Document Fernley_doc_f1b991a5fa

Comprehensive Annual Financial Report City of Fernley, Nevada For the Fiscal Year Ended June 30, 2010 Prepared by: Finance Department Melville Drown Finance Director City Treasurer ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal i-vi GFOA Certificate of Achievement vii Organization Chart viii List of Principal Officials ix FINANCIAL SECTION Independent Auditor’s Report 1-2 Management’s Discussion and Analysis 3A-3M Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets 4 Statement of Activities 5 Fund Financial Statements: Balance Sheet – Governmental Funds 6 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 7 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 8 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 9 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual General Fund 10-12 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Residential Construction Tax District #1 Special Revenue Fund 13 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Streets and Storm Drains Special Revenue Fund 14 Statement of Net Assets – Proprietary Funds 15 Statement of Revenues, Expenses and Changes in Net Assets – Proprietary Funds 16 Statement of Cash Flows – Proprietary Funds 17 Statement of Fiduciary Assets and Liabilities – Fiduciary Fund 18 Notes to Financial Statements 19-43 Required Supplementary Information: Schedule of Funding Progress – Other Postemployment Benefit Plans 44 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010 TABLE OF CONTENTS (Continued) Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet 45 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 46 Governmental Special Revenue Funds: Nonmajor Special Revenue Funds Combining Balance Sheet 47 Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances 48 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: Municipal Court Administrative Fees Special Revenue Fund 49 Municipal Court Facilities Fees Special Revenue Fund 50 Residential Construction Tax District #2 Special Revenue Fund 51 Grants Special Revenue Fund 52 Private Sector Community Support Special Revenue Fund 53 Transient Lodging Tax Fund 54 Governmental Capital Projects Funds: Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: Capital Projects Fund 55 Nonmajor Capital Improvement Fund Balance Sheet 56 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: Nonmajor Capital Improvement Fund 57 Proprietary Funds: Schedule of Revenues, Expenses and Changes in Net Assets – Budget and Actual: Water Utility Enterprise Fund 58 Sewer Utility Enterprise Fund 59 Fiduciary Funds: Municipal Trust Fund Statement of Changes in Assets and Liabilities 60 Schedule No. Page STATISTICAL SECTION Financial Trends Information: Net Assets by Component 1 61 Change in Net Assets 2 62-63 Fund Balances of Governmental Funds 3 64 Changes in the Fund Balances of Governmental Funds 4 65 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010 TABLE OF CONTENTS (Continued) Schedule No. Page Revenue Capacity Information: Assessed and Estimated Actual Value of Taxable Property 5 66 Property Tax Rates - Direct and Overlapping Governments (Per $100 of Assessed Value) 6 67 Principal Property Owners 7 68 Water User Fees 8 69 Principal Water Users 9 70 Debt Capacity Information Ratios of Outstanding Debt by Type 10 71 Ratios of General Bonded Debt Outstanding 11 72 Computation of General Obligation Direct and Overlapping Debt 12 73 Computation of Legal Debt Margin 13 74 Water and Sewer Funds Revenue Bond Coverage 14 75 Demographic and Economic Information: Demographic Statistics 15 76 Major Employers 16 77 Operating Information: Full-time Equivalent City Government Employees by Function – Last Nine Fiscal Years 17 78 Operating Indicators by Function – Last Eight Fiscal Years 18 79 Capital Asset Statistics by Function/Program – Last Nine Fiscal Years 19 80 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010 TABLE OF CONTENTS (Continued) COMPLIANCE SECTION Independent Auditor’s 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 81-82 Independent Auditor’s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 83-84 Schedule of Expenditures of Federal Awards 85 Notes to Schedule of Expenditures of Federal Awards 86 Schedule of Findings and Questioned Costs 87-89 Summary Schedule of Prior Year Audit Findings 90 AUDITOR’S COMMENTS Statute Compliance 91 Progress on Prior Year Statute Compliance 91 Prior Year Recommendations 91 Current Year Recommendations 91 Schedule of Fees Imposed Subject to the Provisions of NRS 354.5989 Limitation of Fees for Business Licenses 92 Independent Accountant’s Report on NRS 354.6241 93 ---PAGE BREAK--- INTRODUCTORY SECTION ---PAGE BREAK--- City of Fernley Finance Department Utility Billing Accounting Budgeting Treasury 595 Silver Lace Blvd. Fernley NV 89408 Telephone: (775) 784-9843 Fax: (775) 784-9999 January 3, 2011 To the Honorable Mayor, Members of the City Council, and Citizens of the City of Fernley Nevada: The comprehensive annual financial report (CAFR) for the City of Fernley for the fiscal year ended June 30, 2010 is hereby submitted. State law requires that local governments provide for an annual audit by independent certified public accountants of its financial statements in accordance with auditing standards generally accepted in the United States of America. This report consists of management’s representations concerning the finances of the City of Fernley. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in the report. To provide a reasonable basis for making these representations, management of the City of Fernley has established a comprehensive internal control framework that is designed both to protect the City’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Fernley’s financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Because the cost of internal controls should not outweigh their benefits, the City of Fernley’ comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City of Fernley’s financial statements have been audited by Kafoury, & Co., a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Fernley for the fiscal year ended June 30, 2010 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Fernley’s financial statements for the fiscal year ended June 30, 2010, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. ---PAGE BREAK--- City of Fernley Finance Department ii This is the third consecutive year the City has required the single audit. Because the City of Fernley expended more that $500,000 in federal financial assistance during the fiscal year ended June 30, 2010, the City of Fernley was required to have the federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditors to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. . GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Fernley’s MD&A can be found immediately following the report of the independent auditors. Profile of the Government The City of Fernley, incorporated in 2001, is located in western Nevada. The City of Fernley currently occupies a land area of 164 square miles and serves a population of approximately 18,929 according to the Nevada State demographer 2010 population estimates. The City of Fernley is empowered to levy a property tax on both real and personal properties located within its boundaries. The City of Fernley is also empowered by state statute to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the City Council. The City of Fernley operates under the council-manager form of government. Policy- making and legislative authority are vested in a governing council consisting of the mayor and five City Council members. The City Council is responsible, among other things, for establishing policy, passing ordinances, adopting the budget, appointing committees, and establishing the organizational structure of the City. Pursuant to state statutes, the Mayor is the Chief Executive Officer of the City. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for supervising the heads of various departments. The City Manager is the Chief Administrative Officer of the City. The City Council members are elected by Ward to serve four year staggered terms. The Mayor is elected citywide to serve a four-year term. The City of Fernley provides a wide range of services, including construction and maintenance of streets and infrastructure; water and sewer services; recreational activities and events; vector and animal control; community development services and general administrative services. The City of Fernley contracts with the Lyon County Sheriff for police protection services. The City contracts with Lyon County for animal shelter ---PAGE BREAK--- City of Fernley Finance Department iii services. Fire protection services are provided through the legally separate North Lyon County Fire Protection District. The Fernley Swimming Pool District owns and operates a swimming pool in Fernley. The District is formed under NRS 318 to provide recreation/pool services. Lyon County and the Lyon County School District also provide regional services in Fernley. The annual budget serves as the foundation for the City of Fernley’s financial planning and control. All departments of the City of Fernley are required to submit requests for appropriation to the City Manager in February of each year. The City Manager uses these requests as the staring point for developing a proposed budget. The City Manager then presents this proposed budget to the City Council for review and a series of City Council workshops are held to discuss the budget. The City Council is required to hold a public hearing on the proposed budget and adopt a final budget by no later than June 1 of each year. The appropriated budget is prepared by fund, function, and department. Department heads may make transfers of appropriations within a department. Transfers of appropriations between departments, however, require the special approval of the City Council. Budget-to actual comparisons are provided in this report for each individual governmental fund for which an appropriated budget has been adopted. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Fernley operates. The City of Fernley enjoyed a favorable economic environment and has been the fastest growing city (in percentage terms) in Nevada. Connections to the water and sewer system and population have more than doubled in the previous six years. However, the City of Fernley now finds itself experiencing the same economic slowdown as the rest of the State of Nevada. Currently, Lyon County leads the State in unemployment (17.2%) and one in 50 homes have received some sort of a foreclosure filing in the City of Fernley As a result, the economy in the City of Fernley is being challenged on a scale that is higher than other rural communities in Nevada. The fiscal policy of the State of Nevada has been structured to provide revenue from property taxes and sales tax. Revenue to local government has come primarily from the above mentioned sources and from significant fees from residential and commercial development. Taxes and fees have declined significantly in the City of Fernley. The “City” is presently developing business strategies that will help attract both residential and commercial developers to the City of Fernley. Manufacturing and transportation represents approximately 50% of business in the City Fernley (Angelou Economics, 2006; City of Fernley Business License). Several companies have located facilities in Fernley, benefiting the community and leading the ---PAGE BREAK--- City of Fernley Finance Department iv way into the future. There are several fortune 500 companies that have established facilities in Fernley including, Amazon.com, Trex Inc., Worldcolor Printing, MSC Industrial Supply, Agru America, UPS Worldwide Logistics (Honeywell), Johns Manville, Sherwin Williams, and Feldmeir Corporation, Wal Mart and Lowe’s. Recent development includes the relocation of the Regional Southwest Gas facility from Fallon, Nevada, the opening of the Fernley Nugget Casino and Black Bear Restaurant, Wal Greens Drug Store and some smaller commercial projects along the Main Street Corridor. During FY10, the City of Fernley had a tax rate of $0.351 per $100 of assessed valuation. In the last 18 months, the City of Fernley’s elected Mayor resigned and a new Mayor has been appointed, two council wards have held recall elections. One election resulted in a sitting councilmember being recalled and a new councilmember being seated. The second recall election was unsuccessful. The City of Fernley appointed a new City Manager, Treasurer/Finance Director, and City Attorney. Nothing has occurred during the fiscal year ending June 30, 2010 that would indicate that any of the City’s financial policies had any negative effect on the City of Fernley and it’s ability to conduct business. Long-term financial planning: The City of Fernley has many long range plans. These plans include the following:  Development of an alternative water system to deliver non-potable water for irrigation (thus conserving treated water)  Development of a community center  Continuing to invest in technology to enhance service delivery to customers  Improving streets and storm drains  Enhancing record management policies and developing record management systems  Analyzing and financing the operation and maintenance costs of expanded services The City of Fernley annually updates the Capital Improvement Plan required by state statutes and continues to prepare the necessary facilities plans for ultimate development of a more comprehensive Capital Improvement Plan. The City also established a Capital Improvements Advisory Committee to more thoroughly review facility plans and examine funding alternatives for both construction and operation and maintenance of needed facilities. Completed projects in the most recent fiscal year include improvements to Green Valley Park, In Town Park and Out of Town Park, increased the capabilities of the Sewer Treatment Plant and completed the construction of the Water Treatment Plant. ---PAGE BREAK--- City of Fernley Finance Department v Cash Management Policies and Practices. Cash temporarily idle during the year was invested in money market accounts and two State Treasurer’s investment pools. The average yield on investments was approximately 1.45%. The City’s investment policy is to minimize credit and market risks with maintaining a competitive yield on its portfolio. The City’s bank deposits are covered by FDIC insurance and collateralized by the Office of the State Treasurer/Nevada Collateral Pool. Risk Management: As authorized by state law, the City does not self-insure its unemployment insurance benefits but participates in the State unemployment system. The City participates in the Nevada Public Agency Insurance Pool for risk of loss related to torts, property damage/loss, errors and omissions, and natural disasters. The City participates in the Public Agency Compensation Trust for workers’ compensation coverage. The City provides employee health and dental insurance through the Nevada Public Employees Benefits Program. Management believes such coverage is sufficient to preclude any significant losses to the City. Pension Information: The City contributes to the Public Employees’ Retirement System of Nevada (“PERS”), a cost sharing multiple-employer pension plan administered by the Retirement Board of PERS. The City has no obligation in connection with employee benefits offered through these plans beyond its annual contractual payments to PERS. Additional information regarding the City of Fernley defined benefits plan can be found in the notes to the financial statements. The preparation of this report could not have been accomplished without the efficient and dedicated staff of the Finance Department. Our auditors, Kafoury, & Co. provided the expert support and guidance that made the preparation of this report possible. I would also like to express my thanks to the City Manager, the department heads and employees of the City of Fernley, and the citizens of Fernley whose continued cooperation, support, and assistance have contributed greatly to the financial stability of the City of Fernley. The Government Finance Officers Association of the United States and Canada (GFOA) awarded the Certificate of Achievement for Excellence in Financial Reporting to the City of Fernley for its comprehensive annual financial report for the fiscal year ended June 30, 2009. This was the fifth consecutive year that the City of Fernley has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of ---PAGE BREAK--- ---PAGE BREAK--- vii ---PAGE BREAK--- City Clerk/Court Administrator City Manager City Attorney Municipal Court Judge Community Development Director Public Works Director Parks and Recreation Director City Treasurer/ Finance Director Payroll/Accounts Payable Technical Specialist II Accounting Technician II Accounting Technician II Technical Specialist II Deputy City Clerk Building Official GIS Coordinator Senior Planner Permit Technician Permit Technician Code Enforcement/ Building Inspector (½ time) Code Enforcement/ Building Inspector Vector Control Supervisor Maintenance Supervisor Administrative Specialist Technical Specialist II Court Clerk II Office Assistant II Technical Specialist II Assistant Public Works Director Public Works Superintendent Public works Supervisor Mechanic Water Meter Reader Maintenance Worker Animal Control Officer Court Clerk II Maintenance Worker Maintenance Worker Maintenance Worker IT Specialist City Council/Mayor Legal Secretary Water Meter Reader Water Senior Public Works Worker Water Public Works Worker Water Public Works Worker Water Public Works Worker Streets Senior Public Works Worker Streets Public Works Worker Streets Public Works Worker Wastewater Treatment Plant Operator Wastewater Treatment Worker Wastewater Treatment Worker Senior Water Treatment Operator (contract vacant) Water Treatment Plant Operator III Water Treatment Plant Operator II (2 vacant positions) Water Treatment Plant Operator I (vacant) Water Treatment Plant Operator II (contract ) Water Treatment Plant Operator I (2 positions -contract) Citizens of City of Fernley Directors Statutory positions and City Manager (contract) City Staff Deputy Finance Director Organization Chart -May 2009 viii ---PAGE BREAK--- ix City Council Mayor LeRoy Goodman Council Member Ward 1 Kelly Malloy Council Member Ward 2 Don Parsons Council Member Ward 3 Robert Chase Council Member Ward 4 Curt Chaffin Council Member Ward 5 Cal Eilrich The Fernley City Council meets in regular session the first and third Wednesday of the month in the Council Chambers in City Hall located at 595 Silver Lace Boulevard, Fernley, Nevada. Staff City Manager Greg Evangelatos City Attorney Brandi Jensen Chief of Police Allen Veil Municipal Court Judge Daniel Bauer Building Official Vacant City Clerk Lena Shumway Community Development Director Fred Turnier Finance Director/City Treasurer Melville Drown Parks and Recreation Director Keith Penner Public Works Director Vacant ---PAGE BREAK--- FINANCIAL SECTION ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- 3-A Management’s Discussion and Analysis As management of the City of Fernley, we offer readers of the City of Fernley’s financial statements this narrative overview and analysis of the financial activities of the City of Fernley for the fiscal year ended June 30, 2010. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i through vi of this report. Financial Highlights  The assets of the City of Fernley exceeded its liabilities at the close of the most recent fiscal year by $147,856,493 (net assets). Of this amount, $ 17,367,399 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net assets decreased by $4,269,222. The decrease is attributable primarily to the reduction in cash and investments used to complete construction of the water treatment plant and for the payment of the associated debt service.  As of the close of the current fiscal year, the City of Fernley’s governmental funds reported combined ending fund balances of $3,050,022, an increase of $427,854 in comparison with the prior year. The increase is primarily the result of a budget savings in the Streets and Storm Drain fund of $280,000 for street projects that were carried forward to FY 10-11, $61,000 from the Transient Lodging Tax which was put into effect on 11/04/09 as a result of legislation, Ordinance 2009-018, and $28,000 from the Capital Improvement Fund, an ad valorem tax established by State Statute for capital projects within the City. With the exception of the reserved fund balance of $363,602 the funds are available for spending at the government’s discretion (unreserved, undesignated fund balance).  At the end of the current fiscal year, unreserved fund balance for the general fund was $482,078 or 14 % of general fund expenditures. This ending fund balance is in line with the targeted ending fund balance of 8% to 17% of general fund expenditures. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Fernley’s basic financial statements. The City of Fernley’s basic financial statements comprise 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 Fernley’s finances, in a manner similar to a private-sector business. ---PAGE BREAK--- 3-B The Statement of Net Assets presents information on all of the City of Fernley’s assets and liabilities, with the differences 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 Fernley is improving or deteriorating. The Statement of Activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Fernley 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 Fernley include general government, judicial, public works, culture and recreation, community development, and health. The business- type activities of the City of Fernley are water and sewer operations. The government-wide financial statements can be found on pages 4 through 5 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 Fernley, 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 Fernley can be divided into three categories: governmental funds, proprietary funds, and fiduciary 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 balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. ---PAGE BREAK--- 3-C The City of Fernley maintains nine 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 the three funds, which are considered major funds. Data for the other five governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City of Fernley adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 6 through 14 of this report. Proprietary funds. The City of Fernley maintains two proprietary funds as enterprise funds to account for its potable water and sewer (wastewater) operations. Enterprise funds are used to report the same functions presented as business-type activities in the government- wide financial statements. 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 water and sewer operations. The Water Fund and Sewer Fund are considered to be major funds of the City of Fernley. The basic enterprise fund financial statements can be found on pages 15 through 17 of this report Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Fernley’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 18 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 19 through 43 of this report Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain supplementary information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 45 through 60 of this report. ---PAGE BREAK--- 3-D Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the City of Fernley, assets exceeded liabilities by $147,856,493 at the close of the most recent fiscal year. A large portion of the City of Fernley’s net assets (88%) reflects its investment in capital assets land, buildings, machinery, and equipment); net of any related outstanding debt used to acquire those assets. The City of Fernley uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Fernley’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Fernley’s Net Assets Governmental Activities Business-type Activities Totals FY10 FY09 FY10 FY09 FY10 FY09 Current & other assets $3,906,619 $3,465,285 $17,300,501 $31,366,903 $21,207,120 $34,832,188 Capital assets 43,003,602 44,156,258 172,179,080 167,459,162 215,182,682 211,615,420 Total Assets 46,910,221 47,621,543 190,048,816 199,416,403 236,959,037 247,037,946 Long-term liabilities 4,274,438 4,402,477 79,035,761 80,701,818 83,310,199 85,104,295 Other liabilities 1,036,970 898,828 4,755,375 8,909,108 5,792,345 9,807,936 Total liabilities 5,311,408 5,301,305 83,791,136 89,610,926 89,102,544 94,912,231 Net assets: Invested in capital assets, net of related debt 38,680,602 39,652,258 91,444,890 95,281,505 130,125,492 134,933,763 Restricted 363,602 391,600 - - 363,602 391,600 Unrestricted 2,554,609 2,276,380 14,812,790 14,523,972 17,367,399 16,800,352 Total net assets $41,598,813 $42,320,238 106,257,680 $109,805,477 $147,856,493 $152,125,715 A small portion of the City of Fernley’s net assets (less than represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($17,367,399) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Fernley is able to report 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 government’s net assets decreased $4,269,222 during the current fiscal year. The decrease is primarily due to a $13,000,000 ($10,000,000 from bond proceeds) reduction in cash and investments used to complete the water treatment plant and related infrastructure ---PAGE BREAK--- 3-E offset by an $3,500,000 increase in capital assets, a $4,000,000 reduction in commitments to contractors and a $2,000,000 reduction of outstanding debt due to the scheduled payment of debt service. Governmental activities. Governmental activities decreased the City of Fernley’s net assets by $721,425. The key element of this decrease is in capital assets due to the normal depreciation of assets. Property tax revenue increased 14% between FY09 and FY10, but unrestricted interest income declined 35% due once again to lower cash balances and lower interest rates. The following table summarizes the change in net assets for the current fiscal year: Governmental Activities Business-Type Activities Total FY10 FY09 FY10 FY09 FY10 FY09 Revenues: Program revenues: Charges for services $1,817,215 $1,732,998 $6,658,068 $5,663,909 $8,475,283 $7,396,907 Operating grants and contributions 61,500 60,383 441,742 562,372 503,242 622,755 Capital grants and contributions 1,538,400 5,613,270 908,392 7,146,143 2,446,792 12,759,413 General revenues: Property taxes 1,410,347 1,381,621 - - 1,410,347 1,381,621 Shared revenues 561,429 604,295 - - 561,429 604,295 Other revenues 73,085 97,264 506,220 1,046,710 579,305 1,143,974 Total revenues 5,461,976 9,489,831 8,514,422 14,419,134 13,976,398 23,908,965 Expenses: General government 1,762,449 1,626,115 - - 1,762,449 1,626,115 Judicial 265,515 243,889 - - 265,515 243,889 Public works 1,824,412 1,778,649 - - 1,824,412 1,778,649 Culture & recreation 622,998 685,706 - - 622,998 685,706 Community develop. 1,247,018 811,701 - - 1,247,018 811,701 Health 262,865 252,320 - - 262,865 252,320 Water - - 9,420,709 4,127,466 9,420,709 4,127,466 Sewer - - 2,641,510 2,581,981 2,641,510 2,581,981 Interest and Fiscal 198,144 206,092 - - 198,144 206,092 Total expenses 6,183,401 5,604,472 12,062,219 6,709,447 18,245,620 12,313,919 Increase in net assets -721,425 3,885,359 -3,547,797 7,709,687 -4,269,222 11,595,046 Net assets, July 1 42,320,238 38,434,879 109,805,477 102,095,790 152,125,715 140,530,669 Net assets, June 30 $41,598,813 $42,320,238 106,257,680 $109,805,477 $147,856,493 $152,125,715 ---PAGE BREAK--- 3-F FY10 Program Revenues and Expenses- Governmental Activities 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 General Govt Revenue General Govt Expenses Judicial Revenues Judicial Expenses Public Works Revenues Public Works Expenses Culture & Rec Revenues Culture & Rec Expenses Comm. Dev. Revenues Comm Dev Expenses Health Expenses Program $ in thousands Program Expenses Capital Grants and Contributions Operating G&C Charges for services The major sources of program revenues for general government activities are business licenses and public utility license/franchise fees. The program expenses associated with general government activities include the operations of the Office of the City Manager, the Office of the City Clerk, Mayor and City Council activities and a portion of the expense for the Finance Department. The sources of program revenue for judicial activities include fines and fees (unrestricted) as well as administrative assessment and court facility fees (restricted). The program expenses associated with judicial activities include expenses for the Judge, City Prosecutor, Public Defender, and direct court costs. Overhead costs are not allocated. The major sources of program revenues for public works activities are dedications (non- cash transactions) of streets and storm drain systems from developers, regional transportation commission distributions, fuel taxes, and shared county property tax revenues. The program expenses associated with public works activities are operating costs and depreciation related to streets and storm drain activities. Overhead costs are not allocated. The major sources of program revenues for culture and recreation activities include grants, dedications of park property and improvements, and residential construction tax. The program expenses associated with culture and recreation activities include the operating costs in the general fund parks budget and depreciation related to two residential construction tax funds for which the Parks Department is responsible. Overhead costs are not allocated. The major source of program revenues for community development activities is building permits and fees. Planning fees are also included in program revenues. The program ---PAGE BREAK--- 3-G expenses associated with these revenues include the operations of the Community Development Department. It is important to note that other, non-routine Community Development expenditures are grouped in this category. This fiscal year a one-time reserve for miscellaneous accounts receivable was recorded in the Community Development Department in the amount of $105,543. Overhead costs are not allocated. The health operations of the City include animal control and vector control activities. Neither of these activities produces significant revenue. The program revenue consists of animal license fees and donations. The major sources of general revenues (revenues that are not specifically allocated to a particular program) are property taxes, consolidated taxes, fuel taxes and interest earnings. FY10 Revenues by Source - Governmental Activities (in thousands of Charges for Serv., $1,817 , 34% Oper. Grants & Contr., $62 , 1% Shared Revenues, $561 , 10% Other, $73 , 1% Capital Grants & Cont., $1,538 , 28% Property Tax, $1,410 , 26% The Charges for Services category includes primarily fees, fines, and licenses. The Capital Grants and Contributions primarily includes grants and donated (dedicated) infrastructure (streets and storm drains). The Shared Revenue category includes primarily consolidated tax, fuel tax and gaming licenses. The Other category includes interest income and other miscellaneous sources of revenue. Capital projects and donated (dedicated) infrastructure represent the largest part of the increase. Business-type activities. Business-type activities decreased the City of Fernley’s net assets by $3,547,797. The key element of this decrease is the recording of interest expense in the amount of $3,024,954, which was capitalized prior to the completion of the water treatment plant in FY 09-10.  Charges for services for business-type activities increased by $941,271 or 25% due to a rate increase which took effect 7/01/09. ---PAGE BREAK--- 3-H  Capital contributions decreased by $5,118,226 or 88%, as a result of the dramatic decline in new construction.  Investment earnings continued to decrease due to lower interest rates and lower levels of cash available for investment. FY10 Program Revenues and Expenses Business-type Activities 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Water Revenues Water Expenses Sewer Revenue Sewer Expenses Program $ in thousands Expenses Capital Grants and Contributions Operating Grants & Contributions Charges for Serv. Revenues include both cash and non-cash capital contributions in the “Capital Grants and Contributions” section. FY10 Revenue by Source Business Type Activities (in thousands of Unrestricted Interest Income, $262 , 3% Capital Grants & Contr., $908 , 11% Charges for Serv., $6,658 , 83% Other, $244 , 3% ---PAGE BREAK--- 3-I Financial Analysis of the Government’s Funds As noted earlier, the City of Fernley uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City of Fernley’s governmental funds is to provide information on the near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Fernley’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Fernley’s governmental funds reported combined ending fund balances of $3,050,022, an increase of $427,854 in comparison with the prior year. $363,602 is reserved for capital projects and prepaid items leaving the remaining unreserved, undesignated fund balance available for spending at the government’s discretion. The general fund is the chief operating fund of the City of Fernley. At the end of the current fiscal year, unreserved, undesignated fund balance of the general fund was $482,078, while total fund balance increased to $814,316. 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 general fund expenditures. Unreserved, undesignated fund balance represents 14% of total general fund expenditures, while total fund balance also represents about 24% of that same amount. The balance of the City of Fernley’s general fund increased by $125,448 during the current fiscal year. Key factors in this increase are as follows:  The City has maintained the lower level of staffing achieved through staff reductions of 14 FTE’s in early 2009.  A successful citywide effort to reduce spending for non-essential goods and services remains the City’s focus. The Residential Construction Tax District #1 Fund is used to account for the receipt and use of a special tax that is dedicated to specific purposes of construction of parks in accordance with the Park Plan. At the end of the current fiscal year, unreserved, undesignated fund balance of the fund was $15,265. Revenues in this fund are significantly lower than originally projected due to the slow down in the residential housing market. No projects are planned for this fund during FY11. The Streets and Storm Drains Fund is used to account for gas taxes that must be used for street maintenance and capital expenditures as well as other revenues that may be used for projects associated with street and storm drains. At the end of the current fiscal year, unreserved, undesignated fund balance of the fund was $791,178. Unreserved, ---PAGE BREAK--- 3-J undesignated fund balance represents 1.25% of total fund expenditures. The growth in fund balance is due to the deferring of projects to FY 10-11. The Public Works Department has undergone a major reorganization replacing the Public Works Director with a City Engineer. The City Engineer has the task of reviewing and prioritizing the projects that were deferred to the next fiscal year. The Capital Projects Fund is used to accrue funds under a “pay as you go” program to provide funding for future projects involving replacement of equipment and buildings or new facilities and equipment. At the end of the current fiscal year fund balance of the Capital Fund was $1,056,856. Projects planned for FY10 include upgrades of software, replacement of computers as needed and a citywide radio system establishing a point to point connection between all city facilities. The radio system will replace many of cell phones currently in use by city staff. Proprietary funds. The City of Fernley’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets of the Water Fund at the end of the year amounted to $6,920,566; those for the Sewer Fund amounted to $7,892,224 resulting in total unrestricted net assets of $14,812,790. The total change in net assets for the Water Fund was an decrease of ($3,116,912) and decrease in the Sewer Fund of ($430,885). Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Fernley’s business-type activities. General Fund Budgetary Highlights The General fund recorded a $127,451 increase in revenues between the original and final amended budget, but finished the year with a budget shortfall of $202,817, with the largest shortfall of $133,685 in ad valorem taxes. There was an $135,435 increase in appropriations between the original and final amended budget. Following are the main components of the increase:  Appropriations for the General Government were increased for legal expense to allow the City to contract for City Attorney services for the period of September, 2009 to March, 2010, the period that the City Attorney position was vacant.  Appropriations for the General Government were increased for professional services to contract with a lobbyist in Washington, DC working to identify and lobby for federal grants for the City. Capital Asset and Debt Administration Capital assets. The City of Fernley’s investment in capital assets for its governmental and business-type activities as of June 30, 2010 amounts to $215,182,682 (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, buildings, improvements, machinery and equipment, infrastructure (streets and bridges), ---PAGE BREAK--- 3-K and other capital assets. The City of Fernley’s investment in capital assets for the current fiscal year decreased 1% (a 2% decrease for governmental activities and a 3% increase for business-type activities). Major capital asset events during the current fiscal year included the following:  A reduction in the donation of capital assets from developers  The water treatment plant was completed and put into service  The conveyance system associated with the water treatment plant were completed and put into service  Sewer lift station improvements  A reduction in the number of street improvements City of Fernley Capital Assets (net of depreciation) Governmental activities Business-type activities Totals FY10 FY09 FY10 FY09 FY10 FY09 Land $3,909,626 $3,909,626 $1,195,948 $ 1,195,948 $5,105,574 $5,105,574 Water rights 36,938,224 36,814,699 36,938,224 36,814,699 Construction in progress 203,926 361,206 4,331,806 73,705,225 4,535,732 74,066,431 Buildings 7,018,267 7,362,231 663 1,662 7,018,930 7,363,893 Improvements other than buildings 6,897,184 6,855,047 128,282,816 54,081,331 135,180,000 60,936,378 Machinery & Equipment 257,538 338,214 480,699 629,915 738,237 968,129 Infrastructure 24,717,061 25,329,934 - - 24,717,061 25,329,934 Other capital assets 948,924 1,030,382 948,924 1,030,382 TOTAL $43,003,602 $44,156,256 $172,179,080 $167,459,162 $215,182,682 $211,615,420 Additional information on the City of Fernley’s capital assets can be found in note 4 of this report. Long-term debt. At the end of the current fiscal year, the City of Fernley had total bonded debt outstanding of $80,649,772 and lease-purchase debt of $4,323,000. All of the debt is backed by the full faith and credit of the government. ---PAGE BREAK--- 3-L Governmental activities Business-type activities Totals 7/1/10 7/1/09 7/1/10 7/1/09 7/1/10 7/1/09 General obligation/revenue bonds $80,649,772 $82,472,729 $80,649,772 $82,472,729 Lease/Purchase Debt $4,323,000 $4,504,000 $4,323,000 $4,504,000 Unamortized bond premium $38,995 $54,824 $38,995 $54,824 Compensated absences $111,795 $104,477 $54,020 $52,101 $165,815 $156,578 TOTAL $4,434,795 $4,608,477 $80,742,787 $82,579,654 $85,177,582 $87,188,131 The City of Fernley’s total debt decreased by $1,311,866 during the current fiscal year due to the payment of budgeted debt service amounts. State statutes limit the amount of general obligation debt a city may issue to 30% of its total assessed valuation. The current debt limitation for the City of Fernley is approximately $543 million, which is significantly in excess of the City of Fernley’s outstanding general obligation debt of $85,177,582. Additional information of the City of Fernley’s long-term debt can be found in note 7 on pages 37 through 38 of this report. Economic Factors and Next Year’s Budget and Rates Both water rates and sewer rates were increased for the third consecutive year effective July 1, 2009 to pay for operating expenses, capital expansion and debt service.  Residential development has slowed to a standstill, but limited commercial development has continued.  The new state of the art water treatment plant was completed and placed in service. The operation costs will have a significant impact on future operating costs for the water fund.  The city is aggressively seeking, and has been the recipient of grant funding to enhance the community, to fund capital projects and to defray the expense of maintaining operations of the new water treatment plant.  GASB 45 which provides guidance for the reporting of post employment benefits other than pension plans, was implemented in 2009. The fiscal impact to the City was $100,026. All of these factors were considered in preparing the City of Fernley budget for FY10. During the current fiscal year, unreserved, undesignated fund balance in the general fund increased to $482,078. The FY10 General Fund budget assumed a beginning unreserved, undesignated fund balance of $813,807. The cost saving measures put into place during ---PAGE BREAK--- 3-M FY09 and continuing throughout FY10 enabled the city to reflect an improvement in the general fund balance. The rates for the enterprise funds went up again effective July 1, 2009 to provide the necessary funds to operate the water and sewer utility funds. Additional increases have been suspended at this time to allow for further study. It has been established that the increases that have been implemented have not resulted in the anticipated increase in revenue due to decreased usage. Requests for Information This financial report is designed to provide a general overview of the City of Fernley’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City Treasurer/Finance Director, 595 Silver Lace Blvd, Fernley NV 89408. ---PAGE BREAK--- BASIC FINANCIAL STATEMENTS ---PAGE BREAK--- BUSINESS- GOVERNMENTAL TYPE ACTIVITIES ACTIVITIES TOTAL Current assets: Cash and investments 2,986,384 $ 15,682,398 $ 18,668,782 $ Restricted cash and investments Refundable deposits - 627,190 627,190 Interest receivable 8,058 45,036 53,094 Taxes receivable 90,350 - 90,350 Accounts receivable, net 303,562 781,085 1,084,647 Accounts receivable, other 25,063 31,194 56,257 Due from other governments 503,471 - 503,471 Internal balances (14,760) 14,760 - Inventories - 118,838 118,838 Prepaid expenses 4,491 - 4,491 Total Current Assets 3,906,619 17,300,501 21,207,120 Noncurrent assets: Deferred charges - 569,235 569,235 Capital assets: Land and construction in progress 4,113,552 42,465,977 46,579,529 Other capital assets, net of depreciation 38,890,050 129,713,103 168,603,153 Total Capital Assets 43,003,602 172,179,080 215,182,682 Total Noncurrent Assets 43,003,602 172,748,315 215,751,917 Total Assets 46,910,221 190,048,816 236,959,037 Current liabilities: Accounts payable and accrued expenses 531,562 2,374,776 2,906,338 Payable from restricted assets: Refundable deposits - 627,190 627,190 Due to developers 272,024 - 272,024 Due to other governments 19,384 - 19,384 Due within one year 214,000 1,753,409 1,967,409 Total Current Liabilities 1,036,970 4,755,375 5,792,345 Noncurrent liabilities: Other postemployment benefit liabilities 53,643 46,383 100,026 Due in more than one year 4,220,795 78,989,378 83,210,173 Total Noncurrent Liabilities 4,274,438 79,035,761 83,310,199 Total Liabilities 5,311,408 83,791,136 89,102,544 NET ASSETS Invested in capital assets, net of related debt 38,680,602 91,444,890 130,125,492 Restricted for capital projects 363,602 - 363,602 Unrestricted 2,554,609 14,812,790 17,367,399 Total Net Assets 41,598,813 $ 106,257,680 $ 147,856,493 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF NET ASSETS JUNE 30, 2010 See accompanying notes. 4 ---PAGE BREAK--- CHARGES OPERATING CAPITAL BUSINESS- FOR GRANTS AND GRANTS AND GOVERNMENTAL TYPE FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL Governmental Activities: General government 1,762,449 $ 1,267,670 $ - $ 590,755 $ 95,976 $ - $ 95,976 $ Judicial 265,515 196,886 - - (68,629) - (68,629) Public works 1,824,412 116,619 - 796,863 (910,930) - (910,930) Culture and recreation 622,998 25 60,000 150,782 (412,191) - (412,191) Community development 1,247,018 232,719 - - (1,014,299) - (1,014,299) Health 262,865 3,296 1,500 - (258,069) - (258,069) Debt Service: Interest and fiscal charges 198,144 - - - (198,144) - (198,144) Total Governmental Activities 6,183,401 1,817,215 61,500 1,538,400 (2,766,286) - (2,766,286) Business-type Activities: Water 9,420,709 4,774,366 441,742 694,173 - (3,510,428) (3,510,428) Sewer 2,641,510 1,883,702 - 214,219 - (543,589) (543,589) Total Business- type Activities 12,062,219 6,658,068 441,742 908,392 - (4,054,017) (4,054,017) Total 18,245,620 $ 8,475,283 $ 503,242 $ 2,446,792 $ (2,766,286) (4,054,017) (6,820,303) General Revenues: Property taxes 1,410,347 - 1,410,347 Consolidated taxes 170,186 - 170,186 Fuel taxes 294,645 - 294,645 Unrestricted gaming licenses 96,598 - 96,598 Unrestricted interest income 26,847 261,988 288,835 Miscellaneous revenue 46,238 244,232 290,470 Total General Revenues 2,044,861 506,220 2,551,081 Change in Net Assets (721,425) (3,547,797) (4,269,222) NET ASSETS, July 1 42,320,238 109,805,477 152,125,715 NET ASSETS, June 30 41,598,813 $ 106,257,680 $ 147,856,493 $ PROGRAM REVENUES AND CHANGES IN NET ASSETS CITY OF FERNLEY, NEVADA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2010 NET (EXPENSE) REVENUES See accompanying notes. 5 ---PAGE BREAK--- STREETS RESIDENTIAL AND CONSTRUCTION STORM CAPITAL OTHER TOTAL GENERAL TAX DISTRICT DRAINS PROJECTS GOVERNMENTAL GOVERNMENTAL FUND #1 FUND FUND FUND FUNDS FUNDS Cash and investments 861,874 $ 15,223 $ 737,390 $ 613,809 $ 758,088 $ 2,986,384 $ Interest receivable 2,198 42 2,055 1,694 2,069 8,058 Taxes receivable 90,350 - - - - 90,350 Accounts receivable 324,775 - - - 3,850 328,625 Due from other governments 43,296 - 58,467 - 401,708 503,471 Due from other funds - - - 505,000 - 505,000 Prepaid items 4,491 - - - - 4,491 Total Assets 1,326,984 $ 15,265 $ 797,912 $ 1,120,503 $ 1,165,715 $ 4,426,379 $ Liabilities: Accounts payable and accrued liabilities 304,434 $ - $ 6,734 $ 63,647 $ 156,747 $ 531,562 $ Due to developers 142,899 - - - 129,125 272,024 Due to other governments 16,948 - - - 2,436 19,384 Due to other funds 14,760 - - - 505,000 519,760 Deferred revenue 33,627 - - - - 33,627 Total Liabilities 512,668 - 6,734 63,647 793,308 1,376,357 Fund Balance: Reserved for: Prepaid items 4,491 - - - - 4,491 Capital projects 327,747 - - - - 327,747 Convention center - - - - 31,364 31,364 Unreserved - reported in: General Fund 482,078 - - - - 482,078 Special revenue funds - 15,265 791,178 - 312,482 1,118,925 Capital projects funds - - - 1,056,856 28,561 1,085,417 Total Fund Balance 814,316 15,265 791,178 1,056,856 372,407 3,050,022 Total Liabilities and Fund Balance 1,326,984 $ 15,265 $ 797,912 $ 1,120,503 $ 1,165,715 $ 4,426,379 $ BALANCE LIABILITIES AND FUND ASSETS CITY OF FERNLEY, NEVADA BALANCE SHEET JUNE 30, 2010 GOVERNMENTAL FUNDS See accompanying notes. 6 ---PAGE BREAK--- Total Fund Balances - Governmental Funds 3,050,022 $ 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 governmental funds: Capital assets 51,242,170 Less: Accumulated depreciation 8,238,568 43,003,602 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the fund. 33,627 Certain liabilities are not reported in the governmental funds because they are not due and payable in the current period: Other postemployment benefits liability (53,643) Bonds payable (4,323,000) Compensated absences (111,795) (4,488,438) Total Net Assets - Governmental Activities 41,598,813 $ CITY OF FERNLEY, NEVADA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS JUNE 30, 2010 TO THE STATEMENT OF NET ASSETS See accompanying notes. 7 ---PAGE BREAK--- STREETS RESIDENTIAL AND CONSTRUCTION STORM CAPITAL OTHER TOTAL GENERAL TAX DISTRICT DRAINS PROJECTS GOVERNMENTAL GOVERNMENTAL FUND #1 FUND FUND FUND FUNDS FUNDS REVENUES Taxes 1,501,315 $ 5,827 $ - $ - $ 92,142 $ 1,599,284 $ Licenses and permits 1,600,283 - 43,098 - - 1,643,381 Intergovernmental 230,186 - 1,008,927 - 629,419 1,868,532 Fines and forfeits 183,808 - - - 38,758 222,566 Miscellaneous 55,461 125 3,625 7,269 22,285 88,765 Total Revenues 3,571,053 5,952 1,055,650 7,269 782,604 5,422,528 EXPENDITURES Current: General government 1,402,434 - - - - 1,402,434 Judicial 253,101 - - - 4,882 257,983 Public works - - 448,224 - - 448,224 Culture and recreation 468,468 - - - 14,403 482,871 Community development 708,163 - - - 623,960 1,332,123 Health 242,279 - - - - 242,279 Total Current 3,074,445 - 448,224 - 643,245 4,165,914 Debt service: Principal 181,000 - - - - 181,000 Interest 198,144 - - - - 198,144 Total Debt Service 379,144 - - - - 379,144 Capital outlay: Public works - - 224,997 - - 224,997 Culture and recreation - - - - 136,818 136,818 Community development - - - 95,785 - 95,785 Total Capital Outlay - - 224,997 95,785 136,818 457,600 Total Expenditures 3,453,589 - 673,221 95,785 780,063 5,002,658 Excess (Deficiency) of Revenues over (under) Expenditures 117,464 5,952 382,429 (88,516) 2,541 419,870 OTHER FINANCING SOURCES (USES) Proceeds from disposal of capital assets 7,984 - - - - 7,984 Net Change in Fund Balance 125,448 5,952 382,429 (88,516) 2,541 427,854 FUND BALANCE, JULY 1 688,868 9,313 408,749 1,145,372 369,866 2,622,168 FUND BALANCE, JUNE 30 814,316 $ 15,265 $ 791,178 $ 1,056,856 $ 372,407 $ 3,050,022 $ CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2010 GOVERNMENTAL FUNDS See accompanying notes. 8 ---PAGE BREAK--- Net Change if Fund Balances - Governmental Funds 427,854 $ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures and the proceeds from the sale of assets as other financing sources. However, in the statement of activities, the cost of those assets is depreciated over their useful lives and only the gain or loss is recorded when assets are sold. Expenditures for capital assets 565,525 Less: Current year depreciation (1,872,288) (1,306,763) In the statement of activities, the gain or loss on the disposal of capital assets is reported. In the governmental funds, the gain or loss is not reported. Thus, the change in net assets differs from the change in fund balances by the cost of the assets sold less the balance in accumulated depreciation. (1,995) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the governmental fund statements: Donated capital assets 156,102 Because some property taxes will not be collected in time to pay for obligations in the current period, they are not considered available revenues in the governmental funds and are instead reported as deferred revenues. These revenues are accounted for as revenue in the statement of activities. (116,665) The issuance of long-term debt (i.e. bonds) 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. 181,000 The liability for other postmeployment benefits is not recorded in the governmental funds, but is reported in the statement of net assets. This is a current year charge in the liability, reported as an expense in the statement of activities. Change in other postemployment benefit liability (53,640) Generally expenditures recognized in the fund financial statements are limited to only those that use current financial resources but expenses are recognized in the statement of activities when incurred: Change in long-term compensated absences payable (7,318) Change in Net Assets - Governmental Activities (721,425) $ CITY OF FERNLEY, NEVADA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES FOR THE YEAR ENDED JUNE 30, 2010 IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES See accompanying notes. 9 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL REVENUES Taxes: Ad valorem 1,583,470 $ 1,635,000 $ 1,501,315 $ 51,530 $ (133,685) $ Licenses and permits: Business licenses 200,000 200,000 183,952 - (16,048) Franchise fees 920,000 1,100,000 1,049,779 180,000 (50,221) Liquor licenses 30,000 25,000 21,850 (5,000) (3,150) City gaming licenses 90,000 100,000 96,598 10,000 (3,402) Building permits and fees 125,000 194,000 202,804 69,000 8,804 Planning and zoning permits and fees 10,000 29,000 29,915 19,000 915 Other permits 12,500 13,800 15,385 1,300 1,585 1,387,500 1,661,800 1,600,283 274,300 (61,517) Intergovernmental revenues: Consolidated tax distribution 182,649 185,000 170,186 2,351 (14,814) Fernley park agreement 60,000 60,000 60,000 - - 242,649 245,000 230,186 2,351 (14,814) Fines and forfeits: Municipal court fines 135,000 160,000 166,747 25,000 6,747 Municipal court fees 19,800 17,100 17,061 (2,700) (39) 154,800 177,100 183,808 22,300 6,708 Miscellaneous: Interest 10,500 7,500 7,698 (3,000) 198 Park development - - 25 - 25 Miscellaneous 267,500 47,470 47,738 (220,030) 268 278,000 54,970 55,461 (223,030) 491 Total Revenues 3,646,419 3,773,870 3,571,053 127,451 (202,817) EXPENDITURES General government: Finance: Salaries and wages 91,500 79,850 78,342 11,650 1,508 Employee benefits 35,300 36,675 37,159 (1,375) (484) Services and supplies 133,600 91,245 117,838 42,355 (26,593) Total Finance 260,400 207,770 233,339 52,630 (25,569) Information Technology Salaries and wages 41,400 45,300 44,447 (3,900) 853 Employee benefits 17,100 16,550 16,395 550 155 Services and supplies 18,500 12,900 13,241 5,600 (341) Total Information Technology 77,000 74,750 74,083 2,250 667 CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL GENERAL FUND BUDGET VARIANCE WITH FOR THE YEAR ENDED JUNE 30, 2010 (Page 1 of 3) 10 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL Office of the City Clerk: Salaries and wages 106,900 $ 119,000 $ 116,864 $ (12,100) $ 2,136 $ Employee benefits 47,650 44,000 44,123 3,650 (123) Services and supplies 25,600 24,900 22,048 700 2,852 Total City Clerk 180,150 187,900 183,035 (7,750) 4,865 Office of the City Manager: Salaries and wages 173,000 170,200 169,169 2,800 1,031 Employee benefits 63,300 60,675 60,290 2,625 385 Services and supplies 82,050 200,896 190,871 (118,846) 10,025 Total City Manager 318,350 431,771 420,330 (113,421) 11,441 Office of the City Attorney: Salaries and wages 57,000 56,950 56,522 50 428 Employee benefits 24,460 14,270 13,872 10,190 398 Services and supplies 33,100 76,850 63,598 (43,750) 13,252 Total City Attorney 114,560 148,070 133,992 (33,510) 14,078 Mayor/City Council: Salaries and wages 59,400 62,200 62,125 (2,800) 75 Employee benefits 13,200 13,150 12,933 50 217 Services and supplies 60,375 51,950 49,834 8,425 2,116 Total Mayor/City Council 132,975 127,300 124,892 5,675 2,408 Facilities (City Hall) & General Salaries and wages 50,100 46,350 45,922 3,750 428 Employee benefits 21,700 18,210 17,801 3,490 409 Services and supplies 175,000 173,499 169,040 1,501 4,459 Total City Hall 246,800 238,059 232,763 8,741 5,296 Total General Government 1,330,235 1,415,620 1,402,434 (85,385) 13,186 Judicial: Municipal court: Salaries and wages 143,800 144,550 142,094 (750) 2,456 Employee benefits 64,400 57,500 57,158 6,900 342 Services and supplies 43,600 58,400 53,849 (14,800) 4,551 Total Judicial 251,800 260,450 253,101 (8,650) 7,349 Culture and Recreation: Parks: Salaries and wages 187,300 205,800 202,268 (18,500) 3,532 Employee benefits 81,300 68,215 67,841 13,085 374 Services and supplies 235,600 199,675 198,359 35,925 1,316 Total Culture and Recreation 504,200 473,690 468,468 30,510 5,222 CITY OF FERNLEY, NEVADA GENERAL FUND BUDGET STATEMENT OF REVENUES, EXPENDITURES, AND FOR THE YEAR ENDED JUNE 30, 2010 (Page 2 of 3) CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL VARIANCE WITH 11 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL Community development: Building: Salaries and wages 177,200 $ 183,800 $ 180,370 $ (6,600) $ 3,430 $ Employee benefits 79,400 51,200 50,617 28,200 583 Services and supplies 28,120 97,575 81,410 (69,455) 16,165 Total Building 284,720 332,575 312,397 (47,855) 20,178 Planning: Salaries and wages 193,600 204,650 202,850 (11,050) 1,800 Employee benefits 93,600 62,000 61,190 31,600 810 Services and supplies 36,410 32,550 131,726 3,860 (99,176) Total Planning 323,610 299,200 395,766 24,410 (96,566) Total Community Development 608,330 631,775 708,163 (23,445) (76,388) Health: Animal control: Salaries and wages 47,000 55,500 53,912 (8,500) 1,588 Employee benefits 13,600 13,900 13,807 (300) 93 Services and supplies 20,250 11,300 10,422 8,950 878 Total Animal Control 80,850 80,700 78,141 150 2,559 Vector control: Salaries and wages 53,300 32,950 32,003 20,350 947 Employee benefits 22,300 9,025 8,944 13,275 81 Services and supplies 86,910 169,150 123,191 (82,240) 45,959 Total Vector Control 162,510 211,125 164,138 (48,615) 46,987 Total Health 243,360 291,825 242,279 (48,465) 49,546 Debt service: Principal 181,000 181,000 181,000 - - Interest 198,166 198,166 198,144 - 22 Total Debt Service 379,166 379,166 379,144 - 22 Total Expenditures 3,317,091 3,452,526 3,453,589 (135,435) 1,063 Excess of Revenues Over Expenditures 329,328 321,344 117,464 (7,984) (203,880) OTHER FINANCING SOURCES (USES) Proceeds from Sale of Capital Asset - 7,984 7,984 7,984 - Net Change in Fund Balance 329,328 329,328 125,448 - (203,880) FUND BALANCE, July 1 813,807 813,807 688,868 - (124,939) FUND BALANCE, June 30 1,143,135 $ 1,143,135 $ 814,316 $ - $ (328,819) $ CITY OF FERNLEY, NEVADA GENERAL FUND BUDGET STATEMENT OF REVENUES, EXPENDITURES, AND FOR THE YEAR ENDED JUNE 30, 2010 (Page 3 of 3) CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL VARIANCE WITH See accompanying notes. 12 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL REVENUES Taxes: Residential construction tax 5,000 $ 5,000 $ 5,827 $ - $ 827 $ Miscellaneous: Interest 200 200 125 - (75) Net Change in Fund Balance 5,200 5,200 5,952 - 752 FUND BALANCE, July 1 - 9,313 9,313 9,313 - FUND BALANCE, June 30 5,200 $ 14,513 $ 15,265 $ 9,313 $ 752 $ BUDGET VARIANCE WITH FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL RESIDENTIAL CONSTRUCTION TAX DISTRICT #1 FUND See accompanying notes. 13 ---PAGE BREAK--- ORIGINAL FINAL ORIGINAL FINAL ACTUAL TO FINAL TO ACTUAL REVENUES Licenses and permits: Public works fees 21,000 $ 42,000 $ 43,098 $ 21,000 $ 1,098 $ Intergovernmental revenues: Federal grants - - 73,520 - 73,520 Motor vehicle fuel tax 305,094 315,000 345,865 9,906 30,865 Regional transportation commission 937,000 641,000 640,762 (296,000) (238) 1,242,094 956,000 1,060,147 (286,094) 104,147 Miscellaneous: Interest 1,000 2,600 3,625 1,600 1,025 Total Revenues 1,264,094 1,000,600 1,106,870 (263,494) 106,270 EXPENDITURES Public works: Salaries and wages 117,500 116,800 119,848 700 (3,048) Employee benefits 52,450 52,250 51,317 200 933 Services and supplies 188,000 80,500 277,059 107,500 (196,559) Capital outlay 824,150 701,300 224,997 122,850 476,303 Total Expenditures 1,182,100 950,850 673,221 231,250 277,629 Excess (Deficiency) of Revenues Over (Under) Expenditures 81,994 49,750 433,649 (32,244) 383,899 FUND BALANCE, July 1 221,402 408,749 408,749 187,347 - FUND BALANCE, June 30 303,396 $ 458,499 $ 842,398 $ 155,103 $ 383,899 $ BUDGET VARIANCE WITH FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL STREETS AND STORM DRAINS FUND See accompanying notes. 14 ---PAGE BREAK--- WATER SEWER TOTAL UTILITY UTILITY ENTERPRISE FUND FUND FUNDS Current assets: Cash and investments 7,160,876 $ 8,521,522 $ 15,682,398 $ Restricted cash and investments: Refundable deposits 320,065 307,125 627,190 Interest receivable 20,666 24,370 45,036 Accounts receivable, net 605,604 175,481 781,085 Accounts receivable, other 15,742 15,452 31,194 Due from other funds 14,760 - 14,760 Inventories 112,387 6,451 118,838 Total Current Assets 8,250,100 9,050,401 17,300,501 Noncurrent assets: Deferred charges 513,620 55,615 569,235 Capital assets: Not being depreciated 39,813,187 2,652,790 42,465,977 Depreciable assets 113,017,103 35,687,317 148,704,420 152,830,290 38,340,107 191,170,397 Less: Accumulated depreciation 11,417,332 7,573,985 18,991,317 Total Capital Assets 141,412,958 30,766,122 172,179,080 Total Noncurrent Assets 141,926,578 30,821,737 172,748,315 Total Assets 150,176,678 39,872,138 190,048,816 Current liabilities: Accounts payable and accrued liabilities 1,468,109 906,667 2,374,776 Payable from restricted assets: Refundable deposits 320,065 307,125 627,190 Debt due within one year 1,440,146 313,263 1,753,409 Total Current Liabilities 3,228,320 1,527,055 4,755,375 Noncurrent liabilities: Other postemployment benefits 28,930 17,453 46,383 Bonds payable, due after one year 71,124,893 7,864,485 78,989,378 Total Noncurrent Liabilities 71,153,823 7,881,938 79,035,761 Total Liabilities 74,382,143 9,408,993 83,791,136 NET ASSETS Invested in capital assets, net of related debt 68,873,969 22,570,921 91,444,890 Unrestricted 6,920,566 7,892,224 14,812,790 Total Net Assets 75,794,535 $ 30,463,145 $ 106,257,680 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2010 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS See accompanying notes. 15 ---PAGE BREAK--- WATER SEWER TOTAL UTILITY UTILITY ENTERPRISE FUND FUND FUNDS User fees 4,774,366 $ 1,883,702 $ 6,658,068 $ Operating grants 441,742 - 441,742 Total Operating Revenues 5,216,108 1,883,702 7,099,810 Salaries and wages 812,587 490,207 1,302,794 Employee benefits 355,830 224,204 580,034 Services and supplies 2,243,439 710,070 2,953,509 Utilities 525 - 525 Depreciation 2,983,375 978,883 3,962,258 Total Operating Expenses 6,395,756 2,403,364 8,799,120 Operating Income (Loss) (1,179,648) (519,662) (1,699,310) Interest earned on investments 149,324 112,664 261,988 In lieu of water rights fees 13,725 - 13,725 Miscellaneous 230,467 40 230,507 Interest expense (3,024,953) (238,146) (3,263,099) Total Nonoperating Revenue (Expense) (2,631,437) (125,442) (2,756,879) Income (Loss) Before Capital Contributions (3,811,085) (645,104) (4,456,189) Customer connection fees 306,780 151,325 458,105 Developer agreements 4,327 - 4,327 Developer contributed infrastructure 259,541 62,894 322,435 Developer contributed water rights 123,525 - 123,525 Total Capital Contributions 694,173 214,219 908,392 Change in Net Assets (3,116,912) (430,885) (3,547,797) NET ASSETS, July 1 78,911,447 30,894,030 109,805,477 NET ASSETS, June 30 75,794,535 $ 30,463,145 $ 106,257,680 $ CAPITAL CONTRIBUTIONS OPERATING REVENUES NONOPERATING REVENUE (EXPENSE) CITY OF FERNLEY, NEVADA STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS OPERATING EXPENSES See accompanying notes. 16 ---PAGE BREAK--- WATER SEWER TOTAL UTILITY UTILITY ENTERPRISE FUND FUND FUNDS Cash received from customers 4,927,882 $ 1,872,649 $ 6,800,531 $ Cash received from the government 692,299 - 692,299 Cash paid for employees services (1,148,477) (695,998) (1,844,475) Cash paid to vendors for services and supplies (6,684,710) (192,371) (6,877,081) Net Cash Provided (Used) by Operating Activities (2,213,006) 984,280 (1,228,726) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Principal payments on debt (1,541,320) (281,637) (1,822,957) Interest paid on debt (3,381,959) (378,195) (3,760,154) Deferred charges 19,738 1,365 21,103 In lieu of water rights fees 13,725 - 13,725 Acquisition of capital assets (5,112,521) (2,731,225) (7,843,746) Developer agreements 4,327 - 4,327 Connection fees 306,780 151,325 458,105 Net Cash Provided (Used) by Capital and Related Financing Activities (9,691,230) (3,238,367) (12,929,597) CASH FLOWS FROM INVESTING ACTIVITIES: Interest received on investments 152,555 104,658 257,213 Net Increase (Decrease) in Cash and Cash Equivalents (11,751,681) (2,149,429) (13,901,110) 19,232,622 10,978,076 30,210,698 7,480,941 $ 8,828,647 $ 16,309,588 $ REPRESENTED BY: Cash and cash equivalents 7,160,876 $ 8,521,522 $ 15,682,398 $ Cash - refundable deposits 320,065 307,125 627,190 7,480,941 $ 8,828,647 $ 16,309,588 $ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) (1,179,648) $ (519,662) $ (1,699,310) $ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 2,983,375 978,883 3,962,258 Miscellaneous revenues 230,467 40 230,507 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable, net (179,784) (11,096) (190,880) Accounts receivable, other 105,543 - 105,543 Due from other funds (2,710) - (2,710) Due from other governments 250,557 - 250,557 Inventories 8,366 185 8,551 Prepaid expenses 5,000 - 5,000 Increase (decrease) in: Accounts payable (4,442,067) 515,218 (3,926,849) Accrued liabilities (9,950) - (9,950) Compensated absences payable 960 960 1,920 Refundable deposits (12,045) 2,299 (9,746) Other postemployment benefit liability 28,930 17,453 46,383 Total Adjustments (1,033,358) 1,503,942 470,584 Net Cash Provided (Used) by Operating Activities (2,213,006) $ 984,280 $ (1,228,726) $ SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND CAPITAL AND RELATED FINANCING ACTIVITIES Contribution of capital assets from developers 383,066 $ 62,894 $ 445,960 $ CASH AND CASH EQUIVALENTS, June 30 CASH FLOWS FROM OPERATING ACTIVITIES: CASH AND CASH EQUIVALENTS, July 1 CITY OF FERNLEY, NEVADA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS See accompanying notes. 17 ---PAGE BREAK--- AGENCY FUND Cash and cash equivalents 16,450 $ Bail bond deposits held for others 15,739 Other liabilities 711 Total Liabilities 16,450 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUND JUNE 30, 2010 See accompanying notes. 18 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The financial statements of the City of Fernley, Nevada (“the City”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as applied to governmental units. The Government Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A summary of the more significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. A. Reporting Entity: The City of Fernley, Nevada was incorporated on July 1, 2001. The City operates under a Council-Manager form of government and provides the following services as authorized by law: water and sewer utilities, streets, culture and recreation, planning and zoning, animal control, and general administrative services. Prior to July 1, 2001, the entity was organized as an unincorporated town in accordance with Nevada Revised Statutes 269. The financial statements present the financial position and results of operations and changes in fund balances for those funds under the direct jurisdiction of the Mayor and City Council of the City of Fernley for which the Mayor and City Council are financially accountable. B. Government-wide and Fund Financial Statements: The government-wide financial statements report information on all of the non- fiduciary activities of the City of Fernley, Nevada. 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 business-type activities are offset by program revenues. Direct expenses are those that are specifically associated with a specific function or business-type activity. 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 business-type activity and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items properly not included among program revenues are reported instead as general revenues. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 20 The fund financial statements provide information about the City’s funds, including its fiduciary funds. Separate statements for each fund category – governmental, proprietary and fiduciary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. 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 funds and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when liabilities are 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 revenues as soon as all eligibility requirements imposed by the provider have been met. 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 measurable when the amount of the transaction can be determined and 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. When revenues are due, but will not be collected within this 60 day period, the receivable is recorded and an offsetting deferred revenue account is established. Deferred revenues also arise when the government receives resources before it has legal claim to them, and thus in subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. Expenditures generally are recorded when liabilities are incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgment are recorded only when payment is due. Property taxes, consolidated tax revenue (sales tax, cigarette taxes, business services tax, liquor taxes), gaming taxes, gasoline taxes, grants 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. All other revenue items are considered to be measurable and available only when the City receives cash. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 21 In accordance with GASB Statement No. 20 “Accounting and Financial Reporting for Proprietary Funds and other Governmental Entities That Use Proprietary Fund Accounting”, the City applied all applicable FASB pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. The City has elected not to apply FASB pronouncements issued after November 30, 1989. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are interfund services provided and used and other charges between the City’s business-type activities 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. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from an exchange transaction such as providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. Nonoperating revenues and nonoperating expenses result from nonexchange transactions and ancillary services. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, and then unrestricted resources as they are needed. The City reports the following major governmental funds: The General Fund is the City’s general operating fund and is used to account for all financial resources except those required to be accounted for in other funds. The Residential Construction Tax District #1 Special Revenue Fund is used to account for a tax to be used for park development in the District #1 identified in the City of Fernley park plan. The Streets and Storm Drains Special Revenue Fund is used to account for gas taxes that must be used for street maintenance and capital expenditures as well as other revenues that may be used for projects associated with streets and storm drains. The Capital Projects Fund is used to accrue funds under a “pay as you go” program to provide funding for future projects involving replacement of equipment or buildings or new facilities and equipment. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 22 The City reports the following major enterprise funds: The Water Utility Fund is used to account for the provision of water services to the residents of the City and some residents of Lyon County. All activities necessary to provide services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, financing and related debt. The Sewer Utility Fund is used to account for the provision of sewer services to the residents of the City and some residents of Lyon County. All activities necessary to provide services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, financing and related debt. Additionally, the City reports the following fund types: Agency funds are custodial in nature and do not present results of operations or have a measurement focus. Agency funds are accounted for using the accrual basis of accounting. These funds are used to account for assets that the City holds for others in an agent capacity. Included are bonds posted with the municipal court. These funds are excluded from the government-wide financial statements. D. Assets, Liabilities and Net Assets or Equity: Cash and Investments: Cash resources of the individual funds are combined to form a pool of cash and investments, which is managed by the City Treasurer. The City invests in the State of Nevada Local Government Pooled Investment Fund, which is reported at fair value. Interest income earned is distributed to the appropriate funds based on each fund’s equity in the investment. Pursuant to NRS 355 and NRS 355.170, the City of Fernley may only invest in the following types of securities:  Certain rated notes and bonds purchased by a registered broker-dealer that are issued by corporations organized and operating in the United States and that mature within five years from the date of purchase; asset-backed securities and collateralized mortgage obligations rated “AAA” or higher by a nationally recognized rating service. These investments must not, in the aggregate, exceed 20 percent of the total portfolio at the time of purchase, nor include notes and bonds issued by any one corporation in excess of 25 percent of such investments  United States bonds and debentures maturing within ten (10) years from the date of purchase  Certain farm loan bonds  Bills and notes of the United States Treasury, maturing within ten (10) years from the date of purchase ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 23  Obligations of an agency of the United States or a corporation sponsored by the government, maturing within ten (10) years from the date of purchase  Obligations of state and local governments if, the interest is exempt for federal income tax purposes and the obligations have been rated or higher by a nationally recognized bond credit rating agency  Negotiable and nonnegotiable certificates of deposit from commercial banks and insured savings and loan associations  State of Nevada Local Government Pooled Investment Fund  Certain securities issued by local governments of the State of Nevada  Certain bankers’ acceptances  Certain short-term paper issued by a corporation organized and operating in the United States  Other securities expressly provided by other statutes, including repurchase agreements  Certain “AAA” rated mutual funds that invest in securities issued by the Federal Government or agencies of the Federal Government, Master, bank notes or other short-term commercial paper rates as “A-1” or “P-1” issued by a corporation or depository institution organized, licensed and operating in the United States and/or Repurchase agreements that are fully collateralized by and above. Cash Equivalents: Cash equivalents include short-term highly liquid investments (with maturities of 3 months or less when purchased) that are both readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk in changes in value. Based on the nature of the investment policies, all amounts are available on demand and are, therefore, classified as cash equivalents on the Statements of Cash Flows. Receivables and Payables: Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to/from other funds.” Any residual balances outstanding between governmental activities and business- type activities are reported in the government-wide financial statements as “internal balances.” Significant receivable balances not expected to be collected within one year are classified as notes receivable on the government-wide financial statements. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 24 Real property taxes result in a lien on the property and attach on July 1 (the levy date) of the year for which the taxes are levied. Taxes may be paid in four installments payable on the third Monday in August, and the first Mondays in October, January and March to the County Clerk/Treasurer of Lyon County in which the City of Fernley is located. Penalties are assessed if a taxpayer fails to pay an installment within ten days of the installment due date. After a two year waiting period, if taxes remain unpaid, a tax deed is issued conveying the property to Lyon County with a lien for back taxes and accumulated charges. Redemption may be made by the owner and such persons as described by statute by paying all back taxes and accumulated penalties, interest and costs before sale. As such, real property taxes receivable reflect only those taxes receivable from the delinquent roll years, and current taxes collected within 60 days of year end and delinquent taxes from all roll years prior to 2003-2004 have been written off. No provision for uncollectible accounts has been established, as management does not anticipate any material collection losses with respect to the remaining balances. Taxes on personal property are collected currently. Personal property declarations are mailed out annually and the tax is computed using percentages of taxable values established by the Department of Taxation at the tax rates described above. Receivables in proprietary fund types have arisen in the ordinary course of business, and are shown net of an allowance for uncollectible accounts, if applicable. Inventories and Prepaids: All inventories are valued at cost using the first in/first out (FIFO) method. Inventories of governmental funds in the fund financial statements are considered consumable supplies and as such are recorded as expenditures at the time of purchase. 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. Restricted Assets: City policy requires that certain resources be set aside for various purposes in the City’s water and sewer utility funds. These amounts are reported as restricted assets. When both restricted and unrestricted assets are available for the same purpose, restricted assets are used first. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 25 Capital Assets: Capital assets, which include land, construction in progress, water rights, property, plant, equipment and infrastructure, are capitalized and reported in the applicable governmental activities and business-type activities columns of the government- wide financial statements. For governmental fund types, outlays for capital assets are expensed during the current period. The City defines capital assets as assets with an initial, individual cost of more than $5,000 for non-infrastructure assets and $100,000 for infrastructure assets and an estimated useful life in excess of two years. Water rights are considered real property. A water right can be conveyed or transferred. Water rights, however, are appurtenant to the land and are conveyed by deed with the land unless the seller specifically reserves the water right in the deed. Water rights are not depreciable or amortizable. Capital assets are recorded at cost for purchased or constructed assets. 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. Donated capital assets are recorded at estimated fair value at the date of donation. Depreciation is computed using the straight-line method over the following estimated useful lives: Buildings 25-40 years Improvements other than buildings 10-20 years Machinery and equipment 5-10 years Other capital assets 25-40 years Infrastructure 20-40 years GASB Statement No. 34 requires the City to report and depreciate new infrastructure assets effective fiscal year June 30, 2004, the initial year of implementation. Infrastructure assets include roads, bridges, underground pipe (other than related to utilities), traffic signals, etc. These infrastructure assets are likely to be the largest asset class of the City. Neither their historical cost nor related depreciation has been reported in prior years’ financial statements. The retroactive reporting of infrastructure is not required for the City based on its size. As such, the City has elected not to retroactively report all major general infrastructure acquired between July 1, 1980 and June 30, 2003. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 26 Long-Term Liabilities: In the government-wide financial statements and the proprietary fund types in the fund financial statements, long-term debt and other long-term liabilities are reported as liabilities in the applicable government activities, business-type activities, or proprietary fund type statement of net assets. It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. The liability for compensated absences is calculated under the provisions of GASB Statement No. 16, “Accounting for Compensated Absences.” All vacation and sick pay is accrued when incurred in the government-wide and proprietary fund statements. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. For current and advance refunding resulting in a defeasance of debt, the difference between the reacquisition price and the net carrying amount of the old debt is deferred and amortized as a component of interest expense using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. A liability for compensated absences is reported in the governmental funds, primarily the General Fund, only if they have matured as a result of employee resignations, terminations and retirements. For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized during the current period. The face amount of bonds is reported as other financing sources, as are bond premiums. Bond discounts are recorded as other financing uses. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 27 Equity Classification: In the government-wide financial statements, equity is classified as net assets and displayed in three components:  Invested in Capital Assets, Net of Related Debt – Consists of capital assets, net of accumulated depreciation and reduced by outstanding balances of any bonds, notes, or other borrowings that are attributable to the acquisition, construction or improvement of those assets.  Restricted Net Assets – Consists of net assets with constraints placed on their use either by external groups such as creditors, grantors, contributors, or laws and regulations or other governments; law through constitutional provisions or enabling legislation.  Unrestricted Net Assets – All other net assets that do not meet the definition of “restricted” or “invested in capital assets, net of related debt.” In the fund financial statements, governmental fund equity is reported as fund balances and is displayed as reserved, unreserved/designated and unreserved/undesignated. Reservations of fund balance are established for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Unreserved/designated fund balance represents amounts that are designated by management for a specific purpose. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 28 The following amounts are reserved/restricted for future capital projects: Developer/ Development Balance at June 30, 2010 Project Description Upland Ranches $ 22,258 Farm District Rd Bike Lane Upland Ranches – Phase 7 29,311 Farm District Rd Turn Lane Sundance 4,140 Farm District Rd Bike Lane Country Ranch Estates 936 Farm District Rd Bike Lane Aspen Meadows 5,100 Farm District Rd Bike Lane Mt View Estates 10,282 Farm District Rd Bike Lane Silverland Estates, Ph 1 19,387 Farm District Rd Bike Lane Truckee River Ranch, Ph 1 & 2 40,673 Farm District Rd Bike Lane Skyridge II 7,866 Farm District Rd Bike Lane Sierra Vista 14,670 95A Turn Lane Shady Grove 5,925 95A Turn Lane Fernley Chiropractic 7,260 95A Curb, Gutter & Sidewalk Renslow Commercial Bldg 14,200 95A Curb, Gutter & Sidewalk Nevada State Bank 9,328 95A Curb, Gutter & Sidewalk Quick Stop Markets 3,850 95A Curb, Gutter & Sidewalk North Seneca Falls 27,180 Hardie Ln Improvements SVWW II, LLC 105,381 Shadow Ln Improvements Convention Center 31,364 Convention Center Total $ 363,402 NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY: A. Budgetary Information: The City of Fernley adheres to the Local Government Budget and Finance Act (Act) incorporated within the statutes of the State of Nevada, in which annual budgets are legally adopted for all funds except Agency funds. The Act and City policy include the following procedures to establish the budgetary data, which is reflected in these financial statements: 1. On or before April 15, the City Manager submits to the Fernley City Council a tentative budget for the fiscal year commencing the following July 1, to be filed with the Nevada Department of Taxation. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 29 2. Public hearings on the tentative budget are held on the third Tuesday in May to obtain taxpayer comments. 3. Prior to June 1, at a public hearing, the Council indicates changes, if any, to be made to the tentative budget and adopts a final budget by the favorable vote of a majority of the members of the Council. The final budget must then be forwarded to the Nevada Tax Commission for final approval. 4. The City may not amend the budget without approval by the City Council. The City Manager is authorized to transfer appropriations between accounts within any department, with notification to the City Council. Any revisions that alter the total appropriations of a function or fund must be approved in advance by the City Council. Formal budgetary integration in the financial records of all funds is employed to enhance management control during the year. The City does not use the encumbrance method of accounting. 5. Budgets for all fund types are adopted on a basis consistent with accounting principles generally accepted in the United States of America (GAAP). Appropriations lapse at year end. 6. In accordance with State statute, actual expenditures may not exceed budgeted appropriations of the various governmental functions of the General, Special Revenue, and Capital Project Funds. Per NRS 354.626, expenditures over budgeted appropriations are allowed for bond repayments, medium term obligation repayments, and other long-term contracts expressly authorized by law. The sum of operating and nonoperating expenses in Proprietary Funds also may not exceed total appropriations. The budget reflected in the financial statements has been amended from the original budget amounts in accordance with State statute. Such amendments included augmentations for prior obligations, as well as supplemental appropriations needed for grants, contingencies, and other uses. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 30 B. Excess of Expenditures/Expenses Over Appropriations: The City conformed to all significant statutory constraints on its financial administration during the year with the following possible exceptions:  Actual expenditures exceeded appropriations in the Community Development function of the General Fund by $76,389. This is an apparent violation of NRS 354.626. C. Other Compliance Matters:  The City did not complete a physical inventory over capital assets within the last two years. The above appears to be a potential violation of NAC 354.750. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 31 NOTE 3 – CASH AND INVESTMENTS: A summary schedule of cash and investments for the City of Fernley at June 30, 2010, is as follows: Cash and Investment Balances Held by: Governmental Funds $ 2,986,384 Fiduciary Funds 16,450 Proprietary Funds Unrestricted 15,682,398 Restricted 627,190* Total Cash and Investments $ 19,312,422 *Restricted cash in the Proprietary Funds consists of refundable customer deposits. Balances Classified by: Cash: On hand $ 750 Wells Fargo Bank: Checking 264,717 EFT Transaction Account 11,635 Investments: NVEST 11,972,729 Local Government Investment Pool 7,062,591 Total Cash and Investments $ 19,312,422 As of June 30, 2010, the City of Fernley had the following investments and maturities: Investment Maturities (in Years) Investment Type Fair Value Less Than 1 1-5 6-10 More Than 10 NVEST: U.S. Treasuries $ 961,687 $ 735,114 $ 226,573 $ - $ - U.S. Agencies 5,746,280 5,590,514 155,766 - - Mortgage-Backed 2,283,959 256,526 395,428 760,056 871,949 Corporate Bonds 2,391,235 39,500 2,051,174 300,561 - Money Market Fund 589,568 589,568 - - - State of Nevada Local Government Investment Pool 7,062,591 7,062,591* - - - Total $19,035,320 $14,273,813 $2,828,941 $1,060,617 $871,949 * average weighted maturity of 80 days. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 32 The City is a voluntary participant in the State of Nevada Local Government Investment Pool (LGIP), which has regulatory oversight from the Board of Finance of the State of Nevada. The City’s investment in the LGIP is equal to its original investment plus allocation of interest income, and realized and unrealized gains and losses, which is the same as the value of the pool shares. The City’s investment in the LGIP is reported at fair value. Nevada Revised Statutes (NRS 355.170) set forth acceptable investments for Nevada local governments. The City has not adopted a formal investment policy that would further limit its investment choices nor further limit its exposure to certain risks as set forth below. Interest Rate Risk. Interest rate risk is the risk of possible reduction in the value of a security, especially a bond, resulting from a rise in interest rates. As noted above, the City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates beyond those specified in the statute. Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation and is a function of the credit quality ratings of its investments. As of June 30, 2010, the City’s investments in Mortgage-Backed securities were rated AAA by Standard and Poor’s and Aaa by Moody’s Investors Service. Of the City’s investments in corporate bonds, $2,351,735 was rated AAA/Aaa, and $39,500 has a withdrawn rating. The State of Nevada Local Government Investment Pool is an unrated external investment pool. As noted above, the City does not have a formal investment policy that specifies minimum acceptable credit ratings beyond those specified in statute. As of June 30, 2010, more than 5% of the City’s investments are in Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Nissan Auto Lease Trust. These investments are 17%, 9% and respectively, of the total investments. As of June 30, 2010, the City was holding $200,000 par value security of Lehman Brothers Holdings. Although rated as Lehman Brothers filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code on September 18, 2008. At fiscal year end, the value of the investment was written down to $39,500; which was the market value as determined by the City’s investment custodian. Custodial Credit Risk- Deposits. Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned. All of the bank balance was covered by FDIC insurance or collateralized by the Office of the State Treasurer/Nevada Collateral Pool. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 33 NOTE 4 – CAPITAL ASSETS: Capital asset activity for the year ended June 30, 2010, was as follows: Balance July 1, 2009 Additions or Transfers In Deletions or Transfers Out Balance June 30, 2010 Governmental Activities: Capital assets, not being depreciated Land $ 3,909,626 $ - $ - $ 3,909,626 Construction in progress 361,206 565,525 (722,805) 203,926 Total capital assets, not being depreciated 4,270,832 565,525 (722,805) 4,113,552 Capital assets, being depreciated Buildings 8,599,098 - - 8,599,098 Improvements other than buildings 8,200,580 665,329 - 8,865,909 Machinery and Equipment 1,156,806 57,477 (10,900) 1,203,383 Infrastructure 28,304,127 156,101 - 28,460,228 Total capital assets, being depreciated 46,260,611 878,907 (10,900) 47,128,618 Less accumulated depreciation for: Buildings (1,236,867) (343,964) - (1,580,831) Improvements other than buildings (1,345,533) (623,192) - (1,968,725) Machinery and Equipment (818,592) (136,158) 8,905 (945,845) Infrastructure (2,974,193) (768,974) - (3,743,167) Total accumulated depreciation (6,375,185) (1,872,288) 8,905 (8,238,568) Total capital assets, being depreciated, net 39,885,426 (993,381) (1,995) 38,890,050 Governmental activities capital assets, net $ 44,156,258 $ (427,856) $ (724,800) $ 43,003,602 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 34 Balance July 1, 2009 Additions or Transfers In Deletions or Transfers Out Balance June 30, 2010 Business-Type Activities: Capital assets, not being depreciated Land $ 1,195,948 $ - $ - $ 1,195,948 Water rights 36,814,699 123,525 - 36,938,224 Construction in progress 73,705,225 8,238,455 (77,611,874) 4,331,806 Total capital assets, not being depreciated 111,715,872 8,361,980 (77,611,874) 42,465,978 Capital assets, being depreciated Buildings 17,530 - - 17,530 Improvements other than buildings 67,401,953 77,889,842 - 145,291,795 Machinery and Equipment 1,708,102 42,228 (26,864) 1,723,466 Other capital assets 1,671,630 - - 1,671,630 Total capital assets, being depreciated 70,799,215 77,932,070 - 148,704,421 Less accumulated depreciation for: Buildings (15,868) (999) - (16,867) Improvements other than buildings (13,320,622) (3,688,357) - (17,008,979) Machinery and Equipment (1,078,187) (191,444) 26,864 (1,242,767) Other capital assets (641,248) (81,458) - (722,706) Total accumulated depreciation (15,055,925) (3,962,258) - (18,991,319) Total capital assets, being depreciated, net 55,743,290 73,969,812 - 129,713,102 Business-type activities capital assets, net $ 167,459,162 $ 82,331,792 $ (77,611,874) $ 172,179,080 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 35 Depreciation expense was charged to functions/programs of the City as follows: Governmental Activities: General government $ 343,353 Public works 1,371,929 Culture and recreation 131,534 Health 16,855 Community development 8,617 Total depreciation expense – governmental activities $ 1,872,288 Business-type Activities: Water $ 2,983,375 Sewer 978,883 Total depreciation expense – business-type activities $ 3,962,258 NOTE 5 – DEFINED BENEFIT PENSION PLAN: Plan Description. The City of Fernley contributes to the Public Employees Retirement System of the State of Nevada (PERS), a cost sharing, multiple employer, defined benefit plan administered by the Public Employees Retirement System of the State of Nevada. PERS provides retirement benefits, disability benefits, and death benefits, including annual cost of living adjustments, to plan members and their beneficiaries. Chapter 286 of the Nevada Revised Statutes establishes the benefit provisions provided to the participants of PERS. These benefit provisions may only be amended through legislation. The Public Employees Retirement System of the State of Nevada issues a publicly available financial report that includes financial statements and required supplementary information for PERS. That report may be obtained by writing to the Public Employees Retirement System of the State of Nevada, 693 West Nye Lane, Carson City, NV 89703- 1599 or by calling (775) 687-4200. Funding Policy. Benefits for plan members are funded under one of two methods; the employer (ER) pay contribution plan or the employer/employee (ER/EE) paid contribution plan. Under the ER contribution plan, the City is required to contribute all amounts due under the plan. Under the ER/EE contribution plan, employees are required to contribute a percentage of their compensation to the plan, while the City is required to match that contribution. The contribution requirements of the City are established by Chapter 286 of Nevada Revised Statutes. The funding mechanism may only be amended through legislation. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 36 The City's contribution rates and amounts contributed (equal to the required contributions for the year) for the last three years are as follows: Fiscal Year Contribution Rate ER Contribution Rate ER/EE Total Contribution 2009-2010 21.50% 11.25% $448,636 2008-2009 20.50% 10.50% $468,921 2007-2008 20.50% 10.50% $509,714 NOTE 6 – INTERFUND TRANSFERS: The composition of interfund balances as of June 30, 2010, is as follows: Due to/from other funds: Receivable Fund Payable Fund Amount Water Utility Fund General Fund $ 14,760 Capital Projects Fund Grants Fund 505,000 Total $ 519,760 NOTE 7 – LONG-TERM DEBT: A. The City was, in accordance with Nevada Revised Statutes, within the legal debt limit at June 30, 2010. B. The following schedule summarizes the changes in long-term debt: ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 37 Issue Date Interest Rate Maturity Date Authorized and Issued Outstanding July 1, 2009 Additions (Deletions) Outstanding June 30, 2010 Due in 2010-2010 Governmental Activities: Compensated absences payable - - - $ - $ 104,477 $ 35,259 $ (27,941) $ 111,795 $ 25,000 City Hall Expansion Bonds 12/29/05 4.49% 12/01/2025 $ 5,000,000 4,504,000 - (181,000) 4,323,000 189,000 Total governmental activities 4,608,477 35,259 (208,941) 4,434,795 214,000 Business-type Activities: State Water Pollution Control Revolving Fund 10/28/92 4.00% 6/30/2012 $ 2,000,000 507,729 - (137,957) 369,772 143,531 2003 Refunding Bonds 11/25/03 3% - 5% 5/01/2010 $ 950,000 185,000 - (185,000) - - 2007 Water/Sewer Bonds 3/28/07 4% - 5% 2/01/2037 $50,000,000 49,180,000 - (860,000) 48,320,000 895,000 2008 Water/Sewer Bonds 4/01/08 3.25% - 5% 2/01/2038 $32,600,000 32,600,000 - (640,000) 31,960,000 660,000 82,472,729 - (1,822,957) 80,649,772 1,698,531 Unamortized Bond Discount/(Premium) 54,824 - (15,829) 38,995 14,878 Compensated absences payable 52,101 78,479 (76,560) 54,020 40,000 Total business-type activities 82,579,654 78,479 (1,915,346) 80,742,787 1,753,409 Total Long-Term Debt $ 87,188,131 $ 113,738 $ (2,124,287) $ 85,177,582 $ 1,967,409 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 38 The following schedule reflects debt service requirements to maturity of the City's long-term debt: Debt Supported by General Obligation Debt Supported by Sewer Fund Revenues Debt Supported by Water Fund Revenues Total Requirements to Maturity Fiscal Year Principal Interest Principal* Interest* Principal* Interest* Principal Interest 2011 189,000 189,860 292,595 365,759 1,405,936 3,308,617 1,887,531 3,864,236 2012 198,000 181,172 304,493 354,377 1,459,836 3,256,950 1,962,329 3,792,499 2013 207,000 172,079 238,010 342,526 1,513,902 3,203,231 1,958,912 3,717,836 2014 216,000 162,583 168,131 334,810 1,576,869 3,145,884 1,961,000 3,643,277 2015 226,000 152,660 175,548 328,359 1,644,452 3,086,110 2,046,000 3,567,129 2016- 2020 1,295,000 597,821 1,004,884 1,513,704 9,375,116 14,241,165 11,675,000 16,352,690 2021- 2025 1,622,000 271,690 1,261,902 1,251,071 11,718,098 11,825,304 14,602,000 13,348,065 2026- 2030 370,000 8,306 1,596,426 939,211 14,783,574 8,908,070 16,750,000 9,855,587 2031- 2035 - - 2,007,457 527,868 18,572,543 5,052,457 20,580,000 5,580,325 2036- 2038 - - 1,086,446 85,568 10,463,554 862,144 11,550,000 947,712 Total $ 4,323,000 $ 1,736,171 $ 8,135,892 $ 6,043,253 $ 72,513,880 $ 56,889,932 $ 84,972,772 $ 64,669,356 * Exclusive of unamortized premium and issuance costs. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 39 Long-term liabilities are reflected in the government-wide Statement of Net Assets. The liabilities will be liquidated primarily by the General Fund for governmental activities and the Water and Sewer Funds for business-type activities. NOTE 8 – POSTEMPLOYMENT RETIREMENT HEALTH INSURANCE BENEFIT: Plan Descriptions: The City administers a single-employer defined benefit healthcare plan, City of Fernley Employee Health Benefits Plan (COFEHBP). Additionally, the City contributes to an agent multiple-employer defined benefit postemployment healthcare plan, Public Employees’ Benefits Plan (PEBP). Each plan provides medical, vision, dental, and life insurance benefits to eligible retired City employees and beneficiaries. Benefit provisions for the COFEHBP are established pursuant to NRS 287.023 and amended through negotiations between the City and the respective associations. NRS 288.150 assigns the authority to establish benefit provisions to the Board of Commissioners. The plan provides healthcare insurance for eligible retirees and their beneficiaries through the City’s group health insurance plan, which covers both active and retired members. Under NRS 287.023, eligible retirees are able to participate in the plan with blended rates, thereby benefitting from an implicit subsidy. Retirees are required to pay 100% of their premiums under the plan. As of June 30, 2010, no retirees were using this plan. The COFEHBP does not issue a publicly available financial report. Benefit provisions for the PEBP are administered by the State of Nevada. NRS 287.043 assigns the authority to establish and amend benefit provisions to the PEBP nine-member board of trustees. City employees who met the eligibility requirements effective September 1, 2008 for retirement within the Nevada Public Employee Retirement System had the option upon retirement to enroll in coverage under the PEBP. NRS 287.023 sunsetted the option to join PEBP for City employees who retired from the City after November 29, 2008. Local governments are required to pay the same portion of the cost of coverage for their retirees joining PEBP that the State of Nevada pays for state retirees participating in the plan. As of June 30, 2010, 7 City retirees were utilizing this benefit. Funding Policy: For COFEHBP, contribution requirements of the plan members and the City are established and may be amended through negotiations between the City and the associations. Retirees pay 100% of the pay-as-you-go premiums based on a blended rate that blends active participants and retirees. The City’s contribution requirements for retirees relate to the implicit subsidy that results from using the blended rates and is determined in actuarial studies contracted for by the City. The implicit subsidy as determined by the actuary is The City did not prefund any future benefits. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 40 For the PEBP, NRS 287.046 establishes the subsidies to be contributed toward the premium costs of the eligible retired City employees. The contribution requirements of plan members and the City may be amended by the PEBP board. Premium rates determined by PEBP are the same for all participating members. The unsubsidized nonstate retiree plan premiums in effect for fiscal year 2010 ranged from $323 to $736, depending on the type of plan chosen. Plan members receiving benefits have their contribution deducted from their pension checks based on the health plan chosen by the retiree, as reduced by the amount of the subsidy; therefore, their contributions are not available. For the plan year ended June 30, 2010, City retirees qualified for a subsidy of $79 at five years of service and $436 at twenty years of service, with incremental increases for years of service in between. As a participating employer, the City is billed for the subsidy on a basis and is legally required to provide for it. For fiscal year 2010, the City contributed $18,613 to the plan, equal to required contributions. The City did not prefund future benefits. Annual OPEB Cost and Net OPEB Obligation: The City’s annual other postemployment benefit (OPEB) cost (expense) for the plans is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plans, and the net OPEB obligations, by plan, for fiscal year 2009-10 were as follows: Annual OPEB Cost Percentage (Entry Age Normal Employer of Annual OPEB Net OPEB Fiscal Year End Cost Method) Contributions Contributed Obligation COFEHBP June 30, 2010 $ 94,813 $ - 0% $ 94,813 PEBP June 30, 2010 23,826 18,613 78% 5,213 $ 118,639 $ 18,613 $ 100,026 Note that fiscal year 2010 is the first year of prospective implementation of GASB 45, Accounting and Financial Reporting by Employers for Postemployment Benefit Plans Other Than Pension Plans; therefore, prior year information is unavailable. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 41 The net OPEB obligation (NOPEBO) as of June 30, 2010, was calculated as follows: COFEHBP PEBP Total Annual Required Contribution (ARC) $ 94,813 $ 23,826 $ 118,639 Interest on net OPEB obligation - - - Adjustment to annual required contribution - - - Annual Required Contribution 94,813 23,826 118,639 Contributions made - 18,613 18,613 Increase in net OPEB obligation 94,813 5,213 100,026 Net OPEB obligation – beginning of the year - - - Net OPEB obligation – end of year $ 94,813 $ 5,213 $ 100,026 Funded Status and Funding Progress: The funded status of the plans as of June 30, 2010 were as follows: COFEHBP PEBP Total Accrued actuarial liability $ 301,357 $ 420,276 $ 721,633 Actuarial value of plan assets - - - Unfunded Actuarial Accrued Liability – $ 301,357 $ 420,276 $ 721,633 Funded Ratio / 0% 0% 0% Covered payroll $ 2,494,167 N/A Unfunded Actuarial Accrued Liability as a Percentage of Covered Payroll / 12% N/A Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Multiyear information will be provided as it becomes available. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 42 Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the City and plan members to that point. Actuarial calculations reflect long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and actuarial value of assets. Significant methods and assumptions used in the June 30, 2010 actuarial valuation were as follows: COFEHBP PEBP Actuarial valuation date June 30, 2010 June 30, 2010 Actuarial cost method Entry Age Normal Cost Entry Age Normal Cost Amortization method Level Percentage of Payroll Level Percentage of Payroll Amortization period (open) 30 years 30 years Asset valuation method Market Value Market Value Actuarial Assumptions: Investment rate of return 4% 4% Projected overall salary increase 4% 4% Medical Healthcare inflation rate* 9%-5% - PEBP Subsidy inflation rate - - * Actual medical premiums used in 2010, 9% decreasing each year by 1% until 5% is reached in 2014. NOTE 9 – RISK MANAGEMENT: The City, like any governmental entity, is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries of employees; and natural disasters. The City has joined together with similar public agencies (cities, counties and special districts) throughout the State of Nevada to create a pool under the Nevada Interlocal Cooperation Act. The Nevada Public Agency Pool Insurance (Pool) is a public entity risk pool currently operating as a common risk management and insurance program for its members. The City pays an annual premium and specific deductibles, as necessary, to the Pool for ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 43 its general insurance coverage. The Pool is considered a self-sustaining risk pool that will provide coverage for its members for up to $10,000,000 per event and a $13,000,000 general aggregate per member The City has also joined together with similar public agencies, under the Nevada Interlocal Cooperation Act, to create an intergovernmental self-insured association for workers compensation insurance, the Public Agency Compensation Trust (PACT). The City pays premiums based on payroll costs to the PACT. The PACT is considered a self-sustaining pool that will provide coverage based on established statutory limits. The City continues to carry commercial insurance for other risks of loss, including specific risks of loss not covered by the Pool, including bonding and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial coverage for the past three years. NOTE 10 – COMMITMENTS AND CONTINGENGIES: There are lawsuits and unresolved disputes involving the city or its employees in which the City is represented by outside counsel. However, in the opinion of the outside counsel, these actions will not, in aggregate, have a material adverse effect upon the operations or financial position of the City. At June 30, 2010, the City had three construction contracts in progress. Management has estimated that of the $3,309,303 in contracts awarded, approximately $242,804 will be billed for work completed over the next fiscal year. ---PAGE BREAK--- REQUIRED SUPPLEMENTARY INFORMATION ---PAGE BREAK--- Actuarial Accrued Liability Actuarial (AAL) - UAAL as a Value of Entry Age Percentage Actuarial Plan Normal Unfunded Funded Covered of covered Valuation Assets Cost AAL (UAAL) Ratio Payroll Payroll Date (b - a) (a/b) - a]/c) COFEHBP June 30, 2010 - $ 301,357 $ 301,357 $ 0% 2,494,167 $ 12% PEBP June 30, 2010 - 420,276 420,276 0% N/A N/A Multi-year data will be provided as it becomes available. CITY OF FERNLEY, NEVADA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2010 SCHEDULE OF FUNDING PROGRESS - OTHER POSTEMPLOYMENT BENEFIT PLANS 44 ---PAGE BREAK--- COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES ---PAGE BREAK--- NONMAJOR NONMAJOR SPECIAL CAPITAL REVENUE PROJECTS FUNDS FUND TOTAL Cash and investments 729,606 $ 28,482 $ 758,088 $ Interest receivable 1,990 79 2,069 Accounts receivable 3,850 - 3,850 Due from other governments 401,708 - 401,708 Total Assets 1,137,154 $ 28,561 $ 1,165,715 $ Liabilities: Accounts payable 156,747 $ - $ 156,747 $ Due to developers 129,125 - 129,125 Due to other Goverments 2,436 - 2,436 Due to other funds 505,000 - 505,000 Total Liabilities 793,308 - 793,308 Fund Balance: Reserved: Reserved for convention center 31,364 - 31,364 Unreserved: Undesignated 312,482 28,561 341,043 Total Fund Balance 343,846 28,561 372,407 Total Liabilities and Fund Balance 1,137,154 $ 28,561 $ 1,165,715 $ CITY OF FERNLEY, NEVADA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2010 ASSETS LIABILITIES AND FUND BALANCE 45 ---PAGE BREAK--- NONMAJOR NONMAJOR SPECIAL CAPITAL REVENUE PROJECTS FUNDS FUND TOTAL REVENUES Taxes: Residential construction tax 1,000 $ - $ 1,000 $ Transient lodging tax 62,685 - 62,685 Ad Valorem - 28,457 28,457 Intergovernmental: Grant 629,419 - 629,419 Fines and forfeits: Municipal administrative fees 38,758 - 38,758 Miscellaneous: Interest earnings 8,031 104 8,135 Other 14,150 - 14,150 Total Revenues 754,043 28,561 782,604 EXPENDITURES Services and supplies: Judicial 4,882 - 4,882 Culture and recreation 14,403 - 14,403 Community development 623,960 - 623,960 Total Services and supplies 643,245 - 643,245 Capital outlay: Culture and recreation 136,818 - 136,818 Total Expenditures 780,063 - 780,063 Net Change in Fund Balance (26,020) 28,561 2,541 FUND BALANCE, JULY 1 369,866 - 369,866 FUND BALANCE, JUNE 30 343,846 $ 28,561 $ 372,407 $ CITY OF FERNLEY, NEVADA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2010 46 ---PAGE BREAK--- MUNICIPAL RESIDENTIAL PRIVATE MUNICIPAL COURT COURT CONSTRUCTION SECTOR TRANSIENT ADMINISTRATIVE FACILITIES TAX DISTRICT GRANTS COMMUNITY LODGING FEES FUND FEES FUND #2 FUND FUND SUPPORT FUND TAX FUND TOTAL Cash and investments 28,917 $ 50,781 $ 137,261 $ 454,347 $ 13,477 $ 44,823 729,606 $ Interest receivable 80 140 369 1,240 37 124 1,990 Accounts receivable 1,638 2,212 - - - - 3,850 Due from other governments - - 76,755 302,699 - 22,254 401,708 Total Assets 30,635 $ 53,133 $ 214,385 $ 758,286 $ 13,514 $ 67,201 $ 1,137,154 $ Liabilities: Accounts payable - $ - $ 30 $ 154,680 $ - $ 2,037 $ 156,747 $ Due to developers - - 129,125 - - - 129,125 Due to other Goverments - - - - - 2,436 2,436 Due to other funds - - - 505,000 - - 505,000 Total Liabilities - - 129,155 659,680 - 4,473 793,308 Fund Balance: Reserved: Reserved for convention center - - - - - 31,364 31,364 Unreserved: Undesignated 30,635 53,133 85,230 98,606 13,514 31,364 312,482 Total Fund Balance 30,635 53,133 85,230 98,606 13,514 62,728 343,846 Total Liabilities and Fund Balance 30,635 $ 53,133 $ 214,385 $ 758,286 $ 13,514 $ 67,201 $ 1,137,154 $ ASSETS LIABILITIES AND FUND BALANCE CITY OF FERNLEY, NEVADA NONMAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET JUNE 30, 2010 47 ---PAGE BREAK--- MUNICIPAL RESIDENTIAL PRIVATE MUNICIPAL COURT COURT CONSTRUCTION SECTOR TRANSIENT ADMINISTRATIVE FACILITIES TAX DISTRICT GRANTS COMMUNITY LODGING FEES FUND FEES FUND #2 FUND FUND SUPPORT FUND TAX FUND TOTAL REVENUES Taxes: Residential construction tax - $ - $ 1,000 $ - $ - $ - $ 1,000 $ Transient lodging tax - - - - - 62,685 62,685 Intergovernmental: Grant - - 38,664 590,755 - - 629,419 Fines and forfeits: Municipal administrative fees 16,318 22,440 - - - - 38,758 Miscellaneous: Interest earnings 226 394 2,391 4,819 158 43 8,031 Other - - - - 14,150 - 14,150 Total Revenues 16,544 22,834 42,055 595,574 14,308 62,728 754,043 EXPENDITURES Services and supplies: Judicial 4,882 - - - - - 4,882 Culture and recreation - - 253 - 14,150 - 14,403 Community development - - - 623,960 - - 623,960 Total Services and supplies 4,882 - 253 623,960 14,150 - 643,245 Capital outlay: Culture and recreation - - 136,818 - - - 136,818 Total Expenditures 4,882 - 137,071 623,960 14,150 - 780,063 Net Change in Fund Balance 11,662 22,834 (95,016) (28,386) 158 62,728 (26,020) FUND BALANCE, JULY 1 18,973 30,299 180,246 126,992 13,356 - 369,866 FUND BALANCE, JUNE 30 30,635 $ 53,133 $ 85,230 $ 98,606 $ 13,514 $ 62,728 $ 343,846 $ CITY OF FERNLEY, NEVADA NONMAJOR SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2010 48 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Fines and forfeits: Municipal administrative fees 15,000 $ 16,318 $ 1,318 $ Miscellaneous: Interest earnings 200 226 26 Total Revenues 15,200 16,544 1,344 EXPENDITURES Judicial Services and supplies 5,350 4,882 468 Excess (Deficiency) of Revenue Over Expenditures 9,850 11,662 1,812 FUND BALANCE, July 1 18,772 18,973 201 FUND BALANCE, June 30 28,622 $ 30,635 $ 2,013 $ FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL MUNICIPAL COURT ADMINISTRATIVE FEES FUND 49 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Fines and forfeits: Municipal administrative fees 22,000 $ 22,440 $ 440 $ Miscellaneous: Interest earnings 350 394 44 Total Revenues 22,350 22,834 484 FUND BALANCE, July 1 30,299 30,299 - FUND BALANCE, June 30 52,649 $ 53,133 $ 484 $ FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL MUNICIPAL COURT FACILITY FEES FUND 50 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Taxes: Residential construction tax 1,000 $ 1,000 $ - $ Intergovernmental: Grant - 38,664 38,664 Miscellaneous: Interest earnings 2,200 2,391 191 Total Revenues 3,200 42,055 38,855 EXPENDITURES Culture and recreation: Capital outlay 143,000 136,818 6,182 Excess (Deficiency) of Revenue Over Expenditures (139,800) (95,016) 44,784 FUND BALANCE, July 1 226,101 180,246 (45,855) FUND BALANCE, June 30 86,301 $ 85,230 $ (1,071) $ FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL RESIDENTIAL CONSTRUCTION TAX DISTRICT #2 FUND 51 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Intergovernmental Grant 558,000 $ 590,755 $ 32,755 $ Miscellaneous: Interest earnings 4,200 4,819 619 Total Revenues 562,200 595,574 33,374 EXPENDITURES Community Development: Services and supplies 750,416 623,960 126,456 Excess (Deficiency) of Revenues Over Expenditures (188,216) (28,386) 159,830 FUND BALANCE, July 1 206,150 126,992 (79,158) FUND BALANCE, June 30 17,934 $ 98,606 $ 80,672 $ FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL GRANTS FUND 52 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Miscellaneous: Interest earnings - $ 157 $ 157 $ Other 15,150 14,150 (1,000) Total Revenues 15,150 14,307 (843) EXPENDITURES Culture and Recreation: Services and supplies 14,150 14,150 - Net Change in Fund Balance 1,000 157 (843) FUND BALANCE, July 1 974 13,357 12,383 FUND BALANCE, June 30 1,974 $ 13,514 $ 11,540 $ FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA PRIVATE SECTOR COMMUNITY SUPPORT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL 53 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Taxes: Transient lodging tax 44,000 $ 62,685 $ 18,685 $ Miscellaneous: Interest earnings - 43 43 Net Change in Fund Balance 44,000 62,728 18,728 FUND BALANCE, July 1 - - - FUND BALANCE, June 30 44,000 $ 62,728 $ 18,728 $ CITY OF FERNLEY, NEVADA TRANSIENT LODGING TAX FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 54 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Miscellaneous: Interest earnings 10,000 $ 7,269 $ (2,731) $ EXPENDITURES Community development: Capital outlay 152,500 95,785 56,715 Net Change in Fund Balance (142,500) (88,516) (59,446) FUND BALANCE, July 1 890,458 1,145,372 254,914 FUND BALANCE, June 30 747,958 $ 1,056,856 $ 195,468 $ FOR THE YEAR ENDED JUNE 30, 2010 CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL CAPITAL PROJECTS FUND 55 ---PAGE BREAK--- ASSETS Cash and investments 28,482 Interest receivable 79 28,561 $ FUND BALANCE Unreserved 28,561 $ Reserved for capital improvements CITY OF FERNLEY, NEVADA CAPITAL IMPROVEMENT FUND BALANCE SHEET JUNE 30, 2010 56 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE REVENUES Taxes: Ad Valorem 34,000 $ 28,457 $ (5,543) $ Miscellaneous: Interest earnings - 104 104 Net Change in Fund Balance 34,000 28,561 (5,439) FUND BALANCE, July 1 - - - FUND BALANCE, June 30 34,000 $ 28,561 $ (5,439) $ CITY OF FERNLEY, NEVADA CAPITAL IMPROVEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 57 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE User fees 4,596,000 $ 4,774,366 $ 178,366 $ Operating Grant 441,742 441,742 - Total Operating Revenues 5,037,742 5,216,108 178,366 Salaries and wages 850,000 812,587 37,413 Employee benefits 221,900 355,830 (133,930) Services and supplies 4,126,911 2,243,964 1,882,947 Depreciation 2,970,000 2,983,375 (13,375) Total Operating Expenses 8,168,811 6,395,756 1,773,055 Operating Income (Loss) (3,131,069) (1,179,648) 1,951,421 Interest earned on investments 170,000 149,324 (20,676) In lieu of water rights fees 4,500 13,725 9,225 Miscellaneous 269,000 230,467 (38,533) Interest expense (2,846,253) (3,024,953) (178,700) Total Nonoperating Revenue (Expense) (2,402,753) (2,631,437) (228,684) Income (Loss) Before Capital Contributions (5,533,822) (3,811,085) 1,722,737 Customer connection fees 293,000 306,780 13,780 Developer agreements 2,000 4,327 2,327 Developer contributed infrastructure 1,000,000 259,541 (740,459) Developer contributed water rights 250,000 123,525 (126,475) Total Capital Contributions 1,545,000 694,173 (850,827) Change in Net Assets (3,988,822) (3,116,912) 871,910 NET ASSETS, July 1 78,791,719 78,911,447 119,728 NET ASSETS, June 30 74,802,897 $ 75,794,535 $ 991,638 $ CAPITAL CONTRIBUTIONS OPERATING REVENUES NONOPERATING REVENUE (EXPENSE) CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENSES AND WATER UTILITY ENTERPRISE FUND FOR THE YEAR ENDED JUNE 30, 2010 OPERATING EXPENSES CHANGES IN NET ASSETS - BUDGET (GAAP BASIS) AND ACTUAL 58 ---PAGE BREAK--- BUDGET ACTUAL VARIANCE User fees 1,850,200 $ 1,883,702 $ 33,502 $ Salaries and wages 500,000 490,207 9,793 Employee benefits 200,000 224,204 (24,204) Services and supplies 1,375,700 710,070 665,630 Depreciation 975,000 978,883 (3,883) Total Operating Expenses 3,050,700 2,403,364 647,336 Operating Income (Loss) (1,200,500) (519,662) 680,838 Interest earned on investments 20,000 112,664 92,664 Miscellaneous 2,000 40 (1,960) Interest expense (372,967) (238,146) 134,821 Total Nonoperating Revenue (Expense) (350,967) (125,442) 225,525 Income (Loss) Before Capital Contributions (1,551,467) (645,104) 906,363 Customer connection fees 150,000 151,325 1,325 Developer contributed infrastructure 250,000 62,894 (187,106) Total Capital Contributions 400,000 214,219 (185,781) Change in Net Assets (1,151,467) (430,885) 720,582 NET ASSETS, July 1 32,641,826 30,894,030 (1,747,796) NET ASSETS, June 30 31,490,359 $ 30,463,145 $ (1,027,214) $ CAPITAL CONTRIBUTIONS OPERATING REVENUES NONOPERATING REVENUE (EXPENSE) CITY OF FERNLEY, NEVADA SCHEDULE OF REVENUES, EXPENSES AND SEWER UTILITY ENTERPRISE FUND FOR THE YEAR ENDED JUNE 30, 2010 OPERATING EXPENSES CHANGES IN NET ASSETS - BUDGET (GAAP BASIS) AND ACTUAL 59 ---PAGE BREAK--- BALANCE BALANCE JULY 1, 2009 ADDITIONS DELETIONS JUNE 30, 2010 Cash and investments 12,055 $ 4,966 $ 571 $ 16,450 $ Bail bond deposits held for others 10,773 $ 4,966 $ - $ 15,739 $ Other liabilities 1,282 - 571 711 Total Liabilities 12,055 $ 4,966 $ 571 $ 16,450 $ ASSETS LIABILITIES CITY OF FERNLEY, NEVADA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND - MUNICIPAL TRUST FUND FOR THE YEAR ENDED JUNE 30, 2010 60 ---PAGE BREAK--- STATISTICAL SECTION ---PAGE BREAK--- This part of the City of Fernley'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. Section Contents Schedule # Financial Trends 1 - 4 These schedules contain trend information to help the reader understand how the City's financial performance and well being have changed over time. Revenue Capacity 5 - 9 These schedules contain information to help the reader assess the factors affecting the City's ability to generate its property and sales taxes. Debt Capacity 10 - 14 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt, and its ability to issue additional future debt. Demographic and Economic Information 15 - 16 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons over time and with other governments. Operating Information 17 - 19 These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from comprehensive annual financial reports for the relevant year. The city implemented GASB 34 in fiscal year 2004, and schedules presenting government-wide information include information beginning in that year. CITY OF FERNLEY, NEVADA STATISTICAL SECTION ---PAGE BREAK--- SCHEDULE 1 2004 2005 2006 2007 2008 2009 2010 GOVERNMENTAL ACTIVITIES Invested in capital assets, net of related debt 11,913,896 $ 15,883,001 $ 24,608,748 $ 30,721,447 $ 35,677,010 $ 39,652,258 $ 38,680,602 $ Restricted - - - - 362,289 391,600 363,602 Unrestricted 3,927,329 5,884,904 5,535,323 4,549,063 2,395,580 2,276,380 2,554,609 Total Governmental Activities Net Assets 15,841,225 $ 21,767,905 $ 30,144,071 $ 35,270,510 $ 38,434,879 $ 42,320,238 $ 41,598,813 $ BUSINESS-TYPE ACTIVITIES Invested in capital assets, net of related debt 32,471,737 $ 39,238,863 $ 57,581,522 $ 35,352,177 $ 77,070,390 $ 95,281,505 $ 91,444,890 $ Restricted - 535,237 579,560 - - - - Unrestricted 12,780,664 16,901,342 17,939,851 60,502,722 25,025,399 14,523,972 14,812,790 Total Business-type Activities Net Assets 45,252,401 $ 56,675,442 $ 76,100,933 $ 95,854,899 $ 102,095,789 $ 109,805,477 $ 106,257,680 $ PRIMARY GOVERNMENT Invested in capital assets, net of related debt 44,385,633 $ 55,121,864 $ 82,190,270 $ 66,073,624 $ 112,747,400 $ 134,933,763 $ 130,125,492 $ Restricted - 535,237 579,560 - 362,289 391,600 363,602 Unrestricted 16,707,993 22,786,246 23,475,174 65,051,785 27,420,979 16,800,352 17,367,399 Total Primary Government Net Assets 61,093,626 $ 78,443,347 $ 106,245,004 $ 131,125,409 $ 140,530,668 $ 152,125,715 $ 147,856,493 $ Trend data is only available for the last seven years due to implementation of GASB 34. FISCAL YEAR ENDED JUNE 30, LAST SEVEN FISCAL YEARS NET ASSETS BY COMPONENT CITY OF FERNLEY, NEVADA 61 ---PAGE BREAK--- SCHEDULE 2 2004 2005 2006 2007 2008 2009 2010 EXPENSES Governmental Activities: General government 587,873 $ 595,912 $ 796,403 $ 1,173,360 $ 1,572,115 $ 1,626,115 $ 1,762,449 $ Judicial 156,796 173,804 170,479 194,353 252,189 243,889 265,515 Public works 463,188 642,480 729,919 1,326,718 783,565 1,778,649 1,824,412 Culture and recreation 362,983 458,828 646,259 838,674 689,281 685,706 622,998 Community development 434,627 861,555 875,056 848,010 1,977,586 811,701 1,247,018 Health 50,560 102,768 263,919 295,413 280,743 252,320 262,865 Debt Service: Interest and fiscal charges - - 224,500 221,032 214,326 206,092 198,144 Total Governmental Activities Expenses 2,056,027 2,835,347 3,706,535 4,897,560 5,769,805 5,604,472 6,183,401 Business-type Activities: Water 2,035,646 2,134,429 2,422,583 3,058,553 3,152,845 4,127,466 9,420,709 Sewer 1,347,388 1,509,433 1,530,898 1,812,583 2,012,862 2,581,981 2,641,510 Other - - 700 9,340 212,651 - - Total Business-type Activities Expenses 3,383,034 3,643,862 3,954,181 4,880,476 5,378,358 6,709,447 12,062,219 Total Primary Government Expenses 5,439,061 $ 6,479,209 $ 7,660,716 $ 9,778,036 $ 11,148,163 $ 12,313,919 $ 18,245,620 $ PROGRAM REVENUES Governmental Activities: Charges for Services: General government 731,510 $ 887,827 $ 1,008,662 $ 1,137,510 $ 1,030,613 $ 1,243,230 $ 1,267,670 $ Judicial 170,835 423,178 196,249 89,248 162,416 161,819 196,886 Public works 10,901 31,278 40,071 29,754 23,021 65,129 116,619 Culture and recreation 16,950 13,400 8,150 48,355 1,600 200 25 Community development 1,422,438 1,804,978 1,123,508 679,608 509,440 258,801 232,719 Health 1,766 1,611 2,341 4,318 4,650 3,819 3,296 Operating Grants and Contributions 276,701 268,632 348,627 60,000 60,000 60,383 61,500 Capital Grants and Contributions 8,112,137 4,232,398 7,531,080 6,052,749 4,869,410 5,613,270 1,538,400 Total Governmental Activities Program Revenues 10,743,238 7,663,302 10,258,688 8,101,542 6,661,150 7,406,651 3,417,115 Business-type Activities: Charges for Services: Water 1,794,430 1,975,451 2,201,916 2,306,193 3,273,625 3,833,095 4,774,366 Sewer 1,187,212 1,441,455 1,686,101 1,754,820 1,829,736 1,830,814 1,883,702 Other - 131,300 - - 1,055 - - Operating Grants and Contributions - - - - 424,671 562,372 441,742 Capital Grants and Contributions: 10,829,870 11,157,733 18,729,430 19,015,856 4,579,348 7,146,143 908,392 Total Business-type Activities Program Revenues 13,811,512 14,705,939 22,617,447 23,076,869 10,108,435 13,372,424 8,008,202 Total Primary Government Program Revenue 24,554,750 $ 22,369,241 $ 32,876,135 $ 31,178,411 $ 16,769,585 $ 20,779,075 $ 11,425,317 $ NET (EXPENSE)/REVENUE Governmental Activities 8,687,211 $ 4,827,956 $ 6,552,153 $ 3,203,982 $ 891,345 $ 1,802,179 $ (2,766,286) $ Business-type Activities 10,428,478 11,062,077 18,663,266 18,196,393 4,730,077 6,662,977 (4,054,017) Total Primary Government Net (Expense)/Revenue 19,115,689 $ 15,890,033 $ 25,215,419 $ 21,400,375 $ 5,621,422 $ 8,465,156 $ (6,820,303) $ 62 CITY OF FERNLEY, NEVADA CHANGE IN NET ASSETS LAST SEVEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, ---PAGE BREAK--- SCHEDULE 2 2004 2005 2006 2007 2008 2009 2010 GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS Governmental Activities: Taxes: Property 427,738 $ 496,207 $ 591,082 $ 925,297 $ 1,074,726 $ 1,381,621 $ 1,410,347 $ Consolidated 137,610 163,429 189,158 188,128 197,040 202,188 170,186 Fuel 216,736 233,448 227,691 259,603 304,718 309,896 294,645 Unrestricted gaming licenses 75,015 71,271 97,121 98,753 96,021 92,211 96,598 Unrestricted interest income 22,441 97,729 329,341 361,301 175,866 41,085 26,847 Miscellaneous revenue 35,660 36,640 389,619 89,378 424,649 56,179 46,238 Total Governmental Activities 915,200 1,098,724 1,824,012 1,922,460 2,273,020 2,083,180 2,044,861 Business-type Activities: Unrestricted interest income 86,972 295,730 702,781 1,511,286 1,126,258 477,258 261,988 Miscellaneous revenue 37,142 65,234 59,441 46,287 384,555 569,452 244,232 Total Business-type Activities 124,114 360,964 762,222 1,557,573 1,510,813 1,046,710 506,220 Total Primary Government General Revenues 1,039,314 $ 1,459,688 $ 2,586,234 $ 3,480,033 $ 3,783,833 $ 3,129,890 $ 2,551,081 $ CHANGE IN NET ASSETS Governmental activities 9,602,411 $ 5,926,680 $ 8,376,165 $ 5,126,439 $ 3,164,365 $ 3,885,359 $ (721,425) $ Business-type activities 10,552,592 11,423,041 19,425,488 19,753,966 6,240,890 7,709,687 (3,547,797) Total Primary Government Change in Net Assets 20,155,003 $ 17,349,721 $ 27,801,653 $ 24,880,405 $ 9,405,255 $ 11,595,046 $ (4,269,222) $ Trend data is only available for the last seven years due to implementation of GASB 34. CONTINUED LAST SEVEN FISCAL YEARS CHANGE IN NET ASSETS CITY OF FERNLEY, NEVADA 63 FISCAL YEAR ENDED JUNE 30, ---PAGE BREAK--- SCHEDULE 3 2002 2003 2004 2005 2006 2007 2008 2009 2010 General fund Reserved 2,478 $ 287,018 $ 1,330 $ 5,205 $ 6,239 $ 6,709 $ 366,424 $ 394,251 $ 332,238 $ Unreserved 774,938 725,358 790,990 869,817 938,757 582,237 279,443 294,617 482,078 Total general fund 777,416 $ 1,012,376 $ 792,320 $ 875,022 $ 944,996 $ 588,946 $ 645,867 $ 688,868 $ 814,316 $ All other governmental funds Reserved - Transient Lodging Tax Fund - $ - $ - $ - $ - $ - $ - $ - $ 31,364 $ Unreserved, reported in: Special revenue fund 17,234 309,399 1,688,126 2,302,972 1,398,315 1,568,588 971,544 787,928 1,118,925 Capital projects fund - 728,195 1,499,182 2,502,129 8,032,479 2,397,510 1,160,893 1,145,372 1,085,417 Total all other governmental funds 17,234 $ 1,037,594 $ 3,187,308 $ 4,805,101 $ 9,430,794 $ 3,966,098 $ 2,132,437 $ 1,933,300 $ 2,235,706 $ * Information presented from City incorporation on July 1, 2001 forward. FISCAL YEAR ENDED JUNE 30, CITY OF FERNLEY, NEVADA FUND BALANCES OF GOVERNMENTAL FUNDS LAST NINE FISCAL YEARS 64 ---PAGE BREAK--- SCHEDULE 4 2002 2003 2004 2005 2006 2007 2008 2009 2010 REVENUES Taxes 359,112 $ 585,458 $ 1,190,598 $ 1,316,826 $ 1,787,949 $ 988,056 $ 1,077,545 $ 1,316,879 $ 1,599,284 $ Licenses and permits 936,421 1,724,743 2,241,629 2,796,965 2,271,703 1,949,947 1,663,745 1,663,184 1,643,381 Intergovernmental 494,110 772,510 1,415,460 1,354,521 1,231,732 2,333,333 2,117,309 1,631,060 1,868,532 Fines and forfeits 17,643 104,330 170,836 175,167 228,424 234,353 207,465 161,820 222,566 Miscellaneous 40,306 55,149 199,081 192,613 794,352 581,833 610,883 138,018 88,765 Total revenues 1,847,592 3,242,190 5,217,604 5,836,092 6,314,160 6,087,522 5,676,947 4,910,961 5,422,528 EXPENDITURES General government 480,143 475,065 528,906 595,297 717,355 1,025,295 1,238,982 1,290,272 1,402,434 Judicial 61,567 144,797 154,514 171,868 169,163 194,518 251,829 244,714 257,983 Public works 297,293 517,855 331,318 420,500 376,571 515,394 428,988 457,243 448,224 Culture and recreation 221,460 337,677 324,629 381,962 508,797 647,542 522,392 546,492 482,871 Community development 240,811 301,269 405,298 669,105 810,965 834,503 1,226,149 787,056 1,332,123 Health 10,036 40,828 48,395 96,876 256,738 275,905 262,526 232,843 242,279 Debt service: Principal 84,000 90,314 - - - 158,000 165,000 173,000 181,000 Interest 10,822 5,117 - - 94,789 221,032 214,326 206,092 198,144 Capital outlay - 73,948 1,499,163 1,799,989 3,684,115 8,097,529 3,143,509 1,129,385 457,600 Total expenditures 1,406,132 1,986,870 3,292,223 4,135,597 6,618,493 11,969,718 7,453,701 5,067,097 5,002,658 Excess (deficiency) of revenues over expenditures 441,460 1,255,320 1,925,381 1,700,495 (304,333) (5,882,196) (1,776,754) (156,136) 419,870 OTHER FINANCING SOURCES (USES) Transfers out - (950,000) (1,931,030) (1,690,000) (1,050,000) (711,712) (20,000) (26,000) - Transfers in - 950,000 1,931,030 1,690,000 1,050,000 711,712 20,000 26,000 - General obligations bonds issued - - - - 5,000,000 - - - - Proceeds from disposal of capital assets - - 4,277 - - 61,450 - - 7,984 Total other financing sources (uses) - - 4,277 - 5,000,000 61,450 - - 7,984 Net change in fund balance 441,460 $ 1,255,320 $ 1,929,658 $ 1,700,495 $ 4,695,667 $ (5,820,746) $ (1,776,754) $ (156,136) $ 427,854 $ Debt service as a percentage of noncapital expenditures 7.2% 5.3% 0.0% 0.0% 3.3% 10.9% 9.6% 10.7% 9.1% * Information presented from City incorporation on July 1, 2001 forward. CITY OF FERNLEY, NEVADA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST NINE FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 65 ---PAGE BREAK--- SCHEDULE 5 Ratio of Total Real and Personal Property Assessed To Total Estimated Estimated Fiscal Assessed Actual Actual Year Value Value Value 2002* 233,552,164 $ 667,291,897 $ 35.0 2003 246,640,476 704,687,074 35.0 2004 279,452,986 798,437,103 35.0 2005 303,180,006 866,228,589 35.0 2006 377,743,200 1,079,266,286 35.0 2007 511,154,623 1,460,441,780 35.0 2008 679,959,918 1,942,742,623 35.0 2009 755,529,070 2,158,654,486 35.0 2010 632,953,139 1,808,437,540 35.0 Source: State of NV Department of Taxation's "Local Government Finance Redbook" * Information presented from City incorporation on July 1, 2001 forward. CITY OF FERNLEY, NEVADA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST NINE FISCAL YEARS* 66 ---PAGE BREAK--- SCHEDULE 6 CITY OF FERNLEY, NEVADA PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS (PER $100 OF ASSESSED VALUE) Fiscal City of State of School Special Year Fernley Nevada District County Districts Total 2002* 0.1528 0.1500 1.3367 0.7577 0.3431 2.7403 2003 0.1528 0.1500 1.3367 0.7839 0.3544 2.7778 2004 0.1528 0.1700 1.3367 0.8350 0.3627 2.8572 2005 0.1528 0.1700 1.3367 0.8644 0.3726 2.8965 2006 0.1528 0.1700 1.3367 0.8644 0.3736 2.8975 2007 0.3481 0.1700 1.3367 0.8644 0.0274 2.7466 2008 0.3772 0.1700 1.3367 0.8644 0.3505 3.0988 2009 0.3782 0.1700 1.3367 0.8644 0.3515 3.1008 2010 0.3788 0.1700 1.3367 0.8644 0.3510 3.1009 Source: State of NV Department of Taxation's "Local Government Finance Redbook" * Information presented from City incorporation on July 1, 2001 forward. LAST NINE FISCAL YEARS* 67 ---PAGE BREAK--- SCHEDULE 7 CITY OF FERNLEY, NEVADA PRINCIPAL PROPERTY OWNERS* June 30, 2010 Taxable Approximate Estimated Taxable Percentage of Appraised Assessed Taxable Assessed Taxpayer Product/Service Value Value Valuation Sierra Pacific Power Utility 149,919,514 $ 52,471,830 $ 2.902% BMO Leasing US, Inc. (Quebecor) Printing 43,448,291 15,206,902 0.841% Southwest Gas Corp. Utility 38,077,760 13,327,216 0.737% TREX Company, Inc. Wood Product Manufacturer 32,606,580 11,412,303 0.631% 1600 East Newlands Dr., LLC Developer 26,144,071 9,150,425 0.506% Sherwin-Williams Acceptance Corp Paint Manufacturer 25,490,691 8,921,742 0.493% Sonterra Development Co. Inc. Developer 22,998,066 8,049,323 0.445% Nevada Cement Company Cement Manufacturer 22,455,257 7,859,340 0.435% MSC Industrial Direct Co. Inc. Industrial Distributor 20,259,696 7,090,894 0.392% Amazon.com Retail Distributor 20,123,754 7,043,314 0.389% Totals 401,523,682 $ 140,533,289 $ 7.770% Source: Lyon County Assessor's Office Note: Estimated appraised value is based on assessed value at 35% of appraised value *Nine year period not available as date of incorporation is July 1, 2001 68 ---PAGE BREAK--- SCHEDULE 8 2002 2003 2004 2005 2006 2007 2008 2009 2010 WATER UTILITY Number of Customers 3309 3,966 4,980 6,083 6,634 6,816 7,170 7,371 7,061 Annual Average Day Demand per customer 750 750 750 750 750 750 750 750 750 Gallons of water used (in thousands) 905,839 1,085,693 1,363,275 1,665,221 1,816,058 1,865,880 1,954,754 1,488,674 1,317,721 Direct rate per 1000 gallons 0.95 $ 0.95 $ 0.95 $ 0.95 $ 0.95 $ 0.95 $ 1.11 $ 1.50 $ 2.02 $ Source: City of Fernley *Information presented from City incorporation on July 1, 2001 forward FISCAL YEAR ENDED JUNE 30, LAST NINE FISCAL YEARS* WATER USER FEES CITY OF FERNLEY, NEVADA 69 ---PAGE BREAK--- SCHEDULE 9 User User Employer Fees Rank Fees Rank Trex Manufacturing Company 80,396 $ 1 42,141 $ 1 World Color Fernley 76,196 2 - - Hollywood Investments 61,245 3 18,076 3 Fernley High School 47,891 4 11,081 7 Veteran's Cemetery 42,207 5 15,059 4 Blue Beacon Wash 30,450 6 7,413 8 City of Fernley Out of Town Park 28,087 7 - - Fernley Intermediate School 26,442 8 6,318 9 Trails End Mobile Park 25,974 9 12,016 5 Sherwin Williams 24,687 10 - - Green Valley Park - - 11,957 6 Quebecor World MS #2 - - 31,703 2 Source: City of Fernley * Earliest year information available is 2004 due to change in tracking system. . CITY OF FERNLEY, NEVADA PRINCIPLE WATER USERS 2010 2004* JUNE 30, 70 ---PAGE BREAK--- SCHEDULE 10 Governmental Activities General Total Percentage Fiscal Obligation Water Sewer Primary of Personal Per Year Bonds Bonds Bonds Government Income Capita 2002 90,314 $ - $ - $ 90,314 $ 0.04% 9 $ 2003 - - - - 0.00% - 2004 - - - - 0.00% - 2005 - - - - 0.00% - 2006 5,000,000 670,000 890,282 6,560,282 1.64% 401 2007 4,842,000 45,015,000 6,267,780 56,124,780 12.20% 2,977 2008 4,677,000 74,954,997 8,640,332 88,272,329 17.12% 4,507 2009 4,504,000 74,055,200 8,417,529 86,976,729 16.90% 4,436 2010 4,323,000 72,538,029 8,150,738 85,011,767 16.10% 4,491 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. *Information presented from City incorporation on July 1, 2001 forward See the Schedule of Demographic Statistics on page 68 for personal income and population data. Business-Type Activities CITY OF FERNLEY, NEVADA RATIOS OF OUTSTANDING DEBT BY TYPE LAST NINE FISCAL YEARS* 71 ---PAGE BREAK--- SCHEDULE 11 Percentage General Business of Actual Fiscal Obligation Type Property Per Year Bonds Activities Total Value Capita 2002 90,314 $ 1,341,684 $ 1,431,998 $ 0.21% 150.28 $ 2003 - 1,219,713 1,219,713 0.17% 116.83 2004 - 1,108,830 1,108,830 0.14% 94.63 2005 - 1,008,027 1,008,027 0.12% 73.18 2006 5,000,000 1,560,282 6,560,282 0.61% 401.07 2007 4,842,000 51,282,780 56,124,780 3.84% 2,977.44 2008 4,677,000 83,595,329 88,272,329 4.54% 4,507.14 2009 4,504,000 82,472,729 86,976,729 4.03% 4,435.55 2010 4,323,000 80,688,767 85,011,767 4.70% 4,491.09 Note: See the Schedule of Assessed Value and Estimated Actual Value of Taxable Property for property value data. Population can be found in the Schedule of Demographic Statistics page 68. *Information presented from City incorporation on July 1, 2001 forward CITY OF FERNLEY, NEVADA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST NINE FISCAL YEARS* 72 ---PAGE BREAK--- SCHEDULE 12 CITY OF FERNLEY, NEVADA COMPUTATION OF GENERAL OBLIGATION DIRECT AND OVERLAPPING DEBT June 30, 2010 Total Presently General Self-Supporting Obligation General Net Debt % Applicable Debt Obligation Debt Outstanding Net Debt Direct: City of Fernley 85,011,767 $ 80,688,767 $ 4,323,000 $ 100.00% 4,323,000 $ Overlapping: State of Nevada 1,374,695,000 - 1,374,695,000 0.44% 6,048,658 Lyon County 20,103,727 20,103,727 - 0.00% - Lyon County School District 80,790 - 80,790 35.88% 28,987 Total Overlapping Debt 6,077,645 Total Direct and Overlapping Debt 10,400,645 $ Source: State of Nevada Lyon County Lyon County School District Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Fernley This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. Applicable 73 ---PAGE BREAK--- SCHEDULE 13 CITY OF FERNLEY, NEVADA COMPUTATION OF LEGAL DEBT MARGIN June 30, 2010 Estimated Assessed Value 1,808,437,540 $ Debt Limit - 30 Percent of Total Assessed Value 542,531,262 Total Amount of Debt Applicable to Debt Limit 85,011,767 Legal Debt Margin 457,519,495 $ Note: Legal debt margin as set forth in NRS 266.600 74 ---PAGE BREAK--- SCHEDULE 14 CITY OF FERNLEY, NEVADA WATER AND SEWER FUNDS REVENUE BOND COVERAGE - COMBINED LAST NINE FISCAL YEARS* Net Revenue Available Debt Service Requirements Fiscal Operating Operating For Debt Year Revenue Expenses(1) Service Principal Interest Total Coverage 2002* 2,201,361 $ 1,645,441 $ 555,920 $ 283,405 $ 107,847 $ 391,252 $ 142% 2003 2,501,125 1,815,858 685,267 243,778 97,428 341,206 201% 2004 2,981,642 2,096,056 885,586 248,173 84,152 332,325 266% 2005 3,416,906 2,338,729 1,078,177 262,745 72,580 335,325 322% 2006 3,888,017 2,647,912 1,240,105 277,502 60,323 337,825 367% 2007 4,061,013 2,873,207 1,187,806 287,451 620,879 908,330 131% 2008 5,528,032 3,420,207 2,107,825 1,122,600 3,531,002 4,653,602 45% 2009 5,975,722 4,168,048 1,807,674 1,122,600 3,773,565 4,896,165 37% 2010 7,099,810 4,836,862 2,262,948 1,822,957 3,738,999 5,561,956 41% Note: Total operating expenses exclusive of depreciation *Information presented from City incorporation on July 1, 2001 forward 75 ---PAGE BREAK--- SCHEDULE 15 Fiscal Total Personal Per Capita Unemployment Year Population Income Personal Income Rate 2002 9,529 217,089,678 $ 22,782 $ 5.60% 2003 10,440 243,617,400 23,335 5.40% 2004 11,718 285,380,172 24,354 5.20% 2005 13,775 336,110,000 24,400 5.00% 2006 16,357 399,110,800 24,400 4.70% 2007 18,850 459,940,000 24,400 7.30% 2008 19,585 515,555,540 26,324 8.90% 2009 19,609 514,677,423 26,247 15.30% 2010 18,929 527,967,668 27,892 19.20% Sources: Nevada Demographer's Office Bureau of Economic Analysis Nevada Employment Security Department- Lyon County Data *Information presented from City incorporation on July 1, 2001 forward CITY OF FERNLEY, NEVADA DEMOGRAPHIC STATISTICS LAST NINE FISCAL YEARS* 76 ---PAGE BREAK--- SCHEDULE 16 Percentage Percentage of Total County of Total County Employer Employees Rank Employment Employees Rank Employment Lyon County School District 1000-1499 1 9.43% - - - Amazon.com 600-699 2 5.66% 700-799 1 6.14% Lyon County 500-599 3 4.72% - - - MSC Industrial Supply Co. 200-299 4 1.89% 100-199 3 1.23% TREX Company 200-299 5 1.97% 100-199 4 1.23% World Color Printing USA Corp 100-199 6 0.94% - - - South Lyon Medical Center 100-199 7 0.94% - - - Nevada Cement Company 100-199 8 1.18% 100-199 6 1.23% Lowe's HIW Inc. 100-199 9 1.18% - - - Silverado Casino 90-99 10 0.75% 90-99 7 0.78% Total employment statistics are for the Lyon County area, as information not available at the City level. * Information presented from calendar year 2005, the first year the Comprehensive Annual Financial Report was prepared. CITY OF FERNLEY, NEVADA MAJOR EMPLOYERS JUNE 30, . Source: Nevada Department of Employment, Training and Rehabilitation 2010 2005* 77 ---PAGE BREAK--- SCHEDULE 17 2002 2003 2004 2005 2006 2007 2008 2009 2010 FUNCTION/PROGRAM General government 11.9 14.3 14.7 15.5 12.1 18.6 22.3 9.3 13.0 Judicial 1.7 1.7 1.9 1.9 2.0 1.9 1.9 3.0 2.4 Public works 1.2 1.2 1.3 1.3 2.0 1.5 1.8 2.5 5.5 Culture and recreation 3.5 4.5 4.5 7.5 7.5 10.9 11.5 4.8 6.0 Community development 4.5 7.0 7.0 12.0 15.5 16.0 14.0 8.1 8.0 Health - - - 2.0 3.9 2.9 2.5 3.0 2.0 Water 5.4 5.4 5.6 5.9 8.6 6.8 8.1 15.3 16.5 Sewer 5.4 5.4 5.6 5.9 9.1 6.8 8.1 9.2 4.5 Total 33.6 39.5 40.6 51.9 60.7 65.4 70.1 55.2 57.9 Sources: City of Fernley, Nevada FY 2009/2010 Annual Budget *Information presented from City incorporation on July 1, 2001 forward CITY OF FERNLEY, NEVADA FULL-TIME EQUIVALENT CITY OF FERNLEY, NEVADA EMPLOYEES BY FUNCTION/PROGRAM LAST NINE FISCAL YEARS* 78 ---PAGE BREAK--- SCHEDULE 18 2003 2004 2005 2006 2007 2008 2009 2010 Function/Program Judicial: Municipal Court Cases Filed: Drug 55 33 34 68 35 28 25 39 Driving Under Influence 82 71 75 91 81 83 68 79 Domestic Violence 37 48 65 45 5 3 1 3 Traffic 1,979 2,132 2,410 2,530 1,829 1,668 1,260 2,206 Non-Traffic 160 309 314 326 319 397 326 307 Other 5 0 1 0 0 3 3 3 Public Safety: Calls for Service: Criminal 2,292 2,760 3,072 3,382 3,866 3,633 2,791 2,679 Non-Criminal 948 828 924 1,028 1,180 1,129 1,889 2,144 Domestic Violence 312 432 684 678 866 889 463 414 Follow-up 1,044 1,488 1,404 1,630 1,439 1,624 1,599 1,920 Traffic Stops 1,080 672 876 1,026 1,450 1,639 2,067 1,999 Civil Papers 2,028 1,596 2,028 2,232 2,136 2,601 2,359 2,568 Animal 132 192 168 102 156 204 337 377 Death/Coroner 36 36 36 42 33 45 42 29 Public Service 1,536 1,440 1,044 1,250 927 1,191 1,111 1,195 Assist other Agencies 612 600 684 732 625 1,112 1,024 851 Alarms 216 252 276 346 383 377 517 494 Property Damage Accident 72 120 132 92 120 98 115 108 Injury Accident 12 12 24 24 20 5 15 9 Private Property Accident 60 48 48 48 73 81 65 52 Administrative 2,016 2,316 2,196 2,304 2,761 3,113 3,204 4,715 Total Calls for Service 12,372 12,792 13,572 15,076 16,035 17,741 17,598 19,554 Total Reports Written 1,788 1,740 1,704 1,756 2,298 2,130 1,947 2,326 Arrests: Felony 84 72 60 90 123 76 95 122 Gross Misdemeanor 12 12 24 16 17 27 44 34 Misdemeanor 192 168 120 112 143 146 121 160 Driving Under the Influence 48 48 36 48 84 90 76 111 Domestic Violence 48 48 72 52 71 53 73 61 Mental Health 12 12 12 8 12 11 4 5 Total Arrests 396 360 312 326 450 403 413 493 Citations: Traffic 444 240 228 274 593 464 557 535 Non-Traffic 240 132 168 162 209 234 328 339 Total Citation 684 372 408 436 802 698 885 874 Water Utility Customer Count 3,966 4,980 6,083 6,634 6,816 6,896 6,876 6,693 New Connections 657 1,014 1,103 551 182 80 15 12 Sewer Utility Customer Count 3,950 4,957 6,049 6,600 6,782 6,862 6,312 6,140 New Connections 649 1,007 1,092 551 182 80 14 12 Building 868 1,492 1,445 897 500 352 221 217 Number of Inspection Performed 7,042 15,929 19,108 13,302 5,838 3,107 1,894 929 Planning Number of applications processed 144 195 211 238 223 150 93 52 Sources: City of Fernley *Information presented for fiscal years as available FISCAL YEAR ENDED JUNE 30, LAST EIGHT FISCAL YEARS* OPERATING INDICATORS BY FUNCTION/PROGRAM CITY OF FERNLEY, NEVADA 79 ---PAGE BREAK--- SCHEDULE 19 2002 2003 2004 2005 2006 2007 2008 2009 2010 Function/Program Streets Public Road Mileage 89.5 92.03 95.45 104.12 106.64 116.96 125.36 126.79 126.79 Parks and Recreation: Parks and Open Space Acreage 56.9 68 68.3 85.3 150 155 155 155 155 Developed Parks 5 7 7 8 11 11 11 11 11 Tennis Courts 1 1 1 1 1 1 1 1 1 Rodeo Arena 1 1 1 1 2 2 2 2 2 Playing Fields 6 6 7 8 10 19 19 19 19 Pavilions 1 1 1 2 2 2 3 3 7 Skate Park 1 1 1 1 1 1 1 1 1 Water Utility: Water lines (miles) 73.5 79.4 85.8 92.6 105 115.2 124.7 148.9 152.1 Fire Hydrants 700 775 850 925 1,000 1,033 1,083 1,102 1,102 Sewer Utility: Sanitary Sewer lines (miles) 63.0 68.0 73.4 79.3 90.0 93.6 101.3 124.2 124.2 Sanitary Sewer Manhole 615 864 1,113 1,362 1,510 1,600 2,126 2,227 2,227 Sources: City of Fernley *Information presented from City incorporation on July 1, 2001 forward CITY OF FERNLEY, NEVADA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST NINE FISCAL YEARS* 80 ---PAGE BREAK--- COMPLIANCE SECTION ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- PROJECT/ FEDERAL PASS-THROUGH FEDERAL-GRANTOR/PASS-THROUGH CFDA CFDA FEDERAL GRANTOR/PROGRAM TITLE NUMBER NUMBER EXPENDITURES Department of Housing and Urban Development: Passed through the State of Nevada: Commission on Economic Development Community Development Block Grant 14.218 CDGB/09-PCB/029 26,073 $ Department of the Interior: Direct Programs: Bureau of Reclamation Joint Planning and Development for Water Systems 15.508 R09AP20010 316,418 Bureau of Reclamation Truckee River Settlement Act Implementation, Providing Water to At-Risk Natural Desert Terminal Lakes 15.508 07FG200125 50,230 366,648 Passed through the State of Nevada: Division of State Parks ARRA Outdoor Recreation, Acquisition, Development and Planning 15.[PHONE REDACTED] 38,664 Department of Conservation and Natural Resources Division C, Title II, Section 204, Consolidate Appropriations Act, 2008 as Amended by Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 15.xxx 09G200020 73,521 Total Department of the Interior 478,833 Department of Justice: Direct Program: Bureau of Justice Assistance BJA FY 09 Congressionally Selected 16.753 2009-D1-BX-0070 139,889 Department of Energy: Direct Program: ARRA Energy Efficiency and Conservation Block Grant 81.128 DE-RW0000138 52,000 Department of Health and Human Services: Passed through the State of Nevada: Department of Health and Human Services Title XX Social Services Block Grant 93.667 T27001574 53,062 Total Expenditures of Federal Awards 749,857 $ CITY OF FERNLEY, NEVADA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2010 See accompanying notes. 85 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2010 86 A. REPORTING ENTITY: The accompanying schedule of expenditures of federal awards presents the expenditure activity of all federal awards programs of City of Fernley (the City) for the year ended June 30, 2010. The City’s reporting entity is defined in Note 1 to its basic financial statements. All expenditures of federal awards received directly from federal agencies as well as federal awards passed through other government agencies are included in the schedule. B. BASIS OF ACCOUNTING: The accompanying schedule of expenditures of federal awards is prepared on the modified accrual basis of accounting. C. RELATIONSHIP TO BASIC FINANCIAL STATEMENTS: Expenditures of federal awards have been included in the individual funds of the City as follows: Governmental Activities: Major Governmental Fund: Streets and Storm Drains Fund $ 73,520 Other Governmental Funds: Residential Construction Tax District #2 Fund 38,664 Grants 586,043 Business-Type Activities: Major Business-Type Fund: Water Utility Fund 51,630 $ 749,857 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2010 87 A. SUMMARY OF AUDITORS’ RESULTS 1. The auditor’s report expresses an unqualified opinion on the basic financial statements of City of Fernley, Nevada for the year ended June 30, 2010. 2. No significant deficiencies relating to the audit of the financial statements are reported in the 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. 3. The audit disclosed no instances of noncompliance, which were material to the financial statements of the City of Fernley, Nevada. 4. The audit disclosed a significant deficiency in internal control over the major programs that was not considered to be a material weakness. 5. The auditor’s report on compliance with the requirements applicable to each major federal award program for the City of Fernley, Nevada expressed an unqualified opinion. 6. An audit finding relative to the major federal award programs for City of Fernley, Nevada for the year ended June 30, 2010 which is required to be reported under Section .510(a) of OMB Circular A-133, is reported in Part C of this schedule. 7. The programs tested as major programs were: Truckee River Settlement Act Implementation, Providing Water to At-Risk Natural Desert Terminal Lakes, CFDA 15.508 Joint Planning and Development for Water Systems, CFDA 15.508 Bureau of Justice Assistance 09 Congressionally Selected, CFDA 16.753 8. The dollar threshold for distinguishing Type A and B programs for the year ended June 30, 2010, was $300,000. 9. The City of Fernley, Nevada did not qualify as a low risk auditee for the year ended June 30, 2010, under the criteria set forth in Section .530 of OMB Circular A-133. B: FINDINGS RELATING TO THE FINANCIAL STATEMENT AUDIT REPORTED IN ACCORDANCE WITH GENERALLY ACCEPTED ADITING STANDARDS (GAGAS): None. ---PAGE BREAK--- CITY OF FERNLEY, NEVADA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2010 88 C: FINDINGS AND QUESTIONED COSTS FOR MAJOR FEDERAL AWARD PROGRAMS: Finding 10-1 U.S. Department of Interior Joint Planning and Development for Water Systems, CFDA 15.508 Condition: During our testing of allowable costs, no supporting documentation was found for the administrative cost allocation plan. Criteria: 2 CFR 225 (OMB Circular A-87) prescribes cost principles in determining allowable costs that may be charged to a Federal program. Costs that are allocated to a Federal program must be reasonable, allocable and determined in accordance with generally accepted accounting principles. Appendix C to Part 225 specifies that the local governments should maintain the plan and related documentation for audit. Questioned Costs: $12,170 Cause: Management used an expected percentage of grant proceeds in the application and budget for administrative costs, but failed to support the percentage with proper documentation. Effect: Cost reimbursements submitted to the granting agency may contain costs that are not allowed under 2 CFR 225 (OMB Circular A-87). Recommendation: We recommend the City develop an overhead allocation plan based upon current costs and allocated on a reasonable basis and all documentation supporting such allocations be retained for audit. Managements response: See management’s response on page 89. ---PAGE BREAK--- 89 ---PAGE BREAK--- CITY OF FERNLEY, NEVADA SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2010 90 Finding 09-2: Truckee River Settlement Act Implementation, Providing Water to At-Risk Natural Desert Terminal Lakes, CFDA 15.508 Condition: This finding was a significant deficiency stating that Financial Status Reports were not being reconciled to the general ledger on a timely basis. The accounting records associated with this program included costs in excess of the reports submitted. Recommendation: We recommended procedures be put in place to reconcile the accounting records to the reports prior to submission. Current status: Implemented. ---PAGE BREAK--- AUDITOR’S COMMENTS ---PAGE BREAK--- 91 AUDITOR'S COMMENTS June 30, 2010 Statute Compliance The required disclosure on compliance with Nevada Revised Statutes and the Nevada Administrative Code is contained in Note 2 to the financial statements. Progress on Prior Year Statute Compliance The City monitored expenditures during the current year in order to prevent over expenditures; however, refer to Note 2 to the financial statements. Prior Year Recommendations We identified a financial weaknesses that was reported as a material weaknesses. Our current year audit noted no similar control deficiencies. Current Year Recommendations Our audit disclosed no recommendations for the current year. ---PAGE BREAK--- 92 Schedule of Fees Imposed Subject to the Provisions of NRS 354.5989 – Limitation of Fees for Business Licenses Flat Fixed Fees: Business license revenue for the year ended June 30, 2009 $ 137,657 Adjustment to Base: Base year: 1. Percentage increase in population of the local government 0.1% 2. Percentage increase in the Consumer Price Index for the year ending on December 31, next preceding the year for which the limit is being calculated 4.1% Adjusted Base at June 30, 2010 4.1% 143,301 Actual Revenue 168,379 Actual Amount over (under) Allowable Amount $ 25,078 Fee calculated on a Percentage of Gross Revenue: Adjusted base at June 30, 2009 $ 840,310 Percentage change in CPI 1.041 Adjusted base at June 30, 2010 843,533 Actual Revenue 1,031,452 Actual Amount over (under) Allowable Amount $ 187,919 ---PAGE BREAK---