Document Murray_doc_42ef70bc00

COMPREHENSIVE ANNUAL FINANCIAL REPORT MURRAY CITY CORPORATION, UTAH FOR THE FISCAL YEAR ENDED JUNE 30, 2012 ---PAGE BREAK--- MURRAY CITY CORPORATION, UTAH MURRAY, UTAH COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2012 Prepared by Justin M. Zollinger CPA, Director of Finance Brenda Moore CPA, Controller Joseph Canepari, Senior Accountant ---PAGE BREAK--- 1 TABLE OF CONTENTS Introductory Section 3 Letter of Transmittal 4 City Leadership 7 Organization chart 8 Certificate of Achievement for Excellence in Financial Reporting 9 Financial Section 10 Report of Independent Certified Public Accountants 11 Management’s Discussion and Analysis 13 Basic Financial Statements 22 Statement of Net Assets 23 Statement of Activities 24 Balance Sheet – Governmental Funds 25 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Assets 26 Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Funds 27 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Funds to the Statement of Activities 28 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – General Fund 29 Statement of Net Assets – Proprietary Funds 30 Statement of Revenues, Expenses, and Changes in Net Assets – Proprietary Funds 32 Statement of Cash Flows – Proprietary Funds 33 Notes to the Financial Statements 35 Note 1 – Summary of Significant Accounting Policies 35 Note 2 – Reconciliation of Government-wide and Fund Financial Statements 41 Note 3 – Stewardship, Compliance, and Accountability 42 Note 4 – Detailed Notes for All Funds 43 Supplementary Information 63 Combining Balance Sheet – Nonmajor Governmental Funds 64 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds 65 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Municipal Building Authority – Budget to Actual 66 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Library Fund – Budget to Actual 67 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Redevelopment Fund – Budget to Actual 68 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Community Development Block Grant Fund – Budget to Actual 69 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Capital Projects (Major Fund) – Budget to Actual 70 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Cemetery Perpetual Care Fund – Budget to Actual 71 Statement of Net Assets – Internal Service Funds 72 ---PAGE BREAK--- 2 Statement of Revenues, Expenses, and Changes in Net Assets – Internal Service Funds 73 Statement of Cash Flows – Internal Service Funds 74 Statement of Net Assets – Nonmajor Proprietary Funds 75 Statement of Revenues, Expenses, and Changes in Net Assets – Nonmajor Proprietary Funds 76 Statement of Cash Flows – Nonmajor Proprietary Funds 77 Statistical Section 79 Net Assets by Component 80 Changes in Net 81 Governmental Activities Tax Revenues by Source 82 Fund Balances of Governmental Funds 83 Changes in Fund Balance of Governmental Funds 84 Assessed Value and Estimated Actual Value of Taxable Property 85 Direct and Overlapping Property Tax Rates 86 Principal Sales Tax Payers 87 Property Tax Levies and Collections 88 Ratio of Outstanding Debt by Type 89 Direct and Overlapping Governmental Activities Debt 90 Legal Debt Margin Information 91 Pledged Revenue Coverage 92 Demographic and Economic Statistics 93 Principal Employers 94 Full Time Equivalent City Government Employees by Function 95 Operating Indicators by Function 96 Capital Asset Statistics by Function 97 Compliance Section 98 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 99 Independent Auditor’s Report on Compliance with Requirements that Could Have a Direct and Material Effect on each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 101 Schedule of Federal Awards 103 Notes to The Schedule of Expenditures of Federal Awards 104 Schedule of Findings and Questioned Costs 105 State Compliance Section 107 Independent Auditor’s Report on Compliance in Accordance with the State of Utah Legal Compliance Audit Guide 108 Schedule of Findings and Responses 110 ---PAGE BREAK--- 3 INTRODUCTORY SECTION ---PAGE BREAK--- 4 December 4, 2012 LETTER OF TRANSMITTAL To the Honorable Mayor, Members of the City Council, and Citizens of Murray City: The Comprehensive Annual Financial Report (CAFR) of Murray City (City) for the fiscal year ending June 30, 2012, is submitted herewith. Utah state law requires that the Finance Director in cities of the first and second class shall present to the governing body an annual financial report prepared in conformity with generally accepted accounting principles (GAAP), and audited in accordance with generally accepted auditing standards by a firm of licensed, certified public accounts. This report, which fulfills these requirements, was prepared by the Murray City Finance Department. This report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, the City’s management has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City’s financial statements have been audited by Hansen, Bradshaw, Malmrose and Erickson, P.C., a firm of licensed certified public accountants. The goal of the independent audit was to prove reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2012, 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 report of the independent auditor is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City is part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on internal controls and compliance with legal requirements; special emphasis is placed on internal controls and legal requirements involving the administration of federal awards. These reports can be found as listed in the table of contents. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. ---PAGE BREAK--- 5 Profile of the Government Murray City, incorporated in 1902, is located in the central portion of Salt Lake County, approximately eight miles south of Salt Lake City. The City currently occupies a land area of about 11 square miles and serves a population of about 50,000. The City is empowered to levy a property tax on both real and personal properties located within its boundaries. It is also empowered by state statute to impose a 1% local option sales tax on all retail sales. The City has operated under the strong mayor-council form of government since 1982. Policy-making and legislative authority are vested in the City Council which is made up of five members elected by district. The City Council is responsible, among other things, for passing ordinances, adopting the budget, approving appointments to committees and approving the department heads appointed by the Mayor. The Mayor, who is full time, is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the government and for appointing the heads of the various departments. The City Council is elected on a non-partisan basis with members serving on a staggered four year term basis. The Mayor is elected at-large for a four year term. The City provides a full range of services including; police and fire protection, including ambulance services; construction and maintenance of highways, streets, and infrastructure; recreational activities and cultural events. In additions to general government activities, the governing body controls the Water Fund, the Waste Water Fund, the Power Fund, the Solid Waste Management Fund, the Storm Water Fund, the Telecommunication Fund and the Murray Parkway Recreation Fund; therefore, these activities are included in the reporting entity. However, the Murray City School District has not met the established criteria for inclusion in the reporting entity, and accordingly, is excluded from this report. Factors Affecting Financial Conditions 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 Murray City operates. Local Economy Murray City, like other cities in the area, has felt the effects of the economic slowdown. The City is a major retail center in Salt Lake County with a regional mall, nine major automobile dealerships and several big box retailers. Because of this diversification, the City has been able to maintain more stability during this economic change than other cities. The reconstruction of Fashion Place Mall which includes several high end department stores, numerous restaurants and other retail stores, has helped to maintain a stable economic environment. Long-term financial planning Due to the slow economy, Murray City has been less aggressive in capital construction projects. The City will continue to use General Fund monies to construct, repair and maintain city roads in accordance with the pavement management plan. The City is in the process of implementing a strategic plan, which helps provide a long-term planning framework. There is now added emphasis on the Capital Improvements Plan as a result of the strategic plan. The City offered an early retirement incentive to City employees during July and August of 2011; as a result of the decrease in personnel some departments were reorganized during fiscal year 2012. ---PAGE BREAK--- 6 Awards and Acknowledgments The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement of Excellence in Financial Reporting to Murray City Corporation for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2011. This was the thirty-first consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized comprehensive annual financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. The 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 Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report on a timely basis could not be accomplished without the efficient and dedicated services of the entire Finance Department staff. I would like to express my appreciation to all staff members who assisted in and contributed to its preparation. Credit must also be given to the Mayor and the City Council for their unfailing support for maintaining the highest standards of professionalism in the management of Murray City’s finances. Respectfully submitted, Justin M. Zollinger Director of Finance ---PAGE BREAK--- 7 MURRAY CITY CORPORATION CITY LEADERSHIP Daniel C. Snarr Mayor James A. Brass Council Chairman Dave Nicponski Darren Stam Council Member Council Member Brett A. Hales Jared Shaver Council Member Council Member DEPARTMENT AND DIVISION HEADS Jan Wells Chief of Staff Daniel Barr Library Director Peter A. Fondaco Police Chief Blaine Haacke Power General Manager Jennifer Kennedy City Recorder Douglas P. Hill Public Services Director Wendell Coombs City Treasurer Frank Nakamura City Attorney Gilbert Rodriguez Fire Chief Michael P. Terry Human Resources Director W. Paul Thompson Justice Court Judge B. Tim Tingey Administrative and Development Services Director Justin M. Zollinger Director of Finance/CFO Michael Williams Justice Court Administrator ---PAGE BREAK--- 8 ORGANIZATION CHART Citizens of Murray Mayor City Council Daniel C. Snarr 1. David Nicponski 2. Darren Stam 3. Jim Brass 4. Jared Shaver 5. Brett Hales Chief of Staff City Attorney Jan Wells Frank Nakamura Police Chief Finance Director Pete Fondaco Justin Zollinger Fire Chief Public Services Director Gilbert Rodriguez Doug Hill Court Administrator ADS Director Michael Williams Tim Tingey Human Resources Director Power Director Mike Terry Blaine Haacke ---PAGE BREAK--- 9 CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING Presented to Murray City Corporation Utah For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2011 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. ---PAGE BREAK--- 10 FINANCIAL SECTION ---PAGE BREAK--- E Lynn Hansen. CPA Clarke R Bradshaw, CPA Oaty E. Malmrose, CPA Ed11otn Endaon. CPA MIChad L. Smtih, CPA Ja.on L TIUUICf". CPA Robcn 0 Wood, CPA A~mn R. CPA Ted C Gatd.ner, CPA B. Miles. CPA ,\frmb<-r.1 nj tht! Prl\lllr Company Pr 's management Our responsibility IS to express opinions on these financ1al statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States or America and the standards applicable to financial audits contained in Government Auditing S'tandards, issm:d b} the Comptroller General of the United ~tales . Those standards reqUlre that plan and perform the audn to obtain reasonable assurance about \\hether the financial statements are free of material misstatement An audit includes examining, on a test bas1s. c\ idence supportmg the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management. as well as evaluating the overall Cinancial statement presentation. We believe that our audit provides a reasonable basis for our opintons. In our opinion. the Cinancial referred to above present fairly. in all material respects, the respective Cinanc1al pos1tion of' the governmental activities. the business- type activities. each major fund, and the aggregate remaining fund information of' Murray Cit) Corporation. Utah. as of June 30, 2012. and the respective changes in financial position and cash flows, \\here applicable. thereof and the respective budgcta1~ compalison for the general fund for the year then ended in conlormit) ith accounting principles generally accepted in the United States of Amenca. In accordance ith A udiriug Standard\. we have also issued our report dated November 1 il. 2012. on our consideration of the City's internal control over Cinanc1al reporting and our tests of its compliance with certain provisions of' laws, regulat1ons. contracts and grant agreements and other matters r he purpose of that report is to describe the scope of our testing of internal control over Cinancial and compliance and the resullS of that te<>ting. and not to provide an opinion on the mternal control m.cr financial reporting or on compliance. ·1 hat report is an integral part of an audit performed in accordance With Govemment Auditing and should be considered in assessing the results of our audit. II ---PAGE BREAK--- Accounting principles general!) accepted in the United States of America require that the management's discusston and analysis on pages 13 through 21 be presented to supplement the basic financial statements. Such information. although not a part of the baste financial statements. ts b) the Govemmental Accountmg Standards Board, who considers it to be an cssenttal part of financial reporting for placmg the basic financial statements in an appropriate operational, economic. or historical context. We have applied certain limited procedures to the requtred supplementary tnformation in accordance ith audtting standards generall) accepted in the United States of America which consisted of inquirtc:. of management ahout the methods of preparing the information and comparing the information for wtth management's responses to our inquiries. the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provtde us with suffictent evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opintons on the financial statements that collectively comprise the City's financial statements as a whole. The introductory section. combining and individual nonmajor fund financial statements. budgetary comparison mformauon. and statisttcal section arc presented for purposec; of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of addittonal analysis as rcqutred by OMB Circular A-13 Audi1s of Stutes. Local Government\, and Non-Profit Organi=aflons. and is also not a required part of the financial statements. The combining and individual nonmajor fund financial statements. budgetary comparison information, and the schedule of expenditures of federal awards arc the of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financ1al statements fhe information has been subjected to the auditing procedures applied in the audit of the financial statements and certam additional procedures. including comparing and reconciling such information directly to the underlying accounung and other records used to prepare the financ1al statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinton. the mformatton is Hurly stated in all malenal respects in relation to the financial statements as a whole. The mtroductory and statistical sections have not been subjected to the auditing procedures applied tn the audit of the basic financial statements and, accordingly, we do not express an opinion or provide assurance on them. November 14. 2012 12 ---PAGE BREAK--- 13 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS As management of Murray City Corporation, we offer readers of the Murray City financial statements this narrative overview and analysis of the financial activities of Murray City for the fiscal year ended June 30, 2012. We encourage readers to consider the information presented here in conjunction with the additional information we have furnished in our Letter of Transmittal. Financial Highlights  The assets of Murray City exceeded its liabilities at the close of the most recent fiscal year by $157,482,975 (net assets). Of this amount, $42,768,153 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.  Murray City’s total net assets increased by $10,684,785. Much of this increase was due to a conservative estimate of fiscal year 2012 budgeted revenue. Actual revenues exceeded projections by $1,415,051 for the General Fund. Management did not increase personnel costs wherever possible. The number of full time city positions decreased by twenty over the prior fiscal year as a result of the early retirement incentive. Business-type activities saw increased fees and charges from a warmer than average year.  As of the close of the current fiscal year, Murray City’s governmental funds reported combined ending fund balances of $19,302,309 an increase of $422,081 in comparison with the prior year. Approximately 47 percent of this total amount, $9,150,403 is available for spending at the government’s discretion (unassigned fund balance).  At the end of the current fiscal year, unassigned fund balance for the general fund was $9,150,403 or 22 percent of total general fund estimated revenue. The General Fund’s unassigned fund balance decreased by $1,395,733. This was a result of planned reserve use, as the money was moved to the Capital Projects Fund for future capital needs.  Murray City’s total bonded debt decreased by $1,890,000 (4.98 percent) during the current fiscal year. This discussion and analysis is intended to serve as an introduction to Murray City’s basic financial statements. Murray City’s basic financial statements comprise three components: government-wide financial statements, fund financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of Murray City’s finances, in a manner similar to private-sector business. The statement of net assets presents information on all of Murray City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of Murray City 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). ---PAGE BREAK--- 14 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS The Statement of Activities distinguish functions of Murray City 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 Murray City include general government, public safety, highways and public improvements, parks and recreation, library and community and economic development. The business-type activities of Murray City include a Water Fund, Wastewater Fund, Power Fund, Murray Parkway Fund, Telecommunication Fund, Solid Waste Management Fund, and Storm Water Fund. 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. Murray City, like any other state and local government, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of Murray City can be divided into two categories: governmental funds and proprietary funds. Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial 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 governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Murray City maintains seven 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 capital projects fund which are considered to be major funds. Data from the other five governmental funds are combined into a single aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements in the Required Supplementary Information section of this report. Murray City 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. ---PAGE BREAK--- 15 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS Proprietary funds Murray City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Murray City uses enterprise funds to account for its Water Fund, Waste Water Fund, Power Fund, Storm Water Fund, Murray Parkway Recreation Fund, Telecommunication Fund, and Solid Waste Management Fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among Murray City’s various functions. Murray City uses internal service funds to account for maintenance of its vehicles and for its self- insurance programs. Because both of these services predominantly benefit government rather than business- type functions, they have been included within governmental activities in the government-wide financial statements. Individual fund data for the internal service funds is provided in the form of combining statements in the Required Supplementary Information section of this report. 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 Fund, the Waste Water Fund, the Power Fund, and for the Storm Water Fund all of which are considered to be major funds of Murray City. Data from other proprietary funds are combined into a single aggregate presentation. Individual fund data is provided in the form of combining statements in the Required Supplementary Information section 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. 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 Murray City, assets exceeded liabilities by $157,482,975 at the close of the most recent fiscal year. The largest portion of Murray City’s net assets (71 percent), reflects its investment in capital assets land, buildings, improvements, infrastructure, machinery and equipment,), less any related debt used to acquire those assets that is still outstanding. Murray City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Murray City’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. ---PAGE BREAK--- 16 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS Murray City's Change in Net Assets 2012 2011 2012 2011 2012 2011 Current and other assets 38,026,383 $ 35,355,052 $ 32,445,284 $ 23,561,063 $ 70,471,667 $ 58,916,115 $ Capital assets 67,268,328 66,373,136 80,892,441 82,232,892 148,160,769 148,606,028 Total assets 105,294,711 101,728,188 113,337,725 105,793,955 218,632,436 207,522,143 Long-term liabilities outstanding 12,164,641 14,626,454 25,360,205 26,184,826 37,524,846 40,811,280 Other liabilities 15,746,046 13,127,543 7,884,786 6,785,130 23,630,832 19,912,673 Total liabilities 27,910,687 27,753,997 33,244,991 32,969,956 61,155,678 60,723,953 Net assets: Invested in capital assets, net of related debt 56,770,185 55,550,096 55,047,253 55,429,311 111,817,438 110,979,407 Restricted 2,897,384 4,151,232 - 1,005,358 2,897,384 5,156,590 Unrestricted 17,716,455 14,272,863 25,051,698 16,389,330 42,768,153 30,662,193 Total net assets 77,384,024 $ 73,974,191 $ 80,098,951 $ 72,823,999 $ 157,482,975 $ 146,798,190 $ Total Business-type Activities Governmental Activities An additional portion of Murray City’s net assets (1.8 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($42,768,153) may be used to meet the City’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, Murray City is able to report positive balances in all three categories of net assets, both for 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. There was an increase of $10,684,785 in net assets for Murray City during the current fiscal year. The primary reason for this increase in net assets was from conservative revenue forecasts that limited budgets and controlled expenses. ---PAGE BREAK--- 17 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS Murray City's Changes in Net Assets 2012 2011 2012 2011 2012 2011 Revenues: Program revenues: Charges for services 6,479,306 $ 9,653,063 $ 52,358,497 $ 50,131,643 $ 58,837,803 $ 59,784,706 $ Operating grants and contributions 4,478,557 1,384,745 - - 4,478,557 1,384,745 Capital grants and contributions 2,087,025 2,472,440 833,496 2,860,488 2,920,521 5,332,928 General revenues: Property taxes 10,075,782 9,823,237 - - 10,075,782 9,823,237 Franchise taxes 4,849,560 4,924,741 - - 4,849,560 4,924,741 General sales and highway sales taxes 12,847,464 12,800,032 - - 12,847,464 12,800,032 Investment income 295,607 309,804 244,548 183,447 540,155 493,251 Gain/(loss) on disposal of assets 10,638 - 163,124 (17,049) 173,762 (17,049) Miscellaneous 206,915 196,156 - - 206,915 196,156 Total revenues 41,330,854 41,564,218 53,599,665 53,158,529 94,930,519 94,722,747 Expenses: General government 8,984,119 10,198,008 - - 8,984,119 10,198,008 Public safety 16,678,415 17,790,182 - - 16,678,415 17,790,182 Highways & public improvements 7,880,076 7,277,244 - - 7,880,076 7,277,244 Parks, recreation, and culture 7,068,120 7,479,831 - - 7,068,120 7,479,831 Debt service - interest and fiscal charges 440,286 548,035 - - 440,286 548,035 Power - - 31,190,000 32,432,062 31,190,000 32,432,062 Water - - 4,084,701 4,886,993 4,084,701 4,886,993 Waste water - - 3,255,545 2,732,108 3,255,545 2,732,108 Murray parkway - - 1,697,025 1,614,203 1,697,025 1,614,203 Telecommunications - - 33,120 - 33,120 - Storm water - - 1,884,519 1,690,874 1,884,519 1,690,874 Solid waste - - 1,049,808 942,255 1,049,808 942,255 Total expenses 41,051,016 43,293,300 43,194,718 44,298,495 84,245,734 87,591,795 Increase (decrease) in net assets before transfers 279,838 (1,729,082) 10,404,947 8,860,034 10,684,785 7,130,952 Transfers 3,129,995 3,622,106 (3,129,995) (3,622,106) - - Increase (decrease) in net assets 3,409,833 1,893,024 7,274,952 5,237,928 10,684,785 7,130,952 Net assets at beginning of year 73,974,191 72,081,167 72,823,999 67,586,071 146,798,190 139,667,238 Net assets at end of year 77,384,024 $ 73,974,191 $ 80,098,951 $ 72,823,999 $ 157,482,975 $ 146,798,190 $ Business-type Activities Activities Total Governmental Governmental activities Governmental activities increased Murray City’s net assets by $3,409,833. Key elements are as follows:  Revenue exceeded budget by approximately $1,400,000, part of this positive variance was the result of the following revenues: o $424,000 from sales tax revenue o $426,000 from licenses and permits o $354,000 from charges for services  Expenditures were less than budget by approximately $2,000,000 thanks to all departments’ careful use of taxpayer dollars.  The early retirement incentive contributed to the City’s improved financial position. ---PAGE BREAK--- 18 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS Business-type activities Business-type activities increased Murray City’s net assets by $7,274,952. Key elements of this increase are as follows:  Total operating revenues increased by $2,429,227. This was a result of a waste water and power rate increases, and a warmer than average spring and summer which increased utilization of City services.  Total operating expenses decreased by approximately $1,408,773 over the prior year.  Impact fees and capital contributions were $1,488,448 and $833,496 respectively.  Operational transfers decreased by $406,156.  The Power Department has delayed some capital projects to help build reserves. Purchase power costs decreased by approximately $886,000 over the previous fiscal year.  The Telecommunications Fund was added, it was transferred $100,000 from the General Fund for start-up. Financial Analysis of the Government’s Funds As noted earlier, Murray City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds The focus of Murray City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing Murray City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Governmental fund balance is reported in five separate categories: nonspendable, restricted, committed, assigned, and unassigned. Nonspendable fund balance includes amounts that cannot be spent for legal or practical reasons. Examples include long-term notes receivable, and inventory. Restricted fund balance includes amounts restricted to specific purposes by external parties such as amounts restricted for debt service. Committed fund balance includes amounts that have been set aside by the City Council for a specific purpose prior to the end of the fiscal year. Assigned fund balance includes amounts that have been set aside by the City Council for a specific purpose, but subsequent to the end of the fiscal year. Unassigned fund balance includes all remaining amounts. As of the end of the current fiscal year, Murray City’s governmental funds reported combined ending fund balances of $19,302,309, an increase of $422,081 in comparison with the prior year. Of the total balance, $235,198 is nonspendable, $2,897,384 is restricted, $7,019,324 is assigned, and $9,150,403 is unassigned. The General Fund is the chief operating fund of the City. At fiscal year end, the General Fund reported total fund balance of $11,302,325, of which $235,198 is nonspendable, $1,916,724 is restricted, and $9,150,403 is unassigned. ---PAGE BREAK--- 19 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS The Capital Projects Fund has a total fund balance of $4,839,240, an increase of $1,219,875 over the prior year. The increase is for planned future capital needs. This fund will continue to increase over the next few years as savings occurs for future capital projects. Proprietary funds Murray City’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 were $6,222,021, in the waste water fund $6,651,421, in the power fund $10,896,520, and in the storm water fund $763,435. Each fund saw an increase in unrestricted net assets except for storm water, which saw a decrease of $385,208. This decrease was due to a large capital project. The Water, Waste Water, and Storm Water Funds received capital contributions of $304,166, $148,806, and $380,524 respectively. These contributions of water and sewer lines, and storm water improvements came from developers within the City. As mentioned earlier in this report, the Water and Waste Water Funds refunded a portion of the 2003 Water & Sewer Revenue Bonds. General Fund Budgetary Highlights The original budget and the final amended budget changed by $3,504,627, the material changes are summarized as follows:  A grant from the U.S. Department of Transportation/Federal Highway Administration was received for Highway Planning and Construction for $1,973,782. In addition, to complete the project a City portion was budgeted of $143,329.  Budget for the Cottonwood/Winchester Intersection project was appropriated for $320,000.  Budget for the Vine Street Widening project was appropriated for $152,980.  City department reorganization occurred with a budget appropriated of $655,319. Other minor increases in appropriations were for miscellaneous items. Capital Asset and Debt Administration Murray City’s investment in capital assets for its governmental and business-type activities as of June 30, 2012 was $148,160,769 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements other than buildings, machinery and equipment, furniture and fixtures, infrastructure, intangibles, and construction in progress. The total change in Murray City’s investment in capital assets for the current fiscal year was a decrease of $445,259. This represents an $895,192 increase for governmental activities and a $1,340,451 decrease for business-type activities. These changes in capital assets will have no effect on the availability of fund reserves for future use. ---PAGE BREAK--- 20 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS Major capital projects and investments during the current fiscal year included the following:  Fireclay roadway and bridge was donated to the City for approximately $2,059,000  Winchester & Fireclay storm drain project approximately 1,180,000  4800 South 300 E – 800 E road project approximately $1,098,000  Fireclay & 900 E water line projects approximately $800,000  4854 & 4858 South State land purchase approximately $393,000  Cottonwood/Winchester Intersection realignment approximately $320,000  Vine Street Widening project approximately $153,000 Murray City's Capital Assets (Net of depreciation) 2012 2011 2012 2011 2012 2011 Land 13,077,618 $ 12,624,238 $ 6,974,069 $ 6,894,695 $ 20,051,687 $ 19,518,933 $ Buildings 31,700,614 31,448,612 6,061,001 6,061,001 37,761,615 37,509,613 Improvements other than buildings 16,072,009 16,072,009 144,471,674 142,761,164 160,543,683 158,833,173 Machinery and equipment 11,435,408 11,431,832 18,740,025 18,198,990 30,175,433 29,630,822 Furniture and fixtures 1,286,618 1,286,618 546,542 546,542 1,833,160 1,833,160 Infrastructure 65,868,655 61,450,189 - - 65,868,655 61,450,189 Intangibles - - 4,309,027 4,309,027 4,309,027 4,309,027 Construction in progress 87,781 394,930 1,863,415 39,023 1,951,196 433,953 Total capital assets 139,528,703 134,708,428 182,965,753 178,810,442 322,494,456 313,518,870 Less accumulated depreciation (72,260,375) (68,335,292) (102,073,312) (96,577,550) (174,333,687) (164,912,842) Net capital assets 67,268,328 $ 66,373,136 $ 80,892,441 $ 82,232,892 $ 148,160,769 $ 148,606,028 $ Governmental Business-type Activities Activities Total Additional information regarding the City’s capital assets can be found in the notes to the financial statements of this report. At the end of the current fiscal year, Murray City had total bonded debt outstanding of $36,090,000. All of Murray City’s debt represents bonds secured solely by specified revenue sources (i.e. revenue bonds). Murray City's Outstanding Debt 2012 2011 2012 2011 2012 2011 Revenue bonds 10,365,000 $ 11,850,000 $ 25,725,000 $ 26,130,000 $ 36,090,000 $ 37,980,000 $ Activities Activities Total Governmental Business-type Murray City’s bonded debt decreased by $1,890,000 or 4.98 percent in fiscal year 2012. ---PAGE BREAK--- 21 MURRAY CITY MANAGEMENT’S DISCUSSION AND ANALYSIS In May 2012, the City issued $1,030,000 of Sewer Revenue Bonds for various capital projects. The City is authorized to issue an additional $1,596,000 for a total of $2,626,000. The bond was issued by the State of Utah. Murray City during fiscal year 2012 refunded a portion of the Series 2003 Water and Sewer Bonds. This resulted in a net present value savings of $438,446. Additional information on Murray City’s long-term debt can be found in the notes to the financial statements of this report. Economic Factors and Next Year’s Budgets and Rates In August 2012, the City increased solid waste fees by $2 per month for the first can and recycling, and increased the charge for a second can by $1.35 per month. This increase occurred to cover higher solid waste collection fees. Fiscal year 2013 is the City’s final year of the state sales tax hold harmless provision. This provision guaranteed a certain level of sales tax revenue to the City. Over the last several years, the City has received payments for the sale of the sports mall, this note was paid off in full October 2012. The City continues to approach budgeting for revenues conservatively with a focus on long-term sustainability. Requests for Information This financial report is designed to provide a general overview of Murray City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Office of the Finance Director, 5025 South State Street, Murray City, Utah, 84107. ---PAGE BREAK--- 22 BASIC FINANCIAL STATEMENTS ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 23 MURRAY CITY STATEMENT OF NET ASSETS JUNE 30, 2012 Governmental Business-type Activities Activities Total ASSETS Current assets: Cash and cash equivalents 21,197,697 $ 18,091,198 $ 39,288,895 $ Accounts receivable (net of allowance) 10,403,518 7,147,053 17,550,571 Notes receivable 1,273,743 18,338 1,292,081 Due from other governments 2,817,718 111,150 2,928,868 Inventory 75,694 1,780,759 1,856,453 Noncurrent assets: Restricted cash 15,692 962,103 977,795 Notes receivable - 312,048 312,048 Deferred costs 558,525 774,426 1,332,951 Investments in joint ventures 1,683,796 3,254,426 4,938,222 Land 13,077,618 6,974,069 20,051,687 Buildings 31,700,614 6,061,001 37,761,615 Improvements other than buildings 16,072,009 144,471,674 160,543,683 Machinery and equipment 11,435,408 18,740,025 30,175,433 Furniture and fixtures 1,286,618 546,542 1,833,160 Infrastructure 65,868,655 - 65,868,655 Intangibles - 4,309,027 4,309,027 Construction in progress 87,781 1,863,415 1,951,196 Accumulated depreciation and amortization (72,260,375) (102,073,312) (174,333,687) Total assets 105,294,711 113,343,942 218,638,653 LIABILITIES Current liabilities: Accounts payable 856,500 3,508,498 4,364,998 Accrued liabilities 1,909,223 421,223 2,330,446 Customer deposits - 1,176,801 1,176,801 Unearned revenue 9,725,593 - 9,725,593 Compensated absences 1,688,592 651,615 2,340,207 Interest payable 61,138 106,877 168,015 Notes payable - 18,338 18,338 Bonds and leases payable 1,505,000 2,001,434 3,506,434 Noncurrent liabilities: Compensated absences 650,298 381,046 1,031,344 Net OPEB payable 2,521,200 823,357 3,344,557 Notes payable - 312,048 312,048 Bonds and leases payable 8,993,143 23,843,754 32,836,897 Total liabilities 27,910,687 33,244,991 61,155,678 NET ASSETS Invested in capital assets, net of related debt 56,770,185 55,047,253 111,817,438 Restricted for: Perpetual care 520,000 - 520,000 Low income housing 445,033 - 445,033 Construction and debt service 1,901,224 - 1,901,224 Other 31,127 - 31,127 Unrestricted 17,716,455 25,051,698 42,768,153 Total net assets 77,384,024 $ 80,098,951 $ 157,482,975 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 24 MURRAY CITY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 Net (Expense) Revenues Operating Capital and Changes in Net Assets Charges for Grants and Grants and Governmental Business-type Expenses Services Contributions Contributions Activities Activities Total Governmental activities General government 8,984,119 $ 3,422,552 $ - $ - $ (5,561,567) $ - $ (5,561,567) $ Public safety 16,678,415 1,182,550 209,242 - (15,286,623) - (15,286,623) Highways and public improvements 7,880,076 99,116 4,056,543 2,087,025 (1,637,392) - (1,637,392) Parks, recreation, and culture 7,068,120 1,775,088 212,772 - (5,080,260) - (5,080,260) Debt service - interest and fiscal charges 440,286 - - - (440,286) - (440,286) Total governmental activities 41,051,016 6,479,306 4,478,557 2,087,025 (28,006,128) (28,006,128) Business-type activities Water 4,084,701 6,373,244 - 304,166 - 2,592,709 2,592,709 Waste water 3,255,545 4,347,747 - 148,806 - 1,241,008 1,241,008 Power 31,190,000 37,627,800 - - - 6,437,800 6,437,800 Murray Parkway 1,697,025 1,562,957 - - - (134,068) (134,068) Telecommunication 33,120 33,780 - - - 660 660 Solid waste 1,049,808 1,009,285 - - - (40,523) (40,523) Storm water 1,884,519 1,403,684 - 380,524 - (100,311) (100,311) Total business-type activities 43,194,718 52,358,497 - 833,496 9,997,275 9,997,275 General Revenues: Taxes Property taxes 10,075,782 - 10,075,782 Franchise taxes 4,849,560 - 4,849,560 General sales taxes and highway sales taxes 12,847,464 - 12,847,464 Investment income 295,607 244,548 540,155 Gain on disposal of assets 10,638 163,124 173,762 Miscellaneous 206,915 - 206,915 Transfers - net 3,129,995 (3,129,995) - Total general revenue and transfers 31,415,961 (2,722,323) 28,693,638 Change in net assets 3,409,833 7,274,952 10,684,785 Net assets - beginning 73,974,191 72,823,999 146,798,190 Net assets - ending 77,384,024 $ 80,098,951 $ 157,482,975 $ Program Revenues ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 25 MURRAY CITY BALANCE SHEET – GOVERNMENTAL FUNDS JUNE 30, 2012 Governmental Fund Types Other Total Capital Governmental Governmental General Projects Funds Funds ASSETS Cash and cash equivalents 11,035,873 $ 5,053,237 $ 3,516,041 $ 19,605,151 $ Receivables, net: Property taxes 5,972,624 - 3,731,178 9,703,802 Special assessments 120 - - 120 Other 4,304,240 - - 4,304,240 Notes receivable 1,273,743 - - 1,273,743 Due from other funds 443,908 - - 443,908 Due from other governments 2,704,220 - 113,498 2,817,718 Restricted cash 65 - 15,627 15,692 Total assets 25,734,793 5,053,237 7,376,344 38,164,374 LIABILITIES Accounts payable 508,531 213,997 43,265 765,793 Accrued liabilities 1,635,897 - 17,976 1,653,873 Due to other funds - - 443,908 443,908 Deferred revenue 12,288,040 - 3,710,451 15,998,491 Total liabilities 14,432,468 213,997 4,215,600 18,862,065 FUND BALANCE Nonspendable 235,198 - - 235,198 Restricted for: Class C roads 320,316 - - 320,316 UTOPIA 1,580,908 - - 1,580,908 Historic Smelter 15,500 15,500 Cemetery perpetual care - - 520,000 520,000 Low income housing - - 445,033 445,033 Library endowment - - 15,627 15,627 Assigned to: Special revenue funds - - 1,384,336 1,384,336 Capital projects funds - 4,839,240 - 4,839,240 Permanent fund - - 795,748 795,748 Unassigned 9,150,403 - - 9,150,403 Total fund balances 11,302,325 4,839,240 3,160,744 19,302,309 Total liabilities and fund balances 25,734,793 $ 5,053,237 $ 7,376,344 $ 38,164,374 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 26 MURRAY CITY RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS FOR THE YEAR ENDED JUNE 30, 2012 Amounts reported for governmental activities in the Statement of Net Assets are different because: Total Fund Balances - Total Governmental Funds 19,302,309 $ Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds. 68,952,124 Other long-term assets are not available for current period expenditures and are therefore deferred in the funds balance sheet. 3,226,779 Internal service funds are used by management to charge the costs of fleet management and risk management to individual funds. The assets and liabilities of internal service funds are included in governmental activities in the Statement of Net Assets. 1,257,068 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. (15,354,256) Net Assets - Governmental Activities 77,384,024 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 27 MURRAY CITY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Governmental Fund Types Other Total Capital Governmental Governmental General Projects Funds Funds REVENUES Taxes and special assessments 24,052,611 $ - $ 3,572,486 $ 27,625,097 $ Licenses and permits 1,525,957 - - 1,525,957 Intergovernmental 4,024,167 - 454,390 4,478,557 Charges for services 6,006,020 - 44,730 6,050,750 Fines and forfeitures 1,845,339 - 51,256 1,896,595 Miscellaneous 200,102 - 6,813 206,915 Investment income 237,059 23,890 25,654 286,603 Total revenues 37,891,255 23,890 4,155,329 42,070,474 EXPENDITURES General government 9,317,552 425,744 - 9,743,296 Public safety 16,086,866 - - 16,086,866 Highways and public improvements 6,477,285 1,098,030 1,096,613 8,671,928 Parks, recreation, and culture 5,183,327 - 1,410,495 6,593,822 Debt service: Principal 1,485,000 269,149 - 1,754,149 Interest and fiscal charges 449,301 11,092 14,814 475,207 Pledge payment - UTOPIA debt service 1,660,930 - - 1,660,930 Total expenditures 40,660,261 1,804,015 2,521,922 44,986,198 Excess (deficiency) of revenues over (under) expenditures (2,769,006) (1,780,125) 1,633,407 (2,915,724) OTHER FINANCING SOURCES (USES) Transfers in 4,259,681 3,000,000 1,000 7,260,681 Transfers out (3,101,000) - (1,029,686) (4,130,686) Sale of capital assets 207,810 - - 207,810 Total other financing sources (uses) 1,366,491 3,000,000 (1,028,686) 3,337,805 Net change in fund balance (1,402,515) 1,219,875 604,721 422,081 Fund balance at beginning of year 12,704,840 3,619,365 2,556,023 18,880,228 Fund balance at end of year 11,302,325 $ 4,839,240 $ 3,160,744 $ 19,302,309 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 28 MURRAY CITY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds 422,081 $ Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays and capital contributions exceeded depreciation in the current period. 899,128 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (49,463) The issuance of long-term debt bonds, leases) provides current financial resources to governmental funds, while the payment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transactions, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas, these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long- term debt and related items. 1,706,234 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Similarly, some expenditures reported in the governmental funds are not reported as expenses in the statement of activities. 337,940 The net revenue of certain activities of the Internal Service Funds are reported with governmental activities 93,913 Change in net assets of governmental activities 3,409,833 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 29 MURRAY CITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET TO ACTUAL – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2012 Original Final Actual Variance with Budget Budget Amounts Final Budget REVENUES Property tax 6,503,253 $ 6,503,253 $ 6,503,296 $ 43 $ Sales and use tax 12,275,000 12,275,000 12,699,755 424,755 Franchise tax 4,703,000 4,703,000 4,849,560 146,560 Licenses and permits 1,099,300 1,099,300 1,525,957 426,657 Intergovernmental 1,749,000 3,970,156 4,024,167 54,011 Charges for services 5,309,437 5,651,495 6,006,020 354,525 Fines and forfeitures 1,738,000 1,704,000 1,845,339 141,339 Investment income 264,814 250,000 237,059 (12,941) Miscellaneous 288,000 320,000 200,102 (119,898) Total revenues 33,929,804 36,476,204 37,891,255 1,415,051 EXPENDITURES General government: Legislative 368,601 368,601 344,720 23,881 Justice court 1,562,354 1,557,886 1,458,024 99,862 Mayor 463,714 463,714 452,755 10,959 Finance 1,262,385 520,308 447,318 72,990 Legal 594,317 693,334 684,293 9,041 Nondepartmental 1,739,350 1,670,115 1,050,678 619,437 Personnel 365,046 260,383 241,187 19,196 Administrative and Development Services 3,405,330 4,882,075 4,638,577 243,498 Total general government 9,761,097 10,416,416 9,317,552 1,098,864 Public safety: Police department 9,830,223 9,946,344 9,588,818 357,526 Fire department 6,958,795 6,914,353 6,498,048 416,305 Total public safety 16,789,018 16,860,697 16,086,866 773,831 Highways and public improvements Engineering 815,818 645,442 656,906 (11,464) Streets and highways 3,234,925 6,015,715 5,723,718 291,997 Shops and garages 95,600 95,600 96,661 (1,061) Total highways and public improvements 4,146,343 6,756,757 6,477,285 279,472 Parks, recreation, and culture Parks and recreation 4,677,305 4,844,520 4,810,086 34,434 Cemetery 379,089 379,089 373,241 5,848 Total parks, recreation, and culture 5,056,394 5,223,609 5,183,327 40,282 Debt service: Principal 1,485,000 1,485,000 1,485,000 - Interest 449,305 449,305 449,301 4 Pledge payment - UTOPIA debt service 1,520,000 1,520,000 1,660,930 (140,930) Total debt service 3,454,305 3,454,305 3,595,231 (140,926) Total expenditures 39,207,157 42,711,784 40,660,261 2,051,523 OTHER FINANCING SOURCES (USES) Sale of capital assets 300,000 300,000 207,810 (92,190) Transfers in 4,240,751 4,255,565 4,259,681 4,116 Transfers out - (3,101,000) (3,101,000) - Net other financing sources (uses) 4,540,751 1,454,565 1,366,491 (88,074) Net change in fund balance (736,602) (4,781,015) (1,402,515) 3,378,500 Fund balance at beginning of year 12,704,840 12,704,840 12,704,840 - Fund balance at end of year 11,968,238 $ 7,923,825 $ 11,302,325 $ 3,378,500 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 30 MURRAY CITY STATEMENT OF NET ASSETS – PROPRIETARY FUNDS JUNE 30, 2012 Business-type Activities - Enterprise Funds Governmental Non-Major Activities - Water Waste Water Power Storm Water Enterprise Internal Fund Fund Fund Fund Funds Total Service Funds ASSETS Current assets: Cash and cash equivalents 5,500,763 $ 2,109,983 $ 8,877,204 $ 772,704 $ 830,544 $ 18,091,198 $ 1,592,546 $ Accounts receivable (net) 1,183,883 451,851 5,265,147 140,569 105,603 7,147,053 - Notes receivable - - - - 18,338 18,338 - Due from other funds 205,245 - - - - 205,245 - Due from other governments - 111,150 - - - 111,150 - Inventory - - 1,695,258 - 85,501 1,780,759 75,694 Total current assets 6,889,891 2,672,984 15,837,609 913,273 1,039,986 27,353,743 1,668,240 Noncurrent assets: Restricted cash 1 961,546 556 - - 962,103 - Notes receivable - - - - 312,048 312,048 - Deferred costs 33,502 88,208 652,716 - - 774,426 - Investment in joint venture - 3,254,426 - - - 3,254,426 - Capital assets: Land 2,155,313 455,921 1,691,650 2,344,849 326,336 6,974,069 - Buildings 904,024 949,132 3,410,311 - 797,534 6,061,001 - Improvements other than buildings 23,083,685 10,380,963 75,890,502 31,382,375 3,734,149 144,471,674 - Machinery and equipment 2,870,542 1,095,597 12,800,164 1,122,759 850,963 18,740,025 161,743 Furniture and fixtures - - 546,542 - - 546,542 - Intangibles - - 4,309,027 - - 4,309,027 - Construction in progress 860,624 166,004 - 836,787 - 1,863,415 - Accumulated depreciation and amortization (13,507,393) (5,905,243) (56,464,968) (21,655,451) (4,540,257) (102,073,312) (106,224) Total noncurrent assets 16,400,298 11,446,554 42,836,500 14,031,319 1,480,773 86,195,444 55,519 Total assets 23,290,189 $ 14,119,538 $ 58,674,109 $ 14,944,592 $ 2,520,759 $ 113,549,187 $ 1,723,759 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 31 MURRAY CITY STATEMENT OF NET ASSETS – PROPRIETARY FUNDS JUNE 30, 2012 Business-type Activities - Enterprise Funds Governmental Non-Major Activities - Water Waste Water Power Storm Water Enterprise Internal Fund Fund Fund Fund Funds Total Service Funds LIABILITIES Current liabilities: Accounts payable 288,956 $ 123,780 $ 2,992,540 $ 13,782 $ 89,440 $ 3,508,498 $ 90,707 $ Accrued liabilities 24,897 11,822 339,378 11,390 33,736 421,223 255,350 Due to other funds - - - - 205,245 205,245 - Accrued interest payable 25,063 17,128 63,640 1,046 - 106,877 - Compensated absences 132,888 58,572 356,329 36,473 67,353 651,615 19,652 Notes payable - - - - 18,338 18,338 - Bonds and leases payable 275,388 164,612 1,505,000 56,434 - 2,001,434 - Total current liabilities 747,192 375,914 5,256,887 119,125 414,112 6,913,230 365,709 Noncurrent liabilities: Deposits 8,200 - 1,168,601 - - 1,176,801 - Compensated absences 77,708 34,252 208,371 21,328 39,387 381,046 11,492 Net OPEB payable 141,742 75,891 465,502 65,819 74,403 823,357 33,971 Notes payable - - - - 312,048 312,048 - Bonds and leases payable 3,416,512 3,072,210 17,355,032 - - 23,843,754 - Total noncurrent liabilities 3,644,162 3,182,353 19,197,506 87,147 425,838 26,537,006 45,463 Total liabilities 4,391,354 3,558,267 24,454,393 206,272 839,950 33,450,236 411,172 NET ASSETS Invested in capital assets, net of related debt 12,674,895 3,905,552 23,323,196 13,974,885 1,168,725 55,047,253 55,519 Unrestricted 6,223,940 6,655,719 10,896,520 763,435 512,084 25,051,698 1,257,068 Total net assets 18,898,835 10,561,271 34,219,716 14,738,320 1,680,809 80,098,951 1,312,587 Total liabilities and net assets 23,290,189 $ 14,119,538 $ 58,674,109 $ 14,944,592 $ 2,520,759 $ 113,549,187 $ 1,723,759 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 32 MURRAY CITY STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS – PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Business-type Activities - Enterprise Funds Governmental Non-Major Activities Water Waste Water Power Storm Water Enterprise Internal Fund Fund Fund Fund Funds Total Service Funds OPERATING REVENUES Sales and charges for services 5,665,425 $ 3,834,579 $ 35,083,253 $ 1,400,191 $ 2,606,022 $ 48,589,470 $ 986,715 $ Connection and servicing fees 10,525 4,955 210,282 - - 225,762 - Other 20,012 53,345 1,981,256 204 - 2,054,817 - Total operating revenues 5,695,962 3,892,879 37,274,791 1,400,395 2,606,022 50,870,049 986,715 OPERATING EXPENSES Production or purchase of power - - 19,000,850 - - 19,000,850 - Administration and general 1,141,965 510,548 3,661,097 76,403 157,875 5,547,888 300,778 Depreciation and amortization 886,517 386,998 2,970,438 1,146,498 178,418 5,568,869 3,936 Operations and maintenance 1,893,631 2,024,471 4,712,903 656,495 2,442,928 11,730,428 597,092 Total operating expenses 3,922,113 2,922,017 30,345,288 1,879,396 2,779,221 41,848,035 901,806 Operating income (loss) 1,773,849 970,862 6,929,503 (479,001) (173,199) 9,022,014 84,909 NONOPERATING REVENUES (EXPENSES) Investment income 39,917 9,572 183,761 6,860 4,438 244,548 9,004 Interest and fiscal charges (162,588) (101,243) (844,712) (5,123) (732) (1,114,398) - Impact fees 677,282 454,868 353,009 3,289 - 1,488,448 - Equity in income of joint venture - (232,285) - - - (232,285) - Gain/(loss) on disposal of assets 90,393 - 56,635 9,596 6,500 163,124 - Total nonoperating revenues (expenses) 645,004 130,912 (251,307) 14,622 10,206 549,437 9,004 Income (loss) before contributions and transfers 2,418,853 1,101,774 6,678,196 (464,379) (162,993) 9,571,451 93,913 Capital contributions 304,166 148,806 - 380,524 - 833,496 - Transfers in - - - - 100,000 100,000 - Transfers out (491,613) (332,343) (2,267,472) (116,567) (22,000) (3,229,995) - Change in net assets 2,231,406 918,237 4,410,724 (200,422) (84,993) 7,274,952 93,913 Total net assets, beginning 16,667,429 9,643,034 29,808,992 14,938,742 1,765,802 72,823,999 1,218,674 Total net assets - ending 18,898,835 $ 10,561,271 $ 34,219,716 $ 14,738,320 $ 1,680,809 $ 80,098,951 $ 1,312,587 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 33 MURRAY CITY STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Business-type Activities - Enterprise Funds Governmental Non-Major Activities - Water Waste Water Power Storm Water Enterprise Internal Fund Fund Fund Fund Funds Total Service Funds Cash flows from operating activities Receipts from customers and users 5,272,655 $ 3,889,025 $ 36,923,420 $ 1,403,370 $ 2,608,528 $ 50,096,998 $ 681,000 $ Payments to suppliers (2,403,230) (2,092,371) (22,761,760) (407,840) (1,901,183) (29,566,384) (598,725) Payments to employees (1,011,939) (409,379) (3,709,245) (320,530) (687,467) (6,138,560) 5,028 Investments in joint venture - (153,758) - - - (153,758) - Net cash provided (used) by operating activities 1,857,486 1,233,517 10,452,415 675,000 19,878 14,238,296 87,303 Cash flows from noncapital financing activities Transfers from other funds - - - - 100,000 100,000 - Transfers to other funds (491,613) (332,343) (2,267,472) (116,567) (22,000) (3,229,995) - Changes to interfund receivables and payables (205,725) 480 - - 205,245 - - Net cash provided (used) by noncapital financing activities (697,338) (331,863) (2,267,472) (116,567) 283,245 (3,129,995) - Cash flows from capital and related financing activities Purchases of capital assets (1,715,916) (200,611) (603,585) (870,746) (83,195) (3,474,053) - Proceeds from sale of assets 123,554 - 60,201 52,000 6,500 242,255 - Impact fees 677,282 454,868 353,009 3,289 - 1,488,448 - Proceeds from issuance of debt 3,173,224 2,926,776 - - - 6,100,000 - Bond issuance costs paid (18,844) (79,447) - - - (98,291) - Principal paid on capital debt (3,382,120) (2,021,632) (1,460,000) (122,418) (41,461) (7,027,631) - Interest and fiscal charges paid on capital debt (182,302) (110,880) (813,369) (7,155) (1,346) (1,115,052) - Net cash provided (used) by capital and related financing activities (1,325,122) 969,074 (2,463,744) (945,030) (119,502) (3,884,324) - Cash flows from investing activites Investment income 39,917 9,572 183,761 6,860 4,438 244,548 9,004 Net cash provided by investing activities 39,917 9,572 183,761 6,860 4,438 244,548 9,004 Net increase (decrease) in cash and cash equivalents (125,057) 1,880,300 5,904,960 (379,737) 188,059 7,468,525 96,307 Cash and cash equivalents, beginning of year 5,625,821 1,191,229 2,972,800 1,152,441 642,485 11,584,776 1,436,118 Cash and cash equivalents, end of year 5,500,764 3,071,529 8,877,760 772,704 830,544 19,053,301 1,532,425 Unrestricted cash 5,500,763 2,109,983 8,877,204 772,704 830,544 18,091,198 1,532,425 Restricted cash 1 961,546 556 - - 962,103 - Total Cash 5,500,764 $ 3,071,529 $ 8,877,760 $ 772,704 $ 830,544 $ 19,053,301 $ 1,532,425 $ ---PAGE BREAK--- The accompanying notes are an integral part of this statement. 34 MURRAY CITY STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Business-type Activities - Enterprise Funds Governmental Non-Major Activities - Water Waste Water Power Storm Water Enterprise Internal Fund Fund Fund Fund Funds Total Service Funds Reconciliation of operating income to net cash provided (used) by operating activities Operating income (loss) 1,773,849 $ 970,862 $ 6,929,503 $ (479,001) $ (173,199) $ 9,022,014 $ 84,909 $ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 886,517 386,998 2,970,438 1,146,498 178,418 5,568,869 3,936 Investments in joint ventures - (153,758) - - - (153,758) - Changes in assets and liabilities: Accounts receivable (424,757) (3,854) (872,076) 2,975 2,506 (1,295,206) 63,233 Inventories - - 143,746 - 1,923 145,669 (7,049) Accounts payable (357,332) 14,084 717,823 (37,175) 13,887 351,287 1,916 Accrued liabilities 995 (35) 33,454 (240) 4,021 38,195 801 Compensated absences and OPEB (23,236) 19,220 8,822 41,943 (7,678) 39,071 (322) Customer deposits 1,450 - 520,705 - - 522,155 - Net cash provided by operating activities 1,857,486 $ 1,233,517 $ 10,452,415 $ 675,000 $ 19,878 $ 14,238,296 $ 147,424 $ Noncash investing, capital and financing activities Capital contributions - developers 304,166 $ 148,806 $ - $ 380,524 $ - $ 833,496 $ - $ ---PAGE BREAK--- 35 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The basic financial statements of Murray City Corporation (the City) have been prepared in conformity with accounting principles (GAAP) generally accepted in the United States of America as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing accounting and financial reporting principles. Financial reporting is based upon all GASB pronouncements, as well as the FASB Statements and Interpretations, APB Opinions and Accounting Research Bulletins that were issued on or before November 30, 1989 that do not conflict with or contradict GASB pronouncements. FASB pronouncements issued after November 30, 1989 are not followed in the preparation of the accompanying financial statements. The City of Murray was incorporated November 25, 1902. The City operates under a strong Mayor Council form of government. As required by GAAP, these financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). The component units discussed below are included as part of the City’s reporting entity as blended component units. The Redevelopment Agency of Murray City (RDA) was established in 1976 to prepare and carry out plans to improve, rehabilitate and redevelop blighted areas within the City. The RDA is governed by a board of trustees composed of the City Mayor and members of the Municipal Council. Although it is a legally separate entity from the City, the RDA is reported as if it were part of the primary government because of the City’s ability to impose its will upon the operations of the RDA. The RDA is included in these financial statements as the Redevelopment Agency Special Revenue Fund. Separate financial statements are not issued for the RDA. The Municipal Building Authority of Murray City Corporation (MBA) was established to finance and construct municipal buildings that are then leased to the City. The MBA is governed by a five-member board of trustees composed of the Municipal Council. Although it is a legally separate entity from the City, the MBA is reported as if it were part of the primary government because of the City’s ability to impose its will upon the operations of the MBA. The MBA is included in these financial statements as the Municipal Building Authority Special Revenue Fund. Separate financial statements are not issued for the MBA. ---PAGE BREAK--- 36 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Government-Wide and Fund Financial Statements The government-wide financial statements the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the City and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely mainly on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those which are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The use of financial resources to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than as another financing source. Amounts paid to reduce long-term debt of the City are reported as a reduction of the related liability, rather than an expenditure in the government-wide financial statements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City’s policy for revenues to be considered available is if they are collected with 45 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt-service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. ---PAGE BREAK--- 37 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Sales taxes, use taxes, franchise taxes, and earned but unreimbursed state and federal grants 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. Property taxes are measurable as of the date levied (assessed) and are recognized as revenues when they become available. Available means when due, or past due, and received within the current period or collected soon enough thereafter (within 45 days) to be used to pay liabilities of the current period. All other revenues are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds:  The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except for those required to be accounted for in another fund.  The Capital Projects Fund accounts for the activities of the City’s various construction projects and capital improvements for governmental activities. The City reports the following major proprietary funds:  The Power Fund accounts for the activities of the City’s electrical production and distribution operations.  The Water Fund accounts for the activities of the City’s water production, treatment and distribution operations.  The Waste Water Fund accounts for the operation and maintenance of the City’s sewer collection system and sewage treatment.  The Storm Water Fund accounts for the activities of the City’s storm water drainage system. Additionally, the City reports the following fund types: Internal Service funds are used in the City to account for the self-insurance activities of the various funds and to account for the costs of operating a maintenance facility for City owned vehicles and equipment. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments to the General Fund by various enterprise funds for the providing of administrative and billing services for such funds. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. ---PAGE BREAK--- 38 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of all enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds includes the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources. Cash, Deposits and Investments Cash includes cash on hand, demand deposits with banks and other financial institutions, and deposits in other types of accounts or cash management pools that have the general characteristics of demand deposit accounts. City policy allows for the investment of funds in time certificates of deposit with federally insured depositories, investment in the Utah Public Treasurer’s Investment Fund and other investments allowed by the State of Utah’s Money Management Act. Investments are reported at fair value. The State Treasurer’s Investment Fund operates in accordance with state laws and regulations. The reported value of the Fund is approximately the same as the fair value of the Fund shares. Cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Investments with maturities of three months or less when purchased meet this definition. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to or due from other funds”. In the Power, Water, Wastewater, Storm Water, and Solid Waste Management funds, the City records utility revenues billed to customers when meters are read on a basis. Unbilled service accounts receivable at June 30, 2012 were estimated based on July billings and are included in the operating revenues and accounts receivable at year end. Receivables are shown net of allowance for uncollectibles. The allowance adjustment is estimated annually based on historical trends and professional judgment. Inventories and Prepaid Items Inventories of materials and supplies in the proprietary funds, consisting principally of materials used in the repair of the transmission, distribution, collection and treatment systems, are valued at cost and accounted for on a first-in, first-out basis (FIFO). 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 Restricted assets are comprised of cash restricted for future debt service payments, unexpended portions of bonds issued for capital construction, and customer deposits held. ---PAGE BREAK--- 39 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Capital Assets Capital assets, which include property, plant, equipment, and infrastructure roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an individual cost of more than $5,000 and an estimated useful life of three years or greater. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Property, plant, and equipment are depreciated using the straight-line method over the following estimated useful lives: Buildings 10 to 40 years Infrastructure 10 to 40 years Improvements other than buildings 20 to 40 years Machinery and equipment 3 to 15 years Furniture and fixtures 5 to 10 years Compensated Absences For governmental funds amounts of vested or accumulated vacation leave and comp time that are not expected to be liquidated with available financial resources are reported as liabilities in the government-wide statement of net assets and as expenses in the government-wide statement of activities. No expenditures are reported for these amounts in the fund financial statements. Vested or accumulated vacation leave and comp time of proprietary funds is recorded as an expense and a liability of those funds as the benefits accrue to the employees and are thus recorded in both the government-wide financial statements and the individual fund financial statements. Sick pay amounts are charged to expenditures when incurred. Employees may accumulate sick leave without limitation. Accumulated sick leave is paid to employees upon retirement, with a limitation of 25 percent of accumulated hours. Employees that are terminated for reasons other than retirement are not paid for accumulated sick leave. Historically, compensated absences are paid by the individual funds as they become due, for governmental funds, most of the costs are paid by the general fund. Long-Term Obligations In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums, discounts, and issuance costs are deferred and amortized over the life of the applicable debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, when incurred. The face amount of debt issued is reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. ---PAGE BREAK--- 40 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Fund Equity GASB Statement No. 54 provided new reporting categories for fund balance in governmental funds. The categories and descriptions are as follows:  Nonspendable Fund Balance – Prepaid expenditures and other similar assets not in a spendable form or that are contractually required to be maintained intact are classified as nonspendable fund balance.  Restricted Fund Balance – Assets that are constrained by externally imposed restrictions, or by law through constitutional provisions or enabling legislation.  Committed Fund Balance – Amounts formally designated by City Council though ordinance or resolution for a specific purpose that cannot be used for another purpose unless the City Council formally changes the use.  Assigned Fund Balance – Amounts constrained by City Council or City Management for a specific purpose normally through the appropriations process in establishing and amending budgets. Furthermore, funds in special revenue, capital project, and permanent funds are by their nature assigned to the purpose for which the resources are collected. Unassigned Fund Balance – Amounts that may be used for any governmental purpose. When an expenditure qualifies to be used from more than one fund balance classification identified above, it is the City’s policy to use resources in the following order: restricted, committed, assigned, and then unassigned. The City has not adopted a formal policy on minimum fund balance. However, state statute requires the City to maintain a minimum fund balance in the general fund of at least 5% of total revenues. Estimates The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain financial statement balances. Actual results could vary from those estimates. Reclassifications Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation and are considered by the City to be immaterial. ---PAGE BREAK--- 41 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS NOTE 2 – RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Assets The governmental fund balance sheet includes a reconciliation between total governmental fund balances and net assets of governmental activities as reported in the government-wide statement of net assets. This difference primarily results from the long-term economic focus of the statement of net assets versus the current financial resources focus of the governmental fund balance sheets. Capital related items: When capital assets (property, plant and equipment) that are to be used in governmental activities are purchased or constructed, the cost of these assets is reported as expenditures in governmental funds. However, the statement of net assets includes those capital assets among the assets of the City as a whole. Cost of capital assets 139,528,703 $ Investment in joint venture 1,683,796 Accumulated depreciation (72,260,375) Total difference 68,952,124 $ Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Assets (Continued) Long-term debt transactions: Long-term liabilities applicable to the City’s governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities in the fund financials. All liabilities (both current and long-term) are reported in the statement of net assets. Balances at June 30, 2012 were: Sales tax revenue bonds 10,365,000 $ Bond issuance premium 133,143 Interest payable on long-term debt 61,138 Net OPEB payable 2,487,229 Compensated absences 2,307,746 Total difference 15,354,256 $ ---PAGE BREAK--- 42 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Explanation of Certain Differences Between Governmental Fund Operating Statements and the Statement of Net Activities The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances - total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. The first element of this reconciliation states that capital outlays are reported in the governmental funds as expenditures while the government-wide statement of activities allocates these costs over the useful lives of the assets as depreciation. While shown in the reconciliation as the net difference, the elements of this difference are as follows: Capital outlay 2,882,950 $ Capital contributions 2,087,025 Depreciation expense (4,070,847) Net difference, as reported 899,128 $ NOTE 3 – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Budgetary Information Prior to May 1, the Mayor submits to the Municipal Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the proposed sources of revenues. Between May 1 and June 20, the Municipal Council reviews and adjusts the Mayor’s proposed budget. On or before June 20, a public hearing is held and the budget is legally adopted through passage of a resolution. After the budget is adopted, the Finance Director may transfer any unencumbered or unexpended appropriation amount from one expenditure account to another within a department. The Municipal Council may, by resolution, transfer any unencumbered or unexpended appropriation amount from one department in a fund to another department within the same fund. When the Municipal Council determines that an emergency exists, such as widespread damage from fire, flood, or earthquake the Municipal Council may increase the budget of the General Fund by resolution and a public hearing. Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds, and Capital Projects Fund. In the General Fund, budgets are adopted at the functional level and budgetary control is exercised at the departmental level. For Special Revenue Funds, budgets are adopted and control is exercised at the level of total expenditures for each individual fund. ---PAGE BREAK--- 43 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Annual budgets for the General Fund, all Special Revenue Funds (Municipal Building Authority Fund, Library Fund, Redevelopment Agency Fund, Community Development Block Grant Fund), and the Capital Projects Fund were legally adopted by the City and are prepared on the modified-accrual method of accounting. Encumbrances (commitments related to unperformed purchase orders or contracts for goods or services) are used only as an internal management control device during the year. The City does not have any encumbrances outstanding at year end since appropriations lapse at year end. However, encumbered amounts are generally re-appropriated and honored as part of the following year’s budget. Although Utah State law requires the initial preparation of budgets for all City funds (both governmental and proprietary), it only requires the reporting of actual versus such budgets for governmental funds. Tax Revenues Property taxes are collected by the Salt Lake County Treasurer and remitted to the City. Taxes are levied and are due and payable on November 1st and delinquent after November 30th of each year at which time they become liens if not paid. An accrual of delinquent current and prior year’s property taxes beyond that which was received within 45 days after fiscal year end has not been made, as the amounts are not deemed to be material. An accrual for current year property taxes estimated to be collected the following November and December is made each year. Sales taxes are collected by the Utah State Tax Commission and remitted to the City An accrual has been made for all taxes received by the State for the period ended June 30th and thus due and payable to the City. Franchise taxes are charged to various utility companies doing business with the City including telephone, cable television, gas utility, and electric utility companies. The fees are remitted on a quarterly, semi-annual, or annual basis. An accrual has been made for fees due and payable to the City at June 30th. NOTE 4 – DETAILED NOTES FOR ALL FUNDS Deposits and Investments Utah State law establishes the rules and regulations for deposits and investments and is known as the Utah Money Management Act. The Act established the Money Management Council that promulgates additional rules and determines which financial institutions may qualify to hold deposits and investments for state and local entities. The City has complied with the Utah Money Management Act and the Money Management Council Rules with regard to deposits and investments. ---PAGE BREAK--- 44 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS As of June 30, 2012, the City’s demand deposits and cash on hand totaled $6,032,628. As of June 30, 2012, the City has investments in the Utah Public Treasurer’s Investment Fund (PTIF) of $34,234,062. The PTIF is authorized and regulated by the Money Management Act. Deposits in the PTIF are not insured nor guaranteed by the State of Utah, and participants share proportionally in any realized gains or losses on investments. The PTIF values investments at fair market value at June 30 and December 30 each year in accordance with GASB 31. However, the PTIF reports to participants on an amortized cost basis, which approximates the fair value at year end. Custodial Credit Risk - Deposits This is the risk that in the event of a bank failure, the City’s deposits may not be returned. As of June 30, 2012, $5,782,628 of the City’s $6,032,628 bank balance was exposed to custodial credit risk because it was uninsured and uncollateralized. The Utah Money Management Act does not require deposits to be insured or collateralized and the City has no formal policy regarding deposit credit risk. The Act requires that the City keep deposits in a qualified depository, which the City has done. Custodial Credit Risk - Investments This is the risk that in the event of the failure of the counterparty, the City will not be able to recover the value of its investments that are in the possession of an outside party. The City has no formal policy regarding custodial credit risk for investments. Money invested in the Utah Public Treasurer’s Investment Fund is pooled with many other state and local entities, and is managed by the Utah State Treasurer. The PTIF fund has no investment rating. Interest rate risk This is the risk that changes in interest rates will adversely affect the fair value of an investment. The City’s policy for managing its exposure to fair value loss from changes in interest rates is to follow the Utah Money Management Act and only invest in instruments that mature in one year or less. Investments within the Public Treasurer’s Investment Fund have a weighted average maturity of less than 90 days. Credit risk This is the risk that an issuer will not fulfill its obligations. The City policy is consistent with and complies with the Utah State Money Management Act. Investment is limited to U.S. Treasuries, U.S. Government Agency instruments, Utah Public Treasurer’s Investment Fund, and other instruments that are rated A or higher by Standard & Poor’s or Moody’s. The City only invested in the Utah Public Treasurer’s Investment Fund and qualified corporate debt securities during the year. The PTIF is not registered with the SEC as an investment company and is unrated. ---PAGE BREAK--- 45 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Concentration of Credit Risk City policy requires diversification and limits the amount that may be invested in the same company. First, the City may not invest more than 20% of its idle funds outside of the Utah Public Treasurer’s Investment Fund. Second, not more than 10% of the total portfolio may be invested in a single company’s credit instruments. The Utah Public Treasurer’s Investment Fund is highly diversified and must comply with various rules of the Utah State Money Management Act and Money Management Council. The deposits and investments are included on the government-wide statement of net assets as follows: Cash and cash equivalents 39,288,895 $ Restricted cash 977,795 40,266,690 $ Deposits Enterprise fund deposits are deposits the City requires from residential renters and any business receiving a utility connection. The deposit is refundable after 2 years for residential and business customers upon satisfactory payment history. Receivables Receivables as of year-end for the City’s individual major funds and nonmajor and internal service funds, in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: General Water Waste Water Power Storm Water Nonmajor Funds Internal Service Funds Total Taxes 5,972,624 $ - $ - $ - $ - $ 3,731,178 $ - $ 9,703,802 $ Accounts receivable 973,189 1,196,215 461,021 5,421,201 142,971 107,691 - 8,302,288 Special assessments 120 - - - - - - 120 Notes receivable 1,273,743 - - - - 330,386 - 1,604,129 Loans 3,604,644 - - - - - - 3,604,644 Intergovernmental 2,704,220 - 111,150 - - 113,498 - 2,928,868 Gross receivables 14,528,540 1,196,215 572,171 5,421,201 142,971 4,282,753 - 26,143,851 Less: allowance for uncollectibles (273,593) (12,332) (9,170) (156,054) (2,402) (2,088) - (455,639) Net total receivables 14,254,947 $ 1,183,883 $ 563,001 $ 5,265,147 $ 140,569 $ 4,280,665 $ - $ 25,688,212 $ ---PAGE BREAK--- 46 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Governmental funds report deferred revenue in connection with receivables for revenues that are not considered available to liquidate liabilities. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the government funds were as follows: Unavailable Unearned Notes receivable (General Fund) 1,273,743 $ - $ Sales taxes receivable (General Fund) 1,291,258 - Franchise taxes receivable (General Fund) 103,254 - Property tax receivable (General Fund) 5,887,409 - Property tax receivable (RDA Fund) 2,278,291 - Property tax receivable (Library Fund) 1,432,160 - Loan to UTOPIA for bond payments (General Fund) 3,604,644 - Various prepayments received (General Fund) - 127,732 Total deferred/unearned revenue for governmental funds 15,870,759 $ 127,732 $ Notes Receivable General Fund notes receivable includes a $1,273,743 third party promissory note for the sale of property known as the Sports Mall. The note has an interest rate of nine percent with principal and interest payments of $26,796. This note was paid in full in October 2012. ---PAGE BREAK--- 47 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Capital Assets Capital asset activity for the year ended June 30, 2012 was as follows: Governmental activities Beginning Balance Increases Decreases Ending Balance Capital assets, not being depreciated: Land 12,624,238 $ 453,380 $ - $ 13,077,618 $ Construction in progress 394,930 87,781 (394,930) 87,781 Total capital assets, not being depreciated 13,019,168 541,161 (394,930) 13,165,399 Capital assets, being depreciated: Buildings 31,448,612 252,002 - 31,700,614 Improvements other than buildings 16,072,009 - - 16,072,009 Infrastructure 61,450,189 4,418,466 - 65,868,655 Machinery and equipment 11,431,832 153,276 (149,700) 11,435,408 Furniture and fixtures 1,286,618 - - 1,286,618 Total capital assets being depreciated 121,689,260 4,823,744 (149,700) 126,363,304 Less accumulated depreciation for: Buildings (10,839,732) (836,518) - (11,676,250) Improvements other than buildings (11,019,249) (787,100) - (11,806,349) Infrastructure (37,549,546) (1,556,814) - (39,106,360) Machinery and equipment (7,744,150) (851,768) 149,700 (8,446,218) Furniture and fixtures (1,182,615) (42,583) - (1,225,198) Total accumulated depreciation (68,335,292) (4,074,783) 149,700 (72,260,375) Total capital assets, being depreciated, (net) 53,353,968 748,961 - 54,102,929 Net governmental capital assets 66,373,136 $ 1,290,122 $ (394,930) $ 67,268,328 $ ---PAGE BREAK--- 48 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Business-type activtities Beginning Balance Increases Decreases Ending Balance Capital assets, not being depreciated: Land 6,894,695 $ 81,590 $ (2,216) $ 6,974,069 $ Construction in progress 39,023 1,863,415 (39,023) 1,863,415 Total capital assets, not being depreciated 6,933,718 1,945,005 (41,239) 8,837,484 Capital assets, being depreciated: Buildings 6,061,001 - - 6,061,001 Improvements other than buildings 142,761,164 1,710,510 - 144,471,674 Machinery and equipment 18,198,990 691,056 (150,021) 18,740,025 Furniture and fixtures 546,542 - - 546,542 Intangibles 4,309,027 - - 4,309,027 Total capital assets, being depreciated 171,876,724 2,401,566 (150,021) 174,128,269 Less accumulated depreciation for: Buildings (4,531,164) (102,638) - (4,633,802) Improvements other than buildings (78,777,181) (4,405,870) - (83,183,051) Machinery and equipment (10,758,395) (908,629) 73,115 (11,593,909) Furniture and fixtures (531,410) (3,358) - (534,768) Intangibles (1,979,408) (148,374) - (2,127,782) Total accumulated depreciation and amortization (96,577,558) (5,568,869) 73,115 (102,073,312) Total capital assets, depreciated (net) 75,299,166 (3,167,303) (76,906) 72,054,957 Net business-type capital assets 82,232,884 $ (1,222,298) $ (118,145) $ 80,892,441 $ ---PAGE BREAK--- 49 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS In the government-wide financial statements depreciation was charged as follows by program or activity: General government 710,668 $ Public safety 866,376 Highways and public improvements 1,717,152 Parks, recreation, and culture 780,587 Total depreciation expense - governmental activities 4,074,783 $ Business-type activities: Water 886,517 $ Waste Water 386,998 Storm Water 1,146,498 Power 2,970,438 Murray Parkway Recreation 178,418 Total depreciation expense - business-type activities 5,568,869 $ Interfund Receivables, Payables and Transfers At June 30, 2012, interfund balances due to or from other funds was as follows: Receivable Fund Payable Fund Amount General Library 347,273 $ General CDBG 96,635 Water Murray Parkway Recreation 205,245 649,153 $ Interfund loans are generally for working capital requirements and are expected to be repaid within the next few fiscal years. During the year ended June 30, 2008, the General Fund advanced the Library Fund $750,000 for a building remodel project. During the year ended June 30, 2009, this loan was restructured to mature on March 1, 2015 with equal annual installment payments, including interest at a rate of 3.25%, due each March. In fiscal year 2012 the Murray Parkway Recreation Fund received a loan from the Water fund for $205,245 for the purchase of golf carts. The loan is for five years at 2.5% interest. ---PAGE BREAK--- 50 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS In addition to the above amounts which will be repaid by the respective funds, transfers were made which will not be repaid. Such amounts for the fiscal year ended June 30, 2012 were as follows: Fund Transferring Out Fund Receiving Transfer Amount Water General 491,613 $ Waste Water General 332,343 Storm Water General 116,567 Power General 2,267,472 Murray Parkway Recreation General 22,000 Cemetery Perpetual Care General 60,000 Library General 66,160 Redevelopment Agency General 884,488 Community Development General 19,038 General Telecommunication 100,000 General MBA 1,000 General Capital Projects 3,000,000 7,360,681 $ The City commonly budgets transfers to various funds to finance capital and operating costs. The City also uses an operational transfer from the enterprise funds to the general fund; this amount will not be repaid and is considered a return on investment. Investments in Joint Ventures The City is a participant in several joint ventures that generate financial resources through member assessments, surcharge taxes, or user fees. The City reflects its equity position (in the net resources of the joint ventures) in the funds which have the rights to such resources. Trans-Jordan Cities The City has an approximate 8.8% ownership share in the Trans-Jordan Cities (the Association) joint enterprise. The City’s equity in the net resources of the Association at June 30, 2012, is reported in the government-wide statement of net assets. The Association was organized in 1968 as a joint enterprise fund of the Cities of Sandy, Midvale, West Jordan, and Murray, Utah. The City of South Jordan, Utah joined the Association during fiscal year 1997. The cities of Draper and Riverton, Utah joined the Association during fiscal year 1998. The primary purpose of the Association is the operation, maintenance and control of a refuse dumping site east of Bingham Canyon in Salt Lake County. The City has no firm commitments to make additional equity investments in Trans-Jordan Cities. The Association is governed by its Board of Directors. Under the organization agreement, the Board of Directors is composed of the Mayors, or their appointed representatives, of the participating cities. The Board of Directors appoints the management and staff of the Association and approves all financial matters such as the operating budget and usage fees. Separate audited financial statements for Trans-Jordan Cities may be obtained from Trans-Jordan Cities, Accounting Department at 10873 South 7200 West, South Jordan, UT 84095. ---PAGE BREAK--- 51 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Central Valley Water Reclamation Facility The Waste Water Fund (an enterprise fund) has an approximate 5.7% ownership in the Central Valley Water Reclamation Facility (the Facility). The Facility, a separate legal entity and political subdivision of the State of Utah, was formed pursuant to the Utah Interlocal Co-operation Act. The Facility’s membership consists of five special-purpose government entities and two cities. The Facility was formed to plan, construct and operate a regional sewage treatment facility for the benefit of the seven members. Members of the Facility are required to pay their proportionate share of operating costs, construction costs, maintenance, and administrative costs. The Facility is governed by its Board of Directors. Under the Organization Agreement, all seven members (one of whom is the City), are entitled to designate one of the Facility’s seven directors. The City’s share of operating, maintenance, administrative expenses and debt service amounted to $1,179,387 in 2012. The Waste Water Fund made a net contribution of $153,758 to the Facility in 2012 and recorded a ($232,285) loss in joint venture resulting in a net decrease in its investment in the Facility of ($78,527). During 2005, the Facility issued $35,000,000 of revenue bonds. The City’s share of the total outstanding obligation at December 31, 2011 is $2,726,496. The City is required to fund its proportionate share of debt service each year, which is included in the City’s assessment from the Facility. Separate compiled financial statements for Central Valley Water Reclamation Facility may be obtained from the Central Valley Water Reclamation Facility Accounting Department at 800 West Central Valley Road, Salt Lake City, UT 84119. Interlocal Agreements Utah Associated Municipal Power System (UAMPS) The Power Department is a member of the Utah Associated Municipal Power Systems (UAMPS). UAMPS, a joint action agency and political subdivision of the State of Utah, was formed by an Organization Agreement dated November 6, 1980, pursuant to the provisions of the Utah Interlocal Co-operation Act. UAMPS’ membership consists of 34 municipalities, one joint action agency, one electric service district and one water conservancy district. UAMPS is a legally separate entity, which possesses the ability to establish its own budget, incur debt, sue and be sued, and own and lease property. No other governmental units in Utah exercise significant control over UAMPS. As such, UAMPS is not a component unit as defined by the Governmental Accounting Standards Board in their Statement No. 14, “The Financial Reporting Entity”. UAMPS’ purpose includes planning, financing, developing, acquiring, constructing, improving, bettering, operating and maintaining of projects, or ownership interests or capacity rights therein, for the generation, transmission and distribution of electric energy for the benefit of its members. ---PAGE BREAK--- 52 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS As a member of UAMPS, the City has participated in various individual projects. The City acquired for $45,662 an approximate five percent interest in the Hunter II power plant project. During the year ended June 30, 1990, the City acquired an approximate five percent entitlement in UAMPS’ share of a transmission service project from Craig, Colorado to Mona, Utah (the Craig-Mona project) for $1,805,428. The City acquired an additional 1.6 megawatts of plant capacity in the San Juan Generating Station Unit 4 for $1,953,599 during 1994. During the year ended June 30, 2009, the City acquired an interconnection with Granger Electric at their electric generating facility in South Jordan for $550,000. These entitlement payments represent prepayment of future generation fees for the projects and are being amortized over the lives of the service contracts. The unamortized balance of prepaid generation and transmission fees at June 30, 2012 is $2,181,245, reported as an intangible asset. Under various power sales contracts, UAMPS’ members are required to pay their proportionate share of all operation and maintenance expenses and debt service on the revenue bonds issued by UAMPS, and any other energy-related costs, as defined in the contract regardless of whether any power is supplied to the Power Fund. The City has no firm commitments to make additional equity investments in UAMPS or in any specified projects of UAMPS. Under the organization agreement, the four members with the greatest financial obligations to UAMPS, one of which is the City, are each entitled to designate one of UAMPS’ directors. All other directors are selected from the representatives of the remaining UAMPS members. Separate financial statements for UAMPS may be obtained from the Manager of Finance at 2825 East Cottonwood Parkway, Suite #200, Salt Lake City, UT 84121. Valley Emergency Communications Center The City is a member of the Valley Emergency Communications Center (the Center). The Center was organized June 30, 1988, as a joint enterprise between the City, Midvale City, Salt Lake County, Sandy City, South Jordan City, West Jordan City and West Valley City. The primary purpose of the Center is to fund and operate a communications center which handles communications and other services for the members, including police, fire, 911 service, dispatch and records services. The Center is governed by a Board of Trustees consisting of one representative from each member appointed by the governing body thereof. The Center’s activities are funded by a surcharge tax on telephones within each member’s city and member assessments. The Board of Trustees sets assessments for all member agencies in amounts sufficient to provide the funds required for the annual budget. The Center determines the 911 assessments for the telephone users within the members’ jurisdictions. Separate audited financial statements for Valley Emergency Communications Center may be obtained from the Finance Director at 5360 South 5885 West, West Valley City, UT 84118. ---PAGE BREAK--- 53 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Drug Enforcement Administration - Metro Task Force The City is a member and lead agency of the Drug Enforcement Administration (DEA) Metro Task Force (the Task Force). The Task Force is an interlocal co-operative organized to investigate and prosecute controlled substance offenders in the Salt Lake metropolitan area. The membership of the Task Force consists of sixteen Federal, State, County and Municipal law enforcement agencies. Activities of the Task Force are funded through federal and state grants, with no funds being provided by the participating members. Separate audited financial statements for DEA-Metro Task Force may be obtained from Murray City Corporation, Finance Department 5025 South State Street, Murray, UT 84157-0520. Utah Infrastructure Agency (UIA) On June 7, 2010, the City joined 8 other cities in an interlocal cooperative to purchase, lease, construct or equip facilities that are designed to provide telecommunication services within the respective cities. This agreement was amended and restated on November 1, 2010. The purpose of the agreement is to work in conjunction with Utah Telecommunications Open Infrastructure Agency (UTOPIA) to complete a wholesale fiber optic network for the residences and businesses in each city (see note on UTOPIA pledge and loan agreement). Capital Leases The City has entered into lease agreements, as lessee, for financing the acquisition of equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the inception date. The assets acquired through capital leases are as follows: Original Principal Interest Rates Storm water truck 211,766 $ 4.450% ---PAGE BREAK--- 54 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2012 were as follows: June 30, Totals 2013 58,945 $ Total minimum lease payments 58,945 Less: interest portion (2,511) Present value of minimum lease payments 56,434 Amount due within one year (56,434) Amount due after one year 0 $ Revenue Bonds The City has issued bonds where the revenues and assets of the issuing fund are pledged as security for the bonds. During fiscal year 2012 the City authorized the Waste Water Fund to issue bonds in the amount of $2,626,000, but as of year end only $1,030,000 was issued. Revenue bonds outstanding at June 30, 2012 by issue are as follows: Original Issue Annual Principal Interest Rate Final Due Date Amount 8,500,000 $ $305,000 to $630,000 2.00% to 5.25% 10/1/2023 1,180,000 $ 9,300,000 $305,000 to $685,000 3.00% to 5.25% 6/1/2025 6,840,000 9,700,000 $15,000 to $1,500,000 4.00% to 5.00% 6/1/2021 9,485,000 3,140,000 $1,020,000 to $1,070,000 4.60% to 4.85% 6/1/2014 2,120,000 5,070,000 $60,000 to 600,000 2.575% 10/1/2023 5,070,000 2,626,000 $102,000 to 165,000 2.5% 10/1/2032 1,030,000 9,990,000 $710,000 to $875,000 3.75% to 5.000% 12/1/2020 6,120,000 4,580,000 $275,000 to $405,000 3.00% to 4.40% 4/1/2023 3,445,000 1,535,000 $235,000 to $275,000 3.00% to 3.75% 4/1/2015 800,000 54,441,000 $ 36,090,000 $ Bond Description Water/Sewer Series 2003 - partial defeasance Electric Series 2004 Sales Tax Series 2009B Electric Series 2006 Electric Series 2011 Water/Sewer Series 2012 Sewer Series 2012 Sales Tax Series 2007 Sales Tax Series 2009A ---PAGE BREAK--- 55 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Revenue bond debt service requirements to maturity are as follows: Principal Interest Totals 3,450,000 $ 1,342,118 $ 4,792,118 $ 3,226,500 1,250,921 4,477,421 3,361,500 1,148,497 4,509,997 3,171,500 1,006,074 4,177,574 3,216,500 869,643 4,086,143 15,627,500 2,414,414 18,041,914 3,727,500 303,746 4,031,246 2028 - 2032 257,500 25,751 283,251 51,500 1,288 52,788 36,090,000 $ 8,362,452 $ 44,452,452 $ 2013 2014 2015 2016 2017 2033 2018 - 2022 2023 - 2027 Current Refunding In April 2012, the City issued $5,070,000 of Water and Sewer Refunding Bond Series 2012. The proceeds of the Series 2012 bonds of $5,070,000, net of issuance costs of $54,667, were used for a current refunding of $4,680,000 of Water and Sewer Bond Series 2003. The reacquisition price exceeded the net carrying amount of the old debt by $335,333. This amount is being netted against the new debt and amortized over the remaining life of the refunded debt. The refunding was done to reduce total future debt service payments. The City realized an economic gain of $438,446 from the refunding. ---PAGE BREAK--- 56 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Changes in Long-Term Liabilities Long-term liability activity for the year ended June 30, 2012 was as follows: Beginning Balance Increases Decreases Ending Balance Due in One Year Governmental activities Bonds payable: Sales tax 11,850,000 $ - $ (1,485,000) $ 10,365,000 $ 1,505,000 $ Bond issuance premium 150,967 - (17,824) 133,143 - Total bonds payable 12,000,967 - (1,502,824) 10,498,143 1,505,000 Capital leases 269,149 - (269,149) - - Compensated absences 2,644,843 2,030,224 (2,336,177) 2,338,890 1,688,592 Net OPEB payable 2,477,866 43,334 - 2,521,200 - Governmental activities, long-term liabilities 17,392,825 $ 2,073,558 $ (4,108,150) $ 15,358,233 $ 3,193,592 $ Business-type activities Bonds payable: Revenue bonds payable 26,130,000 $ 6,100,000 $ (6,505,000) $ 25,725,000 $ 1,945,000 $ Deferred loss - (358,752) 7,474 (351,278) - Bond issuance premium 453,268 - (38,236) 415,032 - Total bonds payable 26,583,268 5,741,248 (6,535,762) 25,788,754 1,945,000 Capital leases 220,313 - (163,879) 56,434 56,434 Compensated absences 1,081,580 730,249 (779,168) 1,032,661 651,615 Net OPEB payable 735,367 93,517 (5,527) 823,357 - Business-type activities, long-term liabilities 28,620,528 $ 6,565,014 $ (7,484,336) $ 27,701,206 $ 2,653,049 $ The following is a schedule of bonds that were issued by the City and later refunded because lower interest rates were available: Original Issue Unpaid Balance June 30, 2012 Final Date of Maturity Refunding Bonds Water and Sewer Bonds Series 2003 8,500,000 $ $ 4,680,000 10/1/2023 Water and Sewer Refunding Bonds 2012 Bond Description ---PAGE BREAK--- 57 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Other Information Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City’s Retained Risk Reserve Fund (an internal service fund) accounts for and accumulates resources for uninsured loss. Under this program, the Retained Risk Reserve Fund (the Fund) provides coverage for up to a maximum of $250,000 for each general liability claim. The City purchases commercial insurance for claims in excess of coverage provided by the Fund and for all other risks of loss. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. Contingent Liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims including amounts already collected, may constitute a liability of the applicable fund. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City’s counsel the resolution of these matters will not have a materially adverse effect on the financial condition of the City. The City is a participant of the Intermountain Power Agency (IPA), a separate legal entity established under the guidelines of the Utah Interlocal Co-operation Act. The IPA operates a power production plant near Delta, Utah for the benefit of its members. IPA has approximately $5.1 billion of revenue bonds that are paid from the revenues received from participant charges. Under the terms of its original contract with IPA, the City is entitled and obligated to purchase four percent of the plant’s power output. However, under a subsequent excess power sales agreement, the City transferred its power entitlement to certain California purchasers for the duration of the project unless the City recalls any or all of the entitlement. In recent years, the City sold most of its entitlement to the California purchasers. The City is liable for operating expenses and repayment of the outstanding bonds only in the event of a prolonged power outage (in excess of 24 months) and/or failure to perform under the agreement on the part of each of the California participants. Commitments Utah Telecommunication Open Infrastructure Agency (UTOPIA) The City entered into a Pledge and Loan Agreement with UTOPIA. UTOPIA is an interlocal cooperative created to finance, construct and operate a system of fiber optic communication lines in various cities in the state. UTOPIA leases use of the fiber optic system to retail vendors of telephone, video, and internet services. The pledge commits the City to set aside and deposit funds as security in a debt service fund for the portion of the project related to the City. The maximum amount committed by the City was $1,580,908 for the year ended June 30, 2012, with a 2% increase per year through 2040. Sales and use tax revenues have been ---PAGE BREAK--- 58 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS pledged towards the payment of the City’s share of the debt service reserve fund requirement if withdrawals were made by the Trustee to make bond payments; however, the pledge is junior to any previously pledged sales and use tax revenue. On July 1, 2007, the City was required to deposit $1,235,039 into the UTOPIA Series 2004 Bond Debt Service Reserve Fund. These funds will remain on deposit until the sooner of the bonds being retired or 33 years from June 2, 2008. The City may, if additional bonds are issued, be required to deposit additional funds into a bond debt service reserve fund. The timing of these additional pledged deposits depends on the timing of additional bond issues. In June 2008, the City entered into an Amended and Restated Pledge and Loan Agreement as part of a restructuring of UTOPIA debt. The City pledged sales and use tax revenue towards its share of any debt service fund shortfall. In January 2010, the Trustees of the UTOPIA bond funds notified the City that part of UTOPIA’s Debt Service Reserve Fund was used to make the required bond payments. The City has received similar notices each month since this original notice mentioned above. The City understands that these withdrawals will continue for an undetermined period of time and that applicable replenishment payments will be required of the City for its share of the amounts withdrawn from the debt service reserve fund beginning in January 2011. According to the Amended and Restated Pledge and Loan Agreement, the amounts withdrawn from the City’s share of the Debt Service Reserve fund becomes a loan to UTOPIA. A loan receivable for $3,604,644 at June 30, 2012 is recorded in the general fund with an offsetting entry to deferred revenue. It is currently unclear as to when UTOPIA will be in a position to repay the loan. In December 2011, UTOPIA completed a second amended and restated pledge and loan agreement with its member cities. This change occurred so that UTOPIA could refund the Series 2008 Bonds. This reduced UTOPIA’S market risk and administrative costs. This amendment also helps assure that money will be available to make timely debt service payments since the member cities pay directly into the Debt Service fund and are no longer paying into the Debt Service Reserve fund. Utah Infrastructure Agency (UIA) On May 1, 2011, the City entered into a “Communication Service Contract” with UIA to provide connections to a fiber optic network for the residences and businesses of the City. The agreement obligates the City to financially support UIA if UIA revenues are insufficient to pay operational and debt payments. The City has obligated up to $690,241 of its annual franchise tax revenue for this support. This represents 13.4% of the combined commitment of all the cities in UIA. The service contract also provides that the City will bill and collect connection service fees from the end users located in the City on behalf of UIA. The City is entitled to 5% of the fee for administrative costs and the remaining 95% is due to UIA. The City becomes a signatory party to the end user agreement, along with UIA and the end user. The City is responsible for collection of the user fees stipulated in the agreement should the end user default. ---PAGE BREAK--- 59 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Conduit Debt Obligations From time to time, the City has issued Industrial Revenue Bonds (IRBs) to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City and the State, nor any political subdivision thereof, is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of June 30, 2012, there have been ten series of Industrial Revenue Bonds issued. The aggregate principal amount payable could not be determined; however, their original issue amounts totaled $97 million. Redevelopment Agency In connection with the activities of the Redevelopment Agency (RDA), incremental tax revenues totaling $1,990,651 was generated. Of this amount, the RDA was required to pay $400,000 to the Murray School District. There is no outstanding debt of the RDA at June 30, 2012; however, the RDA has agreed to make payments on the Series 2009A and 2009B sales tax bonds. During the year ended June 30, 2012, funds expended by the RDA were limited to the categories of debt service, capital outlay and administration costs. Administrative costs totaled $701,425, capital outlay costs totaled $20,000, and debt service payments totaled $834,488 for the year. Employee Retirement Systems and Pension Plans The City contributes to the Local Governmental Contributory Retirement System, Local Governmental Noncontributory Retirement System, Public Safety Retirement System for Employers with Social Security Coverage, and the Fire Fighters Retirement System for Employers without Social Security Coverage, (hereafter referred to cumulatively as the Systems) which are cost-sharing multiple-employer defined benefit pension plans administered by the Utah Retirement Systems (URS). The Systems provide retirement benefits, annual cost of living adjustments, death benefits, and refunds to plan members and beneficiaries in accordance with retirement statues. The Systems are established and governed by the respective sections of Chapter 49 of the Utah Code Annotated 1953, as amended. The Utah State Retirement Office Act in Chapter 49 provides for the administration of the Systems under the direction of the Utah State Retirement Board (Board) whose members are appointed by the Governor. URS issues a publicly available financial report that includes financial statements and required supplementary information for the Systems. A copy of the report may be obtained by writing to the Utah Retirement Systems, 540 East 200 South, Salt Lake City, UT 84102 or by calling 1-[PHONE REDACTED]. ---PAGE BREAK--- 60 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS Funding Policy Plan members are required to contribute a percent of their covered salary (all or part may be paid by the employer for the employee) to the respective systems to which they belong; 6.00% to the Local Government Contributory Retirement System and 15.05% to the Firefighters Retirement System. The City is required to contribute a percent of members’ annual covered salary to the respective systems; 9.76% to the Local Government Contributory Retirement System, 13.77% to the related Noncontributory Retirement System, 27.07% to the Public Safety Noncontributory Retirement System, and 0.50% to the Firefighters Retirement System. The contribution rates are the actuarially determined rates. The contribution requirements of the Systems are authorized by statute and specified by the Board. The City’s contributions in dollars to each of the Systems for the years ending June 30, 2012, 2011 and 2010, were equal to the required contributions for each year. The contribution amounts are as follows: 2012 2011 2010 Local Governmental Contributory Retirement System 139,372 $ 149,231 $ 153,142 $ Local Governmental Noncontributory Retirement System 1,647,739 1,823,498 1,611,044 Public Safety Retirement System for Employers with Social Security Coverage 983,825 1,030,602 933,857 Firefighters Retirement System 491,798 569,058 457,029 Deferred Compensation Plan Under the URS, the City offers its employees a Deferred Compensation Plan (the Plan) in accordance with Internal Revenue Code Section 457. The Plan, available to all City employees, permits them to defer a portion of their salary until future years. The payment of deferred compensation is not available to employees until termination, retirement, death, or emergency. The City discontinued contributions to this plan in 2003. Defined Contribution Plans The 401(k) plan provided by URS is a multiple-employer defined contribution plan. All employees of the City who participate in the URS contributory, noncontributory, or fire fighters system are eligible to participate in the plan. Employees are immediately 100 percent vested in their contributions to the plan. Employee contributions to the 401(k) plan and the Deferred Compensation Plan are voluntary. Employer contributions are also voluntary and are intended to standardize the contribution rates for all full time employees participating in the URS. The City’s contributions to the 401(k) plan were $720,372, $786,237, and $809,863 for the years ended June 30, 2012, 2011 and 2010, respectively. ---PAGE BREAK--- 61 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS In addition to the URS plans, the City also participates in a 401 plan provided by International City Management Association, a multiple-employer defined contribution plan. Only elected or appointed employees of the City are eligible to participate in this plan. Employees are fully vested upon contribution to the plan. Currently, there are three employees who participate in the plan. The City contributes to the plan on behalf of the employee. Employees are not eligible to make contributions. The contribution requirement for the year ended June 30, 2012 was $59,614. Other Postemployment Benefits In addition to the pension benefits described above, the City provides post-retirement health care benefits (OPEB) in accordance with City policy, to all employees who retire from the City upon completing the requirements for the retirement plan participated in as detailed above. Currently there are 44 retirees who meet those requirements. The City pays 50% of the retirees’ health care insurance premiums for the first 18 months with the remaining 50% paid by the retirees on a pay-as-you-go basis. After 18 months, the City pays 20% to 30% of the premium, depending on the retiree’s years of service. This postemployment benefit is available until the retiree reaches the age of 65 at which time they are no longer eligible to participate. Terminated employees under the COBRA act are allowed to purchase the same insurance policy at their own expense for a period of 18 months. The City paid $199,869 in premiums for retirees during the fiscal year ended June 30, 2012. For governmental funds, most of the costs are paid by the general fund. The City does not prepare separate financial statements for the OPEB plan. As of June 30, 2012, the date of the latest actuarial valuation, approximately 365 active employees and 43 inactive (retired) employees are receiving health insurance benefits from the City. The actuarial accrued liability (AAL) for benefits was $3.84 million, with no actuarial value of assets, resulting in an unfunded accrued liability of $3.84 million due to the City’s pay-as-you-go accounting. The following table shows the components of the City’s annual OPEB costs for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation: Annual required contribution 388,486 $ Interest on net OPEB obligation 128,529 Adjustments to annual required contribution (185,822) Annual OPEB cost (expense) 331,193 Contributions made (199,869) Increase in net OPEB obligation 131,324 Net OPEB obligation beginning of year 3,213,233 Net OPEB obligation end of year 3,344,557 $ ---PAGE BREAK--- 62 MURRAY CITY NOTES TO THE FINANCIAL STATEMENTS The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 and the two preceding years were as follows: Year Ended Annual OPEB Cost OPEB Cost Contributed Net OPEB Obligation June 30, 2010 1,546,387 $ 3.3% 2,990,203 $ June 30, 2011 321,831 30.7% 3,213,233 June 30, 2012 331,193 60.3% 3,344,557 The projected unit credit method was used as the actuarial method for valuing assets. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of events far in the future. Examples include assumptions about future employment, mortality and healthcare cost trends. Actuarially determined amounts are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. In the July1, 2011 actuarial valuation, an interest rate of 4% was used and an amortization period of 30 years. The projected annual healthcare cost trend rate is initially 6.5% and trending down to 5.1% for FY 60-61 and later. The Unfunded Actuarial Accrued Liability is being amortized as a level dollar amount over 30 years based on an open group. ---PAGE BREAK--- 63 SUPPLEMENTARY INFORMATION ---PAGE BREAK--- 64 MURRAY CITY COMBINING BALANCE SHEET – NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2012 Permanent Community Total Municipal Development Cemetery Nonmajor Building Library Redevelopment Block Grant Perpetual Care Governmental Authority Fund Agency Fund Fund Funds ASSETS Cash and cash equivalents 777 $ 576,121 $ 1,622,915 $ - $ 1,316,228 $ 3,516,041 $ Receivables: Due from other governments - - - 113,498 - 113,498 Property taxes - 1,452,887 2,278,291 - - 3,731,178 Restricted cash - 15,627 - - - 15,627 Total assets 777 2,044,635 3,901,206 113,498 1,316,228 7,376,344 LIABILITIES Accounts payable - 23,484 2,438 16,863 480 43,265 Accrued liabilities - 17,976 - - - 17,976 Deferred revenue - 1,432,160 2,278,291 - - 3,710,451 Due to other funds - 347,273 - 96,635 - 443,908 Total liabilities - 1,820,893 2,280,729 113,498 480 4,215,600 FUND BALANCE Restricted for: Library endowment - 15,627 - - - 15,627 Low income housing - - 445,033 - - 445,033 Cemetery perpetual care - - - - 520,000 520,000 Assigned 777 208,115 1,175,444 - 795,748 2,180,084 Total fund balance 777 223,742 1,620,477 - 1,315,748 3,160,744 Total liabilities and fund balances 777 $ 2,044,635 $ 3,901,206 $ 113,498 $ 1,316,228 $ 7,376,344 $ Special Revenue ---PAGE BREAK--- 65 MURRAY CITY COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Permanent Community Total Municipal Development Cemetery Nonmajor Building Library Redevelopment Block Grant Perpetual Care Governmental Authority Fund Agency Fund Fund Funds REVENUES Taxes - $ 1,581,835 $ 1,990,651 $ - $ - $ 3,572,486 $ Intergovernmental - 12,041 - 442,349 - 454,390 Charges for services - - - - 44,730 44,730 Fines and forfeitures - 51,256 - - - 51,256 Investment income 1 6,847 9,552 - 9,254 25,654 Miscellaneous - 6,813 - - - 6,813 Total revenues 1 1,658,792 2,000,203 442,349 53,984 4,155,329 EXPENDITURES Highways and public improvements 548 - 671,425 424,640 - 1,096,613 Parks, recreation, and culture - 1,410,495 - - - 1,410,495 Debt service: Interest and fiscal charges - 14,814 - - - 14,814 Total expenditures 548 1,425,309 671,425 424,640 - 2,521,922 Excess of revenues over (under) expenditures (547) 233,483 1,328,778 17,709 53,984 1,633,407 OTHER FINANCING SOURCES (USES) Transfers in 1,000 - - - - 1,000 Transfers out - (66,160) (884,488) (19,038) (60,000) (1,029,686) Total other financing uses 1,000 (66,160) (884,488) (19,038) (60,000) (1,028,686) Net change in fund balance 453 167,323 444,290 (1,329) (6,016) 604,721 Fund balance, beginning of year 324 56,419 1,176,187 1,329 1,321,764 2,556,023 Fund balance, end of year 777 $ 223,742 $ 1,620,477 $ - $ 1,315,748 $ 3,160,744 $ Special Revenue ---PAGE BREAK--- 66 MURRAY CITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – MUNICIPAL BUILDING AUTHORITY – BUDGET TO ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Actual Variance with Original Final Amounts Final Budget REVENUES Miscellanous 1,000 $ - $ - $ - $ Investment income - - 1 1 Total revenues 1,000 - 1 1 EXPENDITURES Highways and public improvements 1,000 1,000 548 452 Total expenditures 1,000 1,000 548 452 Excess (deficiency) of revenues over (under) expenditures - (1,000) (547) 453 OTHER FINANCING SOURCES Transfers in - 1,000 1,000 - Total other financing sources - 1,000 1,000 - Net change in fund balance - $ - $ 453 453 $ Fund balance at beginning of year 324 Fund balance at end of year 777 $ Budgeted Amounts ---PAGE BREAK--- 67 MURRAY CITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – LIBRARY FUND – BUDGET TO ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 1,570,836 $ 1,570,836 $ 1,581,835 $ 10,999 $ Intergovernmental 10,000 12,000 12,041 41 Fines and forfeitures 45,000 45,000 51,256 6,256 Investment income 3,000 3,000 6,847 3,847 Miscellaneous 7,000 7,000 6,813 (187) Total revenues 1,635,836 1,637,836 1,658,792 20,956 EXPENDITURES Parks, recreation, and culture 1,396,507 1,389,212 1,410,495 (21,283) Debt service Principal 105,132 108,549 - 108,549 Interest and fiscal charges 18,231 14,815 14,814 1 Total expenditures 1,519,870 1,512,576 1,425,309 87,267 Excess of revenues over expenditures 115,966 125,260 233,483 108,223 OTHER FINANCING USES Transfer out (66,160) (66,160) (66,160) - Total other financing uses (66,160) (66,160) (66,160) - Net change in fund balance 49,806 $ 59,100 $ 167,323 108,223 $ Fund balance at beginning of year 56,419 Fund balance at end of year 223,742 $ Budgeted Amounts ---PAGE BREAK--- 68 MURRAY CITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – REDEVELOPMENT FUND – BUDGET TO ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 1,790,020 $ 1,790,020 $ 1,990,651 $ 200,631 $ Investment income 8,000 8,000 9,552 1,552 Total revenues 1,798,020 1,798,020 2,000,203 202,183 EXPENDITURES Highways and public improvements 1,191,507 1,311,507 671,425 640,082 Total expenditures 1,191,507 1,311,507 671,425 640,082 Excess (deficiency) of revenues over (under) expenditures 606,513 486,513 1,328,778 842,265 OTHER FINANCING SOURCES (USES) Transfer out (824,596) (884,596) (884,488) 108 Total other financing sources (uses) (824,596) (884,596) (884,488) 108 Net change in fund balance (218,083) $ (398,083) $ 444,290 842,373 $ Fund balance at beginning of year 1,176,187 Fund balance at end of year 1,620,477 $ Budgeted Amounts ---PAGE BREAK--- 69 MURRAY CITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – COMMUNITY DEVELOPMENT BLOCK GRANT FUND – BUDGET TO ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental 357,200 $ 680,659 $ 442,349 $ (238,310) $ Total revenues 357,200 680,659 442,349 (238,310) EXPENDITURES Highways and public improvements 356,920 662,340 424,640 237,700 Total expenditures 356,920 662,340 424,640 237,700 Excess (deficiency) of revenues over (under) expenditures 280 18,319 17,709 (610) OTHER FINANCING USES Transfer out - (12,062) (19,038) (6,976) Total other financing uses - (12,062) (19,038) (6,976) Net change in fund balance 280 $ 6,257 $ (1,329) (7,586) $ Fund balance at beginning of year 1,329 Fund balance at end of year - $ Budgeted Amounts ---PAGE BREAK--- 70 MURRAY CITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – CAPITAL PROJECTS (MAJOR FUND) – BUDGET TO ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Actual Variance with Original Final Amounts Final Budget REVENUES Investment income 20,000 $ 20,000 $ 23,890 $ 3,890 $ Total revenues 20,000 20,000 23,890 3,890 EXPENDITURES General government 1,500,000 1,210,705 425,744 784,961 Highways and public improvements 1,430,000 1,109,053 1,098,030 11,023 Debt service Principal - 269,149 269,149 - Interest and fiscal charges - 11,093 11,092 1 Total expenditures 2,930,000 2,600,000 1,804,015 795,985 Excess (deficiency) of revenues over (under) expenditures (2,910,000) (2,580,000) (1,780,125) 799,875 OTHER FINANCING SOURCES (USES) Transfers in 150,000 3,150,000 3,000,000 (150,000) Total other financing sources (uses) 150,000 3,150,000 3,000,000 (150,000) Net change in fund balance (2,760,000) $ 570,000 $ 1,219,875 649,875 $ Fund balance at beginning of year 3,619,365 Fund balance at end of year 4,839,240 $ Budgeted Amounts ---PAGE BREAK--- 71 MURRAY CITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – CEMETERY PERPETUAL CARE FUND – BUDGET TO ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Actual Variance with Original Final Amounts Final Budget REVENUES Perpetual care fees 52,000 $ 52,000 $ 44,730 $ (7,270) $ Investment income 8,000 8,000 9,254 1,254 Total revenues 60,000 60,000 53,984 (6,016) EXPENDITURES Parks, recreation, and culture - - - - Total expenditures - - - - Excess of revenues over expenditures 60,000 60,000 53,984 (6,016) OTHER FINANCING USES Transfers out (60,000) (60,000) (60,000) - Total other financing uses (60,000) (60,000) (60,000) - Net change in fund balance - $ - $ (6,016) (6,016) $ Fund balance at beginning of year 1,321,764 Fund balance at end of year 1,315,748 $ Budgeted Amounts ---PAGE BREAK--- 72 MURRAY CITY STATEMENT OF NET ASSETS – INTERNAL SERVICE FUNDS JUNE 30, 2012 Central Retained Risk Garage Reserve Fund Fund Total ASSETS Current assets: Cash and cash equivalents 77,568 $ 1,514,978 $ 1,592,546 $ Inventory 75,694 - 75,694 Total current assets 153,262 1,514,978 1,668,240 Noncurrent assets: Capital assets: Machinery and equipment 161,743 - 161,743 Less: accumulated depreciation (106,224) - (106,224) Total noncurrent assets 55,519 - 55,519 Total assets 208,781 1,514,978 1,723,759 LIABILITIES Current liabilities: Accounts payable 68,839 21,868 90,707 Accrued liabilities 5,350 250,000 255,350 Compensated absences 19,652 - 19,652 Total current liabilities 93,841 271,868 365,709 Noncurrent liabilities: Compensated absences 11,492 - 11,492 Net OPEB payable 33,971 - 33,971 Total noncurrent liabilities 45,463 - 45,463 Total liabilities 139,304 271,868 411,172 NET ASSETS Invested in capital assets 55,519 - 55,519 Unrestricted 13,958 1,243,110 1,257,068 Total net assets 69,477 1,243,110 1,312,587 Total liabilities and net assets 208,781 $ 1,514,978 $ 1,723,759 $ ---PAGE BREAK--- 73 MURRAY CITY STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS – INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Central Retained Risk Garage Reserve Fund Fund Total OPERATING REVENUES Charges for services 305,715 $ 681,000 $ 986,715 $ Total operating revenues 305,715 681,000 986,715 OPERATING EXPENSES Administration and general 300,778 - 300,778 Depreciation and amortization 3,936 - 3,936 Self insurance claims - 287,363 287,363 Insurance premiums 1,000 308,729 309,729 Total operating expenses 305,714 596,092 901,806 Operating income (loss) 1 84,908 84,909 NONOPERATING REVENUES (EXPENSES) Investment income - 9,004 9,004 Total nonoperating revenues (expenses) - 9,004 9,004 Change in net assets 1 93,912 93,913 Total net assets - beginning 69,476 1,149,198 1,218,674 Total net assets - ending 69,477 $ 1,243,110 $ 1,312,587 $ ---PAGE BREAK--- 74 MURRAY CITY STATEMENT OF CASH FLOWS – INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Central Retained Risk Garage Reserve Fund Fund Total Cash flows from operating activities Receipts from customers and users - $ 681,000 $ 681,000 $ Payments to suppliers (22,161) (576,564) (598,725) Payments to employees 5,028 - 5,028 Net cash provided (used) by operating activities (17,133) 104,436 87,303 Cash flows from investing activities Investment income - 9,004 9,004 Net cash provided by investing activities - 9,004 9,004 Net increase (decrease) in cash and cash equivalents (17,133) 113,440 96,307 Cash and cash equivalents, beginning of year 34,580 1,401,538 1,436,118 Cash and cash equivalents, end of year 17,447 $ 1,514,978 $ 1,532,425 $ Reconciliation of operating income to net cash provided by operating activities Operating income (loss) 1 $ 84,908 $ 84,909 $ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 3,936 - 3,936 Changes in assets and liabilities: Receivables 63,233 63,233 Inventory (7,049) - (7,049) Accounts payable (17,612) 19,528 1,916 Accrued liabilities 801 - 801 Compensated absences & OPEB (322) - (322) Net cash provided (used) by by operating activities 42,988 $ 104,436 $ 147,424 $ ---PAGE BREAK--- 75 MURRAY CITY STATEMENT OF NET ASSETS – NONMAJOR PROPRIETARY FUNDS JUNE 30, 2012 Murray Solid Parkway Waste Recreation Management Telecommunication Fund Fund Fund Total ASSETS Current assets: Cash and cash equivalents 338,207 $ 394,234 $ 98,103 $ 830,544 $ Accounts receivable (net) - 102,848 2,755 105,603 Notes receivable - - 18,338 18,338 Inventory 85,501 - - 85,501 Total current assets 423,708 497,082 119,196 1,039,986 Noncurrent assets: Notes receivable - - 312,048 312,048 Capital assets: Land 326,336 - - 326,336 Buildings 797,534 - - 797,534 Improvements other than buildings 3,734,149 - - 3,734,149 Machinery and equipment 850,963 - - 850,963 Accumulated depreciation (4,540,257) - - (4,540,257) Total noncurrent assets 1,168,725 - 312,048 1,480,773 Total assets 1,592,433 497,082 431,244 2,520,759 LIABILITIES Current liabilities: Accounts payable 11,466 77,974 - 89,440 Accrued liabilities 33,736 - - 33,736 Due to other funds 205,245 - - 205,245 Compensated absences 67,353 - - 67,353 Notes payable - - 18,338 18,338 Total current liabilities 317,800 77,974 18,338 414,112 Noncurrent liabilities: Notes payable - - 312,048 312,048 Compensated absences 39,387 - - 39,387 Net OPEB payable 74,403 - - 74,403 Total noncurrent liabilities 113,790 - 312,048 425,838 Total liabilities 431,590 77,974 330,386 839,950 NET ASSETS Invested in capital assets, net of related debt 1,168,725 - - 1,168,725 Unrestricted (7,882) 419,108 100,858 512,084 Total net assets 1,160,843 419,108 100,858 1,680,809 Total liabilities and net assets 1,592,433 $ 497,082 $ 431,244 $ 2,520,759 $ Enterprise Funds ---PAGE BREAK--- 76 MURRAY CITY STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS – NONMAJOR PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Murray Solid Parkway Waste Recreation Management Telecommunication Fund Fund Fund Total OPERATING REVENUES Sales and charges for services 1,562,957 $ 1,009,285 $ 33,780 $ 2,606,022 $ Total operating revenues 1,562,957 1,009,285 33,780 2,606,022 OPERATING EXPENSES Administration and general 84,845 73,030 - 157,875 Depreciation and amortization 178,418 - - 178,418 Operations and maintenance 1,433,030 976,778 33,120 2,442,928 Total operating expenses 1,696,293 1,049,808 33,120 2,779,221 Operating income (loss) (133,336) (40,523) 660 (173,199) NONOPERATING REVENUES (EXPENSES) Investment income 1,444 2,796 198 4,438 Interest and fiscal charges (732) - - (732) Gain/(loss) on disposal of assets 6,500 - - 6,500 Total nonoperating revenues (expenses) 7,212 2,796 198 10,206 Income before transfers (126,124) (37,727) 858 (162,993) Transfers in - - 100,000 100,000 Transfers out (22,000) - - (22,000) Change in net assets (148,124) (37,727) 100,858 (84,993) Total net assets - beginning 1,308,967 456,835 - 1,765,802 Total net assets - ending 1,160,843 $ 419,108 $ 100,858 $ 1,680,809 $ Enterprise Funds ---PAGE BREAK--- 77 MURRAY CITY STATEMENT OF CASH FLOWS – NONMAJOR PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Murray Solid Parkway Waste Recreation Management Telecommunication Fund Fund Fund Total Cash flows from operating activities Receipts from customers and users 1,562,957 $ 1,014,546 $ 31,025 $ 2,608,528 $ Payments to suppliers (906,902) (961,161) (33,120) (1,901,183) Payments to employees (614,437) (73,030) - (687,467) Net cash used by operating activities 41,618 (19,645) (2,095) 19,878 Cash flows from noncapital financing activities Transfers from other funds - - 100,000 100,000 Transfers from (to) other funds (22,000) - - (22,000) Changes to interfund receivables and payables 205,245 - - 205,245 Net cash used by noncapital financing activities 183,245 - 100,000 283,245 Cash flows from capital and related financing activities Acquisition of capital assets (83,195) - - (83,195) Proceeds from sale of assets 6,500 - - 6,500 Interest and fiscal charges paid on capital debt (1,346) - - (1,346) Principal paid on debt (41,461) - - (41,461) Net cash used by capital and related financing activities (119,502) - - (119,502) Cash flows from investing activites Investment income 1,444 2,796 198 4,438 Net cash provided by investing activities 1,444 2,796 198 4,438 Net increase (decrease) in cash and cash equivalents 106,805 (16,849) 98,103 188,059 Cash and cash equivalents, beginning of year 231,402 411,083 - 642,485 Cash and cash equivalents, end of year 338,207 $ 394,234 $ 98,103 $ 830,544 $ Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) (133,336) $ (40,523) $ 660 $ (173,199) $ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 178,418 - - 178,418 Changes in assets and liabilities: Accounts receivable - 5,261 (2,755) 2,506 Inventories 1,923 - - 1,923 Accounts payable (1,730) 15,617 - 13,887 Accrued liabilities 4,021 - - 4,021 Compensated absences & OPEB (7,678) - - (7,678) Net cash used by operating activities 41,618 $ (19,645) $ (2,095) $ 19,878 $ Enterprise Funds ---PAGE BREAK--- 78 This page intentionally left blank ---PAGE BREAK--- 79 STATISTICAL SECTION (Unaudited) This part of the Murray City’s comprehensive annual financial report presents detailed information as a context for better understanding what the information in the financial statements, note disclosure, and required supplementary information says about the government’s overall financial health. Financial Trends 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 These schedules contain information to help the reader assess one of the City’s most significant local revenue sources, the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. ---PAGE BREAK--- 80 MURRAY CITY NET ASSETS BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (AMOUNTS EXPRESSED IN THOUSANDS) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Governmental activities Invested in capital assets, net of debt 28,770 $ 28,343 $ 29,542 $ 52,275 $ 52,908 $ 52,903 $ 59,490 $ 58,427 $ 55,550 $ 56,770 $ Restricted 2,559 2,202 1,899 1,900 520 520 6,295 3,432 4,151 2,897 Unrestricted 13,451 15,689 18,077 20,642 18,270 22,141 8,984 10,222 14,273 17,717 Total governmental net assets 44,780 $ 46,234 $ 49,518 $ 74,817 $ 71,698 $ 75,564 $ 74,769 $ 72,081 $ 73,974 $ 77,384 $ Business-type activities Invested in capital assets, net of debt 53,545 $ 49,573 $ 39,193 $ 42,286 $ 56,427 $ 53,269 $ 53,074 $ 51,828 $ 55,429 $ 55,047 $ Restricted 2,155 4,283 314 314 - - 1,003 1,000 1,005 - Unrestricted 2,102 3,189 18,453 16,911 16,279 18,306 16,660 14,758 16,389 25,052 Total business-type net assets 57,802 $ 57,045 $ 57,960 $ 59,511 $ 72,706 $ 71,575 $ 70,737 $ 67,586 $ 72,823 $ 80,099 $ Primary government Invested in capital assets, net of debt 82,315 $ 77,916 $ 68,735 $ 94,561 $ 109,335 $ 106,172 $ 112,564 $ 110,255 $ 110,979 $ 111,817 $ Restricted 4,714 6,485 2,213 2,214 520 520 7,298 4,432 5,157 2,897 Unrestricted 15,553 18,878 36,530 37,553 34,549 40,447 25,644 24,980 30,662 42,769 Total primary government net assets 102,582 $ 103,279 $ 107,478 $ 134,328 $ 144,404 $ 147,139 $ 145,506 $ 139,667 $ 146,798 $ 157,483 $ ---PAGE BREAK--- 81 MURRAY CITY CHANGES IN NET ASSETS LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (AMOUNTS EXPRESSED IN THOUSANDS) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Expenses Governmental activities General government 4,137 $ 4,075 $ 4,054 $ 4,557 $ 5,090 $ 5,536 $ 9,033 $ 9,821 $ 10,198 $ 8,984 $ Public safety 12,392 13,214 13,877 14,387 15,758 15,990 18,182 18,459 17,790 16,679 Highways and public improvments 4,844 5,400 4,408 8,037 6,349 5,989 7,008 8,034 7,277 7,880 Parks, recreation, and culture 4,047 6,822 7,464 8,025 8,183 7,741 7,265 7,717 7,480 7,068 Interest on long term debt 782 764 774 709 427 489 559 621 548 440 Total governmental expenses 26,202 30,275 30,577 35,715 35,807 35,745 42,047 44,652 43,293 41,051 Business-type activities Power 30,597 30,183 30,428 32,394 33,585 35,397 35,358 32,420 32,432 31,190 Water 3,368 3,752 4,047 3,663 4,023 3,520 4,223 5,998 4,887 4,085 Waste water 2,926 2,945 3,033 3,404 3,354 2,746 3,563 3,274 2,732 3,255 Golf course 1,570 1,448 1,469 1,398 1,729 1,538 1,574 1,485 1,614 1,697 Storm water 215 214 - - 1,463 1,382 1,392 1,421 1,691 1,885 Telecommunication - - - - - - - - - 33 Solid waste 299 1,013 683 742 782 711 832 806 942 1,050 Total business-type activities expenses 38,975 39,555 39,660 41,601 44,936 45,294 46,942 45,404 44,298 43,195 Total primary government expenses 65,177 $ 69,830 $ 70,237 $ 77,316 $ 80,743 $ 81,039 $ 88,989 $ 90,056 $ 87,591 $ 84,246 $ Program revenues Charges for services General government 3,553 $ 3,963 $ 4,303 $ 3,272 $ 3,386 $ 3,616 $ 5,964 $ 5,926 $ 6,149 $ 3,423 $ Public safety 248 161 234 338 323 340 867 644 1,500 1,183 Highways & public improvements 711 670 1,743 798 1,041 - 97 85 78 99 Parks, recreation, and culture 1,041 1,341 1,431 1,541 1,724 1,742 1,678 1,750 1,925 1,775 Operating grants and contributions - 307 370 457 555 365 457 406 1,385 4,478 Capital grants & contributions 1,741 1,613 1,366 1,491 14,893 1,591 1,232 2,179 2,472 2,087 Total governmental program revenues 7,294 8,055 9,447 7,897 21,922 7,654 10,295 10,990 13,509 13,045 Business-type activities Charges for services Power 32,332 $ 29,041 $ 28,963 $ 29,904 $ 33,379 $ 33,707 $ 35,617 $ 33,187 $ 36,329 $ 37,628 $ Water 3,663 4,593 5,083 5,106 5,566 5,594 5,492 4,781 5,989 6,373 Waste water 3,059 3,250 3,887 3,257 3,399 3,448 3,556 3,397 4,072 4,348 Golf course 1,585 1,347 1,345 1,475 1,592 1,542 1,596 1,421 1,347 1,563 Storm water - 24 272 278 1,522 1,508 1,467 1,400 1,433 1,403 Telecommunication - - - - - - - - - 34 Solid waste 307 799 813 807 829 833 819 818 962 1,010 Capital grants & contributions 81 - - - - - - - 2,860 833 Total business-type program revenues 41,027 39,054 40,363 40,827 46,287 46,632 48,547 45,005 52,992 53,192 Total primary government program revenues 48,321 $ 47,109 $ 49,810 $ 48,724 $ 68,209 $ 54,286 $ 58,842 $ 55,995 $ 66,501 $ 66,237 $ Net (expense)/revenue Governmental activities (18,698) $ (22,219) $ (21,131) $ (27,818) $ (13,885) $ (28,090) $ (31,752) $ (33,663) $ (29,783) $ (28,006) $ Business-type activities 2,053 (502) 704 (774) 1,351 1,337 1,604 (399) 8,694 9,997 Total primary government net expense (16,645) $ (22,721) $ (20,427) $ (28,592) $ (12,534) $ (26,753) $ (30,148) $ (34,062) $ (21,089) $ (18,009) $ General revenues & other changes in net position Governmental activities Taxes Property taxes 5,707 $ 7,116 $ 6,801 $ 8,517 $ 8,784 $ 8,975 $ 8,774 $ 9,700 $ 9,823 $ 10,076 $ Franchise taxes 2,025 2,141 2,933 3,173 3,481 3,503 5,056 4,931 4,925 4,849 General sales taxes & highway sales taxes 11,796 12,952 13,677 15,115 15,235 15,288 12,444 12,293 12,800 12,847 Interest income 449 434 464 727 1,069 943 514 396 310 296 Gain/(loss) on sale & disposal of assets 134 88 127 115 109 165 51 (85) - 11 Miscellaneous 205 492 203 202 324 269 1,181 735 196 207 Rent, transfers & miscellaneous 445 451 209 1,019 (10,781) 2,813 2,937 3,005 3,622 3,130 Total governmental activities 20,761 23,674 24,414 28,868 18,221 31,956 30,957 30,975 31,676 31,416 Business-type activities Interest income 177 196 369 785 831 760 434 215 183 245 Gain/(loss) on sale & disposal of assets - - 52 2,558 199 579 60 39 (17) 163 Rent & transfers (445) (452) (209) (1,019) 10,813 (2,813) (2,937) (3,005) (3,622) (3,130) Total business-type activities (268) (256) 212 2,324 11,843 (1,474) (2,443) (2,751) (3,456) (2,722) Total primary government 20,493 $ 23,418 $ 24,626 $ 31,192 $ 30,064 $ 30,482 $ 28,514 $ 28,224 $ 28,220 $ 28,694 $ Change in net position Governmental activities 2,063 $ 1,454 $ 3,284 $ 1,049 $ 4,336 $ 3,866 $ (796) $ (2,687) $ 1,893 $ 3,410 $ Business-type activities 1,785 (757) 915 1,551 13,194 (136) (837) (3,151) 5,238 7,275 Total primary government 3,848 $ 697 $ 4,199 $ 2,600 $ 17,530 $ 3,730 $ (1,633) $ (5,838) $ 7,131 $ 10,685 $ ---PAGE BREAK--- 82 MURRAY CITY GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year Property Tax Sales Tax Franchise Tax Transient Room Tax In Lieu of Tax Transfer Total 2003 5,113,897 $ 11,092,873 $ 2,649,398 $ 78,276 $ 1,293,801 $ 20,228,245 $ 2004 6,369,655 11,871,337 3,160,337 60,990 1,374,758 22,837,077 2005 6,919,279 12,356,922 4,188,965 63,918 1,315,997 24,845,081 2006 6,959,296 13,464,760 4,742,777 80,409 - 25,247,242 2007 8,928,609 14,001,006 4,618,367 96,061 - 27,644,043 2008 8,975,027 13,941,921 4,918,591 103,260 - 27,938,799 2009 8,773,598 12,249,133 5,056,167 102,350 - 26,181,248 2010 9,700,152 12,517,564 4,931,012 73,421 - 27,222,149 2011 9,823,237 12,589,925 4,924,741 104,295 - 27,442,198 2012 10,075,782 12,613,871 4,849,560 85,884 - 27,625,097 Note: Beginning in 2006 In Lieu of Tax Transfers were no longer classified as tax revenue. ---PAGE BREAK--- 83 MURRAY CITY FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED BASIS OF ACCOUNTING) (AMOUNTS EXPRESSED IN THOUSANDS) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General fund Reserved 184 $ 1,580 $ 1,745 $ 1,280 $ 3,065 $ 3,035 $ 2,459 $ 1,490 $ - $ - $ Unreserved 4,145 4,032 6,233 7,781 8,092 5,962 7,060 7,522 - - Nonspendable - - - - - - - - - 235 Restricted - - - - - - - - 2,159 1,917 Assigned - - - - - - - - - - Unassigned - - - - - - - - 10,546 9,150 Total General Fund 4,329 $ 5,612 $ 7,978 $ 9,061 $ 11,157 $ 8,997 $ 9,519 $ 9,012 $ 12,705 $ 11,302 $ All other governmental funds Reserved 2,149 $ 1,949 $ 1,978 $ 1,952 $ 575 $ 576 $ 5,077 $ 3,028 $ - $ - $ Unreserved 1,426 1,722 1,617 1,572 4,461 4,779 2,447 2,701 - - Nonspendable - - - - - - - - 20 - Restricted - - - - - - - - 1,992 981 Assigned - - - - - - - - 4,163 7,019 Unassigned - - - - - - - - - - Total all other governmental funds 3,575 $ 3,671 $ 3,595 $ 3,524 $ 5,036 $ 5,355 $ 7,524 $ 5,729 $ 6,175 $ 8,000 $ Note: Per GASB Statement No. 54, fund balances have been reclassified beginning fiscal year 2011. ---PAGE BREAK--- 84 MURRAY CITY CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED BASIS OF ACCOUNTING) (AMOUNTS EXPRESSED IN THOUSANDS) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenues Taxes & special assessments 20,228 $ 22,837 $ 24,845 $ 25,247 $ 27,644 $ 27,939 $ 26,181 $ 27,222 $ 27,442 $ 27,625 $ Licenses & permits 1,052 1,025 2,235 1,449 1,659 1,629 1,236 1,180 1,439 1,526 Intergovernmental 1,952 1,920 1,736 1,948 2,099 1,956 1,688 2,585 3,423 4,478 Charges for services 1,365 1,586 1,776 1,985 2,122 2,043 5,586 5,434 6,256 6,051 Fines & forfeitures 1,842 2,150 2,384 2,300 2,477 2,026 1,784 1,791 1,958 1,897 Rents & concessions 747 1,060 1,326 1,314 1,297 - - - - - Miscellaneous 205 492 203 202 325 269 1,181 734 196 207 Interest 439 434 464 727 1,026 905 496 391 306 286 Total revenues 27,830 31,504 34,969 35,172 38,649 36,767 38,152 39,337 41,020 42,070 Expenditures General government 4,069 4,302 4,566 5,105 5,407 5,212 7,969 7,991 7,952 9,697 Public safety 11,744 12,534 13,194 14,624 16,166 16,003 19,804 16,927 16,719 15,987 Highways & public improvements 4,705 4,768 3,952 6,340 3,619 3,342 3,467 4,738 4,657 6,204 Parks, recreation and culture 4,658 6,164 6,842 7,161 7,552 6,868 6,847 6,740 6,657 6,325 Capital outlay 5,864 4,095 2,967 231 1,371 8,358 4,342 5,134 1,058 2,883 Principal 585 935 1,260 1,300 1,340 1,305 1,723 2,066 2,634 1,754 Interest 777 745 772 713 448 515 515 659 589 475 Bond issuance costs - - - - 159 - 141 - - - Pledge payment - UTOPIA - - - - - - - 821 1,123 1,661 Total expenditures 32,402 33,543 33,553 35,474 36,062 41,603 44,808 45,076 41,389 44,986 Excess of revenues over (under) expenditures (4,572) (2,039) 1,416 (302) 2,587 (4,836) (6,656) (5,739) (369) (2,916) Other financing sources (uses) Proceeds from borrowing - 3,000 - - 10,156 - 6,162 - - - Payments to refunding bond escrow - - - - (11,619) - (1,520) - - - Capital lease financing - - 733 180 - - 1,557 207 - - Transfers in 560 25 245 1,576 5,195 8,809 4,681 4,181 4,824 7,261 Transfers out (560) (25) (245) (557) (2,842) (5,996) (1,744) (1,176) (1,202) (4,131) Sales of capital assets 134 418 141 115 130 184 210 224 886 208 Total other financing sources (uses) 134 3,418 874 1,314 1,020 2,997 9,346 3,436 4,508 3,338 Net change in fund balances (4,438) $ 1,379 $ 2,290 $ 1,012 $ 3,607 $ (1,839) $ 2,690 $ (2,303) $ 4,139 $ 422 $ Debt service as a % of noncapital expenditures 4.39% 5.27% 6.45% 6.02% 5.22% 4.57% 5.26% 6.43% 8.44% 5.21% ---PAGE BREAK--- 85 MURRAY CITY ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS 2003 2,240,713,841 $ 2,870,000,000 $ 78.07% 0.[PHONE REDACTED] 2,646,945,401 3,578,000,000 73.98% 0.[PHONE REDACTED] 2,759,982,137 3,720,000,000 74.19% 0.[PHONE REDACTED] 2,862,401,216 3,863,000,000 74.10% 0.[PHONE REDACTED] 3,288,381,528 4,420,000,000 74.40% 0.[PHONE REDACTED] 3,866,773,720 5,225,000,000 74.01% 0.[PHONE REDACTED] 4,098,025,336 6,075,000,000 67.46% 0.[PHONE REDACTED] 3,603,823,596 5,388,000,000 66.89% 0.[PHONE REDACTED] 3,516,872,832 6,218,000,000 56.56% 0.[PHONE REDACTED] 3,352,596,180 6,078,768,680 55.15% 0.002203 Source: Salt Lake County Auditor's Office Note: All property in Salt Lake County is assessed annually. All real property is assessed at its fair market value with a 45% reduction in fair market value allowed for primary residential property. Tax rates are per $1,000 of assessed value. Business personal property is self assessed annually and is not included above. Ratio of Total Assessed Value to Total Estimated Actual Value Fiscal Year Ending June 30 Total Real Taxable Assessed Value Total Direct Tax Rate Estimated Actual Real Taxable Value ---PAGE BREAK--- 86 MURRAY CITY DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS City Direct Rate 2003 0.001490 0.00647 0.00038 0.00294 0.00002 0.00040 2004 0.001510 0.00651 0.00038 0.00287 0.00003 0.00036 2005 0.001500 0.00664 0.00051 0.00282 0.00003 0.00035 2006 0.001450 0.00653 0.00049 0.00268 0.00003 0.00040 2007 0.001770 0.00595 0.00043 0.00235 0.00003 0.00040 2008 0.001520 0.00509 0.00037 0.00199 0.00002 0.00030 2009 0.001420 0.00479 0.00035 0.00192 0.00002 0.00029 2010 0.001630 0.00552 0.00040 0.00228 0.00003 0.00040 2011 0.001740 0.00593 0.00042 0.00259 0.00005 0.00042 2012 0.001772 0.00620 0.00043 0.00270 0.00005 0.00044 Source: Salt Lake County Central Utah Water Conservation Overlapping Rates Fiscal Year Total Murray City Direct Murray School District Murray City Library Salt Lake County Mosquito Abatement District ---PAGE BREAK--- 87 MURRAY CITY PRINCIPAL SALES TAX PAYERS CURRENT YEAR AND NINE YEARS AGO Taxpayer Sales Tax Collections Rank Percentage of Total City Sales Taxes Sales Tax Collections Rank Percentage of Total City Sales Taxes Warehouse Store 1,467,225 $ 1 11.63% - $ Clothing Store 639,742 2 5.07% 376,067 5 2.94% Furniture Store 549,400 3 4.36% 613,163 1 4.80% Auto Sales 546,997 4 4.34% 337,624 7 2.64% Auto Sales 395,310 5 3.13% Auto Sales 372,409 6 2.95% 427,210 3 3.34% Warehouse Store 357,296 7 2.83% 487,752 2 3.82% Auto Sales 321,387 8 2.55% 382,641 4 2.99% Auto Sales 307,599 9 2.44% 298,371 10 2.33% Electronics Store 305,685 10 2.42% Electronics Store 303,351 11 2.40% 182,617 15 1.43% Auto Sales 283,386 12 2.25% 302,101 8 2.36% Municipality 255,382 13 2.02% 216,754 14 1.70% Department Store 254,175 14 2.02% Electrical Supplies 228,408 15 1.81% 356,223 6 2.79% Auto Sales 301,092 9 2.36% Department Store 268,298 11 2.10% Food Retailer 233,609 12 1.83% Building Products 220,481 13 1.72% Total Sales Tax 12,613,871 $ 52.23% 12,785,017 $ 39.14% Source: Utah State Tax Commission Note: The detail to match current year auto sales to auto sales from nine years ago was unavailable. 2012 2003 ---PAGE BREAK--- 88 MURRAY CITY PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN YEARS Amount Amount 2003 3,370,383 $ 3,266,544 $ 96.92% 103,839 3,370,383 $ 100.00% 2004 4,050,520 3,895,765 96.18% 154,755 4,050,520 100.00% 2005 4,213,642 4,131,312 98.05% 82,330 4,213,642 100.00% 2006 4,252,740 4,125,737 97.01% 115,888 4,241,625 99.74% 2007 5,961,277 5,803,417 97.35% 110,310 5,913,727 99.20% 2008 5,680,958 5,382,672 94.75% 107,223 5,489,895 96.64% 2009 5,979,944 5,764,695 96.40% 157,907 5,922,602 99.04% 2010 5,863,420 5,669,616 96.69% 184,530 5,854,146 99.84% 2011 5,903,086 5,779,782 97.91% 67,940 5,847,722 99.06% 2012 5,903,253 5,839,394 98.92% - 5,839,394 98.92% Source: Salt Lake County Treasurer Fiscal Year Ending June 30 Collected within the Fiscal Year of the Levy Total Collections to Date Taxes Levied for the Fiscal Year Collections in Subsequent Years Percentage of Levy Percentage of Levy ---PAGE BREAK--- 89 MURRAY CITY RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN YEARS Total Percentage 2003 16,005,000 $ - $ 18,755,000 $ 98,000 $ 34,858,000 $ 2.62% 781 $ 2004 18,070,000 - 26,555,000 387,000 45,012,000 3.22% 1,010 2005 16,810,000 713,000 34,820,000 290,000 52,633,000 3.59% 1,184 2006 15,510,000 543,000 33,450,000 200,000 49,703,000 3.27% 1,121 2007 13,115,000 550,159 32,505,000 639,562 46,809,721 2.71% 1,044 2008 11,810,000 372,998 31,005,000 420,924 43,608,922 2.73% 954 2009 14,865,000 1,746,581 29,420,000 531,008 46,652,589 2.80% 1,010 2010 13,305,000 1,448,203 27,765,000 378,420 42,896,623 2.58% 932 2011 11,850,000 269,149 26,130,000 220,314 38,469,463 2.16% 823 2012 10,365,000 - 25,725,000 56,434 36,146,434 1.97% 759 Per Capita Business-type Activities Primary Government of Personal Income Fiscal Year Ending June 30 Revenue Bonds Capital Leases Revenue Bonds Governmental Activities Capital Leases ---PAGE BREAK--- 90 MURRAY CITY DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2012 Governmental Unit Debt Outstanding Debt repaid with property taxes Murray City School District 17,815,000 $ 100.00% 17,815,000 $ Salt Lake County General Obligation Debt 258,300,000 4.54% 11,726,820 Other debt Salt Lake County Sales Tax Bonds 104,900,000 4.54% 4,762,460 Salt Lake County Lease Revenue Bonds 82,000,000 4.54% 3,722,800 Salt Lake County Capital Leases 1,000,000 4.54% 45,400 Salt Lake County Special Assessment Bonds 2,300,000 4.54% 104,420 Salt Lake County Transportation Rev. Bonds 77,600,000 4.54% 3,523,040 Salt Lake County Notes Payable 14,800,000 4.54% 671,920 Subtotal, overlapping debt 42,371,860 Murray City direct debt 10,365,000 Total direct and overlapping debt 52,736,860 $ Source: Debt outstanding data obtained from Salt Lake County Auditor. The percentange of overlapping debt is based upon population per 2010 census. Murray City School District's debt is as of their fiscal year end which is June 30. Salt Lake County's debt is as of their fiscal year end which is December 31. Estimated Percentage Applicable Estimated Share of Overlapping Debt ---PAGE BREAK--- 91 MURRAY CITY LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (IN THOUSANDS OF DOLLARS) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Debt limit 229,600 $ 286,240 $ 297,600 $ 309,040 $ 353,600 $ 418,000 $ 486,000 $ 431,040 $ 497,440 $ 486,302 $ Total net debt applicable to limit 18,977 29,739 39,085 48,960 45,620 42,815 44,285 41,070 37,980 36,090 Legal debt margin 210,623 $ 256,501 $ 258,515 $ 260,080 $ 307,980 $ 375,185 $ 441,715 $ 389,970 $ 459,460 $ 450,212 $ Total net debt applicable to the limit as a percentage of debt limit 8.27% 10.39% 13.13% 15.84% 12.90% 10.24% 9.11% 9.53% 7.64% 7.42% 6,078,769 $ 486,302 36,090 450,212 $ Note: The bonded debt of the City is limited by statute to 8% of the "reasonable fair cash value" of property. Legal debt margin Legal Debt Margin Calculation for Fiscal Year 2012 Total reasonable fair cash value Debt limit of fair cash value) Debt applicable to debt limit ---PAGE BREAK--- 92 MURRAY CITY PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Principal Interest Coverage 2003 32,505,637 $ 25,863,361 $ 6,642,276 $ 675,000 $ 958,300 $ 4.07 2004 29,174,680 25,364,029 3,810,651 700,000 931,300 2.34 2005 29,276,312 25,246,377 4,029,935 730,000 1,138,221 2.16 2006 32,957,429 27,534,067 5,423,362 1,060,000 1,276,823 2.32 2007 33,905,131 28,952,452 4,952,679 1,115,000 1,147,010 2.19 2008 34,091,482 30,928,405 3,163,077 1,175,000 1,207,253 1.33 2009 35,876,773 30,789,288 5,087,485 1,255,000 1,057,379 2.20 2010 33,372,210 27,194,578 6,177,632 1,315,000 1,003,759 2.66 2011 36,527,393 28,380,854 8,146,539 1,360,000 946,684 3.53 2012 37,868,196 27,374,850 10,493,346 1,505,000 763,671 4.63 2004 7,904,276 $ 4,865,702 $ 3,038,574 $ - $ 161,331 $ 18.83 2005 9,075,720 4,799,802 4,275,918 305,000 346,825 6.56 2006 8,645,714 5,112,252 3,533,462 310,000 340,675 5.43 2007 9,565,796 5,363,965 4,201,831 315,000 345,122 6.37 2008 9,683,420 4,836,573 4,846,847 325,000 327,619 7.43 2009 9,263,744 5,980,985 3,282,759 330,000 319,425 5.05 2010 8,235,529 7,076,036 1,159,493 340,000 309,788 1.78 2011 10,022,697 6,188,768 3,833,929 350,000 299,000 5.91 2012 10,860,873 5,570,615 5,290,258 440,000 160,730 8.81 Note: Details regarding City's outstanding debt can be found in the notes to the financial statements. Revenues include operating and non-operating revenues. Expenses exclusive of depreciation, amortization, loss in joint venture, interest expense, and in lieu of tax transfers. Net Available Revenues Debt Service 2004, 2006, 2011 Electric Revenue Bonds 2003, 2012 Water and Sewer Revenue Bonds Fiscal Year Utility Revenues(1) Less Utility Expenses(2) ---PAGE BREAK--- 93 MURRAY CITY DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS Year Population(1) 2003 45,315 $ 1,329,949,935 $ 29,349 $ 6.3% 2004 44,621 1,331,401,398 29,838 5.7% 2005 44,555 1,397,467,575 31,365 4.8% 2006 44,453 1,466,193,299 32,983 4.7% 2007 44,844 1,728,467,186 38,544 2.4% 2008 45,732 1,598,379,132 34,951 3.4% 2009 46,201 1,663,605,608 36,008 5.7% 2010 46,010 1,715,068,760 37,276 6.3% 2011 46,746 1,777,329,666 38,021 7.3% 2012 47,632 1,839,214,416 38,613 5.7% United States Census Bureau for Murray City. U.S. Department of Commerce, Bureau of Economic Analysis for Salt Lake County/City. Utah Department of Workforce Services for Salt Lake County. Personal Income Per Capita Personal Income(2) Unemployement Rate(3) ---PAGE BREAK--- 94 MURRAY CITY PRINCIPAL EMPLOYERS AS OF JUNE 30, 2012 Employer Industry Type Employees Rank Intermountain Medical Center Health Care 4463 1 Murray City School District Public Education 861 2 Murray City Corporation City Government 828 3 SelectHealth Health Care 800 4 IHC Health Services Health Care 757 5 University of Phoenix Education 494 6 3M Health Information Systems Data Processing Services 377 7 Costco Wholesale Corp Retailer 309 8 Inc Retailer 303 9 Sorenson Bio Science Manufacturer of Plastic Products 231 10 Source: Murray City Business Licensing Note: Principal employers for 9 years prior is not available. ---PAGE BREAK--- 95 MURRAY CITY FULL TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Function/Program General Government 66 66 68 66 65 59 59 63 60 61 Police Officers 70 72 75 75 78 78 75 77 79 73 Civilians 17 17 17 17 17 17 18 14 12 10 Fire Firefighters 50 50 50 50 52 52 59 61 60 58 Civilians 2 2 2 2 2 2 3 2 2 1 Highways & Public Improvements 38 40 40 42 36 35 35 34 34 28 Parks & Recreation 34 34 34 34 34 34 34 33 33 33 Library 10 10 10 10 10 9 9 12 9 11 Community & Economic Development 6 6 5 5 5 4 4 5 5 6 Central Garage 6 6 5 5 4 4 4 4 4 4 Power 55 56 54 54 54 54 55 55 52 46 Water 17 16 16 16 16 16 16 17 16 16 Wastewater 9 10 10 9 9 8 9 9 8 8 Golf Course 9 9 9 9 9 8 8 10 8 7 Storm Water 0 0 0 0 6 6 7 6 7 7 Total Full Time Equivalent Employees 389 394 395 394 397 386 395 402 389 369 Seasonal Employees 503 555 574 543 575 560 579 514 459 477 Total Employees 892 949 969 937 972 946 974 916 848 846 Full Time Equivalent Employees as of June 30 ---PAGE BREAK--- 96 MURRAY CITY OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Function/Program Police Physical arrests 3,528 4,318 4,563 4,260 2,549 2,194 2,588 2,735 2,484 2,436 Traffic citations 7,746 11,429 13,588 11,959 6,935 6,666 8,141 8,057 8,694 6,847 Fire Fire calls 1,163 1,030 1,086 1,261 1,252 1,261 1,496 1,306 1,231 1,622 Medical calls 3,473 3,141 3,490 3,456 3,687 3,962 3,741 3,801 3,781 3,515 Inspections 1,310 1,266 1,132 1,176 1,200 1,261 794 1,309 2,017 1,673 Parks & recreation Park center admissions 18,539 30,317 32,074 34,000 33,257 43,272 34,000 46,744 38,451 35,691 Recreation participants 13,653 14,873 15,581 15,320 15,484 16,447 17,779 15,402 14,242 14,219 Library Volumes in collection 82,335 82,602 81,643 85,861 84,236 86,723 90,627 86,892 85,100 77,069 Total volumes borrowed 307,901 340,622 352,306 339,282 365,855 406,842 418,169 524,179 524,487 568,372 Water Customers 9,310 9,356 9,304 9,456 9,490 9,825 9,890 9,932 9,946 9,946 Annual consumption (in millions of gallons) 2,729 2,711 3,234 2,750 3,865 3,344 3,784 2,519 2,650 2,841 Sewer Customers 8,722 8,784 8,817 8,953 8,966 8,977 9,151 9,181 9,181 9,194 Power Customers 15,999 16,087 16,112 16,269 16,500 16,546 16,637 16,671 16,701 16,744 Peak demand (KW) 93,150 98,300 93,310 98,560 98,246 107,110 98,327 97,000 97,490 98,100 Internal generation (MWH) 50,014 42,411 25,729 27,655 53,055 62,038 21,261 23,031 17,546 19,523 Purchased power (MWH) 331,056 397,312 369,312 383,825 361,917 449,567 448,487 412,385 412,943 419,388 ---PAGE BREAK--- 97 MURRAY CITY CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Function/Program Police Stations 1 1 1 1 1 1 2 2 2 2 Patrol units 36 38 38 38 40 41 42 41 41 40 Fire stations 3 3 3 3 3 3 4 4 4 4 Public works Streets(miles) 142 142 143 143 144 144 144 144 144 147 Streetlights 2409 2454 2458 2489 2584 2505 2610 2574 2584 2608 Parks & recreation Acreage 259 259 259 259 259 259 252 252 252 252 Parks 10 10 10 10 10 10 10 10 10 10 Golf courses 2 2 2 2 2 2 2 2 2 2 Recreation centers 1 1 1 1 1 1 1 1 1 1 Water Water mains(miles) 176 177 178 178 179 183 185 185 192 201 Wastewater Sanitary sewers(miles) 122 124 125 125 125 124 128 128 128 129 Power Generators 4 4 4 4 4 5 5 5 5 5 Substations 4 4 4 4 5 5 6 6 6 6 ---PAGE BREAK--- 98 COMPLIANCE SECTION ---PAGE BREAK--- E. nn ILin'oen, CPA C~ R. BOO.ha" . CPA Gill) E. Malmrose,CPA Edwan L. CPA M.:hxl L. Smuii. CPA J.uon L. Tulk"r, CPA R<>l>crl 0 . Wood, CPA Allton R. Hu,on,CPA Ted C Gardaner, CPA B. Male•. CPA Mrml>..pressing an opinion on the effectiveness of the City's internal control over linancial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over linancial reporting. A deficienc} in internal control exists when the design or operation of a control docs not allow management or employees. in the normal course of performing their assigned functions. to prc\.enl. or detect and correct misstatements on a timely basis. A material weakness is a dcfic1enc), or a combtnatton of defictenctes. in internal control such that there is a reasonable possibilny that a material misstatement or the entity's financial statements will not be prevented. or detec.tcd and corrected on a time I) basis. Our consideration of internal control over financial reporting was for the limited purpose described in lhe first paragraph of' this section and was not designed to identify all deficiencies in internal control that might be deficiencies. sign11icant deficiencies, or material weaknesses. We drd not identtf} any deficiencies in internal control over financial reporting that we consider to be material weaknesses. as defined above. 99 ---PAGE BREAK--- Compliance and Other Maners As part of obtaining reasonable assurance about whether the City's financial statements are free of matenal misstatement. v.c performed tests of its compliance with certain prov1sions of laws. regulations. contract~. and grant agreements. noncompliance with which could have a direct and material effect on the dctennmation of financial statement amounts. llowevcr. provid1ng an opmion on compliance with those provisions was not an obJeCtive of our audit. and according!~. we do not express such an opinion lhc results of our test~ disclosed an instance of noncompliance or other maners that is required to be reported under Government Auditing Standards and which IS 111 the accompanying Schedule of Findings and Responses as item 12-1. The City's response to the findmg identified in our audit 1s described in the accompanying Schedule of Findings and Responses. We did not audit the City's response and, we express no opinion on the response. This report is solei) for the mformat1on and use of management, the City Council and others within the organization and federal awarding agencies and pass- through entities and is not intended to be and should not be used by anyone other than these specified parties. November 14.2012 100 ---PAGE BREAK--- E L)1111 Han«:n, CPA Clar\.e R. Br-a.hhJw, CPA Gary E. Malmrt)k, CPA Edwin L. Erick•on. CPA M•chad L Smuh, CPA Juan L. Tanner. CPA Robert D Wood, CPA Anton R. H1.a:.on. CPA Ttd C. GardJner CPA Jeffrey B. Mtle'l, CPA li~ 1\crountanrJ M~mMrs of''" Pri•·au CINffP'Uiy Proctt<" S«fi(/11 Hansen, Bradshaw, Malmrose & Erickson A Professional Corporation CERTIFIED PUBUC ACCOUNTAI\'TS 559 West 500 South Buunhful. Uiah 84010 80 l-291\-ll2Cl0 Fax [PHONE REDACTED]! INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WJTH REQUIREMENTS THAT COULD UAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CJRCULARA-133 Honorable Mayor and Members of the City Council Murray Cit~ Corporation, Utah Compliance We have audited the compliance of Murray City Corporation. Utah (the City), with the t) pes of compliance requirements described 111 the US. Office of Management and Budge1 (OMB) Circular A-/33 Compliance Supplement that could have a direct and material effect on each of tts major federal programs for the year ended June 30, 2012 The City's major federal programs are identified in the Summary of Auditors' Results section of the accompanying Schedule of Findings and Questioned Costs Compliance wnh the requirements of la\ S, regulations, contracts and grants applicable to its major federal programs arc the responsibility of the Cit) 's management. Our responsibilit} is to express an opinton on the Ctly's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted m the United States of America. the standards applicable to financial audits contained in Gv,·ernment Auditing Standards. issued b) the Comptroller General of the United States: and OMB Circular A-133, Audits of State.~. Loc·ul Governments. and Non- Profit Organizatiom. rhose ~tandards and OMB Circular 1\-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a ma_1or federal program occurred. An audit includes examining. on a test basis. evidence about the Cit) 's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We belie\ e that our audit provides a reasonable basis for our opin1on. Our audit does not provide a lcg.ol detcnnination on the City·s compliance\\ ith those requirements. In our opinion, the Cit) complied, m all material respects, w1th the compliance requirements referred to above that could have a direct and material erfect on each or its major federal programs for the year ended June 30, 2012. 101 ---PAGE BREAK--- Lnter:nal Control Ov~.:r Compliance The management of the Cit) IS responsible for establishmg and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audll, we considered the Cit) 's mtemal control over compliance with the requirements that could have a d1rect and matenal effect on a maJor federal program to determine the aud1llng procedures for the purpose of expressing our opinion on compliance and to test and repo11 on internal control over compliance in accordance with OMB Circular /\-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly. we do not express an opinion the effectiveness of the Cit) ·s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compl1ance does not allow management or employees, in the nom1al course of performing their ass1gned funcuons, to prevent. or detect and correct. noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency. or combination of deficiencies, 111 mternal control over compliance. such that there IS a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be or detected and corrected. on a timely basis. Our consideratiOn of internal control over compliance was for the limited purpose described in the lirst paragraph or this section and was not designed to identify all deficiencies in internal control over compliance that might be defic1encies. signilicant deficiencies. or material weaknesses. We did not identif) any defic1encies in internal control over compliance that we: consider to be material weaknesses. as defined above. This report is intended solely for the Information and use of management, the City Council, others within the organiT..ation. federal a\.\.arding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. November 14, 2012 10~ ---PAGE BREAK--- 103 MURRAY CITY SCHEDULE OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012 Federal Grantor/Pass-Through Grantor/ Federal Federal Award/ Award Disbursements/ Program Title CFDA No. Contract No. Amount Expenditures U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant (CDBG) 14.218 BV03654 323,459 $ 289,235 $ Community Development Block Grant (CDBG) 14.218 BV03754 213,246 154,443 Total HUD 536,705 443,678 U.S. Department of Transportation/Federal Highway Administration (FHWA) Highway Planning and Construction Grant - ARRA 20.205 F-LC35(182) 4,006,298 1,973,782 Total FHWA 4,006,298 1,973,782 U.S. Department of Homeland Security Homeland Security Grant 97.067 10-SHSP 30,181 18,892 Homeland Security Grant 97.067 2009-72-71002 18,250 14,926 Homeland Security Grant 97.067 2010-72-71102 4,468 4,468 Emergency Management Performance Grant 97.042 EMPG 11 10,000 10,000 Emergency Management Performance Grant 97.042 EMPG 12 8,500 4,250 Public Assistance Disaster Grant 97.036 DR-4011-UT 27,549 27,549 Total Department of Homeland Security 98,948 80,085 U.S. Department of Justice Justice Assistance Grant (JAG) 16.738 2010-DJ-BX-1417 40,626 220 Justice Assistance Grant (JAG) 16.738 2011-DJ-BX-2141 34,519 34,519 Victims of Crime Act Grant (VOCA) 16.575 11-VOCA-35 38,838 38,017 Total Department of Justice 113,983 72,756 Total Federal Awards 4,755,934 $ 2,570,301 $ ---PAGE BREAK--- 104 MURRAY CITY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS NOTE 1 – PURPOSE OF THE SCHEDULE The Schedule of Expenditures of Federal Awards (the Schedule) is a supplementary schedule to the basic financial statements. The Schedule is required by the U.S. Office of Management and Budget (OMB) Circular A-133, “Audits of States, Local Governments, and Non-Profits Organizations.” NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The information in the schedule is presented in accordance with OMB Circular A-133. The Schedule is prepared using the same accounting policies and basis of accounting as the basic financial statements. Major Programs OMB Circular A-133 establishes the levels of expenditures or expenses and other criteria to be used in defining major federal financial assistance. The federal awards tested as major programs were CFDA number 14.218 and 20.205. NOTE 3 – SUB-RECIPIENTS The following amounts were passed through to sub-recipients: CFDA # Program Amount 14.218 CDBG $329,903 20.205 FWHA $1,973,782 ---PAGE BREAK--- 105 MURRAY CITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 A. Summary of Auditor’s Results 1. The auditor’s report expresses an unqualified opinion on the basic financial statements of Murray City Corporation, Utah. 2. No significant deficiencies or material weaknesses 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. No instances of noncompliance material to the financial statements of Murray City, Corporation, Utah were disclosed during the audit. 4. The auditor’s report compliance for the major federal award programs for Murray City Corporation, Utah expresses an unqualified opinion. 5. No significant deficiencies or material weaknesses relating to internal control over major federal programs were identified. 6. The programs tested as major programs were: Department of Housing and Urban Development – Community Development Block Grant (CDBG) – 14.218 Department of Transportation – Highway Planning and Construction Grant – ARRA – 20.205 7. The threshold for distinguishing Type A and B programs was $300,000. 8. Murray City Corporation, Utah was determined to be a low-risk auditee. ---PAGE BREAK--- 106 MURRAY CITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2011 No matters were reported in the prior year. ---PAGE BREAK--- 107 STATE COMPLIANCE SECTION ---PAGE BREAK--- e Lynu H.uucn, CPA C'l.&rke R. Brnd,haw, CPA G•l) E. Maim~. CPA E.dwm L Emk..,, CPA Mkll;.el L. Smnh. CPA Jaoon L. Tanner, CPA R•lhc:n D. ~ond. CPA Avon R Hnt!l<•n. CPA Ted C. CPA Jeffrey 8 Mtle•. CPA of 1~ IIIIIIIUir uf rrtiftrd Pttl>lk lf~m~n