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HomeMy WebLinkAbout2009City of Fairhope, Alabama COMPREHENSIVE ANNUAL · FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2009 r I I■ \ I■ ( r I r CITY OF FAIRHOPE,ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2009 PREPARED BY: THE OFFICE OF THE MANAGER OF FINANCIAL REPORTING ,--' r: CITY OF FAIRHOPE, ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2009 TABLE OF CONTENTS INTRODUCTORY SECTION LetterofTransmittal Certificate of Achievement for Excellence in Financial Reporting Organization Chart City Elected and Appointed Officials FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Governmental Fund Financial Statements Fund Balance Sheets -Governmental Funds Reconciliation of Governmental Fund Balance to Net Assets lV lX X X1 1 3 14 15 16 of Governmental Activities 17 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 18 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 19 Proprietary Fund Financial Statements Fund Balance Sheets -Proprietary Funds 20 Statement of Revenues, Expenses and Changes in Net Assets - Proprietary Funds 21 Statement of Cash Flows -Proprietary Funds 22 Discretely Presented Component Units Combining Statement of Net Assets -Discretely Presented Component Units 23 Combining Statement of Activities -Discretely Presented Component Units 24 Notes to the Financial Statements 25 r:: r. I i i t r I 11 CITY OF FAIRHOPE, ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2009 TABLE OF CONTENTS ( continued) REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule -General Fund Schedule of Funding Progress -Employee Retirement System Notes to Required Supplementary Information OTHER SUPPLEMENTARY INFORMATION Fund Balance Sheet -Fairhope Public Library Board Reconciliation of Governmental Fund Balance to Net Assets of Governmental Activities -Fairhope Public Library Board Statement of Revenues, Expenditures and Changes in Fund Balances - Fairhope Public Library Board Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities -Fairhope Public Library Board Fund Balance Sheet -Fairhope Airport Authority Reconciliation of Governmental Fund Balance to Net Assets of Governmental Activities -Fairhope Airport Authority Statement of Revenues, Expenditures and Changes in Fund Balances - Fairhope Airport Authority Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities -Fairhope Airport Authority Schedule of Capital Projects Expenditures Schedule of Information Required By Bond Indentures Summary of Deposits, Withdrawals and Balances of Selected Trust Accounts as Required Under Certain Trust Indentures Page 50 51 52 54 55 56 57 58 59 60 61 62 63 64 r.: r fi r. I l r f l r r 111 CTIY OF FAIRHOPE, ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2009 TABLE OF CONTENTS ( continued) STATISTICAL SECTION Net Assets by Component Changes in Net Assets Governmental Activities Tax Revenues by Source Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Assessed and Estimated Actual Value of Taxable Property Property Tax Rates -Direct and Overlapping Governments Principal Property Taxpayers Property Tax Levies and Collections Direct and Overlapping Sales Tax Rates Principal Sales Tax Remitters Ratios of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Computation of Overlapping Debt Legal Debt Margin Information Demographic and Economic Statistics Principal Employers Full-time Equivalent City Government Employees by Function Operating Indicators by Function Capital Asset Statistics by Function COMPLIANCE SECTION Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 66 67 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 INTRODUCTORY SECTION r Timothy M. Kant, A.C.M.0. Mayor Lisa A. Hanks Ciry Clerk Nancy K. Wilson, CPA Ciry Treasurer Counczl Members Michael A. Ford, A.C.M.0. Rick Kingrea Lonnie L. Mixon Debbie W Quinn, A.C.M.O. January 15, 2010 The Honorable Timothy M. Kant Members of the City Council Citizens of Fairhope, Alabama IV The Comprehensive Annual Financial Report (CAFR) of the City of Fairhope, Alabama (the "City") for the Fiscal Year ending September 30, 2009 is hereby submitted. Responsibility for both the accuracy of the data and the completeness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. Daniel R. Stankoski, C.M.O. REPORTING ENTITY 161 North Section Street P.O. Drawer 429 Fairhope, Alabama 36533 251-928-2136 251-928-6776 Fax www.cofairhope.com Printed on rcqyclrd pap:r The City of Fairhope, incorporated in 1908, is governed by a StrongCouncil I WeakMayor form of government, with each official elected on an at-large basis for a four-year term, and has an estimated population of 17,000. The financial reporting entity includes all funds of the primary government as well as its component units, the Fairhope Public Library and the Fairhope Airport Authority. Component units are legally separate entities for which the primary government is financially accountable. The component units are reported in separate columns in the financial statements to emphasize the legal separation from the primary government, as well as to differentiate the financial positions, results of operations and cash flows from those of the primary government. In addition to the Public Library and Airport Authority, the government provides natural gas, electricity, and water and waste water services for its citizens, as well as police and fire protection, sanitation and recycling services, maintenance of streets and infrastructure, numerous parks, recreational activities for all ages, a recreation center, a museum, a public golf course, a skate park, and many cultural events. ECONOMIC CONDITION AND OUTLOOK The City of Fairhope, as a whole, maintained a stable economic atmosphere, moderately affected by the financial downturn within the State of Alabama and across the nation. Nevertheless, new construction and the issuance of building permits within the City continue to be affected by the sluggish economy, and r.: r:: ( r. V revenues from those two sources were, once again, lower than projected. However, land and home values remained stable, even though market adjustments were felt in real estate sales. "Based on recent U.S. Census data and federal unemployment statistics, Forbes.com named Baldwin County's Eastern Shore as the fourth best place to live in the U.S. in the event of an economic recession. Families in Fairhope .... (and the surrounding cities) were far more likely than most to have relatively low mortgage debt, higher-than-average income and a high level of education." (Ruiz, R., Forbes.com; Henderson, Russ, Press Register October 28, 2008) Fairhope enjoys a strong sense of community ownership and responsibility among city officials and local citizens, resulting in active community participation and involvement in all current city projects and issues. Clean industry within the City supports health services and higher education. In addition, Fairhope gains strong economic stability from· the significant industrial and commercial development in surrounding Baldwin County cities. These factors, along with continued growth, citizen involvement in planning, and strong city management provide strength and promise for continued economic good health for the City of Fairhope. MAJOR INITIATIVES For the Year: A historic change occurred in the City in April -by ordinance of the City Council, the very first sales tax by the City of Fairhope was levied, effective July 1, 2009. The decision to implement a sales tax came only after lengthy public discussions by City Council, citizens, community leaders and local vendors. The objective for the historic decision was to build up reserves in governmental funds, which had become drastically low after three years of hurricane and rainstorm repairs and capital improvement projects, with no additional borrowing. In addition, the sales tax would allow a decrease in funds transferred from the utilities into the General fund, thus building up utility r_eserves. The new ordinance required that one half of the sales tax receipts be set aside monthly in a sales tax reserve account, and held for emergency spending, as authorized by the City Council. As part of the discussion of utilizing the new sales tax, the City Council formed a Strategic Planning Steering Committee, to work with all City managers to analyze and prioritize needs and critical issues within the City. Documentation from their work will go toward creating a three-year strategic plan for spending, which should come to fruition during the current fiscal year. The City Council restructured the budget process for the City to increase input, accountability and ownership of managers in their department's financial performance. As part of the restructuring process, the Financial Advisory Committee was formed. This new committee was charged with overseeing the budget discussions and recommendations, reviewing all funding requests prior to presentation to the City Council, reviewing and modifying cash and financial ,--. I I fi Ill l r. l r. r I Vl reports, and evaluating debt and future needs for debt. In constructing the new budget, the committee adhered to the City's established goals in planning for the continuing growth, as well as continuing to maintain the quality of life and the highest level of governmental services to all residents in the City. The newly constructed Fairhope Recreation Center opened in August, offering a full range of exercise and recreation activities. Membership continues to grow, as the Center becomes a major outlet for the community to enjoy. The Pet Park has achieved full citizen funding for completion, and should be available to Fairhope pets in the near future. The Fairhope Museum of History was recognized in June, as it was added to the Alabama Register of Landmarks and Heritage. The City's horticulturist and landscape department continued to keep the City in , beautiful bloom year-round. Their work was enjoyed by all citizens and by a continuous flow of tourists from across the nation into the City. In September, Money Magazine named Fairhope to its list of Top 25 Places to Retire. The Finance Department was once again awarded the Certificate of Achievement for Excellence in Financial Reporting for its CAFR for the fiscal year 2008, by the Government Finance Officers Association (GFOA) of the United States and Canada. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to be considered for another certificate. For fiscal year 2009, Fairhope implemented GASB 45, Accounting and Financial Reporting for Other Post-Employment Benefits (OPEB). The primary 'other' benefit after retirement is health insurance. Due to the continually rising cost of health insurance for all employers, the Government Accounting Standards Board now requires that this growing liability be actuarially measured and accrued on the financial statements of all governmental entities. The actuarial accrued liability for post-employment health insurance coverage for the City is $~illion, with an Annual Required Contribution (ARC) toward this liability of $611,853. This annual amount appears in the Statement of Net Assets. Fairhope joined Baldwin County to create an intergovernmental funding agreement for a County transit hub. This bus system will provide much needed transportation between Fairhope and outlining shopping and commercial centers. Quail Creek Golf Course was transferred into the General Fund beginning with this fiscal year. The course was closed for three months for remodeling and re-grassing of the greens. Attendance and play at the course is strong and promises to continue. The Grill at the golf course was leased to a private restaurant, 'A Taste of New Orleans' and has become a popular addition to the Clubhouse. r-1 C I C l r-i I vii For The Future: The City continues its focus on improvements to existing infrastructure for drainage, streets and the utilities, along with dependable excellent government services. Budgetary goals for capital improvements and capital equipment will be considered within the parameters of the new Strategic Plan, with maximum efficiency, and fiduciary responsibility. ENTERPRISE FUNDS HIGHLIGHTS The City's enterprise funds, made up of Natural Gas, Electric, and Water and Waste Water, recorded a combined increase in net assets of $2,335,757 for the year, in addition to transferring $5.1 million to support the General fund. Transfers to support the General fund represented 66% of the enterprise funds' operating income. Cash and cash equivalents of the enterprise funds increased by $972,954 over the prior year. A rate study was conducted on the Water and Waste Water departments which indicated a need for a waste water rate increase in fiscal years 2009 and 2010. No new long-term debt was incurred by the utilities and total long- term debt decreased by $863,504. Utility Revenue Warrants issued in 1999 were refinanced, resulting in a savings of $74,968 in debt service for the water and waste water fund. The City utilizes a short-term line of credit each year for use in funding the seasonally high electric power costs during the summer months. The balance of $1,750,000 in the line of credit at the beginning of the fiscal year was paid in full. Separate recordings of revenue and expenses of the water operations and the waster water operations began at the close of the 2009 fiscal year. Gas line infrastructure was extended into growing areas and major electrical upgrades and improvements were completed. Plans have begun for a new Waste Water treatment plant. GENERAL FUND HIGHLIGHTS The General Fund supports the General Administration, Police and Fire, Adult and Youth Recreation, Quail Creek Golf Course, Streets, Sanitation, and other department budgets providing City service. The General Fund experienced a surplus of $993,292 for the fiscal year, including receipt of $5 .1 million in transfers from the utilities during the year. The Fund Balance at year-end was $2,076,675. Total long-term debt of the General Fund decreased by $777,721 during the year. General Obligation Warrants issued in 1999 were refinanced, resulting in a savings of $218,631 in transfers to debt service. The Line of Credit balance of $900,000 from the prior year was paid in full, with no additional borrowing. The initial three months of sales tax revenue totaled $1 ,003 ,864 for the General Fund. r. r: ,- r viii INDEPENDENT AUDIT Alabama State law requires an annual audit by independent Certified Public Accountants. The accounting firm of Hartmann, Blackmon & Kilgore, P.C., was selected by the City to perform the audit. The Independent Auditors' Report on the basic financial statements is included in the financial section ofthis report. The preparation of the CAFR on a timely basis has been accomplished with the efficient and dedicated service of the entire staff of the Finance and the Treasury Departments. Preparation of this report would not have been possible without the leadership and support of the Mayor and City Council. Respectfully submitted, ~~f(_ J'j(~ Nancy K. Wilson, CPA City Treasurer r. r. l r. c' I r. l fi fl IX Certificate of Achievement for Excellence in Financial Reporting Presented to City of Fairhope Alabama For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2008 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. President Executive Director I City Council I I I I ,---------- I I I .---------- I I I ,---.------- I I I ,---------- I I I I Chief of Police I I I Public Safety Police Officers Police Support Corrections Police/Fire Dispatch Animal Control Officer Fire Department Custodian X CITY OF FAIRHOPE, ALABAMA ORGANIZATION CHART AS OF SEPTEMBER 30, 2009 Mayor I City Clerk I I City Attorney I I City Treasurer : Municipal Court 1 Judge I Administrative Superintendent I I I Keueallon Public Utilities Administrative Public Pool Gas Dept. Finance Youth Recreation Electric Dept. Revenue & Billing QC-Pro Shop Water/Sewer Dept. Purchasing QC-Grounds Judicial Meter I I Senior Services Civic Center Human Resources Museum l -7 l Executive Assistant General Superintendent Public Works PW Admin Landscaping Street Sanitation Recycling Equipment Mechanics Construction Trash Other PW Building Maintenance Computer Planning & Bulld.lng Jnfonnation Planning Systems Building Inspections r fi l Timothy M. Kant, ACMO Michael A. Ford, ACMO Rick Kingrea Lonnie L. Mixon Debbie W. Quinn, ACMO Daniel R. Stankoski, CMO Gregg Mims Lisa Hanks NancyK. Wilson, CPA fi Bill D. Press Marion E. Wynne, Jr. xi CITY OF FAJRHOPE, ALABAMA CITY ELECTED AND APPOINTED OFFICIALS SEPTEMBER 30, 2009 Mayor/Superintendent of Utilities Council.member Councilmember Councilmember Councilmember Councilmember City Administrator City Clerk City Treasurer Police Chief City Attorney r. I r.::)_ l fi fi FINANCIAL SECTION Hartmann, Blackmon&::; Kilgore, P.C. Certified Public Accountants &::; Consultants -1- Xavier A Hartmann, III, CPA Rucker T. Taylor, lll, CPA J. Earl Blackmon, Jr., CPA B. Vance Kilgore, CPA Sally S. Wagner, CPA Dennis E. Sherrin, CPA, CVA 806 N. SECTION STREET• P.O. BOX 1469 • FAIRHOPE, ALABAMA 36533 • (251) 928-2443 OR (251) 943-4217 • FAX (251) 928-6921 INDEPENDENT AUDITORS' REPORT Honorable Mayor and Members of the City Council City of Fairhope, Alabama We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Fairhope, Alabama, as of September 30, 2009, and for the year then ended, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Fairhope, Alabama's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Fairhope, Alabama, as of September 30, 2009, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have issued a report dated January 14, 2010 on our consideration of the City of Fairhope, Alabama's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Member American lnsritute ol Certified Public Accountants • Alabama Sociely of Certified Public Accountants Other Locations: 112 W. Section Avenue • P.O. Box 1950 • Foley, Alabama 36536 • (251) 943-5499 • FAX (251) 943-5498 6475 Van Buren Street • Suite IOI • P.O. Box 2990 • Daphne, Alabama 36526 • (251) 626-0846 • FAX (25 1) 626-1403 311 Sowell Street • P.O. Box 1379 • Brewton, Alabama 36427 • (251) 867-3801 • FAX (251) 867-3276 www.hbkcpas.com r. I r. I fi ' I r ~ I l fi [i fi rii -2- Management's Discussion and Analysis on pages 3 -13 and the required supplementary information on pages 50 -53 are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Fairhope, Alabama's basic financial statements. The introductory section, other supplementary information and the statistical information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplementary information has been subjected to the auditing procedures applied by us in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and the statistical information have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. January 14, 2010 Fairhope, Alabama hk;t.,Ml/11, IJ~~i~{f.l-. Certified Public Accountants MANAGEMENT'S DISCUSSION AND ANALYSIS -3 - MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis of the City ofFairhope's financial performance provides a narrative overview of the City's financial activities for the fiscal year ended September 30, 2009. The intent of this Management Discussion and Analysis (MD&A) is to review the City's financial performance as a whole. Please read it in conjunction with the City's financial reports, including the transmittal letter and financial statements. FINANCIAL IDGHLIGHTS • Assets of the City exceeded its liabilities at the close of the fiscal year by $97,707,744 an increase of $1,518,481 (pages 14 and 15). • At the close of the fiscal year, the City's combined governmental funds, including General, Capital Projects, Debt Service and Gas Tax Funds, reported ending fund balances totaling $3,037,173 a decrease of$654,125 from the prior year. The General Fund closed with a fund balance of$2,076,675, an increase of $993,292. The Capital Projects Fund had a decrease in fund balance of $1,519,968 after capital expenditures of$1,510,801. The Gas Tax Fund expended $95,711 on road repair projects (page 18). • The combined governmental funds expended $1,775,834 for capital projects and purchases, including $1,439,049 on recreation projects, $71,752 on drainage and road projects and $293,947 for vehicles, equipment and other infrastructure additions. • The business-type activities, Gas, Electric, Water and Waste Water activities, ended the year with income before transfers of$7,704,444, compared to $4,680,193 for fiscal 2008. Of that amount, the utilities made transfers to the General Fund of $5,094,136. For fiscal 2009 the amount of income transferred from the utilities to the General Fund was 66%, compared to 78% for fiscal 2008. The business-type activities recorded an increase in net assets, after transfers, of$2,335,757 (page 21). • The City's business-type activities made additions to property, plant and equipment of$1.7 million, while incurring no new long-term debt. Funding for these additions was prior debt issues, current income and money set aside for this purpose. • For the first time in the City's history, the City Council implemented a city sales tax of2%. The tax went into effect on July 1, 2009. For the last three months of the fiscal year, revenues from this tax totaled $1,003,864. Fifty percent of sales tax revenues have been designated by the City Council to be reserved for approved emergencies. The amount ofreserved funds at September 30, 2009 was $501 ,932. • Effective October 1, 2008, the City transferred the assets and liabilities of the Golf Fund into the General Fund. Governmental activities' capital assets increased $1 ,092,179 net of accumulated depreciation of $1,836,016 and non-current liabilities increased $178,450, resulting in a residual transfer of assets of $913,729. In connection with this transfer, the Electric Fund forgave $274,551 in debt owed it by the Golf Fund (page 21 ; page 31 , note 2). • Effective October 1, 2008 the City implemented Government Accounting Standards Statement 45, Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions (GASB 45). The City's annual required contribution was $611 ,853. The current year retiree premium was $205,208. The net OPEB obligation at year end was $406,645 (page 14; page 47, note 18). This is the first fiscal year that this liability is being reported. USING THIS ANNUAL REPORT This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements· are comprised of four components: 1) government-wide financial statements, 2) fund financial statements, 3) notes to financial statements, and 4) required supplementary information. The Statement of Net Assets and the Statement of Activities provide information about the activities of the City as a whole and present a longer-term view of the City's finances. For governmental activities, the fund financial statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City's operations in more detail than the government-wide statements by providing information about the City's most significant funds. r;. I -4 - The notes to financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to financial statements start on page 25. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's general fund budget. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with the budget on page 50. The Statement of Net Assets and the Statement of Activities The Fund Balance Sheets and the Statements of Revenues, Expenditures, and Changes in Fund Balances report information about the City as a whole and about its activities. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City's net assets and changes in them. Consideration of the City's net assets, i.e., the difference between assets and liabilities, is one tool to measure the City's financial health, or financial position. Over time, increases or decreases in the City's net assets are indicators of whether its financial health is improving or deteriorating. Consideration of other non-financial factors, however, such as changes in the City's revenue sources and the condition of the City's infrastructure, utility systems and roads, is also necessary for a valid assessment of the overall health of the City. In the Statement of Net Assets and the Statement of Activities, we divide the City into three kinds of activities: Governmental activities -Most of the City 's basic services are reported here, including the police, fire, public works, youth and senior recreation departments, and general administration. Gross receipts, business license fees, property and sales taxes, franchise fees, and state and federal grants finance most of these activities. Funds for Capital Projects and Debt Service are also reported with Governmental activities. Business-type activities -The City charges a fee to customers to help it cover all or most of the cost of certain services provided. Financial information for the Electric Fund, Natural Gas Fund and the Water and Waste Water Fund is reported in this section. Component units -The City has two entities classified as component units, the Fairhope Public Library and the Airport Authority. Although legally separate and managed by City appointed boards, the Library and Airport Authority receive significant support from the City and the City is responsible for any deficits. Net assets may serve over time as a useful indicator of a government's financial position. The City's assets exceeded liabilities by $97,707,744 at the close of the most recent fiscal year, as shown in Figure 1, page 9 and page 14. This is an increase of$1,518,481 from the prior year. The largest portion of the City's net assets, approximately 92.6 percent, reflects its investment in capital assets (e.g. land, streets, sidewalks, buildings, infrastructure, equipment, etc.), less any related debt still outstanding used to acquire those assets. The City uses these capital assets to provide services and utilities to citizens; therefore, these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay debt must be provided from other sources, since capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City's net assets, approximately 3.4 percent, represents resources that are subject to restrictions as to how they may be used. The remaining unrestricted net assets, approximately four percent, may be used to meet the City's ongoing obligations to citizens and creditors. The unrestricted net assets, $3 ,856,085, increased $2,517,822 during fiscal 2009. Effective October 1, 2008 the City implemented Government Accounting Standards Statement 45 , Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions (GASB 45). The City's Annual Required Contribution (ARC) was actuarially determined to be $611,853. The current year retirement premium was $205 ,208.The liability for OPEB obligation at year end was $406 ,645 . This amount is reported on the Statement of Net Assets, page 14, as Net OPEB Obligation. - 5 - Figure 2, page 10, is a condensed Statement of Activities for the City as a whole for all activity types. This condensed statement includes comparative information from the prior year for the governmental and business-type activities, as well as the Library and Airport Authority component units. Fund Financial Statements The fund financial statements provide detailed information about the most significant funds -not the City as a whole. Some funds are required to be established by State Law and by bond covenants. However, the City Council established many other funds to help control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The City's two kinds of funds -governmental and proprietary -use different accounting approaches. • Governmental funds -Most of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Government fund information helps determine whether there are more or fewer resources that can be spent in the near future to finance the City's programs. Proprietary funds -When the City charges customers for the services it provides, whether to outside customers or to other units of the City, these services are reported as proprietary, or enterprise, funds. Proprietary funds are reported separately, on an accrual basis of accounting, in the Proprietary Fund Balance Sheet and the Statement of Revenues, Expenses, and Changes in Net Assets. The City's enterprise funds are the same as the business-type activities we report in the government-wide statements but provide more detail and additional information, such as cash flows. The City's proprietary funds include the Electric Fund, Natural Gas Fund and Water and Waste Water Fund, which are used to account for the operations of the utilities. Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balances may serve as a useful measure of a government's net resources available for spending at the end of the ~seal year. Figure 3, page 11, presents summaries of the governmental funds (General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds) revenues and expenditures, by function, for the fiscal year ended September 30, 2009, and the amounts of increases and decreases in relation to prior year revenues and expenditures. Revenues from Governmental funds decreased $6,799 from the previous fiscal year. Expenditures in Governmental funds decreased approximately $2 million for the same period. The following significant events, related to revenues and expense, occurred during fiscal 2009 (the figures are rounded): Related to revenue: • Taxes, property and local, were up by $1.3 million, due to increased property values and the City's first sales tax, which went into effectJuly 1, 2009. • Licenses and Permits were down by $670,000. Fees, licenses and permits related to real estate development and construction continued the downward trend begun in fiscal 2008. • Intergovernmental revenues (federal and state funds), were down by $1 million, due to completion of grant funded projects. • Contributions from the Library Board for construction costs were down $138 ,000. • Income from the City's golf course, approximately $960,000, was recorded for the first time in governmental operations. • Impact fees, again, related to the down tum in real estate development, were down approximately $400,000. Related to expense: • Capital outlay expenditures were down $1 .5 million from the prior year. Expenditures of $3 .2 for fiscal 2008 included $1.8 million for recreation and park facilities, $530,000 for road and sidewalk improvements, - 6 - $230,000 for the library project and $640,000 for other equipment and infrastructure additions. For fiscal 2009 capital expenditures were reduced to $1.8 million. Some major projects were completed or near completion, resulting in less cost and some originally budgeted capital expenditures were delayed. Major expenditures for 2009 were $1.3 million for parks and recreation facilities, $29,000 on the library project, $72,000 on road and drainage projects and $107,000 on renovations at the Quail Creek Golf Course. An additional $265,000 was spent on other capital additions and equipment. • The Airport Authority appropriation was reduced by $303,000 due to reduced interest payments due on the An-port debt. • Debt service payments were down $1.6 million from fiscal 2008. A $1.3 million "bridge loan", to be paid from pledges to the Library Board, was secured during fiscal 2007 and repaid during 2008 from permanent financing borrowed for that purpose. • The Golf Fund operations were transferred to the General Fund effective October 1, 2008. Expenses for those operations were $1.3 million for fiscal 2009 . Fund Balances When reviewing the City's finances it is important to ask if the City as a whole is in better financial condition when compared with the prior year. An indicator of the City's financial health is whether the fund balances of the governmental and net assets of the proprietary funds increased or decreased as a result of operating activities. Fund balances for all governmental funds, including General Fund, Capital Projects Fund, Gas Tax Revenue Fund and Debt Service Fund, decreased by $654 ,125. The General Fund had an increase in Fund Balance of $993,292; the Capital Projects Fund had a decrease in fund balance of$1,519,968 after capital outlay of$1,510,801 from grants and warrant funds borrowed for that purpose; the Debt Service· fund balance had a decrease of $119,685; and the Gas Tax Fund had a decrease of$_2J.64-;,after expenditures of$95,711 for road repa~ and maintenance ~es 16 and 18). The Gas, Electric and Water and Waste Water Funds had increases in net assets of $2,335,757. The Golf Fund had a decrease in net assets of $639,178 when the residual transfer of net assets to the governmental fund became effective, October 1, 2008 ( see pages 15 and 21). General Fund and enterprise operations fund balances are discussed below. General Fund Balance: Revenues in the General Fund were virtually flat from the prior fiscal year, a decrease of $6,799. Expenditures for the General Fund were down $2,013,254 from the prior year. After net transfers, the fund balance of the General Fund increased by $993,292 during fisca) 20~ The downturn in construction and real estate development continued to have a negative effect on licenses and permits related to construction and impact fees. Those revenues were down $1 million. Income from intergovernmental sources, state and federal grants, were also down $1 million. Most other revenue categories were down due to the troubled economy in 2009. However, property taxes were up $308,000 and the new city sales tax, which went into effect July 1, 2009, generated revenues of $1 million. Additionally, revenues from the operations of the Quail Creek Golf Course, $960,000 were reported in the General Fund for the first time after the transfer of operations, effective October 1, 2008. On the expense side, the most notable differences from fiscal 2008 to 2009 were: grant project expenses were down $430,000; the appropriation to the Airport Authority for debt service was down $302,910, due to reduced interest rates; debt service payments were down $1.5 million, of that amount, $1.3 million was the 2008 refunding of a short term loan secured by the City at the request of the Library Board. Enterprise Operations: The City's enterprise operations consist of the Electric Fund, Natural Gas Fund and Water and Waste Water Fund. The enterprise funds operating revenues increased by $1 ,55 1,363 over the prior fiscal year. Operating expenses decreased by $1,470,024. The reduced expenses were due to decreases in energy purchases for resale. Income for the enterprise funds, before transfers to the General Fund, was $7,704,444. This was an increase of $3 million over the prior year. The transfers to the General Fund were $5,094 ,136, or 66% of income. For fiscal 2008 the income for the three utilities before transfers was $4,680,193 . The transfers to the General Fund were $3 658 368, GF- 78% of income. The change in net assets of the three utilities was an increase of$2,335,757. - 7 - General Fund Budgetary Highlights During the year, the City Council revised the General Fund budget (see page 50). Revenue budget amounts were decreased by $1.6 million. The most notable budget adjustments were decreases in permit fees, licenses and fees related to construction and real estate development, $1 million, due to the down turn in the real estate and other markets; and a reduction of $760,000 in revenue to the City's municipal golf course due to a three month closure for renovations and refurbishment At year end, revenues were $946,402 over the revised budget figures. Approximately $1 million of unbudgeted income was from the new 2% sales tax that went into effect July 1, 2009. The City Council also revised the General Fund expenditures budget for 2009. The final expenditure budget decreased by $718,201 from the original budget amount. At year end, expenditures were $798,545 over the revised budget figures, $80,344 over the original budget. Higher than anticipated legal fees and insurance costs were major factors in the revised budget unfavorable variances. Capital Assets As of September 30, 2009, the City's governmental activities had $83,124,747 invested in capital assets, net of depreciation. This is a decrease of $58,308 from the prior year. The business-type activities had invested capital assets, net of depreciation of$40,126,350, a decrease of $1,166,141 (see Note 3, Fixed Assets, pages 33 and 34). The City's governmental activities capital assets, at cost, were $119,784,395 at September 30, 2009, an increase of $4.6 million from the prior year. The business-type activities, the Gas, Electric and Water and Waste Water Funds, had capital assets, at cost, of $68,962,675, an increase of $1. 7 million. The Golf Fund activities were transferred to the General Fund, governmental activities, at October 1, 2008. The capital assets, at cost, of the Golf Fund were $2,928,195. Figure 4, page 12, summarizes capital assets by asset type, at cost, and changes in fixed assets during the year. Debt Administration As of September 30, 2009, the City had long-term debt of $33,461 ,639 (excluding premiums and discounts), including bonds and warrants payable, notes payable, and obligations under capital leases. This is a net decrease, city wide, of $1,641,225 from the prior year. Governmental activities' decrease in long-term debt was $777,721. Business-type activities' reduction in long-term debt was $863 ,504. The General Obligation Warrant Series 2009 was issued for the purpose ofrefunding the City's General Obligation Warrant Series dated June 1, 1999. The Utilities Revenue Warrant Series 2009 was issued for the purpose of refunding the Utilities Warrant Series 1999 dated June 1, 1999. See notes 5 through IO in the financial statements for more detail. Figure 5, page 13, summarizes the City's long-term debt, including compensated absences. ECONOMIC FACTORS The City's management continued to see revenues related to real estate development and construction fall during fiscal 2009. Those revenues, permits, subdivision and impact fees were down $1 million. In the utility operations, connection fees for newly constructed homes and businesses have also been affected by this reduction in construction and development. For fiscal 2009, connection fee revenues were down $900,000. The City Council passed the City's first sales tax during fiscal 2009. The 2% tax went into effect on July 1, 2009. The revenues for the last quarter of the year were $1 million. For fiscal 2010, revenues for this tax were budgeted at $3.8 million. Through the enabling ordinance, the City Council directed that the Treasurer deposit one-half of each month 's sales tax receipts into a Special Tax Reserve Account. Funds in this reserve account are to be used for emergencies as approved by vote of the City Council. A significant change in financial reporting during fiscal 2009 was the movement of the municipal golf course operations to the General Fund as a recreational activity of the City. The revenues and expenses of the golf course had been reported as a business-type activity prior to October 1, 2008. The golf course had not been able to be self-supporting for the last several years and this new reporting model is thought to be a more accurate representation of the relationship of the operation to the City as a whole. The Quail Creek Golf Course closed for approximately three months of fis cal 2009 - 8 - for refurbishing and renovation. Revenues from the operations were down $500,000 from the previous year because of this closure. For fiscal 2010, revenues of the golf course are budgeted to increase $250,000 and it is hoped that the golf course project will result in increased play and increased revenues in the future. The City's newly completed recreation facility opened at the end of fiscal 2009. Budgeted revenues for 2010 are $225,000 more than the amounts recorded for 2009. The projected additional income will come from memberships at the new facilities. For the first three months of fiscal 2010, membership projections appear to be on target to meet budgeted amounts. The General Fund budgeted increases in expenses for fiscal 2010 of $2.8 million. Of that amount, $2.7 million is for capital purchases of vehicles and equipment and infrastructure additions. Sensitive to economic conditions in fiscal 2009, the City's management postponed many capital purchases and improvements. In the Gas Fund and Electric Fund operations, revenues and expenses are projected to be relatively flat for fiscal 2010. In the Water and Waste Water Fund operations, while the expenses should be flat, the revenues are budgeted to increase $800,000, the result of a waste water rate increase. A rate study was completed in 2009 that indicated the necessity to increase waste water rates to cover the cost of those operations. The budget for fiscal 2010 separated the revenues and expenses for the water operations and the waste water operations into separate departments of the Water and Waste Water Fund. For the business-type activities, reported as Gas Fund, Electric Fund and Water and Waste Water Fund, a projected excess of revenues over expenditures, after budgeted transfers, is $3 ,101,9 16 for fiscal 2010, compared to $2,335 ,757 for fiscal 2009. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need any additional financial information, please contact Rose Fogarty, Financial Reporting Manager, or Nancy Wilson, City Treasurer, at 16 I N. Section Street, Fairhope, Alabama, (251) 928-2136. -9- Figure I CITY OF FAIRHOPE CONDENSED STATEMENT OF NET ASSETS FOR THE YEAR ENDED 9/30/2009 COMPONENT UNITS GOVERNMENT AL BUSINESS -TYPE TOTAL PRIMARY ACTIVITIES ACTIVITIES GOVERNMENT LIBRARY AIRPORT AUTHORITY 9/30/2009 9/30/2008 9/30/2009 9/30/2008 9/30/2009 9/30/2008 9/30/2009 9/30/2008 9/30/2009 9/30/2008 Current & Other Assets s 3,785,576 s 5,886.915 s 9,987,005 s 9,907,318 s 13,772,581 s 15,794,233 s 124,057 $ 131,286 $ 754,754 $ 583,024 Capital Assets, net 83,124,747 83,183,055 40,126,350 41,292,491 123,251,097 124,475,546 131,660 135,007 22,109,988 22,314,780 Total Assets S 86,910,323 $ 89,069,970 S 50,113,355 S 51,199,809 s 137,023,678 s 140,269,779 $ 255,717 $ 266,293 S 22,864,742 $ 22,897,804 Long-Tenn Debt $ 16,308,034 $17,712,254 $ 15,722,772 $ 16,482,02 I s 32,030,806 s 34,194,275 s s s 8,785,517 $ I 8,782,863 Other Liabilities 2,679,451 3,256,780 4,605,677 6,629,461 7,285,128 9,886,241 3,275 1,860 Total Liabilities $ 18,987,485 $ 20,969,034 $ 20,328,449 $ 23,111,482 $ 39,315,934 $ 44,080,516 $ 3,275 $ 1,860 s 8,785,517 $ 8,782,863 Net Assets: Invested in Capital Assets, net ofrelated debt S 66,295,379 S 67,338,065 S 24,210,082 S 24,573,J 81 s 90,505,461 s 91,911,246 s 131,660 s 135,007 S 13,264,988 S 13,469,780 Restricted 1,462,430 847,580 1,883,768 2,092,174 3,346,198 2,939,754 247,600 50,099 Unrestricted 165,029 (84,709) 3,691,056 1,422,972 3,856,085 1,338,263 120,782 129,426 566,637 595,062 Total Net Assets 67,922,838 68,100,936 29,784,906 28,088,327 97,707,744 96,189,263 252,442 264,433 14,079,225 14,114,941 Total Liabilities & Net Assets S 86,910,323 S 89,069,970 $50,113,355 $ 51,199,809 $ 137,023,678 $ 140,269,779 $ 255,717 $ 266,293 $ 22,864,742 S 22,897,804 -10- Figure 2 CITY OF FAIRHOPE CONDENSED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED 9/30/2009 COMPONENT UNITS GOVERNMENTAL BUSINESS -TYPE TOTAL PRIMARY LIBRARY AIRPORT AUTHORITY ACTIVITIES ACTIVITIES GOVERNMENT 9/30/2009 9/30/2008 9/30/2009 9/30/2008 9/30/2009 9/30/2008 9/30/2009 9/30/2008 9/30/2009 9/30/2008 Program Revenues Charges for Services $ 7,746,910 $ 7,653,464 $ 35,337,263 $ 35,273,711 $ 43,084,173 $ 42,927,175 42,647 52,323 141,228 256,658 Operating Grants & Contributions 87,416 206,012 87,416 206,012 691,169 713,074 407,582 900,266 Capital Grants & Cootributions 384,358 7,3 10,387 384,358 7,310,387 General Revenues Taxes 6,938,380 5,669,358 6,938,380 5,669,358 Intergovernmental 436,472 . 293,007 436,472 293,007 Investment Earnings 225,860 340,530 60,104 115,648 285,964 456,178 11,102 4,015 Other 109,958 294,469 109,958 294,469 Total Revenues $ 15,929,354 $ 21,767,227 $ 35,397,367 $ 35,389,359 $ 51,326,721 $ 57,156,586 $ 733,8 16 $ 765,397 $ 559,912 $ 1,160,939 Expenses General Govenunent s 6,536,802 $ 6,392,335 s 6,536,802 $ 6,392,335 Sanitation 1,657,615 1,564,126 1,657,615 1,564,126 Police 4,090,85 1 4,011,091 4,090,851 4,011,091 Fire 878.148 843,469 878.148 843,469 Airport 242,090 545,000 242,090 545,000 Street 4,308,575 3,671,572 4,308,575 3,671,572 Adult Recreation 438,442 459,96 1 438,442 459,961 Recreation 1,031,886 900,759 1,031 ,886 900,759 Golf 1,292,200 1,292,200 Public Library Board 760,174 771,373 760,174 771,373 Interest on Long Tenn Debt 878,534 743,451 878,534 743,451 Electric 15,540,148 16,006,139 15,540,148 16,006,139 Natural Gas 5,349,209 6,709,491 5,349,209 6,709,491 Water and Wastewater 6,803,566 6,502,942 6,803,566 6,502,942 Golf 1,713,486 1,713,486 Airport Authority 595,629 784,959 Fairhope Public Library 745,807 733,091 Total Expenses S 22,115,317 S 19,903,137 S 27,692,923 $ 30,932,058 s 49,808,240 $ 50,835,195 s 745,807 s 733,091 s 595,629 s 784,959 Change in net assets before transfers (6,185,963) 1,864,090 7,704,444 4,457,301 1,518,481 6,321,391 (11,991) 32,306 (35,717) 375,980 Special Item -Trans of Golf to Governmental Activities 913,729 (913,729) 913,729 Transfers 5,094,136 3,658,368 (5,094,136) (3,658,368) Change in net assets (178,098) 5,522,458 1,696,579 798,933 1,518,481 6,321,391 (11,991) 32,306 (35,717) 375,980 Net Assets, beginning 68,100,936 62,578,478 28,088,327 27,289,394 96,189,263 89,867,872 264,433 232,127 14,114,942 13,738,961 Net Assets, ending $ 67,922,838 $ 68,100,936 $ 29,784,906 $ 28,088,327 s 97,707,744 s 96,189,263 s 252,442 $ 264,433 $ 14,079,225 $ 14,114,941 -11- Figure 3 Statement of Revenues and Expeditures Governmental Funds For the Year Ended September 30, 2009 9/30/2009 9/30/2008 Increase Revenues Total Total (Decrease) Taxes $ 6,938,380 $ 5,669,358 $ 1,269,022 Licenses & Permits 2,058,105 2,729,209 (671,104) Fines & Forfeitures 224,022 252,838 (28,816) State of Alabama 368,626 410,636 (42,010) U. S. Government 468,620 1,415,881 (947,261) Contribution from Public Library Board 71,000 208,931 (137,931) Interests and Rents 225,861 340,530 (114,669) Charges for Service 4,450,711 4,610,307 (159,596) Golf Course Revenue 959,730 959,730 Other 277,015 411,179 (134,164) Totals $ 16,042,070 $ 16,048,869 $ (6,799) Increase Expenditures Total Total (Decrease) General $ 5,948,479 $ 6,318,322 $ (369,843) Sanitation 1,475,035 1,405,774 69,261 Police 3,922,163 3,913,015 9,148 Fire 765,645 707,513 58,132 Airport 242,090 545,000 (302,910) Street Department 2,704,242 2,554,959 149,283 Adult Recreation 400,494 431,481 (30,987) Debt Service Principal 863,329 2,424,796 (1,561,467) Interest 809,715 802,140 7,575 Recreation Department 867,174 785,425 81,749 Golf 1,303,135 1,303,135 Public Library Board 530,000 504,560 25,440 The Haven 60,000 60,000 Capital Outlay 1,775,834 3,227,604 (1,451,770) Totals $ 21,667,335 $ 23,680,589 $ (2,013,254) Figure 4 Governmental Activities Land $ Buildings & Structures Vehicles and equipment Infrastructure Construction in progress Total Capital Assets $ Business-t:y(!e activities Balance @ 10/01/08 $ Additions to Plant Addition to land, buildings, vehicles and equipment Transfer to Governmental Activities Construction in Progress Total Capital Assets @ 9/30/2009 $ iiii7 iiiii7 --11 -12- City of Fairhope Capital Assets Balance @ 10/1/08 Additions 18,691,219 $ 260,373.00 28,309,967 3,622,852 7,633,673 2,165,708 59,113,316 71,751 1,416,658 115,164,833 $ 6,120,684 Electric Fund Natural Gas Fund 19,225,015 $ 11,046,710 843,359 390,656 30,010 80,118 20,098,384 $ 11,517,484 Reclassifications/ Retirements $ (84,464) (1 ,416,658) $ (1,501,122) Water/Wastewater Fund $ 36,962,083 373,945 4,833 5,946 $ 37,346,807 iiiiiii7 iiiil iii] Balance @9/30/09 $ 18,951,592 31,932,819 9,714,917 59,185,067 $ 119,784,395 Golf Fund $ 2,928,195 (2,928,195) $ -13- Figure 5 City of Fairhope Debt Administration GOVERNMENTAL LONG TERM DEBT FUNDS General Obligation Warrants, 2002 $ 4,505,668 General Obligation Warrants, 2008 1,131,000 General Obligation Warrants, 2007 7,530,000 General Obligation Warrants, 2006 233,973 General Obligation Refunding Warrant, 2009 3,368,260 Obligations under capital leases 69,942 Notes Payable 30,364 Utilities Revenue Warrants, 2005 Utilities Revenue Warrants, 2002 Utilities Revenue Warrants, 2003 Utilities Revenue Warrants, 2009 General Obligation Refunding Warrant, 2009 General Obligation Warrants, 2002 Obligations under capital leases Compensated absences 1,045,097 TOTALS $ 17,914,304 See Notes 5 through 10 beginning on page 35 for additional detail. BUSINESS-TYPE ACTIVITIES $ 86,035 7,985,000 6,720,000 280,000 1,250,000 61,740 209,657 604,933 $ 17,197,365 ..., , BASIC FINANCIAL STATEMENTS -14- CITY OF FAIRHOPE, ALABAMA STATEMENT OF NET ASSETS SEPTEMBER 30, 2009 Governmental Fund Types Governmental Business-type Component Activities Activities Total Units ASSETS Cash $ 3,347,618 $ 4,538,560 $ 7,886,178 $ 668,587 Restricted cash 321,738 1,883,76 2,205,506 Receivables, net 469,991 1,962,818 2,432,809 25,031 Internal balances (514,236) 514,236 Inventories 767,798 767,798 Other assets 160,465 319,825 480,290 185,193 Land and construction in progress 18 ,951 ,592 375,226 19,326,818 10,934,228 Capital assets, net 64,173,155 39,751,124 103,924,279 11 ,307,420 Total assets $ 86,910,323 $ 50,113,355 $ 137,023,678 $ 23,120,459 LIABILITIES Accounts payable and accrued expenses $ 799,185 $ · 1,829,919 / $ 2,629,104 $ 3,275 Deferred revenue 2,127 2,127 Customer deposits 1,980,032 1,980,032 Long-term liabilities Due within one year 1,566,431 700,789 ' 2,267,220 Due in more than one year 16,308,034 15 ,722,772 32,030,806 8,785,517 Net OPEB obligation 311,708 94,937 406,645 Total liabilities 18,987,485 20,328,449 39,315,934 8,788,792 NET ASSETS Invested in capital assets, net of related debt 66,295,379 24,210,082 90,505,461 13,396,648 Restricted for: Debt service 350,987 1,883,76 2,234,755 Capital projects 550,369 550,369 247,600 Road maintenance and construction 59,142 59,142 Council approved emergencies 501,932 501 ,932 Unrestricted 165,029 3,691,056 3,856,085 687,419 Total net assets 67,922,838 29,784,906 97,707,744 14,331 ,667 Total liabilities and net assets $ 86,910,323 $ 50,113,355 $ 137,023,678 $ 23,120,459 See independent auditors' report and notes to the financial statements Fw1ctions/Pro11rams Primary Government Governmental activities: General $ Sanitation Police Fire Airport Authority Street Adult Recreation Recreation Golf Public Library Board Interest on long term debt Total governmental activities Business-type activities Electric Natural gas Water and Wastewater Golf Total business-type activities Total primary government $ Component Units $ Exeenses 6,536,802 s 1,657,615 4,090.851 878,148 242,090 4,308,575 438,442 1,031,886 1,292,200 760,174 878,534 22,115,317 15.540.148 5,349,209 6,803,566 27,692,923 49,808,240 s 1,341,436 s General revenues: Property taxes Sales tax Liquor taxes Lodging taxes Other taxes Intergovernmental Investment earnings Other Charges for Services 5,140,160 1,368,656 224,022 36,316 130,740 847,016 7,746,910 18.800,459 8,)41,855 8.194.949 35,337,263 43,084,173 183,875 -15- City of Fairhope, Alabama Statement of Activities September 30, 2009 Pro&ram Revenues Operating Capital Grants and Grants and Contributions Contributions s 20,000 $ 67,416 313,358 71,000 87,416 384,358 s 87,416 $ 384,358 $ 1,098,751 $ Special item, transfer of Golf Fund to Governmental Activities Transfers Total general revenues, special item and transfers Change in net assets Net assets, beg·inning Net assets. ending See independent auditors' report and notes to the financial statements Net (Expense) Revenue and Chan&es in Net Assets Prima!}'. Government Governmental Business-type Activities Activities $ (1,376,642) s (288,959) (3,799,413) (878,148) (242,090) (3,995,217) (402,126) (901,146) (445,184) (689,174) (878,534) (13,896,633) s 3,260,31 t 2,992,646 1,391,383 7,644,340 (13,896,633) 7,644,340 4,939,840 1,003,864 385,411 474,852 134,413 436,472 225,860 60,I04 !09,958 913,729 (913,729) 5,094,136 (5,094,136) 13,718,535 (5,947,761) (178,098). 1,696,579 68,100,936 28,088,327 $ 67,922,838 $ 29,784,906 $ Total (1,376,642) (288,959) (3,799,413) (878,148) (242,090) (3,995,217) (402,126) (901,146) (445,184) (689,174) (878,534) (13,896,633) 3,260,3t t 2,992,646 1,391,383 7,644,340 (6,252,293) 4,939,840 1,003,864 385,411 474,852 134,413 436,472 285,964 !09,958 7,770,774 1,518,481 96,189,263 97,707,744 $ s Comeonent Unit Component Units (58,SIO) 11,102 11,102 (47,708) 14 379,375 14,331,667 -16- CITY OFF AIRHOPE, ALABAMA FUND BALANCE SHEETS GOVERNMENTAL FUNDS r SEPTEMBER 30, 2009 Nonmajor Major Funds Fund Special Total Capital Debt Revenue Fund Governmental General Projects Service Gas Tax Funds ASSETS Cash $ 2,713,107 $ 544,369 $ 30,409 $ 59,733 $ 3,347,618 Restricted cash for debt service 321,738 321,738 Receivables, net 440,715 29,276 469,991 Due from other funds 366 130,387 130,753 Other assets 34,925 34,925 Total assets $ 3,189,113 $ 674,756 $ 381 ,423 $ 59,733 $ 4,305,025 LIABILITIES Accounts payable $ 261,500 $ 124,387 $ 1,160 $ 591 $ 387,638 Accrued expenses and taxes 183,822 183,822 Line of credit payable Due to other funds 644,989 644,989 Deferred revenue 22,127 29,276 51,403 Total liabilities 1,112,438 124,387 30,436 591 1,267,852 FUND BALANCES Reserved for: Debt service 350,987 350,987 Council approved emergencies 501,932 501,932 Unreserved, reported in: General fund 1,574,743 1,574,743 Capital projects fund 550,369 550,369 Special revenue fund 59,142 59,142 Total fund balances 2,076,675 550,369 350,987 59,142 3,037,173 Total liabilities and fund balances $ 3,189,113 $ 674,756 $ 381,423 $ 59,733 $ 4,305,025 See independent auditors' report and notes to the financial statements r r -17- CITY OFF AIRHOPE, ALABAMA RECONCILIATION OF GOVERNMENTAL FUND BALANCE TO NET ASSETS OF GOVERNMENT AL ACTIVITIES SEPTEMBER 30, 2009 Fund balance as reported on page 16 Net Assets reported for governmental activities in the Statement of Net Assets are different from Fund Balance for governmental activities because: Capital assets used in governmental activities are financial resources and therefore are not reported in fund financial statements Depreciation is provided for the above capital assets in government-wide reporting, but is not in fund financial statements. Other long-term assets are not available to pay for current-period expenditures and therefore are deferred revenue in fund financial statements. Cost associated with warrant issuance are expensed in the current period in Fund Financial Statements Warrant Issuance costs, net Long-term liabilities, including warrants, notes, capital lease obligations and OPEB obligations are not due and payable in the current period and therefore are not reported in fund financial statements (net of discounts $39,839) Accrued interest on long-term debt is not due and payable in the current-period and therefore not included in fund financial statements. Compensated absences not expected to be paid with current resources as determined under Governmental Accounting Standards are not reported in fund financial statements. Net Assets of Governmental Activities as reported on page 14 See independent auditors' report and notes to the financial statements. $ $ 3,037,173 119,784,395 (36,659,648) 49,276 125,540 (17,141 ,076) (274,159) (998,663) 67,922 ,838 -18- CITY OFF AIRHOPE, ALABAMA ST A TEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2009 Nonmajor Major Funds Fund Special Total Capital Debt Revenue Fund Governmental General Pr~jects Service Gas Tax Funds REVENUES 6,938,380.f:, Local taxes $ -$ -$ -$ 6,938,380 Licenses and permits 2,058,105 (; 2,058,105 Fines and forfeitures 224,022/ 224,022 Intergovernmental 749,400. 87,846 837,246 Contribution from Public Library Board 71,000/ 71,000 Interest and rents 207,939 16,585 1,236 101 225,861 Charges for services 4,450,711 / 4,450,711 Golf course revenue I 959,730 959,730 I Other 277,015 277,015 Total revenues 15,936,302 16,585 1,236 87,947 16,042,070 EXPENDITURES General 5,920,J 51 28,328 5,948,479 Sanitation 1,475,035 1,475,035 Police 3,922,163 3,922,163 Fire 765,645 765,645 Airport 242,090 242,090 Street 2,608,531 95 ,711 2,704,242 Adult Recreation 400,494 400,494 Recreation 867,174 867,174 Golf 1,303,135 1,303,135 Public Library Board 530,000 530,000 Other 60,000 60,000 Debt service payments Principal 463,841 399,488 863,329 Interest 55,752 753,963 809,715 Capital Outlay 265,033 1,510,801 1,775,834 Total expenditures 18,879,044 1,539,129 1,153,451 95,711 21,667,335 Excess of Revenues over (under) Expenditures (2,942,742) (1,522,544) (1,152,215) (7,764) (5,625,265) OTHER FINANCING SOURCES (USES) 3,368,260 J_ Proceeds from issuance of debt 3,368,260 Cost from issuance of debt (78,364~ (78,364) Payment to Defeased Warrants Escrow Agent (3 ,412,892) (3,412,892) Transfer to Debt Service Fund to defease warrants (3 ,289,896) (3,289,896) Transfers in 5,094,136 2,576 4,445,422 9,542,134 Transfers out (1,158,102) (1,158,102) Total other financing sources (uses) 3,936,034 2,576 1,032,530 4,971,140 Net change in fund balances 993,292 (1,519,968) (119,685) (7,764) (654,125) Fund balances -beginning of year 1,083,383 2,070,337 470,672 66,906 3,691,298 FUND BALANCES -END OF YEAR $ 2,076,675 $ 550,369 $ 350,987 $ 59,142 $ 3,037,173 See independent auditors ' report and notes to the financial statements. -19- CITY OF FAIRHOPE, ALABAMA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENT AL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2009 Net change in fund balances -total governmental funds, page 18 $ (654,125) Amounts reported for governmental activities in the Statement of Activities are different from the Statements of Revenues, Expenditures and Changes in Fund balances -Governmental Funds because: Amortization of bond costs and discounts is not recorded in fund level statements (7,308) Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. Capital outlays for the year 1,775,834 Transfer of Golf Fund capital assets to governmental activities 2,928,195 Accumulated depreciation of Golf Fund capital assets (1,836,01 6) Depreciation expense for the year (2,925,901) Loss on assets disposed (417) Bond and other debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of long-term liabilities is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Proceeds from issuance of debt (3 ,368,260) Cost associated with warrant issuance 78,364 Principal payments on long term debt 4,276,221 Transfer of Golf Fund long term liabilities to governmental activities (178,450) Some expenses reported in the statement of activities do not require the use of current resources and therefore are not reported as expenditures in governmental funds. Decrease in compensated absences liability 120,997 Increase in accrued interest payable (75,524) Increase in OPEB liability (311,708) Change in Net Assets of Governmental Activities, page 15 $ (178,098) See independent auditors' report and notes to the financial statements. / r -20- CITY OFF AIRHOPE, ALABAMA FUND BALANCE SHEETS PROPRIETARY FUNDS SEPTEMBER 30, 2009 Business Type Activities Nonmajor Major Funds Fund Water and Electric Natural Gas Waste Water Golf Fund Fund Fund Fund Total ASSETS Current assets Cash and cash equivalents $ 2,306,244 $ 833,703 $ 1,398,613 $ $ 4,538,560 Restricted cash for debt service 100,601 62,050 J,721,117 1,883,768 Receivables, net 1,915,011 6,965 40,842 1,962,818 Inventories 247,796 143,105 376,897 767,798 Prepaid expenses 22,671 10,971 24,130 57,772 Total current assets 4,592,323 1,056,794 3,561 ,599 9,210,716 Noncurrent assets Unamortized expense 28,059 11 ,003 186,901 225,963 Due from other funds 599,257 313,565 912,822 Other assets 12,030 12,030 12,030 36,090 Capital assets Distribution and collection systems 15,819,785 8,820,545 34,347,128 58,987,458 Buildings, vehicles and equipment 4,148,353 2,621,447 2,830,191 9,599,991 Land and construction in progress 130,246 75,492 169,488 375,226 Less accumulated depreciation (9,130,258) (5,006,543) (14,699,524) (28 ,836,325) Total noncurrent assets 11,607,472 6,847,539 22,846,214 41 ,301 ,225 Total assets $ 16,199,795 $ 7,904,333 $ 26,407,813 $ $ 50,511,941 LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 1,208,878 $ 267,744 $ 353,297 $ $ 1,829,919 Customer deposits 1,912,807 67,225 1,980,032 Warrants, notes and capital leases payable 67,371 31 ,121 602,297 700,789 Total current liabilities 3,189,056 298,865 1,022,819 4,510,740 Noncurrent liabilities Compensated absences 102,578 184,035 220,680 507,293 Warrants, notes and capital leases payable 1,734,404 881 ,799 12,599,276 15,215,479 Net OPEB Obligation 26,899 28,481 39,557 94,937 Due to other funds 313,565 85,021 398,586 Total noncurrent liabilities 2,177,446 1,094,315 12,944,534 16,216,295 Total liabilities 5,366,502 1,393,180 13 ,967,3 53 20,727,035 NET ASSETS Invested in capital assets, net of related debt 9,166,351 5,598,021 9,445,7 10 24,210,082 Restricted for debt service 100,601 62,050 1,721 ,117 1,883,768 Unrestricted 1,566,341 851 ,082 1,273,633 3,691 ,056 Total net assets 10,833,293 6,511 ,153 12,440,460 29,784,906 $ 16,199,795 $ 7,904,333 $ 26,407,8 13 $ $ 50,511 ,94 1 See independent auditors' report and notes to the financial statements. -21- CITY OFF AIRHOPE, ALABAMA ST A TEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2009 Business Type Activities Nonmajor Major Funds Fund Water and Electric Natural Gas Waste Water Golf Fund Fund Fund Fund Total OPERATING REVENUES Sales and services $ I 8,344,460 $ 8,333,165 $ 7,648,608 $ -$ 34,326,233 Other charges, sales and receipts 455,999 8,690 546,341 1,011 ,030 Total operating revenues 18,800,459 8,341 ,855 8,194,949 35,337,263 OPERA TING EXPENSES Energy purchases and cost of goods sold 10,962,746 2,648,556 719,642 14,330,944 Salaries 737,927 634,735 1,111 ,884 2,484,546 Depreciation 558,915 282,950 960,968 1,802,833 Insurance 310,838 240,646 411,865 963,349 Electric energy furnished to other departments 1,059,684 1,059,684 Maintenance 440,834 182,868 1,262,996 1,886,698 Community development projects 70,994 71,113 47,018 189,125 Other operating expense 1,299,749 1,243,887 1,630,528 4,174,164 Total operating expenses 15,441 ,687 5,304,755 6,144,901 26,891 ,343 OPERATING INCOME 3,358,772 3,037,100 2,050,048 8,445,920 NONO PERA TING REVENUES (EXPENSES) Interest expense (98,461) (44,454) (658,665) (801 ,580) Interest income 22,572 10,272 27,260 60,104 Total nonoperating revenues (expenses) (75,889) (34,182) (63 I ,405) (741 ,476) INCOME(LOSS) BEFORE TRANSFERS AND OTHER ITEMS 3,282,883 3,002,918 1,418,643 7,704,444 TRANSFERS AND OTHER ITEMS Transfers out (2,080,187) (2,021 ,702) (992,247) (5 ,094,136) Forgiveness of due to (from) obligation (274,551) 274,55 1 Residual transfer of assets to governmental fund (913 ,729) (9 13,729) Total transfers (out) in (2,354,738) (2,021,702) (992,247) (639,178) (6,007,865) Change in net assets 928,145 981 ,216 426,396 (639,178) 1,696,5 79 NET ASSETS -BEGlNNING OF YEAR 9,905,148 5,529,937 12,014,064 639,178 28,088,327 NET ASSETS -END OF YEAR $ 10,833,293 $ 6,511,153 $ 12,440,460 $ $ 29,784,906 See independent auditors' report and notes to the financial statements. -22- CITY OF FAIRHOPE, ALABAMA STATEMENT OF CASH FLOWS PROPRJETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2009 Business Type Activities CASH FLOWS FROM OPERATING ACTIVITIES Received from customers Paid to suppliers for goods and services Paid to personnel for services Net cash provided (used) by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest income and joint revenue (expense) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from borrowings Repayment of debt Interest paid Purchase of property, plant and equipment Net cash provided (used) by capital and related financing activities CASH FLOWS FROM NONCAPIT AL AND RELATED FINANCING ACTIVITIES Change in interfund receivable/payable Transfers in ( out) Net cash provided (used) by noncapital financing activities INCREASE (DECREASE) IN CASH Cash -beginning of year CASH -END OF YEAR Electric Fund $ 18,640,373 $ $ (14,367,819) (737,927) 3,534,627 22,572 500,000 (2,287,184) (98,622) (873,372) (2,759,178) 1,809,660 (2,080,187) (270,527) 527,494 1,879,351 2,406,845 $ Noncash operating, investment, capital, noncapital and financing activities: Nonmajor Major Funds Fund Natural Gas Fund Water and Waste Water Fund Golf Fund Total 8,357,131 $ 8,167,787 $ (3,702,644) (1,111 ,884) 3,353,259 - $ 35,165,291 (4,396,022) (634,735) 3,326,374 10,272 (30,248) (41 ,991) (470,774) (543,013) (187,643) (2,021,702) (2,209,345) 584,288 311,465 27,260 1,311 ,740 (1,966,572) (621 ,590) (384,725) (1,661,147) (1,069,853) (992,247) (2,062,100) (342,728) 3,462,458 (113,766) (113,766) (113,766) 113,766 895,753 $ 3,119,730 $==== $ (22,466,485) (2,484,546) 10,214,260 60,104 1,811,740 (4,284,004) (762,203) (1,728,871) (4,963,338) 552,164 (5,207,902) (4,655,738) 655,288 5,767,040 6,422,328 As discussed in Note 2, effective October I, 2008, the assets and liabilities of the Golf Fund were transferred into the General Fund. In connection with this transfer, the Electric Fund forgave $274,551 of debt owed from the Golf Fund. Reconciliation of operating income to net cash provided (used) by operating activities Income (loss) from operations $ 3,358,772 $ 3,037,100 $ 2,050,048 $ -$ 8,445,920 Adjustments to reconcile income from operations to net cash provided (used) by operating activities Depreciation Amortization Change in assets and liabilities Decrease (increase) in accounts receivable Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in accounts payable Increase (decrease) in customer deposits Increase ( decrease) in compensated absences Increase (decrease) in net OPEB obligation Net cash provided (used) by operating activities $ See independent auditors' report and notes to the financial statements. 558,915 2,336 (160,087) (68,643) 19,109 (268,904) 111,538 (45,308) 26,899 3.534.627 $ 282,950 912 15.276 20,986 (3,906) (11 6,148) 60,723 28,481 3,326,374 $ 960,968 (8,053) 1,802,833 (4,805) (27,162) (171 ,973) 169,264 121 ,607 32,959 48,162 82,351 (302, 70 ]) l 0,344 121 ,882 42,983 58,398 39,557 94,937 3,353.259 $====·= $ 10,214.260 r r THIS PAGE INTENTIONALLY LEFT BLANK -23- CITY OFF AIRHOPE, ALABAMA COMBINING STATEMENT OF NET ASSETS DISCRETELY PRESENTED COMPONENT UNITS SEPTEMBER 30, 2009 Governmental Activities Public Library Airport Board Authority ASSETS Cash $ 79,890 $ 588,697 $ Other assets 44,167 1-66,057 Land 10,934,228 . Capital assets, net 131,660 11 ,175,760 Total assets $ 255,717 $ 22,864,742 $ LIABILITIES Accounts payable and accrued expenses $ 3,275 $ $ Long-term liabilities Due within one year Due in more than one year 8,785,517 Total liabilities 3,275 8,785,517 NET ASSETS Invested in capital assets, net of related debt 131 ,660 13,264,988 Restricted for: Capital projects 247,600 Unrestricted 120,782 566,637 Total net assets 252,442 14,079,225 Total liabilities and net assets $ 255,717 $ 22,864,742 $ See independent auditors' report and notes to the financial statements. r Total 668,587 210,224 10,934,228 11,307,420 23,120,459 3,275 8,785,517 8,788,792 13 ,396,648 247,600 687,419 14,331 ,667 23,120,459 Functions/Programs Airpo11 Authority $ Public Library Board $ -24- CITY OFF AI RH OPE, ALABAMA COMBINING STATEMENT OF ACTIVITIES DISCRETELY PRESENTED COMPONENT UNITS SEPTEMBER 30, 2009 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions 595,629 $ I41,228 $ 407,582 $ . 745,807 42,647 691,169 1,341,436 $ I83,875 $ 1,098,751 $ General revenues: Investment earnings Total General Revenues and Special Item Change in net assets Net assets, beginning Net assets, ending See independent auditors' report and notes to the financial statements. Net (Expense) Revenue and Changes in Net Assets Govenunental Activities Airport Public Library Authority Board Total $ (46,819) $ $ (46,819) (11,991) (11,991) (46,819) (11,991) (58,810) 11,l 02 11 ,l 02 11 ,102 11,I02 (35,717) (11,991) (47,708) ]4,I 14,942 264,433 A379,375 $ 14,079,225 $ 252,442 $ 14,331,667 f THIS PAGE INTENTIONALLY LEFT BLANK -25- CITY OF FAJRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Fairhope, Alabama (the City) was incorporated in April, 1908. The City operates under a Mayor -Council form of government chosen at large every four years. The accounting policies of the City conform to generally accepted accounting principles as applicable to municipal governments. The following is a summary of the more significant policies. A. REPORTING ENTITY The financial statements of the City have been prepared in conformity with the accounting principles generally accepted in the United States as specified by the Governmental Accounting Standards Board (GASB). These financial statements present the primary government (the City) and it's discretely presented component units, an entity for which the government is considered financially accountable. The units are governmental fund type component units and are reported in a separate column of the government-wide statements to emphasize they are legally separate from the primary government. The discretely presently component units have a September 30 fiscal year-end. Component Units Fairhope Public Library -The Library has its own governing body which operates the City public library and is appointed by the City Council. The City provides significantly all the annual operating financial support to the Library. The Library's other sources of revenue come from State financial assistance, gifts, bequests and user fees. The Library Board does not issue separate financial statements. Fairhope Airport Authority -The Authority operates the City airport and has its own governing body which is appointed by the City Council. The City provides a significantly portion of the annual operating funds support to the Airport. The Airport's other sources of revenue come from the Festival of Flight, T Hanger and Office rentals and fuel sales. The Airport Authority does not issue separate financial statements. These financial statements do not include the following: Bay Medical Clinic Board Industrial Board of the City of Fairhope Medical Clinic Board -East, West or North Downtown Redevelopment Authority Parking Authority City management does not exert significant influence or control and does not guarantee any of their outstanding debts. -26- CITY OFF AIRHOPE, ALABAMA NOTES TO THE FJNANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B. BASIS OF PRESENTATION -GOVERNMENT-WIDE AND FUND LEVEL Government-wide The basic financial statements include government-wide and fund financial statements. The reporting model focuses on the City, as a whole, and major funds. Government-wide and fund financial statements categorize primary activities as governmental or business type. In the Statement of Net Assets, governmental and business-type activities (a) are presented on a consolidated basis, and (b) reflect, full accrual accounting, which incorporates long-term assets and receivables as well as long-term debt and obligations. Receivables and payables between activities are eliminated in the government-wide presentation through the caption "Internal Balances" on the Statement of Net Assets. The Statement of Activities reflects both the gross and net cost per functional category (street, police, fire, etc.) which are otherwise being supported by general government revenues (taxes, licenses and permits, etc.). The Statement of Activities reduces gross expenses, including depreciation, by related program revenues. The program revenues must be directly associated with a function or a business-type activity. Operating grants include operating-specific and discretionary ( either operating or capital) grants while the capital grants column reflects capital- specific grants. Fund Level The governmental fund level financial statements are presented on a current financial resource and modified accrual basis of accounting. Since governmental fund level financial statements are presented on a different basis of accounting and measurement focus than governmental activities in the government-wide presentation, a summary is presented to explain adjustments necessary to reconcile fund level statements to the government-wide presentation. The accounts of the City are organized on the basis of funds which are each considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self- balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped into broad fund categories as follows: General Fund -The General Fund is used to account for all revenues and expenditures applicable to the general operations of city government which are not properly accounted for in another fund. All general operating revenues which are not restricted or designated as to use by outside sources are recorded in the General Fund. Special Revenue Fund -Special revenue funds are operating funds for which the use of revenues (usually from taxes) is restricted or designated by outside sources. They are usually required by state or local laws to finance certain activities or functions. -27- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Debt Service Fund -Debt service funds are used to account for the payment of interest and principal on general long term warrants and notes not accounted for in the Proprietary Funds. Capital Project Fund -Capital project funds are used to account for the financial resources used to construct or acquire major capital items (other than those financed by proprietary funds). Enterprise Funds: The Electric Fund, Natural Gas Fund, and Water and Waste Water Fund are Enterprise Funds, which are used to account for the operations of the utilities. Utilities are provided to residents in and around the City of Fairhope. Enterprise Funds are used to account for operations which are financed or operated in a manner similar to private business enterprises -where the intent of the governing body is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered through user charges and fees. Operating revenues, shown for proprietary operations, generally result from producing or providing goods and services. Operating expenses include all costs related to providing services or products. All other revenues or expenses not meeting these criteria are reported as nonoperating income or expenses. Effective October 1, 2008, the City transferred the operations of the Golf Fund into the General Fund. See Note 2 for additional information. C. CAPITAL ASSETS The accounting treatment over capital assets depends on whether the assets are used by governmental funds or proprietary funds and fund level or government-wide reporting. In government-wide reporting, all capital assets are reported as capital assets for both governmental-type and business-type activities. The City has not established a minimum capitalization threshold at this time. Depreciation is provided on all capital assets at the government-wide level. In fund level reporting, capital assets are reported as expenditures by governmental funds, while they remain capital assets in proprietary funds. Depreciation is provided, only, in proprietary funds at the fund level. Capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are valued at estimated fair value on the date donated. Depreciation is allocated as an expense in the Statement of Activities (government-wide level) and accumulated depreciation is reflected in the Statement of Net Assets (government-wide level). Depreciation has been provided over the estimated useful lives using the straight line rates as follows: Plant and distribution systems Buildings Golf course improvements Vehicles and equipment Infrastructure (roads, bridges, drainage) Runways and taxiways 30-40 years 25 -50 years 10-40 years 3-10 years 25 -50 years 75 years r -28- CITY OFF AIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. BASIS OF ACCOUNTING Basis of accounting refers to when revenues and expenditures/expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. All governmental funds are accounted for using the modified accrual basis of accounting. Under the modified accrual basis, revenues are recognized when they become susceptible to accrual, that is when they become both "measurable" and "available" to finance expenditures of the current period. Ad valorem and other taxes collected by an intermediary are considered "measurable" when in the hand of the intermediary collecting governments and may be recognized as revenue at that time. Expenditures, generally, are recorded at the time liabilities are incurred. Revenues susceptible to accrual are: lodging tax, property taxes and federal financial assistance programs, which are measurable and available to finance expenditures of the current period. The City uses a 60-day availability period except for FEMA disaster recovery grants which are recognized using a 12-month availability period. Revenue which is not both measurable and available includes licenses, rents, permits and fines. The enterprise fund financial statements are presented on the accrual basis of accounting in accordance with Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting. The City bas elected to apply all applicable GASB pronouncements as well as any Financial Accounting Standards Board (F ASB) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins issued on or before November 30, 1989, unless those pronouncements conflict or contradict GASB pronouncements. The City also elected to apply all F ASB Statements and Interpretations issued after November 30, 1989, that do not conflict with or contradict GASB pronouncements. E. CASH The City maintains a system in which some excess cash is placed in interest bearing accounts. Cash applicable to a particular fund is readily identifiable. Interest earned is allocated to each fund based upon the proportionate balances of each fund 's cash in the account. F. RECEIVABLES FROM UTILITY CUSTOMERS The Electric fund purchases at face value, the utility receivables of the Natural Gas Fund and the Water and Waste Water Fund as well as the garbage receivable of the General Fund. Purchase is made at the time customers are billed. Customer payments for all are then deposited to the Utility Account in the Electric Fund. -29- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) G. INVENTORIES Governmental fund inventories are maintained on a purchase method of accounting where items are purchased and charged to the budgetary accounts upon receipt. Year-end balances are not significant in governmental funds. Proprietary fund inventories are maintained on a consumption basis and consist of supplies for the utility plant. H. PROPERTY TAX All ad valorem taxes levied by the state, county and any municipality in Baldwin County are assessed and collected by the Revenue Commissioner of Baldwin County. The Baldwin County property tax calendar requires the Revenue Commissioner to assess and attach taxes as enforceable liens on property as of September 30, and taxes are due October 1 through December 31. Property taxes not paid by January 1 are considered as delinquent. Tax collections received by the County Revenue Commissioner are remitted to the City monthly. In accordance with the implementation of Governmental Accounting Standard (GASB) Number 33, revenue is recorded based upon taxes assessed and considered available. Any taxes not considered available are recorded as deferred revenue. I. DEBT ISSUE COST Issuance expenses on long term debt of proprietary funds are deferred and amortized, on the bonds outstanding method, over the terms of the related issues. In the fund financial statements, bond discounts, premiums and issuance costs are treated as period costs in the year of issue. In the government-wide financial statements, bond discounts, premiums and issuance costs are deferred and amortized over the term of the bonds using the bonds outstanding method. Bond discounts/premiums are presented as a reduction/addition to the face amount of the bonds payable whereas issuance costs are recorded as other assets. J. DEFERRED REVENUE The City reports deferred revenue on its fund balance sheet. Deferred revenues arise when potential revenue does not meet both the measurable and available criteria for recognition in the current period. Revenues derived from Street Assessments are deferred and included in revenue when the receivables become available ( collected). Enterprise funds defer revenue recognition when monies are collected for goods and services prior to the provision of those services. r -30- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) K. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the proprietary funds consider all highly liquid investments, with an original maturity of three months or less, to be cash equivalents. Investments consist of U. S. Treasury money market accounts which are presented at cost which equals fair market value. L. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. M. NET ASSET AND EQUITY CLASSIFICATIONS Government-wide Financial Statements Equity is classified as net assets and displayed in three components: • Invested in capital assets, net of related debt -Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. • Restricted net assets -Consists of net assets with constraints placed on the use either by ( 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) the City's own laws through its enabling legislation and other provisions of its laws and regulations. • Unrestricted net assets -All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt. Fund Financial Statements The fund equity of the governmental fund financial statements is classified as fund balance. Fund balance is further classified as reserved and unreserved. The fund equity of the proprietary fund financial statements is classified in the same manner as the government-wide financial statements. N. MAJORFUNDS The City reports the following major Governmental funds : • General Fund • Capital Projects Fund • Debt Service Fund The City reports the following enterprise funds as major funds: • Electric Fund • Natural Gas Fund • Water and Waste Water Fund -31- CTIY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 2 INTERFUND TRANSACTIONS The selling price of electric energy delivered without charge by the Electric Fund to various other funds, boards, and offices of the City of Fairhope is charged to the Electric Fund's operations as electric energy furnished to other divisions of the City of Fairhope. The Water and Waste Water Fund and Golf Department purchase electric energy they receive, at cost. In fiscal year 2009, the General Fund transferred to the Debt Service Fund $1 ,155,526 in support oflong term debt service and $3,289,896 for payment to the escrow agent of the def eased warrants. The utility operations transfer a portion of their earnings to the General Fund each year to support general government operations. In fiscal year 2009, the following amounts were transferred from the utility funds noted to the General Fund. Electric Fund Natural Gas Fund Water and Waste Water Fund Total $2,080,187 2,021 ,702 992,247 $5,094.136 In fiscal year 2009, the City transferred $242,090 to the Airport Authority and $530,000 to the Public Library Board both discretely presented component units. Effective October 1, 2008, the City transferred the assets and liabilities of the Golf Fund into the General Fund. In connection with this transfer, the Electric Fund forgave $274,551 of debt owed from the Gqlf Fund. The following assets were transferred and liabilities assumed by the General Fund: Cash Restricted Cash for Debt Service Other Current Assets Total Assets Transferred Due to the Electric Fund Other Liabilities Total Liabilities Transferred $113,766 4,506 96.333 $ 214.605 $ 70,393 144.212 $214,605 Governmental activities' capital assets increased $1,092,179 net of accumulated depreciation of $1,836,016 and noncurrent liabilities increased by $178,450 resulting in a special item in the Statement of Activities of $913,729. I I NOTE2 -32- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 INTERFUND TRANSACTIONS (continued) Interfund receivables and payables at September 30, 2009 are: General Fund Water and Waste Water Electric Capital Projects Capital Projects Fund General Electric Fund General Water and Waste Water Natural Gas Natural Gas Fund Electric Water and Wastewater Fund General Electric $ $ Due from 366 130,387 514,602 84,655 313,565 Due to 514,602 130,387 313,565 366 84,655 1,043,575 $ 1,043,575 ======= During the course of normal operations, the City has numerous transactions between funds to provide services, construct assets, service debt, etc. These transactions are generally reflected as interfund receivables and liabilities. Transactions reimbursing a fund for expenditures are recorded as expenditures in the disbursing fund and as revenues in the receiving fund. NOTE3 -33- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 CAP IT AL ASSETS Changes in capital assets, during the fiscal year, were as follows: Balance 10/01/08 Increases Governmental Activities Capital assets not subject to depreciation Land $ 18,691,219 $ Construction in progress 1,416,658 Total 20,107,877 Other capital assets Buildings and structures 28 ,309,967 Vehicles and equipment 7,633,673 Infrastructure 59,113,316 Total 95,056,956 Less accumulated depreciation for Buildings and structures (4,582,993) Vehicles and equipment (7,052,529) Infrastructure (20,346,256) Total accumulated depreciation (31 ,981,778) Other capital assets, net 63,075,178 Governmental capital assets, net $ 83,183,055 $ Depreciation was charged to governmental activities as follows: General Sanitation Police Fire Public Library Street Adult Recreation Recreation Golf Total (continued) 260,373 260,373 3,622,852 2,165,708 71 ,751 5,860,311 (709,536) (2,478,031) (1,574,350) (4,761 ,917) 1,098 ,394 1,358,767 Decreases $ - (1 ,416,658) (1 ,416,658) (84,464) (84,464) 84,047 84,047 (417) $ (1 ,417,075) $ 209,378 194,720 215,159 120,354 230,174 1,625,939 43,081 174,382 112,714 $ 2,925,901 $ $ Balance 09/30/09 18,951 ,592 18,951,592 31,932,819 9,714,917 59,185,067 I 00,832,803 (5,292,529) (9,446,513) (21,920,606) (36,659,648) 64,173,155 83,124,747 l NOTE3 -34- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 CAP IT AL ASSETS · CONTINUED Business Type Activities Capital assets not subject to depreciation Land $ Construction in progress Total Other capital assets Distribution and collection system Buildings, vehicles and equipment Total Less accumulated depreciation for Distribution and collection system Buildings, vehicles and equipment Total accumulated depreciation Other capital assets, net Capital assets, net Com11onent Unit• Public Libra[Y Equipment Less accumulated depreciation Net Com11onent Unit• Aimort Authori!Y Capital assets not subject to depreciation Land Other capital assets Runways Buildings and improvements Equipment Total Less accumulated depreciation for Runways Buildings and improvements Equipment Total accumulated depreciation Other capital assets, net Capital assets, net $ $ $ $ $ Balance 10/01/08 629,653 629,653 57,379,498 12,152,848 69,532,346 (20,087,562) (8,781,946) (28,869,508) 40,662,838 41,292,491 Balance 10/01/08 309,587 (173,580) 136,007 10,934,228 9,309,815 3,968,177 76,73 3 13,354,725 (5 38,032) (1 ,359,407) (76,733) (1,974,172) 11,380,553 22.314,781 Increases $ . 5,946 5,946 1,607,960 114,965 1,722,925 (1 ,396,277) (406,556) (1,802,833) (79,908) $ (73 ,962) Increases $ 23,351 (27,698) $ (4,347) $ . 21 ,984 21 ,984 (124,132) (99,504) (3,141) (226,777) (204,793) $ (204,793) Decreases $ (260,373) $ (260,373) (2,667,822) (2,667,822) 1,836,016 1,836,016 (831 ,806) $ (1,092,179) $ Decreases $ . $ $ . $ $ . $ . $ . $ Balance 09/30/09 369,280 5,946 375,226 58,987,458 9,599,991 68,587,449 (21,483,839) (7,352,486) (28,836,325) 39,751,124 40,126,350 Balance 09/30/09 332,93 8 (201,278) 131,660 10,934,228 9,309,815 3,968,177 98,717 13 ,376,709 (662,164) (1,458,911) (79,874) (2,200,949) 11 ,175,760 22,109,98 8 -35- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 4 SINKING FUNDS -PROPRIETARY FUNDS The cash and investments in these sinking funds (bond, reserve and replacement funds) are restricted as to their use in accordance with their respective bond indentures. Amounts in bond funds are included in current assets, while amounts in reserve funds are separately listed as restricted assets. NOTE 5 NOTES AND WARRANTS PAY ABLE-BUSINESS-TYPE ACTIVITIES The following is a summary of revenue bonds, notes and warrants payable from the proprietary funds as of September 30, 2009: Utilities Revenue Warrants, Series 2005 dated March 1, 2005, interest rate 2.20% to 4.25%, payable semi-annually, principal payable December 1, 2005 through December 1, 2020. $ 7,985,000 Unsecured note payable dated April 13, 2005, interest rate 3.50%, monthly payments of$5,143 including interest, due April 2010. 35,155 Utilities Revenue Warrants, Series 2003 dated September 1, 2003, interest rate 1.00% to 3 .50%, payable semi-annually, principal payable 2003 through 2009. 280,000 Utilities Revenue Warrants, Series 2002 dated September 1, 2002, interest rate 4.75% to 5.00%, payable semi-annually, principal payable 2020 through 2025 . 6,720,000 Note payable at an interest rate of 5.84%, annual payments $29,000 including interest, secured by real property. 50,880 General Obligation Warrants, Series 2002 dated September 1, 2002, interest rate 1.60% to 5.00%, payable semi-annually, principal payable 2003 through 2025. 209,657 Utilities Revenue Warrants, Series 2009 dated April 2, 2009, interest rate 3.85%, payable semi-annually, principal payable 2009 through 2019. 1,250,000 General Obligation Refunding Warrant, Series 2009, dated April 2, 2009, interest rate 3.62%, payable semi-annually, principal payable 2010 through 2020. 61 740 TOTAL $16,592.432 -36- CITY OF FAIRHOPE, ALABAMA NOTES TO TIIE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 5 NOTES AND WARRANTS PAY ABLE -BUSINESS-TYPE ACTIVITIES ( continued) On April 2, 2009, the City issued utilities revenue warrants with a par amount of $1,250,000 with an original issue discount of $0 and an underwriter's discount of $0, at a 3.85% interest rate. This issue together with the sum of $205,226 on deposit in escrow was used to refund the City's Utilities Revenue Warrants, Series 1999, dated June 1, 1999, with an outstanding value of $1,260,000. The Utilities Revenue Warrants, Series 2009 mature on December 1, 2019. The sum of $1,313,069 was deposited in an irrevocable trust with an escrow agent to provide debt service payments until the warrants were called on May 5,2009. As a result of the refunding, the City reduced its total debt service requirements by $97,165 which resulted in an economic gain ( difference between the present value of the debt service payments on the old debt and the new debt) of $74,968. Revenue bonds, notes, and warrants payable from the proprietary funds issued prior to 2009 were for the purpose of financing, or re-financing, new water tanks, new water wells, UV Sewer System, new booster pump, radio system, support tower, phone system, construction of warehouse building and mechanics shop, and extensions to the City's water and sewer lines. NOTE 6 NOTE AND WARRANTS PAY ABLE-GOVERNMENT AL ACTIVITIES The following is a governmental fund summary of long term debt at September 30, 2009: General Obligation Warrants, Series 2002 dated September 1, 2002, interest rate 1.60% to 5.00%, payable semi-annually, principal payable 2003 through 2025. $4,505,668 Unsecured note payable dated April 13, 2005, interest rate 3.30% monthly payments of $4,440 including interest, due April 2010. 30,364 General Obligation Warrant, Series 2008, dated March 6, 2008, interest at 2.91 %, payable semi-annually, $130,000 annual principal payments are due on April 1 from 2009 to 2018. 1,131,000 General Obligation Warrants, Series 2007 dated June 1, 2007, interest rate 4.00% to 5.00%, payable semi-annually, principal payable June 1, 2008 through June 1, 2032. 7,530,000 General Obligation Warrant, dated March 31 , 2006, interest rate 3.99%, minimum annual payments of $240,678 including interest, due April 2011. 233,973 General Obligation Refunding Warrant, Series 2009, dated April 2, 2009, interest rate 3.62%, payable semi-annually, principal payable 2010 through 2020. 3.368.260 TOTAL $16 799,265 -37- CITY OFF AIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 6 NOTE AND WARRANTS PAY ABLE -GOVERNMENT AL ACTIVITIES ( continued) On April 2, 2009, the City issued general obligation warrants with a par amount of $3,430,000 with an original issue discount of $0 and an underwriter's discount of $0, at a 3.62% interest rate. This .issue together with the sum of $202,975 on deposit in escrow was used to refund the City's General Obligation Warrants, Series 1999, dated June 1, 1999, with an outstanding value of $3,460,000. The General Obligation Warrants, Series 2009 mature on June 1, 2020. The sum of $3 ,615,956 was deposited in an irrevocable trust with an escrow agent to provide debt service payments until the warrants were called on June 1, 2009. As a result of the refunding, the City reduced its total debt service requirements by $256,699 which resulted in an economic gain ( difference between the present value of the debt service payments on the old debt and the new debt) of $218,631. The General Obligation Warrant Series 2008 related to construction costs on the new Library. The Public Library Board requested the City secure a warrant as a "bridge loan" until pledges from outside donors are collected and remitted to the City. In 2008, the City refunded the original short term note with a general obligation warrant to be paid over 10 years. The Library Board committed to pay costs of the Library project in excess of $3,000,000. Excluding interest on related long-term debt, the Library project costs, to date, are $8,070,288 . As of September 30, 2009, the Library Board has provided funding of $3,263,461 from donations and grants. General Obligation Warrants and notes payable from the governmental funds issued prior to 2008 were for the purpose of financing, or re-financing, automated garbage equipment, fire truck pumper, city drainage projects, hurricane damage repairs and upgrade to Municipal pier, construction of new facilities, including justice center, public library, tennis complex, recreation center, outdoor swimming pool, baseball facility, and renovation of Fairhope historic museum. -38- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL ST A TEMENTS SEPTEMBER 30, 2009 NOTE 7 CHANGES IN LONG TERM DEBT Amounts Balance Balance due within 10/01 /08 Additions Reductions 09/30/09 one year GOVERNMENT AL ACTIVITIES Warrants and notes payable General obligation warrants $ 17,474,232 $ 3,498,500 $ (4,203,831) $ 16,768,901 $ 991,892 Notes payable 81,604 (5 1,240) 30,364 30,364 Total warrants and notes payable 17,555,836 3,498,500 (4,255,071) 16,799,265, 1,022,256 Warrant discount (41,603) 1,764 (39,839) 17,5 14,233 3,498,500 (4,253,307) 16,759,426 1,022,256 Other liabilities Obligations under capital leases 91 ,092 (21,150) 69,942 22,197 Compensated absences 1,166,094 561,141 (682,138) 1,045,097 521,978 Governmental activities long-term liabilities $ 18,771,419 $ 4 ,059,641 $ (4,956,595) $ 17,874,465 $ 1,566,431 The City's general obligation warrants are paid through the Debt Service Fund while notes and capital leases are paid directly by the General Fund. The compensated absences liability will be liquidated by the General Fund. Amounts Balance Balance due within J 0/01 /08 Additions Reductions 09/30/09 one year BUSINESS-TYPE ACTIVITIES Warrants and notes payable General obligation warrants $ 413,404 $ 61 ,740 $ (203,747) $ 271,397 $ 14,435 Utilities revenue warrants 16,865,000 1,250,000 (1 ,880,000) 16,235,000 625,000 Notes payable 170,145 (84,110) 86,035 61,354 Total warrants and notes payable 17,448,549 1,3 11 ,740 (2,167,857) 16,592,432 700,789 Warrant premiums 6,765 (5,41 !) 1,354 Deferred amount on refunding (480,260) 59,208 (421 ,052) Warrant discounts (263,098) 82,385 (75,753) (256,466) 16,711 ,956 1,394,125 (2,189,813) 15,916,268 700,789 Other liabilities Obligations under capital leases 7,387 (7,387) Compensated absences 613,688 227,616 (236,371) 604,933 97,640 Business-type activities Jong-term li abilities $ 17,333 ,031 $ 1,621 ,741 $ (2,433,571) $ 16,521 ,201 $ 798,429 Compensated absences due within one year incl uded in accrued liabilities $ 97,640 Compensated absences due in more than one year included in noncurrent liabilities 507,293 Total compensated absences liability $ 604.933 NOTE8 -39- CITY OFF AIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 SUMMARY OF DEBT SERVICE REQUIREMENTS TO MATURITY GOVERNMENT AL ACTIVITIES The following is a summary of debt service requirements to maturity of long term debt of the Governmental Funds as of September 30, 2009, including interest payments: Year Ending September 30, Principal Interest Total 2010 $ 1,022,256 $ 703,170 $ 1,725,426 2011 788,061 665,366 1,453,427 2012 . 809,407 636,899 1,446,306 2013 850,319 607,401 1,457,720 2014 874,785 576,158 1,450,943 2015 -2019 4,753,713 2,328 ,601 7,082,314 2020 -2024 3,815,089 1,405 ,462 5,220,551 2025 -2029 2,469,934 631 ,'682 3,101 ,616 2030 -2032 1,415,701 132,750 1,548,451 TOTALS $ 16,799,265 $ 7,687,489 $ 24,486,754 The City Governmental funds have entered into capital lease arrangements for vehicles and equipment. Future payments under these lease agreements are as follows: Present Value Year Minimum Amount of Minimum Ending Future Lease Representing Lease September 30, Payments Interest Payments 2010 25 ,659 3,462 22,197 2011 25 ,659 2,363 23 ,296 2012 25 ,659 1,210 24,449 TOTALS $ 76,977 $ 7,035 $ 69 ,942 Capital assets under capital lease had original costs of $141,458 and accumulated depreciation of $141 ,458 at September 30, 2009 in the governmental activities. r NOTE8 -40- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 SUMMARY OF DEBT SERVICE REQUIREMENTS TO MATURITY (continued) BUSINESS-TYPE ACTIVITES The following is a summary of debt service requirements to maturity of long term debt of the Proprietary Funds as of September 30, 2009, including interest payments and excluding discounts and premiums related to warrant issuance: Year Ending Sept. 30, Principal Interest Total 2010 $ 700,789 698,410 $ 1,399,199 2011 724,650 675,843 1,400,493 2012 720,593 651 ,194 1,371,787 2013 749,681 625,425 1,375,106 2014 770,215 597,602 1,367,817 2015 -2019 4,311 ,287 2,672,696 6,983,983 2020 -2024 5,814,911 1,702,292 7,517,203 2025 -2026 2,800,306 314,816 3,115,122 $ 16,592,432 $ 7,938,278 $ 24,530,710 NOTE9 -41- CITY OFF AIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 BONDS PAY ABLE -COMPONENT UNITS The Airport Authority issued bonds totaling $8,845,000. The Airport Improvement Bonds, Series 2007 are dated March 15, 2007. The Bonds bear interest at a variable rate. The bonds are repriced weekly, by the remarketing agent, at a rate to maintain market value of 100% of principal. The bonds mature March 1, 2032, but have mandatory redemption requirements as presented below. The bonds are limited obligations of the Airport Authority, payable solely out of money received by the trustee from the letter of credit, provided by Allied Irish Banks, PLC, or amounts appropriated to the Authority by the City of Fairhope, Alabama. The appropriation agreement between the Authority and the City expires annually on September 30 and is renewable at the City's option. The bond rate at September 30, 2009 was 1.310% A letter of credit fee of .70% of the principal balance and a remarketing fee of .125% of principal balance is assessed in addition to the variable interest rate on the bonds. The following is a summary of debt service requirements to maturity of long term debt of the Airport Authority as of September 30, 2009, including estimated interest payments at 2.135% and excluding discounts related to bonds: Year Ending Sept. 30, Principal Interest Total 2010 $ -$ 188,841 $ 188,841 2011 188,841 188,841 2012 188,841 188,841 2013 240,000 183,717 423,717 2014 255,000 178,273 433,273 2015 -2018 1,520,000 797,743 2,317,743 2019 -2023 2,035,000 603 ,778 2,638,778 2024 -2028 2,730,000 343 ,628 3,073,628 2029 -2032 2,065,000 45 ,796 2,110,796 $ 8,845,000 $ 2,719,45 8 $ 11 ,564,458 r -42- CITY OFF AIRHOPE, ALABAMA NOTES TO Tiffi FINANCIAL STATEMENfS SEPTEMBER 30, 2009 NOTE 10 LINE OF CREDIT PAY ABLE The City has unsecured open lines of credit. The Electric Fund has a revolving line of credit with a $2,000,000 limit. The line of credit, dated July 20, 2009, bears interest at a variable rate of 65% of the One Month LIBOR Rate plus 1.63%, to be adjusted monthly with an interest rate floor of 2.28% per annum and matures July, 2010. This line of credit is available for use by the City utility operations. The City had revolving line of credit with a $2,000,000 limit that expired without renewal June, 2009. The line of credit, bore interest at 2.5% per annum and was available for use in the governmental activities. Following is the summary of activity for fiscal year 2009: Beginning balance Advances Payments Balance at September 30, 2009 NOTE 11 SALARJES-PROPRIETARY FUNDS Electric Fund $ 1,750,000 500,000 (2,250,000) $==== General Fund $900,000 (900.000) $=== The following is a summary of employees' salaries by Utility Fund for the year ended September 30, 2009: Water and Electric Natural Gas Waste Water Fund Fund Fund Total salaries $ 989,238 $ 825,071 $1,164,571 Less: Salaries capitalized for plant additions 251.311 190.336 52.687 Amount of salaries charged to operations $ 7-3 7.227 $ 634,735 $1 ,111 ,884 NOTE 12 RISK MANAGEMENT AND CONTINGENICES The City is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City obtains coverage from commercial insurance companies and effectively manages risk through various employee education and prevention programs. There were no instances where settlements exceeded insurance coverage in the last three years. -43- CITY OFF AIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 12 RISK MANAGEMENT AND CONTINGENICES ( continued) The City is a defendant in a case regarding the territorial right to provide electric service within areas annexed in recent years. The litigation stems from a dispute with the service providers regarding who may provide electrical service to these recently annexed areas under the Service Territories for Electric Suppliers Act of 1985. The parties mediated the case on October 22, 2009, at which time they reached a settlement agreement concerning their electric service territories. This settlement agreement is embodied in a written memorandum of understanding, and is subject to certain conditions including approval by the parties' respective governing bodies. The settlement agreement does not require either party to pay the other party any money. Upon consummation of the settlement agreement, the lawsuit will be dismissed, with prejudice. The City has been named as a defendant in several cases involving the improper connection of sewer lines to the City water system by another utility company. The City intends to vigorously defend its position and believes any claims will not be material and mitigated by insurance. Various other lawsuits are pending against the City. City management believes that the potential adverse impact of these claims is mitigated by insurance and will not be material to the financial statements of the City. The City receives Federal and State grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under the terms of the grant. City management believes such disallowances, if any, will be immaterial. NOTE 13 COMPENSATED ABSENCES The City accrues vacation earned by employees as well as other compensated absences with similar characteristics. Sick leave, which can be paid at termination, if certain conditions are met, is accrued based on the probability that a portion of the current employees will meet required criteria. A liability for sick leave to be paid at termination has been accrued based on estimated probability factors to years of service. The liability to employees who currently meet the criteria to receive sick leave pay has been accrued at 100% of the current hours sick leave earned at current pay rates. Accumulated unpaid vacation and sick pay are accrued when incurred in the Proprietary Funds. Amounts normally paid with expendable available financial resources are recorded in the General Fund when the obligation has matured. Employees may accumulate vacation leave without limitation, however, the maximum accumulation of sick leave is limited to 960 hours. Employees are paid 100% of their accumulated vacation upon termination. Accumulated sick leave is paid only upon retirement to employees with 25 years or more of service, at any age, and to employees with 10 years of service who have attained age sixty (60). NOTE 14 PENSION PLAN Plan Description -44- CTIY OFF AIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 The City's defined benefit pension plan provides retirement and disability benefits, cost-of-living adjustments, and death benefits to plan members and beneficiaries. The plan is affiliated with the Employees Retirement System of Alabama (RSA), an agent multiple-employer pension plan. At September 30, 2008, RSA had a total of 1,058 participating units. RSA issues a publicly available financial report that includes financial statements and required supplementary information for the plan. RSA prepares its financial statements using the accrual basis of accounting and recognizes contributions as revenues when earned. Benefits and refunds are recognized when due and payable. The report may be obtained by writing the Retirement Systems of Alabama, P. 0. Box 302150, Montgomery, Alabama 36130-2150. Substantially all employees are members of RSA Membership is mandatory for covered or eligible employees. Vested employees may retire with full benefits at age 60 (with 10 years of service) or after 25 years of service. Retirement benefits are calculated by two methods with the retiree receiving payment under the method producing the highest benefit. The methods are: ( 1) Minimum Guaranteed, and (2) Formula. The Formula method usually produces the highest benefit. Under this method, the retiree receives an amount equal to 2.0125% of their average final salary (best three of last ten years) for each year of service. Disability retirement benefits are calculated in the same manner. Pre- retirement benefits in the amount of the annual salary for the fiscal year preceding death are provided to plan members. The RSA was established as of October 1, 1945, under the provisions of Act 515, Acts of Alabama 1945, for the purpose of providing retirement allowances and other specified benefits for state employees, State police, and on an elective basis to all cities, counties, towns and quasi public organizations. The responsibility for general administration and operation of the RSA is vested in the Board of Control. Benefit provisions are established by the Code of Alabama 1975, Sections 36-27-1 through 36-27-103, as amended, Sections 36-27-120 through 36-27-139, as amended, and Sections 36- 27B-1 through 36-27B-6. Authority to amend the plan rests with the Legislature of Alabama. However, the Legislature has granted the City authority to accept or reject various cost-of-living adjustments granted to retirees. Funding Policy All full-time employees are required to contribute 5% of their annual covered salary, except law enforcement personnel who must contribute 6% of their annual covered salary. The City is required to contribute at an actuarially determined rate; the current rate is 8.92 % of annual covered payroll. The contribution requirements of plan members and the City are established and may be amended by RSA. The Schedule of Funding Progress -Employee Retirement System has been included on page 51 of the Required Supplementary Information. -45- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENfS SEPTEMBER 30, 2009 NOTE 14 PENSION PLAN (continued) Annual Pension Cost For 2009, the City's annual pension cost of $1,091,972 was equal to the City's required and actual contributions. The required contribution was determined as part of an actuarial valuation ( dated September 2008) using the entry age actuarial cost method. Amortization is determined using the level open percent method over a remaining amortization period of 19 years. The actuarial assumptions included (a) 8.0% investment rate of return, (b) projected salary increases ranging from 4.61% to 7.75% per year, and (c) no cost-of-living adjustments. Both (a) and (b) included an inflation component of 4.5%. The actuarial value of the City of Fairhope's assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a 5- year period. Trend Information Fiscal Year Funding 9/30/09 9/30/08 9/30/07 9/30/06 Annual Pension Cost (APC) $ 1,091,972 $ 985,276 $ 804,930 $ 660,444 NOTE 15 DEPOSIT AND INVESTMENT RISK Percentage ofAPC Contributed 100% 100% 100% 100% Net Pension Obligation At September 30, 2009, the City had investments in U. S. Treasury money market mutual funds through its trustee agreement for debt sinking funds. The fair value was $2,205 ,506 ($321 ,738 in governmental activities and $1,883,768 in business-type activities). The average maturity of the portfolio was 33.05 days. Investment Risk -The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk -State statutes authorize the City's investments. The City is authorized to invest in U.S. Government obligations and its agencies or instrumentalities, direct obligations of the state, SEC registered mutual funds holding like securities. The City has no investment policy that further limits investment choices. As of September 30, 2009, the City's mutual fund investments principal stability rating was AAAm as reported by Standard & Poor's. Custodial Credit Risk -The City is a participant in the Security for Alabama Funds Enhancement (SAFE) Program, a multiple financial institution collateral pool, administered by the State of Alabama. The program, by law, provides administration of pledged collateral coverage for all governments and agencies in the state and requires qualified financial institutions to provide collateral to the administrator adequate to secure all deposits of public funds in that financial institution. The State guarantees deposits identified as "public funds" will be adequately secured by insurance or collateral. Any collateral shortages of one financial institution are assessed to other member financial institutions. NOTE 16 COMMITMENTS -46- CITY OF FAIRHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 The City has various contractual commitments outstanding at year-end. The commitments under these contracts totaled $456,764. The commitments funding from governmental activities will be $54,500 and from business-type activities will be $402,264. NOTE 17 DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan permits employees to defer a portion of their salary until future years. The plan was established by and is administered by the Retirement Systems of Alabama. Any plan changes are at the discretion of the administrator. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The City makes no contributions to the plan. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the individuals who participate in the deferred compensation plan and are not subject to the claims of the City's general creditors. NOTE 18 POST EMPLOYMENT HEALTII BENEFITS Plan Description -The City provides a comprehensive medical plan to eligible retirees and their spouses through the City's group health insurance plan (the Plan), which covers both active and retired members. The Plan is a single-employer defined benefit healthcare plan administered and governed solely by the City and does not issue a publicly available financial report. Effective with the Fiscal Year beginning October 1, 2008, the City implemented Government Accounting Standards City Statement Number 45 , Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions (GASB 45), for its financial disclosure and reporting purposes. The City intends to fund the OPEB Obligation pursuant to GASB 45 to the extent the funding requirement is not met by the retiree health care premiums paid outright. During the year ended September 30, 2009, the City's portion of health care funding cost for retired employees (retiree premiums) totaled $205,208. Contribution Rates -Eligible retirees are subject to employer contributions for medical benefits equal to 90% of the premium. At September 30, 2008, the valuation date, 24 participants were receiving benefits under various provisions of the Plan. Complete plan provisions are included in the official plan documents. Employees do not contribute to their post employment benefits costs until they become retirees and begin receiving those benefits. The plan provisions and contribution rates are contained in the official plan documents. -47- CITY OFF A1RHOPE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 18 POST EMPLOYMENT HEAL TH BENEFITS ( continued) Annual Required Contribution-The City's Annual Required Contribution (ARC) is an amount actuarially determined using the Projected Unit Credit Method in accordance with GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a level percentage of pay, open amortization period of thirty years. The remaining amortization period at September 30, 2009, was 29 years. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation to the Plan: Annual required contribution Interest on net OPEB obligation Adjustment to ARC Annual OPEB cost (expense) Current year retiree premium Change in net OPEB obligation Net OPEB obligation -beginning of year Net OPEB obligation -end of year $ 611,853 611,853 (205,208) 406,645 $ 406.645 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan and the net OPEB obligation for the year ended September 30, 2009 is as follows: Fiscal Year Ended 9/30/09 Annual OPEB Cost $ 611 ,853 Percentage of Annual OPEB Cost Contributed 33.5% $ NetOPEB Obligation (Asset) 406,645 Funded Status and Funding Progress -The first and most recent actuarial valuation under GASB 45 was as of September 30, 2008. There were no assets accumulated in the Plan, however, market value will be used to value such assets. At September 30, 2008, the Actuarial Accrued Liability (AAL) was $6,740,895, which is defined as that portion, as determined by a particular actuarial cost method (the City uses the Projected Unit Credit Method), of the actuarial present value of post employment plan benefits and expenses which is not provided by normal cost. The funded ratio is developed below. Schedule of Funding Progress Actuarial Accrued UAALasa Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) (AAL) Funded Covered of Covered Valuation Assets -Enny (UML) Ratio Payroll Payroll Dated (a) Age (b) (b-a) (alb) (c) (b-a)/c 9/30/08 $ $6,740,895 $(6,740,895) 0.0% $ 11 ,189,043 60.2% -48- CITY OF FAIRHOPE, ALABAMA NOTES TO TIIE FINANCIAL STATEMENTS SEPTEMBER 30, 2009 NOTE 18 POST EMPLOYMENT HEAL TH BENEFITS ( continued) Actuarial Methods and Assumptions -The actuarial calculations are based on the types of benefits provided under the terms of the substantive plan (the plan as understood by the employer and the plan members) at the time of the valuation and on the pattern of sharing costs between the City and its plan members to that point. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations on the pattern of cost sharing between the City and plan members in the future. Consistent with the long-term perspective of actuarial calculations, the actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial liabilities and the actuarial value of assets. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The following assumptions were made: Turnover Rate -An age-related turnover scale based on actual experience has been used. Retirement Rate -Based on past experience, it has been assumed that entitlement to benefits will commence at the earlier of: first, completion of 25 years of service, regardless of age; and, second, attainment of age 60 and completion of 10 years of service. Health Care Cost Trend Rate -The expected rate of increase in medical cost is based on an 11 % projected increase for 2008 graduated down to an ultimate annual rate of 5% for 2016 and beyond. Mortality Rate -Life expectancies were based accordingly to the 1994 Group Annuity Mortality Table set forward three years for males and set forward two years for females. Special tables are used for the period after disability retirement. Investment Return Assumption (Discount Rate) -Based on the assumption that the ARC will be funded, a 4% annual investment return has been used in this valuation. Inflation Rate and Projected Salary Increase -A rate of 4.5% has been used for both inflation and projected salary increases. Method of Determining Value of Benefits -The "value of benefits" has been assumed to be the portion of the premium after retirement date expected to be paid by the City for each retiree and has been used as the basis for calculating the actuarial present value of 0PEB benefits to be paid. NOTE 19 OPERATING LEASES The City holds various leases with entities for use of City property. Most of these leases are monthly and insignificant. One lease for a portion of the new library is leased to a local college at $2,000 per month until December 2009. In addition, the City rents certain facilities to groups for events and activities on a per use basis. NOTE 20 LEASE EXPENSE -49- CITY OFF AIRHOPE, ALABAMA NOTES TO Tiffi FINANCIAL STATEMENTS SEPTEMBER 30, 2009 The City rents equipment, primarily, on monthly arrangements. The leases are not significant to the operations of the City. NOTE 21 UPCOMING ACCOUNTING STANDARD IMPLEMENTATION The City intends to implement the guidance of Governmental Accounting Standard Number 54 "Fund Balance Reporting and Governmental Fund Type Definitions" effective October 1, 2010. The Standard is to enhance the usefulness of fund balance infonnation by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. This hierarchy will consist of five categories of fund balance: nonspendable, restricted, committed, assigned and unassigned. ( REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMNT'S DISCUSSION AND ANALYSIS -50- REQUIRED SUPPLEMENT ARY INFORMATION CITY OF FAIRHOPE, ALABAMA BUDGET ARY COMPARISON SCHEDULE -GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2009 Variance Budgeted Amounts Actual with Final Original Final Amounts Budget REVENUES Local truces $ 6,054,100 $ 6,104,100 $ 6,938,380 $ 834,280 Licenses and permits 2,833,500 2,106,500 2,058,105 (48,395) Fine and forfeitures 310,000 225,000 224,022 (978) Intergovernmental 304,200 675,900 749,400 73,500 Interest and rents 236,000 209,500 207,939 (1,561) Charges for services 4,728,000 4,428,000 4,450,711 22,711 Golf course revenue 1,720,105 964,500 959,730 (4,770) Contributions from Public Library Board 71,000 71,000 Other revenue 365,300 205,400 277,015 71 ,615 Total revenues 16,55 1,205 14,989,900 15,936,302 946,402 EXPENDITURES General government 5,130,100 5,526,030 5,920,151 (394,121) Sanitation 1,606,400 1,411,760 1,475,035 (63 ,275) Police 3,809,400 3,786,401 3,922,163 (135,762) Fire 798,000 753,287 765 ,645 (12,358) Airport Authority , 429,800 254,800 242,090 12,710 Streets 2,641,500 2,422,791 2,608,531 (185,740) Adult recreation 482,300 410,637 400,494 10,143 Recreation 953,200 912,271 867,174 45,097 Golf 1,389,000 1,201,086 1,303,135 (102,049) Public Library Board 530,000 530,000 530,000 Other 60,000 60,000 60,000 Debt service 518,000 664,900 519,593 145,307 Capital outlay 451 ,000 146,536 265,033 (118 ,497) Total expenditures 18,798,700 18 ,080,499 18,879,044 (798,545) Excess of Revenues over (under) Expenditures (2 ,247,495) (3,090,599) (2,942,742) 147,857 Other financing sources (uses) Proceeds from issuance of debt 3,368,260 3,368,260 Cost from issuance of debt (78,364) (78,364) Transfer to Debt Service Fund to defease warrants (3,289,896) (3,289,896) Transfers in 4,090,000 4,444,136 5,094,136 650,000 Transfers out (1,808,000) (1 ,500,000) (1,158,102) 341 ,898 Total other financing sources (uses) 2,282,000 2,944,136 3,936,034 991 ,898 NET CHANGE IN FUND BALANCE $ 34,505 $ (146,463) 993 ,292 $ 1,139,755 FUND BALANCE -BEGINNING OF YEAR 1,083,383 FUND BALANCE -END OF YEAR $ 2,076,675 See independent auditors' report r -51- REQUIRED SUPPLEMENT ARY INFORMATION CITY OF FAIRHOPE, ALABAMA SCHEDULE OF FUNDING PROGRESS -EMPLOYEE RETIREMENT SYSTEM SEPTEMBER 30, 2009 Actuarial Accrued UAALasa Actuarial Liability Unfunded Percentage Actuarial Value of (AAL) AAL Funded Covered of Covered Valuation Assets Entry (UAAL) Ratio Payroll Payroll Date (a) Age(b) 1 b-a ~ (c) (b-1)/c) 9/30/08 $22,906,152 $30,483,488 $7,577,336 75.1% $11,367,443 66.7% 9/30/07 $21,712,337 $28,365,980 $6,653,643 76.5% $10,431,006 63.8% 9/30/068 $19,895,139 $26,367,319 $6,472,180 75.5% $9,530,701 67.9% 9/30/05 $18,565,922 $23,773,976 $5,208,054 78.1% $9,706,576 52.9% 9/30/047 $17,075,176 $ l 9,888,433 $2,813,256 85.9% $7,667,270 36.7% 9/30/036 $16,083,240 $18,576,805 $2,493,565 86.6% $7,555,473 33.0% 9/30/025 $15,177,087 $16,920,564 $1,743,477 90.0% $7,190,278 24.0% 9/30/01 4 $14,577,706 $15,046,428 $ 468,722 96.9% $6,617,043 7.1% 9/30/00 $13,641,601 $12,953,210 $ (688,391) 105.3% $6,068,744 (11.3%) 9/30/99 $12,431,781 $11,674,149 $ (757,632) 106.5% $5,565,025 (13.6%) 9/30/983 $) 1,358,040 $10,577,344 $ (780,696) 107.4% $4,958,496 (I 5.7%) 9/30/972 $ I 0,398,022 $ 9,707,826 $ (690,196) 107.1% $4,649,493 (14.8%) 1 Reflects liability for cost of living benefit increases granted on or after October I, l 978. 2 Reflects change in asset valuation method to market value. 3 Reflects change in asset valuation method to market related val ue (as of September 30, 1998). 4 Reflects changes in actuarial assumptions (as of September 30, 2001 ). 5 Reflects effect of DROP if unit elected to enroll prior to June 20, 2003. 6 Reflects effect of DROP if unit elected to enroll prior to May 18, 2004. 7 Reflects effect of DROP if unit elected to enroll prior to August 4, 2005. 8 Reflects changes in actuarial assumptions. See independent auditors' report. -52- CITY OF FAIRHOPE, ALABAMA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2009 NOTE I BUDGETS AND BUDGETARY ACCOUNTING Although no legal requirement to establish a budget exists, the City Council follows these procedures in establishing the budgets: (1) Each September the Mayor submits to the City Council a proposed working budget for the fiscal year commencing the following October 1. The budget includes proposed expenditures and the means of financing them for the upcoming year. Line item budgets are used for administrative control. The level of control for the detailed budgets is at the department head/function level. (2) Council meetings are conducted to obtain taxpayer comments. (3) The budget is enacted through council action. (4) Reports are submitted to the City Council, showing approved budget and actual operations. (5) The Mayor is authorized to transfer budgeted amounts within departments within any fund; however, any revisions that alter the total expenditures of any fund or transfer of funds between departments must be approved by the City Council. (6) Formal budgetary integration is employed as a management control device during the year for the General Fund. (7) Budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). (8) Budgetary data, if any, for Capital Project Funds are budgeted over the life of the respective project and not on an annual basis. (9) All appropriations lapse at year-end. NOTE2 -53- CITY OF FAIRHOPE, ALABAMA NOTES TO REQUIRED SUPPLMENTARY INFORMATION SEPTEMBER 30, 2009 EXCESS EXPENDITURES The following are General Fund expenditures in excess of final budget amounts. General Government Salaries-Council Salaries-Judge & City Clerk Salaries-Building & Zoning Salaries-Beach Labor Training/Schoolffravel Legal Fees City Computer Expense Office Supplies General Supplies General Maintenance Telephone Dues/Memberships/Subscriptions Bad Debts Equipment & Vehicle Repair Credit Card Processing Fees Printing Mileage Reimbursement-Mayor Publications Newspapers Election Expense Book & Sidewalk Brick County Prisoner Expense Eastern Shore Chamber of Commerce Civic Center Maintenance Greeno Road Pilot Program Grant Expenditures Grant Expenditures-ALDOT Spring Run Dog Park-2008 Project Sales Tax Collection Fees Police Department Salaries Employee Medical Insurance Training/School/Travel General Supplies General Maintenance Gasoline & Oil Equipment & Vehicle Repair NCIC Data System Correction Fund Expense DEA Funds Purchases Fire Department Fire call Payments Employee Medical Insurance Casualty/Workers Compensation Insurance General Supplies Gasoline &. Oil Equipment & Vehicle Repair Purchases-Vehicles & Equipment Excess Expenditures 292 2,969 36,772 2,968 9,198 225,691 5,043 2,288 6,685 13,310 378 3,441 103,841 1,120 1,902 334 1,246 4,348 356 815 3,696 1,500 8,629 53,61 I 19,302 22,875 2,332 13,773 83,250 4,142 7,024 I 0,152 185 6,280 19,995 6,000 I 0,152 19,120 2,320 2,600 11,056 7,780 2,010 I 5.059 23,268 Recreation Department General Supplies General Maintenance Gasoline & Oil Equipment & Vehicle Repair Uniforms Adult Recreation Department Casualty/Workers Compensation Expense Golf Expense Office Expense Street Department Casualty/Workers Compensation Expense General Supplies Gasoline & Oil Equipment & Vehicle Repair Sidewalks Sanitation Department Casualty/Workers Compensation Expense General Supplies Gasoline & Oil Equipment & Vehicle Repair Landfill Charges Golf Department Salaries-Club House Employee Payroll Taxes Employee Retirement Expense Employee Medical Insurance General Supplies General Maintenance Gasoline & Oil Equipment & Vehicle Repair Advertising & Promotion Material & Landscaping Cost-Pro Shop Sales Staff Agencies & Appropriations Airport Appropriation-Debt Service Capital Outlay Capital Improvements-Golf Purchases-Vehicles & Equipment-Police Debt Service Lease Purchase GOW 99 Cost to Refinance Transfers to Debt Service-Defease GOW I 999 Transfers to Capital Projects Fund Excess Expenditures 16,690 351 787 6,679 1,424 177 134 196 4,334 600 3,870 42,630 4,032 4,881 6,639 2,434 36,536 37,401 11,359 588 1,843 88 1 29,040 6,784 3,528 2,674 2,047 38,307 19,369 290 92,079 6,649 11,799 78,364 3,289,896 2,576 r OTHER SUPPLEMENTARY INFORMATION ( INDIVIDUAL FUND FINANCIAL STATEMENTS DISCRETELY PRESENTED COMPONENT UNITS ASSETS Cash and cash equivalents Due from City of Fairhope TOTAL ASSETS LIABILITIES -54- CITY OFF AIRHOPE, ALABAMA FUND BALANCE SHEET FAIRHOPE PUBLIC LIBRARY BOARD SEPTEMBER 30, 2009 Accounts payable and accrued expenses FUND BALANCES Reserved for capital projects Unreserved Total fund balances TOT AL LlABILITIES AND FUND BALANCES See independent auditors' report. ,. $ 79,890 44,167 $ 124,057 $ 3,275 39,562 81 ,220 120,782 $ 124,057 -55- CITY OF FAIRHOPE, ALABAMA RECONCILIATION OF GOVERNMENTAL FUND BALANCE TO NET ASSETS OF GOVERNMENT AL ACTIVITIES FAIRHOPE PUBLIC LIBRARY BOARD SEPTEMBER 30, 2009 Fund balance as reported on page 54 Net Assets reported for governmental activities in the Statement of Net Assets are different from Fund Balance for governmental activities because: Capital assets used in governmental activities are financial resources and therefore are not reported in fund financial statements Depreciation is provided for the above capital assets in government-wide reporting, but is not in fund financial statements. Net Assets of Governmental Activities as reported on page 23 See independent auditors' report. $ $ 120,782 332,937 (201 ,277) 252,442 -56- CITY OF FAIRHOPE, ALABAMA ST A TEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FAIRHOPE PUBLIC LIBRARY BOARD FOR THE YEAR ENDED SEPTEMBER 30, 2009 REVENUES Fines and lost books $ Donations, gifts, memorials and bequests State aid Lease income Payments from City of Fairhope Miscellaneous Total revenues EXPENDITURES Salaries Payroll taxes Employees' retirement Books, periodicals, audio visual Supplies Janitorial service Professional fees Consultant and fundraising Telecommunications Payments to City of Fairhope for Library Debt Capital outlay Maintenance Friends expenses Miscellaneous Total expenditures Net change in fund balance Fund balance -beginning of year Fund balance -end of year $ See independent auditors' report. 21,993 145,894 16,635 6,500 530,000 12,794 733,816 398,723 30,502 12,178 112,047 13,899 18,664 7,974 5,922 468 71,000 23,351 29,782 4,246 13,704 742,460 (8,644) 129,426 120,782 CITY OFF AIRHOPE, ALABAMA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENT AL FUNDS TO THE STATEMENT OF ACTMTIES FAIRHOPE PUBLIC LIBRARY BOARD FOR THE YEAR ENDED SEPTEMBER 30, 2009 Net change in fund balances -total governmental funds, page 56 Amounts reported for governmental activities in the Statement of Activities are different from the Statements of Revenues, Expenditures and Changes in Fund balances -Governmental Funds because: Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. Capital outlays for the year Depreciation expense for the year Change in Net Assets of Governmental Activities, page 24 See indepen dent auditors' report. $ $ (8,644) 23 ,351 (26,698) (11 ,991) ASSETS Cash and cash equivalents TOT AL ASSETS LIABILITIES -58- CITY OF FAIRHOPE, ALABAMA FUND BALANCE SHEET FAIRHOPE AIRPORT AUTHORITY SEPTEMBER 30, 2009 Accounts payable and accrued expenses FUND BALANCES Reserved for capital projects Unreserved Total net assets TOT AL LIABILITIES AND NET ASSETS See independent auditors' report. $ 588,697 $ 588,697 $ 247,600 341 ,097 588,697 $ 588,697 -59- CITY OFFAIRROPE, ALABAMA RECONCILIATION OF GOVERNMENT AL FUND BALANCE TO NET ASSETS OF GOVERNMENTAL ACTIVITIES FAIRHOPEAIRPORTAUTHORITY SEPTEMBER 30, 2009 Fund balance as reported on page 58 $ Net Assets reported for governmental activities in the Statement of Net Assets are different from Fund Balance for governmental activities because: Capital assets used in governmental activities are financial resources and therefore are not reported in fund financial statements Depreciation is provided for the above capital assets in government-wide reporting, but is not in fund financial statements. Cost associated with warrant issuance are expensed in the current period in Fund Financial Statements Warrant Issuance costs, net Long-term liabilities, including warrants payable, capital lease obligations and notes payable are not due and payable in the current period and therefore are not reported in fund financial statements (net of discounts $59,483) Net Assets of Governmental Activities as reported on page 23 See independent auditors' report. $ 588,697 24,310,936 (2,200,948) 166,057 (8,785,517) 14,079,225 -60- CITY OF FAIRBOPE, ALABAMA STA TEMENI OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FAIR.HOPEAIRPORTAUTHORITY FOR TIIB YEAR ENDED SEPTEMBER 30, 2009 REVENUES Fuel sales and rentals Interest income Federal grant revenue Payments from City ofFairhope Total revenues EXPENDIT1JRES Festival of Flight costs Insurance Legal and professional Maintenance Capital outlay Debt service interest Other Total expenditures Net change in fund balance Fund balance -beginning of year Fund balance -end of year See independent auditors' report. $ $ 141,228 11, l 03 165,492 242,090 559,913 3,000/ 31,604 ✓ 21,590✓ 71,7391 21,984'/ 216,627 14,232 380,776 179,137 409,560 588,697 -61- CITY OFF AIRHOPE, ALABAMA RECONCILIATION OF THE STATEMENT OF REVENUES , EXPENDITURES AND CH.P.NGES lN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FAIRHOPE AIRPORT AUTHORITY FOR THE YEAR ENDED SEPTEMBER 30, 2009 Net change in fund balances -total governmental funds, page 60 Amounts reported for governmental activities in the Statement of Activities are different from the Statements of Revenues, Expenditures and Changes in Fund balances -Governmental Funds because: Amortization of bond costs and discounts is not recorded in fund level statements Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. Capital outlays for the year Depreciation expense for the year Change in Net Assets of Governmental Activities, page 24 See ind ependent auditors' report. $ $ 179,137 (10,061) 21 ,984 (226,777) (35,717) Road project Library project -62- CITY OF FAIRHOPE, ALABAMA SCHEDULE OF CAPITAL PROJECTS EXPENDITURES FOR THE YEAR ENDED SEPTEMBER 30, 2009 Football & cbeerleading facility Recreation center Golf Course Project NRCS Hurricane Gustav See independent auditors' report. $ 26 ,350 28,997 15,886 1,287 ,024 107 ,142 45,402 $ 1,510,801 r -63- CITY OF FAIRHOPE, ALABAMA SCHEDULE OF INFORMATION REQUIRED BY BOND INDENTURES SEPTEMBER 30, 2009 Natural Water and Electric Gas Waste Water Fund Fund Fund A. Utility customers at September 30, 2009 were as follows: Number of customers 6,3 97 8,866 23,917 Number of metered customers 6,3 97 8,866 23,917 Number of unmetered customers Number of waste water customers 8,564 B. Annual Net Income of Utility Operations Natural Water and Electric Gas Waste Water Fund Fund Fund Income from operations $3,358,772 $3,037,100 $2,050,048 Add: Depreciation and amortization 558,915 282,950 960,968 Interest income 22,572 10,272 27,260 Annual net income as prescribed by debt covenants $3,940,259 $3,3 30,322 $ 3,038,276 C. Utility fund casualty insurance coverage on electrical sub stations, natural gas facilities, water and waste- water facilities is included in a blanket policy with the Governmental Funds general capital assets building and facilities. The City of Fairhope, Alabama is the named insured on all policies. Comprehensive general liability -expires January 2010 Buildings and facilities -expires April 20 I 0 A u1omobile -expires April 20 I 0 Liability Uninsured motorist Public officials errors and omissions liability -expires Janu ary 20 I 0 D. The City ha s complied with all requirements of the respective bond indentures. Total $ 8,445,920 l ,802,833 60,104 $ I 0,308,857 $ 5,000,000 67,274,7 30 1,000,000 50,000 5,000,000 1996 1999 Caei1al lrnerovement Warrant Fund B,loncc 10/01/08 s 50.000 s 95.046 s Deposits 149 3.482.494 Disbursements (149) (3,577.540) Balance 9/30/09 50.000 s s -64- Cll>' OF FAIRHOPE. ALABAMA SUMMARY OF DEPOSITS. WITHDRAWALS AND BALANCES OF SELECTED TRUST ACCOUNTS AS REQUIRED UNDER CERTAIN TRUST INDENTURES SEPTEMBER 30. 2009 1999 2002 2002 2002 2003 2003 Reserve Fund Warrant Fund Warrant Fund Reserve Fund Reserve Fund Warrant Fund I 53.913 s I 12.407 s 155.559 s 675.774 s 431.097 s 357.258 s 330.050 453.311 2.006 1.284 309.196 (153.913) (331.650) (457.373) (5,780) (148,531) (429,963) s 110,807 s 151,497 s 672,000 s 283,850 s 236,491 s 2005 2007 2009 2009 Warrant Fund Warrant Fund Warrant Fund Reserve Fund 205.582 s 179.688 s s S44.534 528.604 83.962 125.000 (427.051) (531.571) (7.887) 323.065 s 176,721 s 76,075 s 125,000 r ( STATISTICAL SECTION THIS PAGE INTENTIONALLY LEFT BLANK -65- STATISTICAL SECTION This part of the City of Fairhope, Alabama's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well-being ha ve changed over time. Revenue Capacity Th ese schedules contain information to help the reader assess the government's most significant local revenue sources, the sales tax and the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the go vernment's current levels of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicalOrs to help the reader understand the environment within which the government's financial activities take place. Operating Jnformation These schedules contain service and infrastructure data to help the reader understand how the information in th e government's financial report relates to the services the government provides and the activities it performs. Page 66-71 72-77 78-81 82-83 84-86 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. C' TIDS PAGE INTENTIONALLY LEFT BLANK r ' Govenunental activities Invested in capital assets, net of related debt Restricted Unrestricted Total governmental ac tivities net assets Business-type activities Invested in capital assets, net of related debt Restricted Unrestricted Total business-type activities net assets Primary govenunent Invested in capital assets, net of related debt Restricted Unrestricted Total primary govenunent net assets -66- CITY OF FAIRHOPE, ALABAMA NET ASSETS BY COMPONENT LAST SEVEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2003 2004 2005 2006 $ 54,678 ,761 $57,031 ,298 $60,149,769 $67,742,360 1,695 ,559 1,788,014 1,908,452 787,538 {12,3222 273,964 88,053 {1,195) $ 56,361,998 $59,093,276 $62,146,274 $68,528,703 $ 11,617,954 $17,337,442 $15,801,139 $19,307,068 1,652,831 1,991,871 2,058,968 2,089,642 8,962,015 2,949,282 5,082,800 3,334,264 $ 22,232,800 $22,278,595 $22,942,907 $24,730,974 $ 66,296,715 $74,368,740 $75,950,908 $87,049,428 3,348,390 3,779,885 3,967,420 2,877,180 8,949,693 3,223,246 5,170,853 3,333,069 $ 78,594,798 $81,371,871 $85,089,181 $93,259,677 2007 $61,450,916 1,073,262 54,300 $62,578,478 $23,076,992 2,106,516 2,105,886 $27,289,394 $84,527,908 3,179,778 2,160,186 $89,867,872 The City implemented GASB Statement number 34 fiscal year 2003. Therefore, net asset information is not available years prior. 2008 2009 $67,338,065 $66,295,379 847,580 1,462,430 (84,7092 165,029 $68,100,936 $67,922,838 $24,573,181 $24,210,082 2,092,174 1,883,768 1,422,972 3,691,056 $28,088,327 $29,784,906 $91,911,246 $90,505,461 2,939,754 3,346,198 1,338,263 3,856,085 $96,189,263 $97,707,744 Expenses Governmental activities: General Public safety Police Fire Public works Sanitation Street Public Library Board Airport Recreation Adult Recreation Golf fnterest on long-tenn debt Total governmental activities expenses Business-type activities: Natural gas Electric Water and wastewater Golf Total business-type activities expenses Total primary government expenses Program Revenues Governmental activities: Charges for services: General Police Sanitation Recreatioo Adult Recreation Golf Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business-type activities: Charges for services: Gas Electric Water and wastewater Golf course Total business-type activities program revenues Total primary government program revenues -67- CITY OF FAIR.HOPE, ALABAMA CHANGES IN NET ASSETS LAST SEVEN FISCAL YEARS (accrual basis of accounting) 2003 2004 2005 Fiscal Year 2006 $ 2,493,723 $ 3,674,382 $ 2,679,665 s 3,873,823 2,316,492 2,683,124 3,202,753 3,482,683 572,709 559,002 550,602 692,972 826,924 922,013 990,51 I 1,123,517 5,208,843 3,488,870 6,767,426 4,653,792 300,451 341,789 355,908 336,823 166,760 98,890 95,272 149,179 448,782 518,126 596,686 645,154 274,802 281,383 305,018 321,557 673,220 526,835 503,428 475,699 13,282,706 13,094,414 16,047,269 15,755,199 4,714,305 4,891,447 5,345,092 6,329,438 10,406,720 10,428,908 11,213,904 12,842,542 4,521,100 4,756,900 5,255,779 5,682,694 1,154,390 1,278,737 1,320,403 1,476,373 20,796,515 21 ,355,992 23,135,178 26,331,047 $34,079,221 $ 34.450,406 $39,182,447 $42,086.246 $ 1,396,101 $ 1,637,995 $ 2,098,805 $ 3,726,334 267,834 249,181 325,728 354,504 824,893 772,645 749,301 1,252,282 28,736 90,954 70,665 73,975 43,677 44,608 40,019 41,590 130,119 1,453,233 3,472,502 3,065,387 2,392.663 2,325,885 3,792,402 4,861,100 5,084,023 6,574,501 10,549.422 13.375,172 5,995,994 6,330,45 I 6,606,396 7,112,944 12,196,246 11,918,793 12,497,288 14,683,254 5,603,119 7,119,904 7,330,152 8,348,064 1,250,380 1,259,510 1,233,703 1,527,311 25,045,739 26,628,658 27,667.539 31,671 ,573 $ 30.129,762 $ 33.203,159 $38,216,961 $45,046,745 2007 s 5,540,860 3,789,666 781,696 1,479,374 3,757,204 594,378 397,183 819,051 390,125 624,883 18,174,420 5,948,144 14,029,975 6,387,739 1,544,528 27,910,386 $46,084,806 $ 5,862,11 8 362,441 1,294,033 75,592 34,534 631 ,133 8.526,591 16,786,442 7,388,531 16,658,326 8,669,895 1,505,21 1 34 ,221,963 $ 51,008,405 The City implemented GASB Statement number 34 fiscal year 2003. Therefore, net asset information is not available years prior. (continued) 2008 2009 $ 6,392,335 $ 6,536,802 4,0ll,091 4,090,851 843,469 878,148 1,564,126 1,657,615 3,671,572 4,308,575 771 ,373 760,174 545,000 242,090 900,759 1,031,886 459,961 438,442 1,292,200 ' 743,451 878,534 19,903,137 22,115.317 6,709,491 5,349,209 16,006,139 I 5,540,148 6,502,942 6,803,566 1.713,486 30.932,058 27,692,923 $ 50.835.195 $ 49,808,240 $ 5,952,299 $ 5,140,160 252,838 224,022 1,331,617 1,368,656 83,919 130,740 32,791 36,316 847,016 206,012 87,416 7.310,387 384,358 15.169,863 8.218.684 7,841,853 8,341 ,855 17,777,703 18,800,459 8,166,344 8,194,949 1.487,811 35.273,711 35.337.263 $50,443.574 $ 43.555.947 Net (expense)/revenue Governmental activities Business-type activities Total primaiy government net expense General Revenues and Other Changes in Net Assets Governmental activities: Taxes Property taxes Sales tax Liquor taxes Lodging taxes Other Intergovernmental Investment earnings Other Transfer of Golf Fund to Governmental Activities Transfers in/( out) Total government activities Business-type activities: Investment earnings Transfer of Golf Fund to Governmental Activities Transfers. in/( out) Total business-type activities Total primary government Change in Net Assets Governmental activities Business-type activities Total primary government -68- CITY OF FAIRHOPE, ALABAMA CHANGES IN NET ASSETS LAST SEVEN FISCAL YEARS (accrual basis of accounting) 2003 2004 2005 Fiscal Year 2006 $ (8,198,683) $ (6,519,913) $ (5,497,847) $ (2,380,027) 4,249,224 5,272,666 4,532,361 5,340,526 $ (3,949,459) $ (1,247,247) $ (965,486) $ 2,960,499 $ 2,278,650 $ 2,674,204 $ 2,710,256 $ 3,159,187 299,681 3 I 7,899 352,827 347,415 362,860 449,079 196,224 27,152 100,554 130,305 124,738 288,487 243,469 325,557 522,196 328,868 290,659 327,687 394,006 4,613 107,685 205,060 230,691 4,360,675 5,330,481 4.058,380 3,787,999 7,588,126 9,427,81 I 8.559,151 8,762,456 176,061 103,610 190,330 235,538 {4,360,675) (5,330,481} (4,058,380) (3,787,999) (4,184,614) (5.226,871) (3.868.050) (3,552.461) $ 3,403.512 $ 4,200.940 $ 4,691,101 $ 5,209,995 $ (610,557) $ 2,907,898 $ 3,061,304 $ 6,382,429 64,610 45,795 664.311 1,788,065 $ (545,947) $ 2.953,693 $ 3.725.615 $ 8.170,494 2007 $ (1,387,978) 6,311,577 $ 4,923,599 $ 3,589,489 373,794 420,024 138,857 472,667 508,558 251 ,476 (10,317,112) (4,562.247) 266,888 (4,020,046) (3,753,158) $ (8 ,3 I 5,405) $ (5,950,225) 2,558,419 $ (3,391,806) The City implemented GASB Statement number 34 fiscal year 2003. Therefore, net asset infonnation is not available years prior. 2008 2009 $ (4,733,274) $(13,896,633) 4,341 ,653 7,644,340 $ (391 ,621) $ (6,252,293) $ 4,631,476 $ 4,939,840 1,003,864 396,196 385,411 495,850 474,852 145,836 134,413 293,007 436,472 340,530 225,860 294,469 109,958 913 ,729 3,658,368 5,094,136 10,255,732 13,718,535 115,648 60,104 (913,729) (3,658,368) (5,094,136) (3,542,720) (5,947,761) $ 6,713,012 $ 7,770,774 $ 5,522,458 $ (178,098) 798,933 1,696,579 $ 6,321,391 $ 1,51 8,481 Fiscal Year 2003 2004 2005 2006 2007 2008 2009 $ Sales Tax 1,003,864 $ Ad Va lorem Tax 1,953,186 $ 2,328,984 2,268,195 2,639,610 3, I 03 ,284 4,143,286 4,424,103 -69- CITY OF FAIRHOPE, ALABAMA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST SEVEN FISCAL YEARS (accrual basis of accounting) Beer, Wine Automobile and Liquor Cigarette Lodging Tax Tax Tax Tax 325,464 $ 299,681 $ 26,941 $ 345,220 317,899 100,379 362,860 442,061 352,827 130,168 449,079 519,577 347,415 124,606 196,224 486,205 373,794 138,754 420,024 488,190 396,080 145,836 495,852 515,737 385,411 134,297 474,852 The City implemented GASB Statement number 34 fiscal year 2003. Therefore, governmental activities information is not available years prior. Dog Tax $ 211 175 137 107 103 I 14 116 $ Burglar Alarm Tax 25 $ Total 2,605,483 3,455,517 3,642,467 3,827,539 4,522,164 5,669,358 6,938,380 l -70- CITY OF FAIRHOPE, ALABAMA FUNDBALANCESOFGOVERNMENTALFUNDS (modified accrual basis of accounting) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 General fund Reserved $ $ $ $ $ $ $ $ $ $ 501,932 Unreserved (8,283) 21,189 369,032 382,274 421,331 1,033,668 1,087,642 1,703,619 1,083,383 1,574,743 Total general fund $ ~8,283} $ 21,189 $ 369,032 $ 382,274 $ 421,331 $1,033,668 $ 1,087,642 $ 1,703,619 $ 1,083,383 $2,076,675 All other governmental funds Reserved $1,744,104 $1,665,750 $ 4,438,497 $ 558,630 $ 377,983 $ 272,950 $ 235,348 $ 456,957 $ 470,671 $ 350,987 Unreserved, reported in: Special revenue funds 107,85 1 161,307 169,668 92,201 143,257 227,109 257,881 311,553 66,907 59,142 Capital projects funds 2,972,957 1,263,203 863,518 876,358 1,219,106 1,602,259 263,202 3,892,524 2,070,337 550,369 Total all other governmental funds $ 4,824,912 $ 3,090,260 $5,471,683 $1,527,189 $ 1,740,346 $2,102,318 $ 756,431 $4,661,034 $ 2,607,915 $ 960,498 -71- CITY OF FAIRHOPE, ALABAMA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS (modified accrual basis of accounting) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 REVENUES Local taxes $ 2.174.392 $ 2.366.153 $ 2.513.172 $ 2.60S.483 s 3.4S5.SI 7 s 3.642.467 $ 3.827.S64 $ 4.S22.164 $ S.669,3S8 s 6.938.380 Licenses and pennits 830.384 1.046.440 1.224.196 1.363. 78S 1.S27.160 2,055,861 3.401.207 2,996.213 2,729.209 2,058.105 Fines and forfeitures 190.768 221.864 209.233 267.834 249.181 32S.728 354.504 362.441 2S2.838 224,022 Intergovernmental 1.129.879 656.440 1.574.34S 2,336. 19S 3.S98.224 6.S14.824 7.319,833 3.167.141 1.826,Sl 7 837,246 Contribution from Public Library Bd 1.500,000 1.128,850 685,003 208,931 71,000 Interest and rents 651.293 517,064 315.162 328.868 290,659 327.686 394,009 377.743 340.530 225,861 Charges for services 643. 136 667.705 6~3.445 704.228 735.311 792.245 1.577.409 4,149,905 4,610,307 4,450,711 Assessments 425.469 256,060 243.251 182.764 122,170 124.582 39,199 1.831 Golf course revenue 959.730 Olher 305,320 277,022 310,159 258.351 391,478 315,745 343.588 492 419 411,179 277 015 Total revenues 6,350,641 6,008,748 7.072.963 8.047,508 10,369,700 15,599,138 18,386,163 16,754,860 16,048,869 16,042,070 EXPENDITURES General govenunent 3,358.804 2,049.471 2,387,201 2.353.659 3.595.220 2.412.693 2.731.819 5,090.777 6,318.322 5,948,479 Sanitation 802.549 688.238 836.798 745.802 861.317 929,815 960.328 1,254.694 1.405.774 1.475.035 Police 1.590.230 1.575.277 1.845.698 2.124.786 2.476.353 2,881.293 3.110.086 3,405,687 3.913.015 3,922.163 Fire 343.432 359.786 396.772 372.263 366.421 492.552 576.191 619.434 707,513 765,645 Airport 10.412 20.090 10.850 6,895 12,742 9,124 63,031 397.183 545,000 242,090 Street 2.044.167 2.095.209 2.167.030 4.159.154 2.453.144 5,636,288 3,580.189 2,552,328 2,554,959 2,704,242 Recreation 3 I 0.730 331.712 324,385 366.531 396.660 472.129 513.503 658.837 785.425 867.174 Adult recreation 208.134 191.030 208.020 231.615 238,007 261.569 277.808 328,744 431.481 400,494 Golf 1,303.135 Capital outlay 2,314.640 3,596.843 4,146,979 2,544.947 4,131,361 14,308,234 6,054,830 3,227,604 1,775,834 Debt service: Principal 763.810 745,891 749.567 891.680 712.321 1.288.488 835.627 4.412.690 2.424,796 863,329 Interest 408.300 376.379 337,944 666,600 532,508 512,025 482.436 532,687 802,140 809,715 Bond issuance costs 138,476 Public Library Board 265,178 286.205 297.147 300.450 288.400 330,806 336.823 396,000 504,560 530,000 Other 60,000 60,000 60.000 60 000 60,000 Total expenditures 10,105,746 11,033,928 13,158,255 16,366.414 14.478 040 19,418,143 27,836,075 25,902,367 23,680,589 21,667,335 Excess (deficiency) of revenues over expenditures (3,755.105) (5,025,180) (6,085,292) (8,318,906) (4,108,340) (3,819,005) (9,449,912) (9,147,507) (7,631,720) (5,625,265) OTHER FINANCING SOURCES (USES) Transfers in 3,435.320 4,167.792 4.654,781 5.293.525 5,561.528 4,876.111 5,325.589 4.897,503 5.228.182 9,542,134 Proceeds from issuance of debt 5,386.930 126.903 734.934 4.370.000 9,692,000 1,300,000 3,368,260 Cost from iss uance of debt (78.364) Payment to Defeased Warrants Escrow Agent (3.412.892) Transfer to Debt Service to defease warrants (3,289,896) Warrant discount (620.107) (43.956) Transfers out (908,208) (847,792) (706,969) (932,851) (1,200,974) (817,731) (1,537,590) (877,457) (1 ,569,814} (1,158,102} Total other financing sources (uses) 2,527,112 3.320.000 8,714,635 4,487,577 4,360,554 4 793,314 8,157,999 13,668,090 4,958,368 4971140 Net change in fund balance $ ! t,227,993) $ !1,705,180) $ 2,629,343 $ (3,831,329) $ 252,214 $ 974,309 $ (1,291,913) $ 4,520,583 $ (2,673,352) $ (654,125) Debt service as a percentage of noncapital expenditures 11.6% 12.9% 11.4% 12.8% 10.4% 11.8% 9.7% 24.9% 15.8% 8.4% -72- CITY OF FAIRHOPE, ALABAMA ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OFT AXABLE PROPERTY LAST TEN FISCAL YEARS Fiscal Total Estimated Year Less: Total Taxable Direct Actual Ended Residential Commercial Industrial Tax Exempt Assessed Tax Taxable September 30 Property Property Property Real Property Valu e Rate Value 2000 $ 43,946,700 $ 1,642,352 $ 88,786,340 $ 23,011,780 $ 111,363,612 $ 15 $ 1,670,454,180 2001 57,935,060 1,895,840 89,722,510 23,482,700 126,070,710 15 1,891,060,650 2002 62,132,860 1,824,680 95,099,142 25,951,300 133, I 05,382 15 1,996,580,730 2003 66,037,480 1,446,470 99,099,267 25,446,440 141,136,777 15 2, 117,05 I ,655 2004 76,237,460 1,512,340 109,796,799 28,481,560 159,065,039 15 2,385,975,585 2005 81,947,620 1,615,900 110,912,740 29,677,300 164,798,960 15 2,471,984,400 2006 96,692,100 1,715,620 127,556,120 32,829,960 193,133,880 15 2,897,008,200 2007 111 ,365,480 1,842,120 147,264,040 36,224,280 224,247,360 15 3,363,7 I 0,400 2008 167,784,240 1,268,220 217,340,040 58,488,560 327,903,940 15 4,918,559,100 2009 166,205,000 1,412,140 224,300,620 61,340,580 330,577,180 15 4,958,657,700 Source: County Tax Assessor -73-CITY OF FAIRHOPE, ALABAMA PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Overlaeelng Rates Coun State Total Total Road/ Health Care Total Total Direct & Fiscal General School Bond Tax City General Bridge Fire School Authority County General School Soldier State Overlapping Year Millage MIiiage MIiiage Millage MIiiage MIiiage MIiiage Millage MIiiage Millage MIiiage MIiiage MIiiage Mlllage Rates 2000 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2001 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2002 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2003 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2004 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2005 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2006 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2007 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2008 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 2009 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0 Source: Baldwin County Commission Tax~a~er Arbor Gates LLC $ FST Mississippi Baldwin Square Al Co11e Jr family Limited Partnership Shellbrooke Pointe Apartments Ltd. The Sanctuary, LLC Fairhope LLC Bellsouth Tele, Inc. dba AT&T CHS Properties, Inc. Fairhope Yacht Club Pelican Properties, Inc. FST E&A Southeast Limited Partnership Fairhope Mob, LLC Rock Creek Partners LLC Rock Creek LLC Honours-Rock Creek Golf Course LLC Poser Business forms Inc. $ Source: Baldwin County Revenue Commissioner -74- CITY OF FAIRHOPE, ALABAMA PRINCIPAL PROPERTY TAXPAYERS SEPTEMBER 30, 2009 2009 Taxable Percentage of Assessed Total Taxable Value Rank Assessed Value 3,127,180 I 0.9% 1,939,520 2 0.6% 1,670,800 3 0.5% 1,447,380 4 0.4% 1,309,960 5 0.4% 1,217,220 6 0.4% 1,171,800 7 0.4% 1,165,640 8 0.4% 1,117,320 9 0.3% 1,103,880 10 0.3% 15,270,700 4.6% 2000 Taxable Percentage of Assessed Total Taxable Value Rank Assessed Value $ 1,802,500 1.6% 1,454,340 5 1.3% 1,464,020 4 1.3% 1,703,560 2 1.5% 1,484,300 3 1.3% 1,289,320 6 1.2% 834,140 7 0.7% 828,480 8 0.7% 790,700 9 0.7% 623,340 10 0.6% $ 12,274,700 11.0% -75- CITY OF FAIRHOPE, ALABAMA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Fiscal Year Total Tax Collected within the Ended Levy for Fiscal Year of the Levy September 30 Fiscal Year Amount Percentage of Levy 2000 $ 1,670,454 $ 1,623,042 97.16% 2001 1,891,061 1,742,571 92.15% 2002 1,996,58 1 1,831,812 91.75% 2003 2,117,052 1,936,184 91.46% 2004 2,385,976 2,233,532 93.61% 2005 2,471,984 2,240,259 90.63% 2006 2,897,008 2,650,741 91.50% 2007 3,363,710 3,053,904 90.79% 2008 4,918,559 4,087,005 83.09% 2009 4,958,658 4,378,939 88.31% Source: Baldwin County Revenue Commissioner. -76- CITY OF FAIRHOPE, ALABAMA DIRECT AND OVERLAPPING SALES TAX RATES CURRENT FISCAL YEAR Fiscal Year 2009 City Direct Rate 2.00% Source: City Clerk's Office Baldwin County 2.00% State of Alabama 4.00% The City implemented its first sales tax effective July 1, 2009 -77- CITY OF F Am.HOPE, ALABAMA PRINCIPAL SALES TAX REMITTERS CURRENT YEAR Tax 2009 Tax Remitter Liability Rank Wal-Mart SuperCenter $ 169,771 Publix 112,972 2 PCH Hotels and Resorts, Inc. 59,425 3 Winn Dixie Stores 52,545 4 Southern Family Markets, LLC 44,660 5 Bay Shores Oil, Inc. 20,347 6 Walgreens 15,388 7 Autry Greer & Sons Inc. 13,818 8 Cefco Food Store #401 11,071 9 C K Collection Inc. 10,440 10 $ 510,437 Source: City Treasurer's Office r Percentage of Total 16.91% 11 .25% 5.92% 5.23% 4.45% 2.03% 1.53% 1.38% 1.10% 1.04% 50.85% Governmental Activities General Fiscal Obligation Notes Capital Year Debt Pa;i:able Leases 2000 $ 7,411,204 $ 402,168 $ 849,925 2001 7,008,152 19,888 741 ,893 2002 11 ,138,233 7,348 1,030,084 2003 9,988,410 285,104 979,700 2004 9,522,129 246,607 772,224 2005 9,046,405 650,780 290,221 2006 11 ,437,202 1,943,967 140,632 2007 18,430,349 230,130 111 ,245 2008 17,474,232 81,604 91,092 2009 16, 768,90 I 30,364 69,942 -78- CITY OF FAIRHOPE, ALABAMA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Buslness-T;i:ee Activities General Utilities Obligation Revenue Notes Debt Debt Papble $ 563,797 $ 13,055,000 $ $ 519,688 12,710,000 480,867 19,065,014 195,000 471,590 18,470,000 177,395 462,871 18,340,000 158,761 453,595 18,615,000 593,077 442,820 18,045,000 446,267 431,688 17,465,000 293,764 413,404 16,865,000 170,145 271,397 16,235,000 86,035 Total Percentage Capital Primary of Personal Per Leases Government Income Caeita 190,532 $ 22,472,626 6.89% $ 1,801 315,375 21,314,996 6.11% 1,615 850,159 32,766,705 9.01% 2,424 1,076,351 31,448,550 8.30% 2,249 993,213 30,495,805 7.46% 2,168 448,007 30,097,085 7.29% 2,134 284,572 32,740,460 7.46% 2,203 122,438 37,084,614 8.28% 2,465 7,387 35,102,864 7.26% 2,204 33,461,639 6.65% 2,067 Fiscal Year 2000 $ 2001 2002 2003 2004 2005 2006 2007 2008 2009 -79- CITY OF FAIRHOPE, ALABAMA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Percentage of Estimated General Less: Amounts Actual Taxable Obligation Available in Debt Value of Debt Service Fund Total Property 7,975,001 $ 1,744,104 $ 6,230,897 1.91% 7,527,840 1,263,203 6,264,637 1.79% 11 ,619,100 863,518 10,755,582 2.96% 10,460,000 558 ,630 9,901 ,370 2.61% 9,985,000 377,983 9,607,017 2.35% 9,500,000 272,950 9,227,050 2.23% 11,880,022 235,347 11,644,675 2.65% 18,862,037 456,957 18,405 ,080 4.11% 17,887,636 470,671 17,416,965 3.60% 17,040,298 350,987 16,689,3 11 3.32% r Per Capita $ 499 475 796 708 683 654 783 1,223 1,094 1,031 Direct debt of the City -80- CITY OF FAIRHOPE, ALABAMA COMPUTATION OF OVERLAPPING DEBT SEPTEMBER 30, 2009 Percentage of debt Applicable Outstanding to the City Debt Fairhope (1) $ 16,869,207 100.00% Overlapping Debt (Supported by ad valorem tax) Baldwin County $ 123,961 ,381 7.09% ()) Amount of debt Applicable to City of Fairhope $ 16,869,207 8,788,862 $ 25,658,069 (1) Percentage of net assessed value of property in City ($330,577,180) to net assessed value of property in Baldwin County ($4,664,597,260) on 10/1/2008. 2000 2001 Debt limit $25,214.142 $26,621.000 Total net debt applicable to limit 4,993.462 4,863,152 Legal debt margin $20,220,680 $21,757,848 Total net debt applicable to limit as a percentage of debt limit 19.80% 18.27% -81- CITY OF FAIRHOPE, ALABAMA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 2002 2003 2004 2005 $26,621.076 $28,227.355 $31.813,008 $32,959,792 11,619,099 11.724,805 11,003,831 9,987,406 $15,001,977 S 16,502,550 $20,809.177 $22,972,386 43.65% 41.54% 34.59% 30.30% 2006 $38,626,776 13,381,169 $25,245,607 34.64% Legal Debt Margin Calculation for Fiscal Year 2009 Total assessed value $ Debt limit (20% of total assessed value) Debt applicable to limit: General obligation warrants Notes payable Total net debt applicable to limit Legal debt margin s 2007 2008 2009 $44,849,472 $65,580.788 $66,115,436 18.660,479 17,555,836 17,070,662 $26,188,993 $48,024,952 $49,044,774 41.61% 26.77% 25.82% 330,577,180 66,115.436 17,040,298 30,364 17,070,662 49,044,774 Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -82- CITY OF FAIRHOPE, ALABAMA DEMOGRAPIDC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Per Capita Personal Personal School Population Income Income Enrollment 12,480 $ 325,952,640 $ 26,118 3,516 13,200 349,113,600 26,448 3,527 13,518 363,499 ,020 26,890 3,701 13,985 378,923,575 27,095 3,701 14,067 408,899,556 29,068 3,965 14,106 413,136,528 29,288 3,906 14,863 438 ,948,979 29,533 4,305 15,046 447,693,730 29,755 4,050 15,927 483,400,377 30,351 4,307 16,185 503,418,240 31 ,104 4,652 Sources: U.S. Census Bureau State of Alabama Department of Industrial Relations Eastern Shore Chamber of Commerce www.scbooldigger.com Unemployment Rate 3.3% 3.9% 4.6% 4.5% 4.6% 3.4% 2.8% 2.7% 4.1% 7.9% -83- CITY OF FAIRHOPE, ALABAMA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2009 Percentage of Total City Employer Employees Rank Employment Employees Thomas Hospital Grand Hotel Wal-Mart City of Fairhope Publix Winn-Dixie Print Xcel (formerly Poser Business Forms) Bruno's Fokkert AIR Inc. Balloons Everywhere BF Goodrich Aerospace Sources: Eastern Shore Chamber of Commerce State Department of Labor Additional 2000 employment data is not available. 1,050 590 370 353 130 110 80 70 70 55 2,878 1 16.8% 2 9.5% 3 5.9% 4 5.7% 5 2.1% 6 1.8% 7 1.3% 8 1.1% 9 1.1% 10 0.9% 46.2% NOTE: Total city employment number represents people residing in COF that are employed (place of residence) rather than employment for COF businesses 2000: 5,570 2009: 6,232 650 400 196 170 110 1,526 2000 Percentage of Total City Rank Employment 1 11.7% 2 7.2% 3 3.5% 4 3.1% 5 2.0% 27.4% Function General Govenunent Public Safety Police Fire Firefighters and Dispatch Highways and Streets Public Works Sanitation Culture and Recreation Recreation Adult Recreation Gas Department Electric Department Water/Waste Water Department Golf Department Total -84- CITY OF FAIRHOPE, ALABAMA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS Full-time Eguivalent Em~lolees as of Se~ternber 30, 2000 2001 2002 2003 2004 2005 2006 35 38 42 46 48 49 58 24 29 32 35 37 39 40 2 2 2 4 5 7 9 19 22 25 26 28 28 27 11 15 16 19 21 19 25 4 6 6 6 8 8 8 1 1 15 16 16 16 17 17 16 14 15 15 17 17 17 17 18 19 20 21 23 23 24 10 12 12 13 13 12 12 153 175 187 204 218 220 237 Source: City of Fairhope hwnan resources department 2007 2008 2009 61 62 54 41 42 51 9 14 13 29 28 37 22 20 21 8 9 18 3 6 10 16 19 18 20 19 17 24 25 23 13 13 19 246 257 281 2000 Function Police Physical arrests 472 Parking violations 286 Traffic violations 1,503 Fire Number of calls answered 311 Inspections 256 Highways and streets Street resurfacing (miles) Potholes repaired 416 Sanitation Garbage collected (tons/year) 5,130 Trash collected (tons/year) 11,702 Recyclables collected (tons/year) 1,354 Culture and recreation Golf course rounds @ 9 hole rounds 78,367 Pavilion/park parties Waste water Average daily sewage treatment 1.4 (millions of gallons) Sources: Various government departments -85- CITY OF FAIRHOPE, ALABAMA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS 2001 2002 2003 2004 532 562 539 840 152 120 65 65 1,467 1,895 1,566 2,116 288 311 332 364 270 376 429 505 0.25 0.25 7.80 0.25 520 780 416 416 5,515 5,800 6,010 6,566 11 ,470 15,628 19,361 18,345 1,569 1,549 1,660 1,699 72,922 69,874 70,948 82,695 *** 9 1.6 1.6 1.7 1.8 *** Ordinance was passed in June 2004 -no rent collected prior to this time 2005 2006 2007 2008 2009 949 1,255 1,710 1,131 993 27 56 13 71 285 2,381 2,589 1,516 996 1,004 429 381 339 432 427 585 463 282 196 382 0.25 2.30 1.5 312 312 312 414 384 7,000 7,200 8,246 7,520 7,782 23,744 17,943 19,309 21,908 21,275 2,112 1,959 2,131 1,989 1,297 80,603 93,082 92,702 88,475 53,755 87 59 74 88 84 1.8 1.6 1.7 1.7 1.7 2000 Function Public safety Pol ice Stations I Patrol units 18 Fire stations 2 Highways and streets Streets (miles) 68.5 Culture and recreation Parks acreage 143 Parks 34 Swimming pools Tennis courts 4 Community center 2 Sewer Sanitary sewers (miles) 107 Storm sewers (miles) 1.5 Maximum daily treatment capacity 4 (millions of gallons) Sources: Various government departments -86- CITY OF FAIRHOPE, ALABAMA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS 2001 2002 2003 2004 2005 I I I 21 24 26 29 32 3 3 3 3 3 69.7 69.7 75.2 82.2 84.2 168 168 168 168 168 46 46 46 46 46 2 2 2 4 4 4 4 4 2 2 2 2 2 110 112 I 14 I 15 117 1.75 2 2.8 2.9 3 4 4 4 4 4 2006 2007 2008 2009 I I 33 35 36 40 3 3 3 3 89.7 89.7 98.1 98.1 168 208 208 208 46 50 50 50 2 3 3 3 4 6 6 6 2 2 I 3 119 120 121 121 1.6 1.5 1.2 1.2 4 4 4 4 r Tms PAGE INTENTIONALLY LEFT BLANK ( ' r COMPLIANCE SECTION Hartmann, Blackmon &::; Kilgore, P .C. Certified Public Accountants &::; Consultants -87- Xavier A. Hartmann, Ill, CPA Rucker T. Taylor, Ill, CPA J. Earl Blackmon, Jr., CPA B. Vance Kilgore, CPA Sally S. Wagner, CPA Dennis E. Sherrin, CPA, CVA 806 N. SECTION STREET• P.O. BOX 1469 • FAIRHOPE, ALABAMA 36533 • (251) 928-2443 OR (251) 943-4217 • FAX (251) 928-6921 CITY OFF AIRHOPE, ALABAMA INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT Honorable Mayor and Members of the City Council City of Fairhope, Alabama AUDITING STANDARDS We have audited the basic financial statements of the City of Fairhope, Alabama as of and for the year ended September 30, 2009, and have issued our report thereon dated January 14, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Fairhope's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Member American Institute of Certified Public Accoumants • Alabama Society of Cer1ilied Public Accountants Other Locations: 112 W. Section Avenue • P.O. Box 1950 • Foley, Alabama 36536 • (25 1) 943-5499 • FAX (251) 943-5498 6475 Van Buren Street • Suite JOI • P.O. Box 2990 • Daphne, Alabama 36526 • (251) 626-0846 • FAX (25 1) 626-1403 311 Sowell Street • P.O. Box 1379 • Brewton, Alabama 36427 • (251) 867-3801 • FAX (251) 867-3276 www.hbkcpas.com -88- Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Fairhope's general purpose financial statements are free of material misstatement,. we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. This report is intended for the information of management, 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. January 14, 2010 Fairhope, Alabama ~ g~ i ;j#o-f C-c I (j I Certified Public Accountants