital projects funds 1,073,947 407,657 3,781,016 12,602,816 5,196,626 3,256,176 5,462,764 914,420 962,881 4,163,637 Total all other governmental funds 10,217,817 $ 4,515,557 $ 7,747,608 $ 15,881,778 $ 8,747,164 $ 8,905,480 $ 12,699,165 $ 10,401,303 $ 10,604,796 $ 15,210,335 $ 95 ---PAGE BREAK--- City of Farmington Schedule 4 Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Revenues Taxes 33,591,316 $ 36,336,066 $ 38,862,323 $ 41,112,611 $ 40,403,271 $ 41,936,943 $ 46,771,900 $ 53,932,065 $ 56,044,554 $ 58,848,446 $ Licenses and permits 545,882 541,787 605,528 556,573 605,478 602,971 819,869 951,280 765,694 794,169 Intergovernmental 5,458,960 4,684,185 3,083,418 1,761,181 1,869,860 2,674,803 2,238,291 2,929,307 2,600,396 3,623,207 Charges for services 623,128 591,993 599,326 852,738 978,022 1,170,531 1,365,408 1,840,336 1,637,437 1,769,334 Fines 560,224 923,530 1,069,025 1,265,848 1,403,928 1,602,721 1,418,646 1,133,053 1,222,171 1,341,297 Special assessments 160,775 180,097 92,337 77,800 72,337 61,327 46,859 36,370 39,943 18,591 Investment earnings 1,154,620 966,600 1,052,525 960,773 634,552 425,731 469,012 858,611 1,064,838 962,448 Miscellaneous 434,654 746,565 688,425 875,603 1,341,924 1,317,524 1,221,761 876,250 1,199,675 1,386,242 Total revenues 42,529,559 44,970,823 46,052,907 47,463,127 47,309,372 49,792,551 54,351,746 62,557,272 64,574,708 68,743,734 Expenditures Current General government 8,335,656 9,594,926 12,033,658 12,937,208 12,757,384 13,801,711 15,247,239 18,478,746 18,715,493 18,153,620 Police 7,377,884 9,680,015 9,861,647 9,499,112 10,359,890 10,690,905 10,647,826 12,606,701 14,678,179 15,536,666 Fire 4,069,023 4,245,944 4,426,573 4,491,634 4,719,878 5,416,395 5,097,630 5,872,350 7,265,724 8,298,829 Parks, recreation and cultural affairs 10,690,406 12,583,544 9,549,436 10,917,165 15,061,168 10,285,641 10,482,092 11,128,612 12,765,857 14,551,969 Community development 8,482,998 6,877,761 7,703,717 7,946,575 7,116,935 6,357,491 7,186,770 7,182,068 7,262,150 7,147,609 Debt service Principal 895,000 865,000 955,000 1,360,000 1,815,000 1,900,000 1,965,000 1,060,000 1,130,000 1,180,000 Interest 401,243 393,364 284,653 378,265 560,368 483,230 421,480 588,521 512,905 470,217 Arbitrage rebate - - - 34,387 - - - - - - Bond issuance costs - - - 70,733 - - - - - - Capital outlay 3,394,502 4,081,929 574,043 1,579,147 1,505,876 1,722,060 4,653,660 6,844,613 4,924,265 4,787,620 Total expenditures 43,646,712 48,322,483 45,388,727 49,214,226 53,896,499 50,657,433 55,701,697 63,761,611 67,254,573 70,126,530 Excess of revenues over (under) expenditures (1,117,153) (3,351,660) 664,180 (1,751,099) (6,587,127) (864,882) (1,349,951) (1,204,339) (2,679,865) (1,382,796) Other Financing Sources (Uses) Operating transfers in 2,566,188 3,088,479 5,540,599 960,119 104,810 2,539,337 2,856,182 3,000,104 3,288,811 7,168,448 Operating transfers out (2,571,575) (3,669,441) (5,603,991) (1,220,341) (844,310) (1,098,484) (1,101,365) (1,824,537) (1,942,696) (5,747,728) Refunding bonds issued - - - 15,076,862 - - - - - - Payment to refunded bond escrow agent - - - (4,412,245) - - - - - - Sale tax debt issuance - - - - - - 5,725,000 - - - Total other financing sources and uses (5,387) (580,962) (63,392) 10,404,395 (739,500) 1,440,853 7,479,817 1,175,567 1,346,115 1,420,720 Net change in fund balance (1,122,540) $ (3,932,622) $ 600,788 $ 8,653,296 $ (7,326,627) $ 575,971 $ 6,129,866 $ (28,772) $ (1,333,750) $ 37,924 $ Debt service as a percentage of noncapital expenditures 3.2% 3.2% 3.4% 4.5% 5.8% 5.4% 5.1% 3.3% 2.7% 2.6% 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 1999 369,609,573 15,294,090 $ 312,889,453 24,113,867 $ 188,514,391 15,499,911 $ 871,013,417 54,907,868 $ 2000 415,662,646 17,246,144 321,709,062 24,762,182 194,805,327 15,912,041 932,177,035 57,920,367 $ 2001 429,757,253 21,722,841 333,379,723 26,214,508 205,024,833 17,059,945 968,161,809 64,997,294 $ 2002 462,903,142 22,693,047 337,927,815 28,410,790 209,454,419 18,535,512 1,010,285,376 69,639,349 $ 2003 507,977,321 25,749,348 346,859,949 30,100,769 217,722,653 19,483,312 1,072,559,923 75,333,429 $ 2004 534,477,360 29,938,234 357,922,721 30,404,252 225,728,002 19,725,920 1,118,128,083 80,068,406 $ 2005 531,770,480 30,639,879 373,486,566 32,573,368 227,851,212 20,631,883 1,133,108,258 83,845,130 $ 2006 572,104,774 29,221,308 410,740,633 33,420,772 241,379,191 20,582,004 1,224,224,598 83,224,084 $ 2007 555,601,114 27,650,228 424,489,296 35,718,918 252,758,254 22,250,296 1,232,848,664 85,619,442 $ 2008 512,182,632 28,575,487 435,684,969 38,744,030 266,420,452 24,752,754 1,214,288,053 92,072,271 $ Change 1999-2008 38.6% 86.8% 39.2% 60.7% 41.3% 59.7% 39.4% 67.7% Total Industrial Commercial Residential 97 ---PAGE BREAK--- City of Farmington Schedule 6 Electric Rates by Customer Type 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 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 19,649,168 $ 1 21.34% - $ - - Transwestern Pipeline/Paragon/Enron 5,568,614 2 6.05% - - - Val Verde Gas Gathering, LP 2,694,491 3 2.93% - - - Western Refining Southwest, Inc. 2,262,084 4 2.46% 1,809,529 3 3.30% Praxair, Inc. 1,670,977 5 1.81% - - - San Juan Regional Medical Center 1,398,068 6 1.52% 742,226 5 1.35% San Juan College 985,412 7 1.07% 525,023 6 0.96% Wal-Mart/Sam's Club 701,468 8 0.76% 426,823 8 0.78% Animas Valley Mall 498,468 9 0.54% 431,547 7 0.79% XTO Energy, Inc. 440,780 10 0.48% - - - El Paso Field Services - - - 8,147,793 1 14.84% Burlington Resources Oil & Gas - - - 4,557,202 2 8.30% Enron Capital & Trade - - - 1,218,841 4 2.22% Smith's Food & Drug - - - 227,108 9 0.41% Western Gas Resources - - - 190,996 10 0.35% Total 35,869,530 $ 38.96% 18,277,088 $ 33.29% 2008 1999 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 1999 28,497,933 $ 796,418 $ 3,285,030 $ 1,011,935 $ 33,591,316 $ 2000 31,039,545 831,478 2,893,504 1,571,539 36,336,066 2001 33,213,633 883,140 3,177,912 1,587,638 38,862,323 2002 35,922,137 922,002 2,551,995 1,716,477 41,112,611 2003 35,146,693 930,112 2,601,794 1,724,672 40,403,271 2004 38,351,091 985,836 715,022 1,884,994 41,936,943 2005 43,134,352 1,043,064 720,748 1,873,736 46,771,900 2006 49,274,220 1,121,723 1,594,098 1,942,024 53,932,065 2007 51,818,982 1,235,064 1,045,698 1,944,810 56,044,554 2008 54,401,730 1,330,285 992,050 2,124,381 58,848,446 Change 1999-2008 90.9% 67.0% -69.8% 109.9% 75.2% Note: Prior to 2004, Payment in Lieu of Taxes (PILT) was reported in the Frinchise 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 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Agriculture 1,724 $ 2,199 $ 12 $ 208 $ 2,002 $ 2,461 $ 2,726 $ 2,769 $ 3,325 $ 3,284 $ Mining 71,688 100,802 117,792 125,093 108,454 122,936 133,973 192,806 222,893 185,838 Construction 77,766 96,788 74,984 97,131 98,292 90,069 118,025 142,174 124,428 121,996 Manufacturing 33,136 31,951 32,266 40,120 27,001 33,015 50,656 78,377 69,509 86,755 Trans/Comm/Utility 41,789 42,428 59,034 48,676 24,178 15,481 20,096 33,026 26,547 32,545 Wholesale Trade 83,114 84,959 101,477 103,921 76,836 85,158 113,951 160,468 197,225 164,098 Retail Trade 609,087 630,252 620,126 667,453 668,134 653,535 673,785 634,152 717,121 753,122 Information and Cultural - - - - - 25,225 44,094 43,293 51,774 51,018 Finance/Ins/Real Estate 21,750 22,326 23,176 22,102 21,467 20,539 21,001 26,338 30,878 34,686 Services 265,693 298,995 302,388 365,188 365,245 464,410 507,610 506,892 537,818 580,933 Government 216 - - - - 2,240 1,920 - - - Unclassified - - - 84 75,713 35,955 40,682 39,669 1,486 14,923 Undisclosed - - 24,620 24,705 33,493 30,835 28,708 26,503 26,258 28,647 Total 1,205,963 $ 1,310,700 $ 1,355,875 $ 1,494,681 $ 1,500,815 $ 1,581,859 $ 1,757,227 $ 1,886,467 $ 2,009,262 $ 2,057,845 City Direct Sales Tax Rate 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% Source: State of New Mexico Department of Taxation & Revenue distribution reports Data has been suppressed for purposes of taxpayer confidentiality. Information is suppressed when too few taxpayers are included in a category. Although the figures in the table have been derived from "NM_FR003-500 Local Gov't Distribution Summary" issued by the State, the State suppresses revenue information in certain categories, if release of the information would compromise the confidentiality of an individual taxpayer. Accordingly, the "Taxable Gross Receipts Tax" totals in this table will differ from those in other tables. Beginning with FY 2001, the Gross Receipts Tax information is derived from the NM_FR003-500 Local Gov't Distribution Summary. Prior year history stems from the previously used Report 080-Analysis of Gross Receipts. Beginning with the 1st Quarter of FY 2004, the State changed the gross receipts tax classification system in the report NM_FR003-500 Local Gov't Distribution Summary, from the Standard Industrial Classification format to the North American Industrial Classification format. Effective January 2005, state legislation removed the state and local options gross receipts tax (GRT) from the sales of food and most health care services, by allowing retail food outlets and medical service providers to deduct qualifying food and heath services from gross receipts reported to the NM Taxation and Revenue Department. However, municipalities and counties' are "held harmless" and are reimbursed the local option GRT on these nontaxable items from the State of New Mexico. The financing of this reimbursement is provided by an increase State GRT of Although the "taxable gross receipts" column does not include food sales and health care services, the amounts reported as GRT collected by the City does include these items. 101 ---PAGE BREAK--- City of Farmington Schedule 10 Direct and Overlapping Gross Receipts Tax Rates Last Ten Fiscal Years (rate per $1,000 of assessed value) Fiscal Year State GRT City Share of State GRT City Direct Rate San Juan County Total City GRT 1999 3.2750% 1.2250% 1.1875% 0.2500% 5.9375% 2000 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 2001 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 2002 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 2003 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 2004 3.2750% 1.2250% 1.1875% 0.6875% 6.3750% 2005 3.7750% 1.2250% 1.1875% 0.6875% 6.8750% 2006 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2007 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2008 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% Source: State of New Mexico Taxation and Revenue Note: The Local Option Gross Receipts can be increased by enacting a City Ordinance. An increase to Gross Receipts Tax by either raising the Municipal Infrastructure Tax or implementing the Municipal Capital Outlay Tax requires an election. 102 ---PAGE BREAK--- City of Farmington Schedule 11 Taxable Gross Receipts Payers by Industry Current Year and Nine Years Ago Ending 6/30 Number of Filers (12 Mth. Avg.) Percentage of Total Taxable Gross Receipts Percentage of Total Number of Filers (12 Mth. Avg.) Percentage of Total Taxable Gross Receipts Percentage of Total (thousands) (thousands) Agriculture 7 0.25% 3,284 $ 0.16% 1 0.05% 1,724 $ 0.14% Mining 59 2.07% 185,838 9.03% 51 2.32% 71,688 5.94% Construction 265 9.31% 121,996 5.93% 203 9.24% 77,766 6.45% Manufacturing 108 3.79% 86,755 4.22% 66 3.01% 33,136 2.75% Trans/Comm/Utility 42 1.48% 32,545 1.58% 97 4.42% 41,789 3.47% Wholesale Trade 189 6.64% 164,098 7.97% 140 6.38% 83,114 6.89% Retail Trade 639 22.45% 753,122 36.60% 618 28.14% 609,087 50.51% Information and Cultural 93 3.27% 51,018 2.48% - 0.00% - 0.00% Finance/Ins/Real Estate 121 4.25% 34,686 1.69% 66 3.01% 21,750 1.80% Services 1,294 45.47% 580,933 28.23% 944 42.99% 265,693 22.03% Government - 0.00% - 0.00% - 0.00% 216 0.02% Unclassified 24 0.84% 14,923 0.73% - 0.00% - 0.00% Undisclosed 5 0.18% 28,647 1.39% 10 0.46% - 0.00% Total 2,846 100.00% 2,057,845 $ 100.00% 2,196 100.00% 1,205,963 $ 100.00% Source: State of New Mexico Department of Taxation & Revenue distribution reports Notes: Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the city's revenue. Beginning with FY2001, the Gross Receipts Tax information is derived from the NM_FR003-500 Local Gov't Distribution Summary. Prior year history stems from the previously used NM Report 080-Analysis of Gross Receipts. Data has been suppressed for purposes of taxpayer confidentiality. Information is suppressed when too few taxpayers are included in a category. Although the figures in the table have been derived from "NM_FR003-500 Local Gov't Distribution Summary" issued by the state, the state suppresses revenue information in certain categories if the release of information would compromise the confidentiality of an individual taxpayer. Accordingly, the "Taxable Gross Receipts Tax" totals in this table will differ from those in other tables. Beginning with the 1st Quarter of FY 2004, the State changed the gross receipts tax classification system in the report NM_FR003-500 Local Gov't Distribution Summary from the Standard Industrial Classification format to the North American Industrial Classification format. Effective January 2005, state legislation removed state gross receipts tax from groceries and healthcare, and held municipal gross receitps tax "harmless". Fiscal Year 2008 Fiscal Year 1999 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 1999 267,418,680 $ 169,225,794 $ 47,930,836 $ 33,380,149 $ 451,195,161 $ 1.667 2.051 1,354,940,423 $ 33.3% 2000 305,827,139 238,899,699 52,732,381 57,201,892 540,257,327 1.539 1.916 1,622,394,375 33.3% 2001 315,605,501 242,149,847 56,231,225 54,407,855 559,578,718 1.582 1.935 1,680,416,571 33.3% 2002 301,906,840 266,855,420 61,117,936 53,434,815 576,445,381 1.584 1.905 1,731,067,210 33.3% 2003 355,058,558 270,933,390 65,556,230 56,984,789 634,563,389 1.510 1.806 1,905,595,763 33.3% 2004 373,904,326 279,329,944 66,969,671 59,092,903 661,111,038 1.526 1.850 1,985,318,432 33.3% 2005 414,565,770 290,602,457 69,183,296 61,710,344 712,641,179 1.496 1.877 2,140,063,601 33.3% 2006 449,119,354 300,261,150 72,774,277 61,449,809 760,704,972 1.511 1.877 2,284,399,315 33.3% 2007 518,861,269 343,707,380 80,889,474 67,559,512 875,898,611 1.434 1.824 2,630,326,159 33.3% 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% 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 1999 1.667 - 1.667 1.482 6.693 11.054 3.631 0.600 25.127 2000 1.539 - 1.539 1.529 6.096 10.814 3.307 0.600 23.885 2001 1.582 - 1.582 1.765 6.276 10.409 3.405 0.600 24.037 2002 1.584 - 1.584 1.123 6.285 10.346 3.410 0.600 23.348 2003 1.510 - 1.510 1.520 6.050 9.757 3.282 0.600 22.719 2004 1.526 - 1.526 1.028 6.661 9.794 3.342 0.600 22.951 2005 1.496 - 1.496 1.234 6.627 9.751 3.316 0.600 23.024 2006 1.511 - 1.511 1.291 6.737 9.800 3.371 0.600 23.310 2007 1.434 - 1.434 1.221 6.451 9.690 3.228 0.600 22.624 2008 1.457 - 1.457 1.250 6.567 9.725 3.283 0.600 22.882 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 1999 2.051 - 2.051 1.482 8.000 11.225 4.500 0.600 27.858 2000 1.916 - 1.916 1.529 8.000 11.077 4.500 0.600 27.622 2001 1.935 - 1.935 1.765 8.000 10.637 4.500 0.600 27.437 2002 1.905 - 1.905 1.123 8.000 10.469 4.500 0.600 26.597 2003 1.806 - 1.806 1.520 8.000 9.887 4.500 0.600 26.313 2004 1.850 - 1.850 1.028 8.500 9.943 4.500 0.600 26.421 2005 1.877 - 1.877 1.234 8.500 9.961 4.500 0.600 26.672 2006 1.925 - 1.925 1.291 8.500 9.934 4.500 0.600 26.750 2007 1.824 - 1.824 1.221 8.500 9.853 4.500 0.600 26.498 2008 1.879 - 1.879 1.250 8.500 9.902 4.500 0.600 26.631 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 Transwestern Pipeline Co. 32,948,246 $ 1 3.5% - - - Compressor Systems, Inc. 24,096,379 2 2.6% - - - Qwest Corporation 24,089,788 3 2.6% 5,256,497 2 1.2% Price Development (Animas Mall) 22,540,257 4 2.4% 7,656,407 1 1.7% Burlington Resources Oil and Gas LP. 17,965,692 5 1.9% 1,731,205 10 0.4% Alltel Communications 17,856,824 6 1.9% - - - Enterprise Field Service, LLC 16,363,543 7 1.8% - - - PNM Gas Services 14,845,614 8 1.6% 1,739,223 8 0.4% XTO Energy, Inc 12,292,269 9 1.3% - - - EES Leasing LLC 11,811,850 10 1.3% - - - Wal-Mart/Sam's Club - - - 3,690,826 3 0.8% Citizens Bank - - - 2,551,200 4 0.6% Farmington Medical Investors - - - 2,398,081 5 0.5% First National Bank - - - 2,336,705 6 0.5% SW Farmington Incorporated (The Inn) - - - 2,189,670 7 0.5% El Paso Field Service - - - 1,481,762 9 0.3% Total 194,810,462 $ 20.9% 31,031,576 $ 6.9% Source: San Juan County Assessor. 2008 1999 106 ---PAGE BREAK--- City of Farmington Schedule 15 Property Tax Levies and Collections Last Ten Fiscal Years Calendar Year Taxes Levied for the Fiscal Year Amount Percentage of Levy Collections in Subsequent Years Amount Percentage of Levy 1998 764,652 $ 753,653 $ 99% 36,620 $ 790,273 $ 103% 1999 789,988 782,611 99% 36,463 819,074 104% 2000 844,443 826,288 98% 31,365 857,653 102% 2001 899,429 865,899 96% 41,751 907,650 101% 2002 927,021 874,028 94% 38,212 912,240 98% 2003 971,270 926,305 95% 41,402 967,707 100% 2004 1,026,992 982,868 96% 37,284 1,020,152 99% 2005 1,103,523 1,055,826 96% 38,894 1,094,720 99% 2006 1,197,589 1,158,836 97% 43,328 1,202,164 100% 2007 1,320,436 1,257,590 95% 36,247 1,293,837 98% Source: San Juan County Treasurer Notes: Taxes are levied and collected by the County Treasurer and distributed to all taxing jurisdictions. The tax rate is requested by the City Council and set by the New Mexico Department of Finance and Administration. The State allows the rate to be set at 5% in excess of the requirements to allow for delinquencies. Collected Within the Fiscal Year of the Levy Total Collections to Date 107 ---PAGE BREAK--- City of Farmington Schedule 16 Ratios of Outstanding Debt by Type Last Ten Fiscal Years General Bonded Debt Governmental Activities Fiscal Year General Obligation Bonds Percentage of Actual Taxable Value of Property Per Capita Sales Tax Revenue Bonds Utility Revenue Bonds NMED Loan Capital Leases Total Primary Government Percentage of Personal Income Per Capita 1999 - N/A N/A 6,460,000 $ 96,935,000 $ $ - 309,478 $ 103,704,478 $ 14.2% 2,561 $ 2000 - N/A N/A 5,545,000 80,215,000 - 203,209 85,963,209 11.5% 2,123 2001 - N/A N/A 4,590,000 61,420,000 - 793,067 66,803,067 8.7% 1,629 2002 - N/A N/A 13,815,000 57,040,000 3,466,634 454,081 74,775,715 9.8% 1,869 2003 - N/A N/A 12,000,000 52,210,000 9,488,786 373,369 74,072,155 9.6% 1,829 2004 - N/A N/A 10,100,000 47,090,000 12,830,162 192,042 70,212,204 8.2% 1,696 2005 - N/A N/A 13,860,000 41,620,000 12,830,162 646,958 68,957,120 7.4% 1,630 2006 - N/A N/A 12,800,000 36,850,000 12,830,162 456,114 62,936,276 6.3% 1,457 2007 - N/A N/A 11,670,000 31,945,000 13,650,539 356,707 57,622,246 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 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 20 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year. Business-type Activities 108 ---PAGE BREAK--- City of Farmington Schedule 17 Direct and Overlapping Governmental Activities Debt As of June 30, 2008 Governmental Unit Debt Outstanding Estimated Percentage Applicable Estimated Share of Direct and Overlapping Debt San Juan County - $ 30.320% - $ Farmington Public Schools 30,645,000 100.000% 30,645,000 San Juan College 22,950,420 30.322% 6,959,026 Subtotal Overlapping Debt 37,604,026 City direct debt 10,490,000 Total direct and overlapping debt 48,094,026 $ 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 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Assessed Valuations Assessed Value 417,815,012 $ 483,055,435 $ 505,170,863 $ 523,010,566 $ 577,578,600 $ 602,018,135 $ 650,930,835 $ 699,255,163 $ 808,339,099 $ 862,849,412 $ Add back - exempt property 33,380,149 57,201,892 54,407,855 53,434,815 56,984,789 59,092,903 61,710,344 61,449,809 67,559,512 68,326,659 Total Assessed Value 451,195,161 540,257,327 559,578,718 576,445,381 634,563,389 661,111,038 712,641,179 760,704,972 875,898,611 931,176,071 Legal Debt Margin Debt limitation - 4 % of total assessed value 18,047,806 21,610,293 22,387,149 23,057,815 25,382,536 27,134,479 28,505,647 30,428,199 35,035,944 37,247,043 Debt applicable to limitation: Total bonded debt 103,395,000 85,760,000 66,010,000 70,855,000 64,210,000 57,190,000 55,480,000 49,650,000 43,615,000 37,300,000 Less: Revenue bonds (103,395,000) (85,760,000) (66,010,000) (70,855,000) (64,210,000) (57,190,000) (55,480,000) (49,650,000) (43,615,000) (37,300,000) Total net debt applicable to limitation - - - - - - - - - - Legal Debt Margin 18,047,806 $ 21,610,293 $ 22,387,149 $ 23,057,815 $ 25,382,536 $ 27,134,479 $ 28,505,647 $ 30,428,199 $ 35,035,944 $ 37,247,043 $ Excludes centrally assessed property. Fiscal Year 110 ---PAGE BREAK--- City of Farmington Schedule 19 Pledged-Revenue Coverage Last Ten Fiscal Years Fiscal Year Utility Service Less: Operating Net Available Sales Tax Charges Expenses Revenue Principal Interest Coverage Revenue Principal Interest Coverage 1999 70,945,775 $ 39,720,550 $ 31,225,225 $ 5,252,551 $ 7,518,423 $ 2.45% 14,471,250 $ 325,000 $ 279,368 $ 23.94% 2000 72,162,111 41,672,313 30,489,798 5,120,000 5,761,169 2.80% 15,761,881 340,000 263,118 26.13% 2001 95,338,525 52,772,478 42,566,047 5,385,000 3,625,288 4.72% 16,685,883 355,000 245,778 27.77% 2002 92,079,901 58,676,235 33,403,666 4,380,000 4,005,058 3.98% 18,241,261 965,000 368,188 13.68% 2003 91,914,248 61,217,128 30,697,120 4,350,000 2,726,755 4.34% 17,847,491 1,815,000 560,368 7.51% 2004 97,272,752 64,101,912 33,170,840 5,120,000 2,291,203 4.48% 19,474,684 1,900,000 483,230 8.17% 2005 104,017,779 73,226,886 30,790,893 5,470,000 2,048,221 4.10% 21,903,624 1,965,000 421,480 9.18% 2006 104,286,825 64,874,653 39,412,172 4,770,000 1,790,605 6.01% 25,021,449 1,060,000 588,522 15.18% 2007 107,924,587 65,220,228 42,704,359 4,905,000 1,647,505 6.52% 26,313,679 1,130,000 512,904 16.02% 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% z 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 1998 40,500 729,000,000 $ 18,000 $ 30.2 10,421 79.9% 18.4% 8.3% 1999 40,500 749,250,000 18,500 30.2 10,375 79.9% 18.4% 7.5% 2000 41,000 768,750,000 18,750 33.6 10,209 83.6% 19.7% 5.8% 2001 40,000 760,000,000 19,000 33.6 10,215 83.6% 19.7% 5.4% 2002 40,500 769,500,000 19,000 33.6 10,126 83.6% 19.7% 6.1% 2003 41,400 852,343,200 20,588 33.6 10,055 83.6% 19.7% 6.8% 2004 42,300 926,327,700 21,899 33.6 10,137 83.6% 19.7% 6.1% 2005 43,100 1,202,015,900 27,889 33.6 10,253 83.6% 19.7% 5.5% 2006 43,600 1,276,390,000 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% Sources: Statistical information prior to 2003 was obtained from City of Farmington Community Development mid-year staff estimate. Demographic information acquired from Bureau of Business and Economic Research, University of New Mexico, and the 1990 and 2000 Censuses. School enrollment provided by Farmington Municipal Schools as of the 40 day census. Unemployment information obtained from the New Mexico Deparment of Workforce Solutions. Per Capita Personal Income estimated for current year based on prior year percent change. Calendar Year 112 ---PAGE BREAK--- City of Farmington Schedule 21 Principal Employers Current Year and Seven Years Ago Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment San Juan Regional Medical Center 1,465 1 2.5% 1,200 1 2.4% Farmington Public Schools 1,213 2 2.1% 1,186 2 2.3% Central Consolidated Schools 1,157 3 2.0% 1,149 3 2.3% BHP Billiton 1,057 4 1.8% 889 4 1.7% City of Farmington 742 5 1.3% 800 5 1.6% San Juan County 721 6 1.2% - - 0.0% Arizona Public Service 700 7 1.2% 565 7 1.1% Aztec Oil & Well 700 8 1.2% - - - Conoco Philips 620 9 1.1% - - - Key Energy Service 620 10 1.1% - - - San Juan College - - - 650 6 1.3% Bloomfield Municipal Schools - - - 500 8 1.0% Public Service Company of New Mexico - - - 428 9 0.8% Aztec Municipal Schools - - - 415 10 0.8% Total 8,995 15.3% 7,782 15.3% Source: San Juan Economic Development Service and the Farmington Chamber of Commerce Note: Statistical data is representative of entire county as City data is not available. Earliest accessible information is 2000. 2008 2001 113 ---PAGE BREAK--- City of Farmington Schedule 22 Full-time-Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 General Government Administration 34.5 36.5 36.5 37.5 37.5 37.5 38.5 39.5 40.5 72.5 Administrative Services 28.0 28.0 29.0 30.0 31.0 31.0 31.0 31.0 32.0 31.0 General Services 30.0 30.0 32.0 32.0 38.0 37.0 36.0 36.0 46.0 46.0 Police 135.2 140.5 143.5 147.5 148.5 148.5 148.5 159.5 172.5 174.5 Fire 71.0 73.0 73.0 73.0 73.0 73.0 73.0 82.0 96.0 96.0 Parks, Recreation and Cultural Affairs 94.5 96.5 103.5 107.0 112.0 114.0 114.0 118.0 124.0 104.0 Community Development 66.0 65.0 65.0 67.0 68.0 68.0 70.0 73.0 74.0 75.0 Electric 130.0 130.0 130.0 133.0 135.0 135.0 144.0 146.0 166.0 177.0 Human Resources 10.0 10.0 11.0 10.0 10.0 10.0 10.0 11.0 11.0 12.0 Water/Wastewater 2.0 3.0 3.0 4.0 7.0 7.0 8.0 8.0 8.0 8.0 Golf 8.0 8.0 8.0 8.0 8.0 8.0 8.0 7.0 7.0 7.0 Airport 5.5 5.5 5.5 5.5 5.5 5.5 5.5 6.5 6.5 6.5 Total Employees 614.7 626.0 640.0 654.5 673.5 674.5 686.5 717.5 783.5 809.5 Source: City of Farmington Program Budget - Staffing Analysis Section, past ten years Note: Full-time-Equivalent includes all approved budgeted positions. Budgeted Full-Time-Equivalent Employees as of June 30 114 ---PAGE BREAK--- City of Farmington Schedule 23 Operating Indicators by Function/Program Last Ten Fiscal Years Fiscal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 General Government Total number of business registration/licenses 2,589 2,618 2,515 2,549 2,576 2,730 2,680 2,739 2,839 3,926 Police Police reports 6,605 7,462 8,213 8,429 7,177 6,512 6,636 6,254 6,500 6,770 Arrests 4,505 4,913 5,211 5,472 5,118 4,523 4,400 3,814 3,787 4,113 Traffic citations 18,291 27,219 23,898 23,475 26,147 22,274 17,473 16,263 18,982 24,449 Fire Fire alarm responses 782 938 1,033 886 804 772 700 888 760 927 Total responses 3,961 3,670 4,167 4,195 4,160 4,746 4,885 5,457 5,825 6,386 Parks and Recreation Parks and recreation participants 352,410 340,732 338,043 320,048 310,076 304,701 299,248 309,546 305,279 349,042 Library Library Visits 337,569 322,209 307,982 289,280 247,983 327,505 410,690 427,831 436,629 503,148 Circulation 292,266 280,404 271,748 279,452 280,022 392,221 490,717 517,654 468,998 489,126 Number of Volumes 165,235 194,222 207,270 165,195 174,689 162,653 174,381 187,431 186,966 183,922 Museum Patrons 38,277 60,350 53,544 47,281 57,782 52,314 64,572 75,427 71,332 65,784 Community Development Summary plats N/A 36 54 49 43 38 89 77 71 66 Building permits issued 1,861 1,797 1,315 1,382 1,339 1,443 1,554 1,494 1,539 1,334 Permit valuation (in 48,352,181 40,301,508 47,969,286 41,087,054 47,827,308 54,288,877 76,647,366 99,406,673 68,119,054 82,560,865 Asphalt placed (sq.ft.) 96,973 81,722 125,456 106,852 96,798 123,514 83,727 132,216 88,582 103,006 Concrete placed (cu.yd.) 1,029 821 762 1,071 1,032 756 698 441 727 2,199 Electric Meter connections 6,200 7,318 7,262 8,608 9,201 9,478 9,265 9,387 8,769 8,484 Meter reads 600,084 611,911 576,928 567,942 558,859 554,291 561,898 541,090 559,121 510,751 Water/Wastewater Water treated (millions of gallons) 4,062 4,011 4,100 4,534 4,452 4,057 3,366 3,842 4,029 4,346 Effluent treated (millions of gallons) 1,824 1,790 1,779 1,772 1,832 1,781 1,858 1,881 2,057 1,906 New water meter installations 216 221 191 177 176 205 304 373 342 262 Golf Golf course participants 78,408 70,626 62,274 58,466 54,388 58,399 60,999 71,689 60,455 65,791 Airport Total enplanements 63,774 63,403 62,459 39,085 27,160 30,132 35,503 32,575 30,177 26,472 Source: Provided by various City Departments Note: Fluctuation in museum patronage is due to special exhibits. 115 ---PAGE BREAK--- City of Farmington Schedule 24 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Police Police stations 1 1 1 1 1 1 1 1 1 1 Sub-stations 3 4 3 3 3 3 3 3 3 4 Patrol vehicles 141 151 158 166 170 172 155 170 186 196 Fire stations 5 5 5 5 5 5 5 6 6 6 Parks and Recreation Developed acres 529 584 584 584 586 588 588 589 592 594 Undeveloped acres 1,740 1,275 1,275 1,275 1,273 1,282 1,289 1,288 1,285 1,283 Number of parks/facilities 59 70 71 76 77 79 80 80 80 80 Baseball/softball diamonds 24 24 24 24 24 24 25 25 24 24 Soccer/football fields 11 11 11 11 11 11 13 13 14 14 Number of golf courses 2 2 2 2 2 2 2 2 2 2 Community Development Streets (miles) N/A N/A N/A 234 235 238 240 245 253 N/A Highway (miles) N/A N/A N/A 17 17 17 17 17 17 17 Streetlights N/A N/A N/A 3,843 3,871 3,915 3,933 3,971 4,124 4,135 Traffic Signals N/A N/A N/A 73 74 75 76 77 78 79 Water Water mains (miles) N/A N/A N/A 310 318 325 330 336 336 340 Fire hydrants N/A N/A N/A 1,866 2,010 2,154 2,296 2,360 2,400 2,670 Storage capacity (thousands of gallons) N/A N/A N/A 24,300 24,300 24,300 24,300 24,300 24,300 24,300 Wastewater Sanitary sewers (miles) N/A N/A N/A 191 195 199 203 207 275 277 Treatment capacity (thousands of gallons) N/A N/A N/A 5,800 5,800 6,670 6,670 6,670 6,670 6,670 Transit - minibuses/vans N/A N/A 8 8 8 8 8 8 11 11 Source: Provided by various City department Note: The city implemented GASB Statement 34 infrastructure information in fiscal year 2002. Fiscal Year 116 ---PAGE BREAK--- Single Audit Section Single Audit Section ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2008 Grantor / CFDA Pass-through PROGRAM NAME Number ID Number Expenditures DIRECT PROGRAMS Airport Improvement Program 20.106 U.S. Department of Transportation $ 148,371 2006 Project Airport Improvement Program 20.106 U.S. Department of Transportation 2,510,467 2007 Project Community Development Block Grant (CDBG) 14.228 U.S. Department of Housing and Urban 669,451 Development Federal Transit - Metropolitan Transit Operations 20.505 U.S. Department of Transportation 507,409 and Capital - Red Apple Transit Federal Transit - Metropolitan Transit Operations 20.505 U.S. Department of Transportation 111,873 MPO Edward Byrne Memorial Justice Assistance 16.738 U.S. Department of Justice 102,263 Grant Program 2007 HIDTA Grant 16.000 Office of the President 9,986 I5PSNP572 HIDTA Grant 16.000 Office of the President 45,843 I6PSNP572 HIDTA Grant 16.000 Office of the President 176,878 I7PSNP572 PASS THROUGH PROGRAMS From the State of New Mexico Department of Public Safety Region II Narcotics Grant (U.N.E.T.) 16.579 U.S. Department of Justice 122,604 04-DCSI-PPA 02-REGION II-FY07 Region II Narcotics Grant (U.N.E.T.) 16.579 U.S. Department of Justice 176,597 04-JAG-REGION II-FY08 Total Federal Assistance $ 4,581,742 See accompanying notes to the Schedule of Expenditures of Federal Awards. 117 ---PAGE BREAK--- CITY OF FARMINGTON NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2008 NOTE 1 - SCOPE OF AUDIT PURSUANT TO OMB CIRCULAR A-133 All federal grant operations of the City of Farmington (the “City”) are included in the scope of the Office of Management and Budget (“OMB”) Circular A-133 audit (the “Single Audit”). The Single Audit was performed in accordance with the provisions of the OMB Circular Compliance Supplement. Compliance testing of all requirements as described in the Compliance Supplement was performed for the grant programs noted below. These programs represent all federal award programs and other grants with fiscal 2008 cash and non-cash expenditures to ensure coverage of at least 25 percent (low risk auditee) of federally granted funds. Actual coverage is 58% of total cash and non-cash federal award program expenditures. Major Federal Award Program Description Fiscal Year 2008 Expenditure 20.106 – Airport Improvement Program – All Projects $2,658,838 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The accompanying Schedule of Expenditures of Federal Awards includes all federal grants to the City that had activity during the fiscal year ended June 30, 2008. This schedule has been prepared on the accrual basis of accounting. Grant revenues are recorded for financial reporting purposes when the City has met the qualifications for the respective grants. Accrued and deferred reimbursements Various reimbursement procedures are used for Federal awards received by the City. Consequently, timing differences between expenditures and program reimbursements can exist at the beginning and end of the year. Accrued balances at year-end represent an excess of reimbursable expenditures over receipts to date. Generally, accrued or deferred balances covered by differences in the timing of cash receipts and expenditures will be reversed in the remaining grant period. 118 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2008 A. SUMMARY OF AUDIT RESULTS 1. The auditors’ report expresses an unqualified opinion on the basic financial statements of the City of Farmington. 2. No significant deficiencies relating to the audit of the financial statements are reported in the Independent Auditor’s Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the financial statements of the City were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award programs are reported in the Independent Auditors’ Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133. 5. The auditor’s report on compliance for the major federal award programs for the City expresses an unqualified opinion. 6. No audit findings relative to the major federal award programs for the City are reported in Part C. of this Schedule. 7. The program tested as major programs included: Major Federal Award Program Description Fiscal Year 2008 Expenditure 20.106 – Airport Improvement Program – 2007 Project $2,510,467 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The City was determined to be a low-risk auditee. 123 ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2008 B. FINDINGS – FINANCIAL STATEMENTS AUDIT Prior Year Findings Status 2007-1 Budgetary Basis of Accounting Cleared 2007-2 Inventory Adjustments Cleared 2007-3 Purchase Card Violation Not cleared and repeated Current Year Findings 2007-3 Purchase Card Violation Condition During our test of disbursements we noted an invoice from Turner Electric Corporation in the amount of $6,314.88 was split into smaller amounts ($4,000.00 and $2,314.88) so that the Purchase Card could be used without going over the Purchase Card limit. Criteria The Purchase Card can be used for purchases of less then $5,000. Cause The Purchase Card was used for a purchase that exceeded the $5,000 amount. Effect The City’s procurement process was avoided by splitting the invoice into smaller amounts so that the Purchase Card could be used for the purchase. Recommendation The City should establish policies and procedures to determine that the employees are not avoiding the intent of the City’s procurement process. Management Response An electric employee requested to have a temporary increase on their card for this specific transaction but the liaison for this employee’s card did not request a sufficient increase to cover the purchase. The liaison will strive to ensure that P-card increase requests are followed up on more carefully. The City Manager has reinforced the P-card policy to all employees. 124 ---PAGE BREAK--- 2008-1 Actual Expenses Exceeded Final Budget Condition The City’s actual expenses exceeded final budget in the Airport Enterprise Fund. Criteria The City is not in compliance with State Statue 6-6-6 NMSA 1978 regarding expenses not exceeding budgeted authority. The State requires that actual expenses do not exceed final budgeted expenses. Cause The City did not sufficiently increase budgeted expenses at year end to cover actual expenses for the year ended June 30, 2008. Effect The City is not in compliance with the State Statue regarding expenses not exceeding budgeted authority. Recommendation The City should adopt a final budget so that actual expenses will not exceed budgeted expenditures. Management Response The revenue budget was increased during the year for the Airport Enterprise Fund to cover cash deficits from project expenditures. However, corresponding increases in budgeted expenses were not sufficient to cover the actual project costs. Staff will work to ensure that future budget adjustments will be sufficient to cover expenditures. 125 ---PAGE BREAK--- 2008-2 Professional Service Contracts Condition The City contracted with Moss Adams LLP in April 2007 to provide professional services without the prior written approval of the State Auditor, as prohibited by Section 2.2.2.8.H(3) NMAC 2008. Criteria The State Auditor Office Rule 2.2.2.8.H(3) NMAC 2008 requires prior written approval of the State Auditor for professional services contracts. Cause City personnel involved were not aware that information systems fall under the guidelines of the State Auditor Rule governing financial audits. Effect The City is not in compliance with State Auditor Office Rule 2.2.2.8.H(3) NMAC 2008. Recommendation The City should ensure that all employees involved in contracting with audit firms are aware of the State Auditor Rule requirements. Management Response The City has conveyed the State Audit Rule requirements on contracting audit assignments to all pertinent employees and will include this requirement in the training of all new employees involved in contracting services for the City. 126 ---PAGE BREAK--- REPORT AND OTHER INFORMATION REQUIRED BY THE PASSENGER FACILITY CHARGE AUDIT GUIDE FOR PUBLIC AGENCIES 127 ---PAGE BREAK--- 128 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- PFC Revenue and Disbursement Schedule Four Corners Regional Airport FY-08 7/1/07 - 6/30/08 FY-07 Quarter 1 Quarter 2 Quarter 3 Quarter 4 FY-08 FY-08 Program Total Jul-Sept Oct-Dec Jan-Mar Apr-Jun Total Program Total Revenue Collections 310,127 $ 21,087 $ 19,772 $ 17,580 $ 14,109 $ 72,548 $ 382,675 $ Interest - - - - - - - Total Revenue 310,127 21,087 19,772 17,580 14,109 72,548 382,675 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 Imporvements 18,859 21,087 19,772 17,580 14,109 72,548 91,407 Proj. 1-D Drainage Improvements - - - - - - - Proj. 1-E Sinage Improvements - - - - - - - Proj. 1-F Airfield Electrical Improvements - - - - - - - Proj. 1-G Security Improvements - - - - - - - Proj. 1-H Terminal Improvements - - - - - - - Proj. 1-I Non-revenue Parking Improvements - - - - - - - Proj. 1-J Acquire Safety Equipment - - - - - - - Proj. 1-K Conduct Planning - - - - - - - Proj. 1-L Improve Service Roads - - - - - - - Proj. 1-M Administrative Costs - - - - - - - Total App 01 310,127 21,087 19,772 17,580 14,109 72,548 382,675 Total Disbursements 310,127 21,087 19,772 17,580 14,109 72,548 382,675 Net PFC Revenue (rev-disb.) PFC Account Balance - $ - $ - $ - $ - $ - $ - $ The schedule is on a cash basis. 131 ---PAGE BREAK--- CITY OF FARMINGTON PASSENGER FACILITY CHARGE PROGRAM AUDIT SUMMARY Year Ended June 30, 2008 1. Type of report issued on PFC financial statements - Unqualified. 2. Type of report on PFC compliance – Unqualified. 3. Quarterly Revenue and Disbursements reconcile with submitted quarterly reports and reported un-liquidated revenue matches actual amounts – Yes. 4. PFC Revenue and Interest is accurately reported on FAA Form 5100-127 – Yes. 5. The Public Agency maintains a separate financial accounting record for each application – Yes. 6. Funds disbursed were for PFC eligible items as identified in the FAA Decision to pay only for allowable costs of the projects – Yes. 7. carrier receipts were reconciled with quarterly carrier reports – Yes. 8. PFC revenues were maintained in a separate interest-bearing capital account or commingled only with other interest-bearing airport capital funds – Yes. 9. Serving carriers were notified of PFC program actions/changes approved by the FAA – N/A. 10. Quarterly Reports were transmitted (or available via website) to remitting carriers – Yes. 11. The Public Agency is in compliance with Assurances 5, 6, 7 and 8 – Yes. 12. Project design and implementation is carried out in accordance with Assurance 9 – Yes. 13. Program administration is carried out in accordance with Assurance 10 – Yes. 14. For those public agencies with excess revenue, a plan for the use of this revenue has been submitted to the FAA for review and concurrence – N/A. 132 ---PAGE BREAK--- CITY OF FARMINGTON EXIT CONFERENCE Year Ended June 30, 2008 An exit conference was held on November 12, 2008. In attendance were: For the City of Farmington: William Standley Mayor Rob Mayes City Manager Andy Mason Administrative Services Director Eric Schlotthauer Controller Steve Ellison Budget Officer Sheree Wilson Enterprise Accountant For David Berry, CPA, PC (auditors): David Berry CPA 133 ---PAGE BREAK--- 134 ---PAGE BREAK--- OTHER INFORMATION OTHER INFORMATION ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF PLEDGED COLLATERAL June 30, 2008 Citizens Bank of Bank of Wells Vectra America Farmington Fargo Bank City of Farmington Deposits Demand Deposit Accounts $ - $ 598,906 $ 631,553 $ - Overnight Deposits - - 3,325,367 - Certificate of Deposit 2,000,000 19,100,000 21,000,000 2,000,000 Sub-Total 2,000,000 19,698,906 24,956,921 2,000,000 Less FDIC insurance 100,000 100,000 200,000 100,000 Uninsured amount 1,900,000 19,598,906 24,756,921 1,900,000 Pledge Collateral Required 102 percent - overnight - - 3,391,874 - 50 percent - deposits 950,000 9,799,453 10,715,777 950,000 Total Pledged Collateral Required 950,000 9,799,453 14,107,651 950,000 Pledged collateral 985,729 12,547,113 19,394,393 1,350,134 Excess of pledged collateral $ 35,729 $ 2,747,660 $ 5,286,741 $ 400,134 Pledged collateral (market value) and location of each respective financial institution consists of the following: Location of of collateral Dallas, TX Dallas, TX Los Angeles San Francisco Federal Home Loan Bank cusip # 3133XKQ65 05/15/12 $ $ 1,018,750 $ 60,477 $ cusip # 31359MSL8 07/17/13 5,045,300 cusip # 3136F6YL7 12/25/12 2,791,883 cusip # 31371LPU7 04/01/14 1,690,916 cusip # 31393APP6 12/25/32 749,814 cusip # 31394HYD7 05/15/16 1,250,450 cusip # 3128JNVM4 01/01/37 1,350,134 FNMS cusip # 31385XAZO 05/01/33 985,729 FNCL cusip # 31385HXE7 11/01/31 9,827 cusip # 31407HS80 02/01/36 127,660 cusip # 31407HZN9 05/01/36 12,262,528 cusip # 31408HBY0 03/01/36 259,762 cusip # 31409DUS0 04/01/36 1,843,975 cusip # 31409WAJ0 04/01/36 919,735 cusip # 31414RGN9 04/01/38 3,325,367 G2SF cusip # 36202DUV1 10/20/32 36,111 GNSF cusip # 36225BEK0 05/15/29 468,467 cusip # 36225BEV6 06/15/29 26,988 cusip # 36225BKX5 09/15/29 31,217 cusip # 36225BM39 04/15/31 22,279 $ 985,729 $ 12,547,113 $ 19,394,393 $ 1,350,134 135 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF JOINT POWERS AGREEMENTS June 30, 2008 Participants Responsible Dates of Total Amount/ FY08 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 06/30/10$23,000/$11,180 11,180 $ City of Aztec San Juan County Aztec,Bloomfield, Water Water issues 3/5/86 until termination $18.2m/32.46% - Water Commission San Juan County Commission San Juan Water Users Assoc. Aztec,Bloomfield, SJ County, San Juan County Police Training 8/07/96 until termination $75,000/$35,150 35,150 $ SJ College NM Dept. of Public Safety Crimminal Justice San Juan College Training Authority Aztec,Bloomfield & City of Farmington Recycling Center 11/1/97 until termination $63,174/$56,682 56,682 $ Each entity San Juan County San Juan County San Juan County Septage Station 12/16/94 through 12/16/14$200,000/operating in-kind only City Aztec,Bloomfield, B.L.M. Trash Force Ilegal dumping 9/26/91 until termination As needed in-kind only City San Juan County N.M.Environment Dept. San Juan County City of Farmington Impact Fees 2/15/96 perpetual Fee for service - City Aztec,Bloomfield, All Participants Solid Waste 03/25/92 As required - City San Juan County NM Taxation & Revenue Tax & Revenue Taxpayer Identi. 05/17/89 perpetual Not applicable - City NM Community Development Dept. of Finance Title 1 Housing 04/12/00 perpetual Not applicable - City Council and NM Dept of Finance & Admin. Aztec,Bloomfield, SJ County City of Farmington MPO 3/11/03 until terminated $ 88,857 / $ 53,314 53,314 $ City San Juan County San Juan County Detention Center 12/16/04 to 6/30/08 $11,461,562/$1,387,696 1,387,696 $ San Juan County San Juan County San Juan County DWI Treatment Ctr 04/15/98 until terminated $2,477,472 / $440,000 440,000 $ San Juan County NM Energy, Minerals and Natural Resources Department (NMEMNRD) NMEMNRD Wildfire Firefighting 12/12/05 until terminated $105,566 / $105,566 105,566 $ NMEMNRD NMEMNRD City of Farmington Wilderness Trails 01/09/06 to 11/30/09 $39,154 / $ 12,533 - $ NMEMNRD 136