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Y{OUR.} HOMETOW N CITY OF ANNA AGENDA NOTICE -CITY COUNCIL WORKSHOP March 25, 2014 6:30 p.m. —Anna City Hall Administration Building The City Council of the City of Anna will meet in Workshop Session at 6:30 p.m., March 25, 2014, at the Anna City Hall Administration Building, located at III N. Powell Parkway (Hwy 5), regarding the following items: 1. Call to Order. 2. Roll Call and Establishment of Quorum. 3. CLOSED SESSION (EXCEPTIONS): Under Tex. Gov't Code Chapter 551, the City Council may enter into closed session to discuss any items listed or referenced on this agenda under the following exceptions, a. consult with legal counsel regarding pending or contemplated litigation and/or on matters in which the duty of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with Chapter 551 of the Government Code (Tex. Gov't Code .551.071); b. discuss or deliberate the purchase, exchange, lease, or value of real property (Tex. Gov't Code §551.072); c. discuss or deliberate Economic Development Negotiations: (1) To discuss or deliberate regarding commercial or financial information that the City has received from a business prospect that the City seeks to have locate, stay, or expand in or near the territory of the City of Anna and with which the City is conducting economic development negotiations; or (2) To deliberate the offer of a financial or other incentive to a business prospect described by subdivision (1). Tex. Gov't Code 4551.087 ); proposed retail development, Villages of Hurricane Creels. 1. The Council may vote and/or act upon each of the items listed in this agenda. 2. The Council reserves the right to retire into executive session concerning any of the items listed on this agenda, whenever it is considered necessary and legally justified under the Open Meeting Act. 3. Persons with a disability who want to attend this meeting who may need assistance should contact the City Secretary at 972 924- 3325 two working days prior to the meeting so that appropriate arrangements can be made. 03-25-14 CC Workshop Meeting Agenda.doc Posted 03-21-14 d. discuss or deliberate personnel matters: City Secretary Update; Tex, Gov't Code . 551.074). The council further reserves the right to enter into executive session at any time throughout any duly noticed meeting under any applicable exception to the Open Meetings Act. 5. Consider/Discuss/Action on any items listed on posted agenda for March 25, 2414 City of Anna City Council Regular Meeting or any Closed Session occurring during this Workshop, as necessary. 6. Adjourn. This is to certify that I, Natha Wilkison, City Secretary, posted this agenda at a place readily accessible to the public at the Anna City Hall and on the City Hall bulletin board at or before 5*00 p.m., March 21, 2014. Natha Wilkison, City Secretary 1. The Council may vote and/or act upon each of the items listed in this agenda. 2. The Council reserves the right to retire into executive session concerning any of the items listed on this agenda, whenever it is considered necessary and legally justified under the Open Meeting Act. 3. Persons with a disability who want to attend this meeting who may need assistance should contact the City Secretary at 972 924- 3325 two working days prior to the meeting so that appropriate arrangements can be made. 03-25-14 CC Workshop Meeting Agenda.doc 2 Posted 03-21-14 Y{OUR} IiONL�TOWN CITY OF ANNA AGENDA NOTICE —CITY COUNCIL REGULAR MEETING March 25, 2014 7:30 p.m. —Anna City Hall Administration Building The City Council of the City of Anna will meet in Regular Session at 7:30 p.m., March 25, 2014, at the Anna City Hall Administration Building, located at I II North Powell Parkway (Hwy 5), to consider the following items. Welcome to the City Council Meeting. Please sign the Sign -In -Sheet as a record of attendance. If you ivish to speak on an open -session agenda item please fill out the Opinion/Speaker Registration Form and turn it in to the City Secretary before the meeting starts. 1. Call to Order. 2. Invocation and Pledge of Allegiance. 3. Citizen comments. Citizens are allomed 3 minutes to speak. The Coamcil is unable to respond to or discuss any issues that are brought up during this section that are not on the agenda, other than to make statements of specific factual information in response to a citizen's inquiry or to recite existing policy in response to the inquiry. 4. Receive reports from Staff or the City Council about items of community interest. Items of community interest inclzrdea expressions of thanks, congratulations, or condolence; information regarding holiday schedules; an honorary or salutary recognition of a public official, public employee, or other citizen (but not including a change in status of a person's public office or public employment); a reminder about an upcoming event organized or sponsored by the governing body; information regarding a social, ceremonial, or community event organized or sponsored by an entity other than the governing body that was attended or is scheduled to be attended by a member of the governing body or an official or employee of the municipality; and announcements involving an imminent threat to the public health and safety of people in the municipality that has arisen after the posting of the agenda. I. The Council may vote and/or act upon each of the items listed in this agenda. 2. The Council reserves the right to retire into executive session concerning any of the items listed on this agenda, whenever it is considered necessary and legallyjustified under the Open Meeting Act. 3. Persons with a disability who want to attend this meeting who may need assistance should contact the City Secretary at 972 924- 3325 two working days prior to the meeting so that appropriate arrangements can be made. 03-25-14 CC Regular Meeting Agenda.doc I Posted 03-21-14 5. Consent Items. These items consist of non -controversial or "housekeeping" items required by law. Items may be considered individually by any Council member making such request prior to a motion and vote on the Consent Items. a. Approve City Council Minutes for March 11, 2014 Regular Meeting 6. Presentation %J the FY 2013 Audit. (Clayton Fulton) 7. Review the FY 2015 Budget Calendar. (Clayton Fulton) 8. Briefing/Discussion regarding Collin County roadway bond project. (City Manager) 9. CLOSED SESSION (EXCEPTIONS): Under Tex. Gov't Code Chapter SS I, the City Council may enter into closed session to discuss any items listed or referenced on this agenda under the following exceptions, a. consult with legal counsel regarding pending ol• contemplated litigation and/or on matters in which the duty of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with Chapter 551 of the Government Code (Tex. Gov't Code 4551.071); b. discuss or deliberate the purchase, exchange, lease, or value of real property (Tex. Gov't Code §551.072), c. discuss or deliberate Economic Development Negotiations: (1) To discuss or deliberate regarding commercial or financial information that the City has received from a business prospect that the City seeks to have locate, stay, or expand in or near the territory of the City of Anna and with which the City is conducting economic development negotiations; or (2) To deliberate the offer of a financial or other incentive to a business prospect described by subdivision (1). Tex. Gov't Code .551.087); proposed retail development; Villages of Hurricane Creek. d. discuss or deliberate personnel matters: City Secretary Update. Tex. Gov't Code �551.074). The council further reserves the right to enter into executive session at any time throughout any duly noticed meeting under any applicable exception to the Open Meetings Act. 1. The Council may vote and/or act upon each of the items listed in this agenda. 2. The Council reserves the right to retire into executive session concerning any of the items listed on this agenda, whenever it is considered necessary and legally justified under the Open Meeting Act. 3. Persons with a disability who want to attend this meeting who may need assistance should contact the City Secretary at 972 924- 3325 two working days prior to the meeting so that appropriate arrangements can be made. 03-25-14 CC Regular Meeting Agenda.doc 2 Posted 03-21-14 10. Consider/Discuss/Action on any items listed on posted agenda for March 25, 2014 Workshop Session or any closed session occurring during this Regular Meeting, as necessary. 11. Adjourn. This is to certify that I, Natha Wson, City Secretary, posted this agenda at a place readily accessible to the public at the Anna City Hall and on the City Hall bulletin board at or before 5:00 p.m. March 21, 20140 Natha Wilkison, City Secretat•y 1. The Council may vote and/or act upon each of the items listed in this agenda. 2. The Council reserves the right to retire into executive session concerning any of the items listed on this agenda, whenever it is considered necessary and legally justified under the Open Meeting Act. 3. Persons with a disability who want to attend this meeting who may need assistance should contact the City Secretary at 972 924- 3325 two working days prior to the meeting so that appropriate arrangements can be made. 03-25-14 CC Regular Meeting Agenda.doc 3 Posted 03-21-14 y{OUR}HOMETOWN Council Meeting: March 25 2014 Account Code #: N/A Budgeted Amount: N/A AGENDA SUBJECT: SUMMARY: RECOMMENDATION: Call to order. Item No. 1 City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Philip Sanders Date Prepared: 3-20-14 Exhibits: ❑Yes ❑ No Council Meeting: Marc1125I 2014 Account Code # Budgeted Amount: AGENDA SUBJECT: SUMMARY: RECOMMENDATION: N/A Item No. 2 City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Philip Sanders Date Prepared: 3-20-14 Exhibits: ❑Yes ❑ No Invocation and Pledge of Allegiance. Y{OIIp}HOMETOWN Council Meeting: March 25, 2014 Account Code #: N/A Budgeted Amount: N/A Item No. 3 City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Philip Sanders Date Prepared: 3-20-14 Exhibits: ❑Yes ❑ No AGENDA SUBJECT: Citizen Comments. Citizens ar•e allowed 3 minutes to speak. The Council is unable to respond to or discuss any issues that are brought up during this section that are not on the agenda, other than to make statements of specific factual information in response to a citizen's inquiry or to recite existing policy in response to the inquiry. SUMMARY: RECOMMENDATION: Item No. 4 City Secretary's use only City of Anna City Council Agenda Staff Report YiOUR}HOMETOWN Council Meeting: March 25, 2014 Staff Contact: Philip Sanders Account Code #: N/A Date Prepared: 3-20-14 Budgeted Amount: N/A Exhibits: ❑Yes ❑ No AGENDA SUBJECT: Receive reports from Staff or the City Council about items of community interest. Items of community interest include: expressions of thanks, congratulations, or condolence; information regarding holiday schedules; an honorary or salutary recognition of a public official, public employee, or other citizen (but not including a change in status of a person's public office or public employment); a reminder about an upcoming event organized or sponsored by the governing body; information regarding a social, ceremonial, or community event organized or sponsored by an entity other than the governing body that was attended or is scheduled to be attended by a member of the governing body or an official or employee of the municipality; and announcements involving an imminent threat to the public health and safeo3 of people in the municipality that has arisen after the posting of the agenda. R� Council Meeting: March 25I 2014 Account Code #: N/A Budgeted Amount: N/A Item No. 5 a City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Philip Sanders Date Prepared: 3-20-14 Exhibits: ❑Yes ❑ No AGENDA SUBJECT: Consent Items. These items consist of non-conb•oversial or 'housekeeping" items required by law. Items may be considered individually by any Council rneinber making such requestprior to a rnotion and vote on the Consent Items. a. Approve City Council Minutes for March 11, 2014 Regular Meeting. RECOMMENDATION: Staff recommends approval of the consent items. MINUTES OF CITY OF ANNA AGENDA NOTICE -CITY COUNCIL WORKSHOP March 11, 2014 6:30 p.m. —Anna City Hall Administration Building The City Council of the City of Anna met in Workshop Session at 6:30 p.m., March 11, 2014, at the Anna City Hall Administration Building, located at 111 N. Powell Parkway (Hwy 5), regarding the following items: 1. Call to Order. Mayor Milce Crist called the meeting to order at 6:30 pm. 2. Roll Call and Establishment of Quorum. Mayor Milce Crist and Council Members John Hopewell, Chad Barnes, Natha Bryan and Dick Dowd were present. Council Members James T. Cook and Lauren Lovato were absent. 3. Briefing/Discussion regarding space needs assessment for City facilities. (Clayton Fulton) Clayton Fulton, Director of Finance presented the item to council Mr. Fulton introduced Melissa Vokey from BV Architects who gave a presentation regarding the potential size and costs of city facilities. Council Member Barnes made the motion to enter closed session at 7:05 pm. Council Member Dowd seconded the motion. Motion passes. AYE 5 NAY 0 4. CLOSED SESSION (EXCEPTIONS): Under Tex. Gov't Code Chapter 551, the City Council may enter into closed session to discuss any items listed or referenced on this agenda under the following exceptions: a. consult with legal counsel regarding pending or contemplated litigation and/or on matters in which the duty of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with Chapter 551 of the Government Code (Tex. Gov't Code 551.071); b. discuss or deliberate the purchase, exchange, lease, or value of real property (Tex. Gov't Code §551.072); c. discuss or deliberate Economic Development Negotiations: (1) To discuss or deliberate regarding commercial or financial 03-1 I-l4 CC Workshop Meeting Minutes.doc I 03-1 I-14 information that the City has received from a business prospect that the City seeks to have locate, stay, or expand in or near the territory of the City of Anna and with which the City is conducting economic development negotiations; or (2) To deliberate the offer of a financial or other incentive to a business prospect described by subdivision (1). (Tex. Gov't Code 551.087 proposed retail development, Villages of Hurricane Creek. The council further reserves the right to enter into executive session at any time throughout any duly noticed meeting under any applicable exception to the Open Meetings Act. Council Member Hopewell made the motion to return to open session 7:29 pm. Council Member Bryan seconded the motion. Motion passes. AYE 5 NAY 0 5. ConsiderlDiscuss/Action on any items listed on posted agenda for March 11, 2014 City of Anna City Council Regular Meeting or any Closed Session occurring during this Workshop, as necessary. Council Member Hopewell made the motion to take no action. Council Member Bryan seconded the motion. Motion passes. AYE 5 NAY 0 ABSTAIN 0 6. Adjourn. Council Member Hopewell made the motion to adjourn at 7:30 pm. Council Member Bryan seconded the motion. Motion passes. AYE 5 NAY 0 ABSTAIN 0 ATTEST: APPROVED: Natha Wilkison, City Secretary Mike Crist, Mayor 03-11-14 CC Workshop Meeting Mimrtes.doc 2 03-I I-14 MINUTES OF CITY OF ANNA AGENDA NOTICE — CITY COUNCIL REGULAR MEETING March 119 2014 7:30 p.m. — Anna City Hall Administration Building The City Council of the City of Anna met in Regular Session at 7:30 p.m., March 11, 2014, at the Anna City Hall Administration Building, located at 111 North Powell Parltway (Hwy 5), to consider the following items. Welcome to the City Council Meeting. Please sign the Sign -In -Sheet as 1. Call to Order. Mayor Mike Crist called the meeting to order at 7:30 pm. 2. Invocation and Pledge of Allegiance. Mayor Mike Crist gave the invocation. a recor 3. Citizen comments. Citizens are allowed 3 minutes to speak. The Council is unable to respond to or discuss any issues that are brought up during this section that are not on the agenda, other than to make statements of specific factual information in response to a citizen's inquiry or to recite existing policy in response to the inquiry. Kelly Patterson -Herndon is concerned about the construction standards of homes being built close to them. Tom Miller concerned about raihoad ties and debris along the rail road lines and the potential for fire. Mr. Miller also had concerns about the building standards of homes being built close to him. 4. Receive reports from Staff or the City Council about items of community interest. Items of community interest include: expressions of thanks, congratulations, or condolence; information regarding holiday schedules, an honorary or salutary recognition of a public official, public employee, or other citizen (but not including a change in status of a per•son's public office or public employment), a reminder about an upcoming event organized or sponsored by the governing body; information regarding a social, ceremonial, or community event organized or sponsored by an entity other than the governing body that was attended or is scheduled to be attended by a member of the governing body or an official or employee of the municipality; and announcements involving all imminent threat to the public health and safety of people in the municipality that has arisen after the posting of the agenda. Mayor Crist mentioned St. Patrick's Day coming up. 03-1 I-14 CC Regular Meeting Mimrtes.doc 1 03-I I-14 5. Consent Items. These items consist of non -controversial or "housekeeping" items required by law. Items may be considered individually by any Council member making such request prior to a motion and vote on the Consent Items. a. Approve City Council Minutes for February 25, 2014 Regular Meeting b. Approve a Resolution approving the final plat of the Oak Hollow Phase 6A Addition. (Maurice Schwanke) c. Approve a Resolution approving the preliminary plat of the Camden Parc Addition. (Maurice Schwanke) d. Approve a Resolution approving the Constiens development plat. (Maurice Schwanke) e. Approve a Resolution approving the Adams development plat. (Maurice Schwanke) f. Approve a Resolution repealing Resolution No. 2014-02-05 regarding a public hearing on roadway impact fees. (Maurice Schwanke) g. Approve a Resolution approving the 2014 Facilities Use Agreement with AYSA. (City Manager) h. Receive presentation of the Quarterly Investment Report. (Clayton Fulton) i. Approve a Resolution reviewing the City's Investment Policy. (Clayton Fulton) Council Member Hopewell made the motion to approve the consent items. Mayor Cr•ist seconded the motion. Motion passes. AYE 5 NAY 0 ABSTAIN 0 6. Consider/Discuss/Action regarding an Ordinance repealing all other previous ordinances and/or resolutions that adopted or approved a personnel policy manual and/or personnel regulations. (City Manager) City Manager, Philip Sanders presented the item to council and answered questions. Council Member Hopewell made the ]notion to approve. Council Member Bryan seconded the motion. Motion passes. 1 ilk AYE 5 ABSTAIN 0 7. Consider/Discuss/Action regarding a Resolution approving the City of Anna Personnel Policy Manual. (City Manager) City Manager, Philip Sanders presented the item to council and answered questions. Council Member• Hopewell made the motion to approve. Council Member• Bryan seconded the motion. Motion passes. AYE 5 NAY 0 ABSTAIN 0 03-11-14 CC Regular Meeting Minutes.doc 2 03-11-14 8. Consider/Discuss/Action regarding a Resolution approving an engineering services contract for the Hackberry Elevated Storage and Water Main Project. (Rob Woods) Robert Woods, Director of Public Works presented the item to council and answered questions. Council Member Bryan made the motion to approve. Mayor Crist seconded the motion. Motion passes. AYE 5 NAY 0 ABSTAIN 0 9. Approve a Resolution making an appointment to the TAPS Public Transit Technical Advisory Committee. (City Manager) City Manager, Philip Sanders presented the item to council and answered questions. Mayor Crist nominated Council Member Hopewell. Council Member Bryan seconded the motion. Motion passes. Council Member recused himself from the voting. AYE 4 NAY 0 ABSTAIN 0 Council Member Bryan made the motion to enter closed session at 7:51 pm. Council Member Dowd seconded the motion. Motion passes. AYE 5 ABSTAIN 0 10. CLOSED SESSION (EXCEPTIONS): Under• Tex. Gov't Code Chapter 551, the City Council may enter into closed session to discuss any items listed or referenced on this agenda under the following exceptions: a. consult with legal counsel regarding pending or contemplated gation and/or on matters in which the %7 of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with Chapter 551 of the Government Code (Tex. Gov't Code 55 1.071); b. discuss or deliberate the purchase, exchange, lease, or value of real property (Tex. Gov't Code §551.072); c. discuss or deliberate Economic Development Negotiations: (1) To discuss or deliberate regarding commercial or financial information that the City has received from a business prospect that the City seeks to have locate, stay, or expand in or near the territory of the City of Anna and with which the City is conducting economic development negotiations; or (2) To deliberate the offer of a financial or other incentive to a business prospect described by subdivision (1). (Tex. Gov't Code 551.087,); proposed retail development; Villages of Hurricane Creels. 03-I 1-14 CC Regular Meeting Minutes.doc 3 03-I 1-14 The council further reserves the right to enter into executive session at any time throughout any duly noticed meeting under any applicable exception to the Open Meetings Act. Council Member Bryan made the motion to return to open session at 8:38 pm. Council Member Dowd seconded the motion. Motion passes. AYE 5 NAY 0 ABSTAIN 0 11. Consider/Discuss/Action on any items listed on posted agenda for March 11, 2014 Workshop Session or any closed session occurring during this Regular Meeting, as necessary. Council Member Hopewell made the motion to take no action. Council Member Bryan seconded the motion. Motion passes. AYE 5 NAY 0 12. Adjourn. ABSTAIN 0 Council Member Bryan made the motion to adjourn at 8:39 pm. Council Member Dowd seconded the motion. Motion passes. AYE 5 NAY 0 ABSTAIN 0 ATTEST: APPROVED: Natha Wilkison, City Secretary Mike Crist, Mayor 03-1 I-14 CC Regular Meeting Mimdes.doc 4 03-I I-14 Council Meeting: March 25I 2014 Account Code #: N/A Budgeted Amount: N/A Item No. 6 City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Clayton Fulton Date Prepared: 3/20/2014 Exhibits: QYes ❑No AGENDA SUBJECT: Presentation and approval and the Fiscal Year 2013 Audit Report SUMMARY: LaFollett &Abbott PLLC performed the City's annual audit. Rod Abbott of the firm will present the FY 2013 Audit and will be available to answer questions. The auditors have presented an Unmodified Audit Opinion (Clean Opinion) of the City's financial statements. This means the audit is a clean representation of the City's financial position as illustrated by the audit. As part of the auditor's testing and review, they noticed a weakness in the Finance Department's year-end reconciliation of the Capital Projects Fund. Accounting standards require revenues and expenditures to be recorded in the period in which they occur. A significant number of capital projects occurred throughout the course of FY 13. Many of these projects had contractors performing work before the end of FY 13 that was not billed until FY 14. Accounting rules require the City to record the payment liability for work performed but not yet paid at year end. Staff did not receive some invoices from contractors prior to the close of the last fiscal year and as a result the corresponding liability was not recorded to the 2013 fiscal year. No funds were misappropriated and no contractors went unpaid. However, staff did not record the liability ensuring the financial position of the Capital Projects Fund was properly illustrated at year-end. This oversight is identified in the audit because staff did not notice the error and correct it prior to the auditor beginning his field work. The city's auditor identified the error, which staff quickly understood and provided the information necessary to correct. Working with staff, the auditor made an adjustment to the Capital Projects Fund's financial statements so that they are a clean representation of our financial position (Unmodified Opinion). Staff sees this finding as an opportunity to improve our year end reconciliation in the Capital Projects Fund and is already developing a policy on year-end reconciliation for the Capital Projects Fund. The auditor also has an ongoing recommendation from the FY 12 audit for accounting for the EDC/CDC. Staff developed a strategy to work with the EDC/CDC at the close of the FY 12 audit Item No. 6 City Secretary's use only to make improvements in the timely reconciliation of financial data and transactions. As we began to implement the plan, it became apparent that the plan needed to be altered. As such, a formal agreement between the EDC/CDC and the City has been reached. This agreement calls for the EDC/CDC to provide prior month financial information to the City on or about the 15th of every month. City staff will enter this information to our accounting program and perform monthly reconciliations. Finally, the auditor also recommended that we implement best practices in accounting for capital projects related to each specific Fund. Staff is working with our accounting consultant on a strategy to implement these practices. RECOMMENTDATION: Staff recommends that the City Council approve the FY 2013 Audit. Susan LaFollett, CPA — Partner Rod Abbott, CPA — Partner and Abbott PLLC Certified Public Accountants March 25, 2014 To the City Council and Management of the City of Anna, Texas Subject; Management Letter In planning and performing our audit of the financial statements of the City of Anna, Texas (the City), for the year ended September 30, 2013, in accordance with auditing standards generally accepted in the United States of America, we considered the City's internal control over financial reporting (internal control) as basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements and not for the purpose of expressing an opinion on the effectiveness of the City's internal control. However, during our audit we became aware of matters that are an opportunity for strengthening internal controls and operating efficiency. The memorandum that accompanies this letter summarizes our comments and suggestions regarding these matters. This letter does not affect our report dated March 25, 2014, on the financial statements of the City. The recommendations should in no way be construed as derogatory towards management. We will review the status of these comments during our next audit engagement. We discussed these comments and suggestions with tanagement, and we will be pleased tc further detail at your convenience, to perform any additional study of the matter, or to implementing the recommendations. Sincerely, LaFollett and Abbott, PLLC LaFollett and Abbott PLLC PO Box 717 •Tom Bean, TX • 75489 903-546-6975 • www.lafollempa.com have already discuss it in assist you in Management Letter Points Prior Year Recommendation • We recommend the City provide management for the Economic Development Corporation (EDC) and Community Development Corporation (CDC) with access and training for the City's accounting software. The EDC and CDC are currently recording checks and deposits on excel spreadsheets. New debt issuances, asset acquisitions, and other transactions are also handled outside of the City's finance department. Although cash transactions are periodically forwarded for recording in the City's accounting software, there remains a disconnect in knowing if all EDC and CDC transactions have been properly recorded. Status of Prior Year Recommendation The finance staff now works closer with the EDC and CDC for matters related to debt, acquisitions, and agreements. The City still experiences significant delays in recording transactions into the accounting system. We also noted that one CDC cash account had not been reconciled to the system balance and caused an $18,000 understatement of cash at fiscal year-end 2013. We have a recurring recommendation to enter and reconcile EDC and CDC transactions in a timely manner. Current Year Recommendations • We recommend the City perform more year-end reconciliation and closing procedures before audit fieldwork begins. Audit adjustments were needed for: cash, accounts payable, fixed assets, and transfers in and out. These adjustments should be identified and posted by the City through normal closing procedures. • We recommend the City deposit new debt proceeds into the appropriate fund considering which fund will be obligated to repay the debt. Proceeds from the $4,210,000 Series 2012 Tax and Revenue Certificates of Obligation were deposited into the Capital Projects Fund, but the Utility Fund will be obligated to repay the debt and the funds are being used for Utility Fund improvements. Although the City has properly reflected amounts due to the Utility Fund from the Capital Projects Fund, best practice would have all the debt's activity recorded in the Utility Fund. Management's Responses to Findings • Staff developed a strategy to work with the EDC/CDC at the close of the FY 12 audit to make improvements in the timely reconciliation of financial data and transactions. As we began to implement to plan, it became apparent that the plan needed to be altered. As such, a formal agreement between the EDC/CDC and the City has been reached. This agreement calls for the EDC/CDC to provide prior month financial information to the City on or about the 151h of every month. City staff will enter this information to our accounting program and perform monthly reconciliations. • Each year City staff has taken a greater role in year-end procedures and reconciliations. This is evidenced by the decline in auditor's adjustments each year. In FY 13, there was a significant increase in capital projects. This exposed a weakness and opportunity to improve year-end closings etc. City staff is developing a year-end checklist for each fund that will guide us in ensuring we don't miss any procedures at year-end. • Staff is working with an accounting consultant to implement best practices in accounting for capital projects that are related to General Fund vs. Utility (Enterprise) Fund activities. Susan LaFollett, CPA— Partner Rod Abbott, CPA — Partner and Abbott PLLC Certified Public Accountants March 253 2014 To the City Council of the City of Anna, Texas We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Anna the "City"), for the year ended September 30, 2013. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated October 21, 2013. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note A to the financial statements. The City adopted new applications of accounting policies during 2013 as follows: Presentation oI financial results for the Anna Economic Development Corporation and Anna Community Development Corporation changed from a discrete presentation to a blended presentation as these component units became special revenue funds for the City effective October 1, 2012. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements was: The disclosure of long-term debt in Note F to the financial statements. This disclosure provides detail of debt terms, future payments, interest rates, and other information for each debt. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate alI known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. LaFollett and Abbott PLLC PO Box 717 •Tom Bean, TX • 75489 903-546-6975 • www.lafollettcpa.com The following summarizes uncorrected misstatements of the financial statements. Property tax revenue understated by $83546 Deferred tax revenue overstated by $85546 Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. Management has corrected all other such misstatements. The following misstatements detected as a result of audit procedures were corrected by management: See separate listing of audit adjustments provided to management. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representation We have requested certain representations from management that are included in the management representation letter dated March 25, 2014. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, Tom Bean, Texas March 25, 2014 CITY OF ANNA, TEXAS ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2013 CITY OF ANNA, TEXAS ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2013 Table of Contents FINANCIAL SECTION Page Independent Auditor's Report.............................................................. 1-2 wired Supplementary Information: Management's Discussion and Analysis .............................................. 3-8 Basic Financial Statements Government -wide Financial Statements Statement of Net Position.......................................................... 9-10 Statement of Activities............................................................... 11 Fund Financial Statements Reconciliation of the Governmental Fund Balance Sheet to the Statement ofNet Position... ... egg glass 0 own 0264041948 a a memo *fee* at be 00444 seaweed 4940woom am to 1 *06 13 Statement of Revenues, Expenditures, and Changes in Fund Balances — GovernmentalFunds...... moomosmse Re Real 4 00490 ***Ole 060 000 *to %*love 0 a Soto met ago am@ 14 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 15 Statement of Net Position — Proprietary Fund, , 0 a at a 0 0 a&& a a 9 so a 0 00 64 0 t 0 a 0 0 0 0 16 Statement of Revenues, Expenses and Changes in Net Position — ProprietaryFund... ... go a too at*talkosed Sao** I motovestall so 6 Ole 4 R a a a a A a 0 t t 4 a 9 a 6 0 0 0 V 4 0 17 Statement of Cash Flows — Proprietary Fund..... tso Ste egg a as 18 Notes to Basic Financial Statements... .... W 5 Rod a 0 4? 0 0 6 a 41 0 0 6 0 4 4 0 DOI 0 a 6 go 0 4 4 4 so a 0 a a a met 19-36 Required Supplementary Information: Budgetary Comparison Schedule —General Fund .................................. 37 Combining Statements Non -Major Governmental Non -Major Governmental Type Funds —Combining Statement of Revenues, COMPLIANCE AND INTERNAL CONTROLS SECTION Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ............... 4142 FINANCIAL SECTION a nd Abbott PLLC Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the City Council of the City of Anna, Texas Susan LaFollett, CPA —Partner Rod Abbott, CPA —Partner Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activity, each major fund, and the aggregate remaining fund information of the City of Anna, Texas (the City), as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. LaFollett and Abbott PLLC PO Box 717 a Tom Bean, TX • 75489 903-546-6975 • www.lafollettcpa.com DRAFT #3 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business -type activity, each major fund, and the aggregate remaining fund information of the City of Anna, Texas, as of September 30, 2013, and the respective changes in financial position, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Otl:er Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 3 through 8 and 37 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. The retirement system funding information on page 38 is also not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 25, 2014, on our consideration of the City's internal control over financial reporting and on 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Anna, Texas internal control over financial reporting and compliance. Tom Bean, Texas March 25, 2014 2 CITY OF ANNA MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis of City of Anna's (the City) financial performance provides an overview of the City's financial activities for the fiscal year ended September 30, 2013. Please read it in conjunction with the City's financial statements, which begin on page 9. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities at the close of FY13 by $34,1685260. This is an increase of $3,394,927 over FY12's net position value of $30,773,333. Unrestricted net position at the close of FYI is $3,898,524 and may be used to meet the City's ongoing obligations to citizens and creditors. This is a decrease of $7,828 from FY12's unrestricted net asset value of $3,906,352. • Although the City's total net position increase of $3,394,927 is much higher than FY12's $48,099 increase, FY 13's result included non -recurring grants, intergovernmental revenue, and capital contributions totaling $3,150,545. The majority of these funds assisted in utility relocation projects and park improvements. • The City's governmental funds reported on page 12 have an ending fund balance of $3,284,331, which is a decrease of $1,736,114 in comparison with FY12 ending fund balances of $5,020,445. $1,489,156 of this decrease was attributable to a planned capital assets transfer to the City's proprietary fund from the Capital Projects Fund. $1,742,740 of the governmental -type fund balance is classified as "unassigned" and available for spending at the City's discretion and in compliance with the City's financial policies. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The government -wide financial statements include the Statement of Net Position and the Statement of Activities (on pages 9-11). These provide information about the activities of the City as a whole and present a long-term view of the City's financial condition. They reflect the flow of total economic resources in a manner similar to the financial reports of a business enterprise. Fund financial statements (starting on page 12) report the City's operations in more detail than the government - wide statements by provng information about the City's most significant funds. Governmental fund statements tell how services were financed in short-term, as well as what resources remain for future spending. They reflect the flow of current financial resources, and supply the basis for funding requests and the appropriations from the State. Proprietary fund financial statements report activity for the City's water, sewer, and sanitation operations. The notes to the financial statements (starting on page 19) provide narrative explanations or additional data needed for full disclosures for the government -wide statements and the fund financial statements. Reporting the City as a Whole —Government-Wide Financial Statements The Statement of Net Position and the Statement of Activities Govemment-wide financial statements, which provide an analysis of the City's overall financial condition and operation, begin on page 9. The primary objective of these statements is to show whether the City's financial condition has improved or deteriorated as a result of the year's activities. The statement of Net Position includes all the City's assets and liabilities (including long-term items) while the Statement of Activities includes all the revenue and expenses generated by the City's operations during the year. Government -wide statements utilize the accrual basis of accounting, which is the same method used by most private sector companies. 3 All of the current year's revenue and expenses are taken into account regardless of when cash is received or paid. The City's revenue is divided into the following categories: 1) charges for services, 2) operating grants and contributions, 3) capital grants and contributions, 4) general revenues not associated with any specific program function. All of the City's assets are reported whether they serve the current or future years. Liabilities are also reported regardless of whether they must be paid in the current or future years. These Ewo statements report the City's net position and changes in them. The City's net position (the difference between assets and liabilities) provide one measure of the City's financial health or financial position. Over time, increases or decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. To fully assess the overall health of the City, you should consider non -financial factors as well, such as changes in the City's request for services from citizens and the condition of the City's facilities. In the Statement of Net Position and the Statement of Activities, the City has two kinds of activities: Governmental Type Activities —City services such as police and fire protection, street maintenance, parks, economic and community development, and city administration are reported here. City property taxes finance most of these activities. Business -Type Activities -The City uses proprietary (business -type) funds to account for its water, sewer and sanitation operations. The services are supported by monthly charges to citizens. , Reporting the City's Most Significant Funds Fund Financial Statements The fund financial statements begin on page 12 and provide detailed information about the most significant funds. The City's two kinds of funds -governmental and proprietary — use different accounting approaches. Governmental Funds —The City reports most of its basic services in governmental funds. Governmental funds use the modified accrual basis of accounting (a method that measures the receipt and disbursement of cash and other financial assets that can be readily converted to cash) and they report balances that are available for future spending. Governmental fund statements provide a detailed short-term view of the City's general operations and the basic services it provides. We describe the accounting differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in reconciliation schedules found on pages 13 and 15. Change in Fuftd Financial Statements Presentation In prior years, the City's Economic Development Corporation (EDC) and Community Development Corporation (CDC) were presented as discrete component units of the City. Their financial results were only presented on the full accrual, government -wide financial statements. Effective October 1, 2012, the CDC and "DC became non -major, blended special revenue funds for the City. Accordingly, beginning governmental- type fund balances have been restated to include EDC and CDC equity. Proprietary Funds —The City uses proprietary (business -type) funds to account for its water, sewer, and sanitation operations. The full -accrual basis of accounting is used for all proprietary type funds. GOVERNMENT -WIDE FINANCIAL ANALYSIS Sixty-one percent (61%) of the City's net position are invested in capital assets; land, streets, parks, buildings, water/sewer infrastructure, vehicles and equipment, less any outstanding debt used to acquire these assets. The City uses capital assets to provide services to the citizens they serve; consequently, these assets are not available for future spending. n The following tables summarize the Statement of Net Position and Changes in Net Position for the year ended September 30, 2013: Current and other assets Capital assets Total assets Long-term liabilities outstanding Other liabilities Total liabilities Net Position: Net investment in capital assets Restricted Unrestricted Total net position Governmental Activities FY13 FY12 $ 4,4144716 $ 5,630,237 18,465,950 16,167,945 22488066 213984182 6,854,813 7,277,605 915,924 374,823 73704737 7,652,428 Revenues: Program Revenues: Charges for services Operating grants and contributions Capital grants and contributions General Revenues: Property taxes Other taxes and franchise fees Other 11,698,639 983,464 24427,826 $ 15,109,929 Expenses: General government Economic/Community Development Police and court Streets Debt service - interest Development and animal control Parks Fire Ambulance Water/Sewer/Sanitation Excess (deficiency) of revenues over expenditures before transfers Transfers In (Out) Increase in net position Net position - October I (beginning) Prior period adjustments Net position - September 30 (ending) 11,028,181 444,340 2,673,233 $ 14,145,754 Business-tvve Activities FY13 FY22 $ IIA93,608 $ 6,758,629 32,164393 30,778,837 43,658,401 374537A66 22,935,997 19,194,300 104,073 1,715,587 24,600,070 20,909*887 9,228,796 8,358,837 I AM698 $ 19,058,331 11,584,537 3,809,923 1,233,119 $ 16,627,579 Total FY13 FY12 $ 1.5,908,324 $ 12,388,866 504630,743 46,946,782 66,539,067 59,335,648 29,790,810 26,471 t905 2,579,997 10904410 324370,807 28,562,315 20,927,435 94342,301 3,898,524 $ 34,168,260 22,612,718 4,254,263 3,906,352 $ 30,773,333 Governmental Activities Business -type Activities Total FY13 FY12 FY13 FY12 FY13 FY12 $ 1,147,988 $ 921,352 $ 5.573,401 S 4,880,931 $ 6,721,389 $ 5,802.283 M531 764729 - M531 76,729 2,665,841 382,003 4844704 - 3,15M45 381003 2,483,857 1,502,779 78,655 7,889,651 885,833 196,384 1,526,399 940,941 270,057 560,983 303,607 641,670 1104446 2,392,504 - 886,810 - 191,700 190363 4,851,098 6,248,868 965,092 - 1,364,060 - 888,763 - ] 96,169 - 530,649 - 290,907 - 445,193 - 114,782 - - - 5,307,272 5.436,320 4,795,615 5,307,272 - 2,483,857 1,502,779 404,350 269A18 5,285,281 14,138,519 4,928,084 4,928,084 2,453,331 55,483 941,596 357,197 (I ,489,156) 964,175 14,145,754 $ ] 5,109,929 (364,582) 1,489,156 (309,099} 2,430,752 13,841,270 16,627,579 6134583 - $ 14,1454754 $ M058,331 G� 885833 , ] 96,384 1,5264399 94 M l 270,057 560,983 303,607 641,670 110A46 5,307,272 10,743,592 2,392,504 886,81 V 596,050 10,136,379 l ,364,060 888,763 196,169 530,649 290,907 445,193 114,782 4,928,084 9,723,699 3,394,927 412,680 357,197 3,394,927 16:270,382 30,773,333 $ 16,627,579 $ 34,168,260 (364,582) 48,098 30,1 I I ,652 613,583 $ 30,773,333 FINANCIAL ANALYSIS OF THE GOVERNMENT -WIDE STATEMENTS Net position of the City's governmental activities increased from $14,145,754 to $15,109,929, Unrestricted net position — the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, or other legal requirements is $2,427,826 for governmental activities. FINANCIAL ANALYSIS OF THE CITY'S FUNDS The City's governmental funds (as presented in the balance sheet on page 12) reported a combined fund balance of $3,284,331 compared to $5,020,445 in FY 12. This represents a decrease of $1,736,114, $1,489,156 of this decrease was attributable to a planned capital assets transfer to the City's proprietary fund from the Capital Projects Fund. Revenues and other financing sources for the City's general fund were $4,350,680I while total expenses and other financing uses were $4,376,186, This resulted in an excess of expenditures over revenues of $25,506 (see page 14). Last year's result was an excess of revenues over expenditures of $339,761. The largest increases in FY13 general fund revenues came from development fees, impact fees, and building permits. The largest increases in FYI general fund expenditures were related to capital outlays. General Fund expenditures were $316,668 more than budgeted. More than budgeted revenue for building permits necessitated more contract expense for the same department. Additionally, the City spent $268,103 for a land purchase, but funds had been accumulating from restricted sources that allow for this expenditure. Revenues for the City's Utility Fund were $4,920,699, while total expenses were $4,928,084. This resulted in income before transfers of $456,892 (see page 17). This is better than 2012's result of a loss before contributions and transfers of $7,385. The main reason for the improvement was a $368,500 increase in developer and impact fees. Water, sewer, and sanitation charges for services also increased in the range of 5 to I0%. The FY13 unrestricted net position is $1,470,698. Excluding depreciation expense, this unrestricted net position is equal to approximately six months of the Utility Fund's 2013 operating expenses. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for all activities as of September 30, 2013 amounts to $50,630,743 compared to $46,946,782 (net of accumulated depreciation) at September 30, 2012. This investment in capital assets includes land, buildings and improvements, street improvements, parks, water and sewer systems, equipment and vehicles. The net increase in the City's investment in capital assets for the current fiscal year was $3,683,961. Some of the major capital asset expenditures during 2013 related to the ongoing F.M. 455 utilities relocation project, water system improvements, and park improvements. Long-term Debt At year-end, the City had total notes, capital leases, bonds and contractual obligations outstanding of $29,676,845. The City had one new $4,210,000 debt issuance during 2013. The Utility Fund's new Series 2012 combination tax and revenue certificates of obligation were issued to finance water and sewer system improvements. The City made all required bond, capital lease, note, and contractual obligation principal payments for 2013 which totaled $872,157, At the end of FY13, the City's total long-term commitments for governmental activities were $6,854,813 and total long-term commitments for the Utility Fund are $22,935,997. Total long-term commitments for the City increased by $3,318,905 from 2012 to 2013. C� ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES From 2008 to 2011, the taxable value of existing properties in Anna declined an average of 3% per year. This equates to a loss of over $42 million in taxable value based on a year to year comparison. The value of existing properties stabilized in 2012, and valuation reports for the 2013 tax year show that the value of existing properties have increased for the first time since 2008. In addition to a modest 4% increase in the value of existing property, approximately $30,000,000 in new construction was added to the tax roll last year. We remain guardedly optimistic that we will continue to see modest appreciation in the value of existing properties. This growth in taxable value corresponds to a significant increase in residential growth and population over the past 24 months. According to the most recent population estimates published by the North Central Texas Council of Governments, the City of Anna population as of January 1, 2013 was 9,360. In 2012, the City issued 333 single family building permits which equates to approximately 1,000 new city residents. In 2013, the City issued another 305 single family building permits. Through February of 2014, the City has issued 78 single family building permits. We forecast a similar pattern of growth for at least the next 12 months. Of course with the growth in population comes a proportional increase in demand for municipal services that are funded primarily by property taxes. In order to fund the FY 2014 budget, the City adopted a tax rate of $0.650332 per $100 valuation which is identical to the tax rate adopted in FY 2013 and slightly greater than the effective tax rate of $0.606872. When compared with other cities in our area, the City of Anna still has one of lowest per -capita property tax burdens. In order to accommodate existing and projected growth, the City invested about $20 million over the last decade to upgrade the water and sewer system. Up until four years ago, the City was able to pay about two-thirds of the outstanding water and sewer debt with impact fees that are paid by a home builder when a new home is constructed. As residential construction declined, the resulting revenue from impact fees fell dramatically. In October of 2009, utility rates were increased in order to generate the revenue necessary to cover the operating costs and debt service obligations of our utility fund. On October 1, 2011, the base rate for residential water customers increased from $18 to $22 per month and the base rate for residential sewer customers increased from $18 to $22 per month. On January 1, 2012, an additional customer charge of $0.15 per 1000 gallons of water used was adopted to pay for the water production fees now being charged by the North Texas Groundwater Conservation District. While no additional rate increases occurred in FY 2013, the FY 2014 budget included a modest 4% increase to the base and volumetric water and sewer rates in order to ensure that our utility rates will continue to support our utility fund operating costs and debt obligations. This adjustment resulted in an estimated increase to the average monthly utility bill (combined water and sewer) of $3.68. We do not anticipate any changes to the utility rate structure during FY 2015. With the increase in growth the City experienced throughout 2013 and the stronger than expected growth seen through the early part of the 2014, the City issued new debt to finance water and sewer infrastructure improvements necessary to accommodate our growing community. The City continues to actively review its existing water and sewer rates. This evaluation is necessary to ensure that the City is able to meets its outstanding debt obligations and prepare for future capital improvements that will be necessary to maintain utility service to our community. In addition to reviewing our water and sewer rates, the City is actively managing its outstanding debt. We have a series of planned debt refundings that will allow us to take advantage of low rates and develop a more level and modest repayment structure. Although the City has some challenges, there are many positive things happening in our community. The City continues to see consistent increases in the amount of sales tax revenue collected each year, which is a testament to the health of our local business climate. The sales tax revenue in FY 2013 was up 10% over the FY 2012 revenue. While we do not expect dramatic increases to continue, we do not anticipate any decrease in sales tax revenue in FY 14. 7 CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, 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 additional financial information, contact City Hail, at 11 l North Powell Parkway, P.O. Box 776, Anna, Texas 75409-0776 or (972) 924-3325. � L r M M 00 M � M O� Q� rJ• M� � M h p O ao vi ct O In N 0�o �O to t� ty M M 0000 0000 N N M C�7 vi ON ao w tT (� 00 V'1 1p ffl 00 w) C� 000 01 O �o O ri 00 cr N M Vl N �%O 00 to �%O t� •"� M N CN M 00 M M V'� CD N N 69 r-. M � 00 00 m V1 M O N U ■III [� 00 00 O M V1 \Q 00 O CV 00 00 N (f3 a a� bC Q Nrg N fCS y �✓ U4 Cl En CO o CC TT ?: .Ucj .fl 12 .O L• I.U. 40 a d U o a d< z c z A % R@272 ¥ pe*5e / kkk\� ■ /ƒ k% # r c < / 7\ \/ ■ k k\k c © & _ / ) \ $ U w / 2\ / 2 § g 4 e m b z A 7 _ \ ®•- § CO CZ. ■ § A $ / � § § k 2 7 > 2\�65 / /z/\ n a0.. E., 0. � U m G Ln � U ¢ O 'b C O of G • �;. U E c U � b O L 0 0 U w a � U on s rn U �O 41 h V• N h �• �D h h M M h 0 �O V• C� O, h 00 V• h in �o M fcl N M Vn O� c`1 O^ M Vn M O O^ 00 00 .- v 1n N O DO M � M �l V'^ r�1� 00 00 ..� ._. 64 i i t i M M cM f7 M cM 00 00 00 O O O W)tnW) �O h rt N r� ri• �c h r� o o v O` rn h w it h kn a o h 00 �n 000 h � N O 00 rn M N �o ..... .,. 0000 CD O 00 V) 0 h O O) N ffrll XIC 00 0000 �O �D V• 'Cf' ^ N N M O N M M ON 00 C) i00 M 0000 N O cr O^ dr rt M M N ^0 kn � d• rh rh In in M M ON O V• �O 1` h O N N N 0o et cn Os h 00 V• O vi N h h ON O' Q\ 00 M� fn � b O M N N v^ 0 o Vl �o �O O cry O �o h r� M �O cY 00 N V' 0) O h M O O V• n O 00 to �o ^ M N V M M r� ^ vi vi vi O h N N V' N V' [� M O O 0�O N VV' 0000 Vim• O M N h 00 M 00 OMO VMj V�1 n V M N M r� M M 64 h v'i M M �-• M 00 (� M N h V V D O ' N Vl M p DD Vr N M h U M OMO V' �n M 00 h �o V• O ON N ^ N V to G .O � G u tb G y N O 'G on a N N > a+ C N G O a X c OV O N y Q C O O a a c a Q E o V o 0cm '� = 0. a G ° aS vG C nCd L va u F z aj z l City of Anna, Texas Balance Sheet - Governmental Type Funds September 30, 2013 Assets Current assets: Cash and cash equivalents Pooled investments Accounts receivable - net Notes receivable - net Due from other funds Total current assets Liabilities Current liabilities: Accounts payable Salaries payable Other accrued liabilities Due to other funds Deferred revenue Total current liabilities Fund Balances Non -spendable Restricted Committed - Revenue stabilization Committed - Building renovations Unassigned Total fund balances Total liabilities and fund balances __ Governmental Fund Types Capital Other General Projects Governmental $ 1,883,680 366,947 244,245 480,251 239759123 167,542 71,465 52,961 62,411 354,379 232,160 123,127 435,000 1,830,457 2,620,744 $ 2,975,123 $ 4,978,422 4,978,422 593,188 45472,536 5,065,724 (87,302) (87,302) $ 45978,422 $ 654,925 104,527 88,353 8473805 1,600 94,990 96,916 88,353 662,951 (415) 750,889 $ 847,805 The accompanying notes are an integral part of these financial statements. 12 Total Governmental Funds $ 7,S17,027 366,947 348,772 88,353 480,251 8,801,350 761,056 71,465 52,961 4,4741136 1571401 5,517,019 88,353 895,111 1231127 435,000 1,742,740 $ 3,284,331 8,801,350 City of Anna, Texas Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position For the Year Ended September 30, 2013 Fund balances of governmental funds (page 12) Amounts reported for governmental activities in the Statement of Net Position (pages 940) are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Accrued interest payable does not require the use of current financial resources and, therefore, are not reported in the governmental funds. Prepaid debt issuance costs are not financial resources and, therefore, are not reported in the funds. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. Revenue earned from a CDC long-term receivable is not all due in the current period and, therefore, is deferred in the fund financial statements. Property taxes and court revenue not received at year-end are shown as deferred income on the fund financial statements, but the amount should not be shown as a liability on the Statement of Net Position. Net position of governmental activities (page 10} $ 3,284,331 18,465,950 (3 0,442) 87,502 (6,854,813) 88,353 69,048 $ 15,109,929 The accompanying notes are an integral part of these financial statements. 13 City of Anna, Texas Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds For the Year Ended September 30, 2013 Revenues Taxes: Property Sales Franchise Intergovernmental Grants Building permits Developer and impact fees Court Parks Other development fees Fire Rentals Investment earnings Other revenue Police Total revenues Expenditures Current: Police Administrative and general Fire Development and animal control Streets Community and economic development Parks Ambulance Court Capital outlays Debt service: Principal retirement Interest expense Total expenditures Excess of revenues over (under) expenditures Other financing sources (uses) Released seizure funds Transfers in Transfers (out) Total other financing sources(uses) Net changes in fund balances Fund balances -beginning (restated) Fund balances - ending Governmental Fund Types Other General Capital Projects Governmental $ 2,146,922 5749649 3535482 88,738 16,510 566,587 203,428 117,518 63,421 69,334 56,178 20,839 11,875 12,352 20,047 4,321,880 1,290,492 852,871 563,564 559,414 201,294 120,030 1103446 1083391 457,780 19,904 133742692 657,888 19,600 2,052,180 4,210 $ 350,057 574,648 3 0,000 7,781 11,547 974,03 3 - 177,705 2,320,814 4,284,186 2,325,024 37,694 15,500 13,300 (92,000) (63,200) (25,506) 2,646,250 $ 2,620,744 (272,844) 1,692,232 (1,539,156) 1539076 (119,768) 32,466 139,351 410,973 271,485 1,001,341 (27,308) 50,000 (1,613,532) (11563,532) (1,5902840) 2,341,729 $ 750,889 The accompanying notes are an integral part of these financial statements. 14 Total Governmental $ 2,496,979 1,149,297 353,482 1,463,430 6743398 566,587 2033428 117,518 63,421 69,334 56,178 50,839 39,256 23,899 20,047 7,348,093 1,290,492 858,908 5631564 5593414 2011294 177,705 120,030 110,446 1082391 2,917,945 430,877 271,485 716102551 (262,458) 15,500 1,755,532 (31244,688) (15473,656) (1,7365114) 5,020,445 $ 35284,331 City of Anna, Texas Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended September 30, 2013 Amounts reported for governmental activities in the Statement of Activities (page 11) are different because: Net change in fund balances -total governmental funds (page 14) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period. Non -cash capital contributions and other contributions not received within sixty days after year-end are not reported as income in the governmental funds. The decrease in accrued interest is not a source of current financial resources and, therefore is not reported in the governmental funds. Principal payments on long-term debt are an expenditure for the governmental funds, but this expenditure is removed for the government -wide financial statements. The increase in accrued compensated absences does not use current financial resources and, therefore is not reported in the governmental funds. Various other reclassifications and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. These include recognizing the change in deferred revenue and various other items. The net effect of these reclassifications is to decrease net position. Governmental funds report the costs of issuing new debt in the year for which it is incurred, but this cost is amortized over the life of the debt for the government -wide financial statements. Change in net position of governmental activities (page 11) The accompanying notes are an integral part of these financial statements. 15 $ (1,736,114) 1,747,915 553,426 1,428 430,877 (8,085) (19,283) (5,989) $ 964,175 City of Anna, Texas Statement of Net Position - Proprietary Fund (Utility Fund) September 30, 2013 Assets Utility Fund Current assets: Cash and cash equivalents $ 23169,466 Accounts receivable - net 366,786 Inventory 210 483 Restricted pooled investments 1409318 Restricted cash for capital improvements 253599654 Due from other funds 3,9931886 Total current assets 93240,593 Noncurrent assets: Deferred charges - prepaid bond issue costs 3883036 Restricted deposits held in trust with GTUA 1,864,979 Capital assets (non -depreciable): Land and easements 3623913 Construction in progress 1,573,835 Capital assets (net of depreciation): Plants, machinery, and equipment 301228,045 Total capital assets 3231643793 Total noncurrent assets 3454172808 Total assets $ 43,658,401 Liabilities Current liabilities: Accounts payable $ 221,583 Salaries payable 27,108 Other liabilities 22,763 Bond interest payable 801,525 Customer deposits 5913094 Current portion of long-term debt 545,997 Total current liabilities 2,2101070 Noncurrent liabilities: Bonds and notes payable 22,3905000 Total liabilities 245600,070 Net Position Net investment in capital assets 9,228,796 Restricted - GTUA deposits I t864,979 Restricted - water and sewer improvements 6,493,858 Unrestricted 114705698 Total net position $ 1%0585331 The accompanying notes are an integral part of these financial statements. 16 City of Anna, Texas Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Fund (Utility Fund) For the Year Ended September 30, 2013 2013 Operating revenues: Water income $ 2,3625035 Sewer income 1,487,160 Sanitation income 6423015 Developer and impact fees 7883500 Connect, install, and tap fees 1405010 Water customer late fees 112,989 Groundwater production fees 40,692 Miscellaneous revenue 19,085 Total operating revenues 535923486 Operating expenses: Personnel and benefits 796,820 Sanitation contract 5649113 Utilities 412,056 Supplies, repairs, and maintenance 379,111 N. Texas Municipal Water District contract 302,436 Other contractual services 378,255 Other operating expenses 277,721 Bad debt 51,115 Depreciation 1,165,380 Total operating expenses 45327,007 Operating income 1,265,479 Non -operating revenues (expenses): Interest expense (955,155) Bond amortization (25,110) Insurance recoveries for damaged assets 137,042 Interest income 34,636 Total non -operating revenues (expenses) (8085587) Income before contributions and transfers 456,892 Contributed capital assets 484,704 Transfers in 1,489,156 Change in net position 2,430,752 Total net position - beginning 16,6275579 Total net position - ending $ 193058,331 The accompanying notes are an integral part of these financial statements. 17 Lj City of Anna, Texas Statement of Cash Flows - Proprietary Fund (Utility Fund) For the Year Ended September 30, 2013 Operating Activities: 20I3 Receipts from customers and users $ 59589,734 Payments to suppliers (2,494,643) Payments to employees (578,593) Net cash provided (used) by operating activities 21516,498 Capital and Related Financing Activities: Cash to restricted capital improvements and GTUA accounts (661,600) Cash paid for acquisition and construction of capital assets $ (577,207) Interest paid on long-term debt (921,768) Principal payments on debt (446,278) Net cash provided (used) by capital and related financing activities (2,6061853) Investing Activities: Insurance proceeds for damaged assets 137,042 Interest received 34,636 Net cash provided (used) by investing activities 171,678 Net increase (decrease) in cash and cash equivalents 81,323 Cash and cash equivalents, October 1 290889143 Cash and cash equivalents, September 30 $ 21169,466 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ 112659479 Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 19165,380 Decrease (increase) in accounts receivable 48,363 Decrease (increase) in inventory (1%655) Decrease (increase) in other assets 47,365 Increase (decrease) in accounts payable 32,800 Increase (decrease) in other liabilities 56,886 Increase (decrease) in customer deposits 609880 Net cash provided by operating activities $ 29516,498 Non -cash capital activities: Transfer of capital assets from the Capital Projects Fund $ 1,489,156 The accompanying notes are an integral part of these financial statements. 18 CITY OF ANNA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2013 NOTE A -SUMMARY OF ACCOUNTING POLICIES The City of Anna, Texas (the "City") is a Home Rule Charter city that operates under a Council -Manager form of government. The City provides the following services: public safety, ambulance, streets, sanitation, planning and zoning, and general administrative services. Other services include water, sewer, and sanitation operations. The financial statements of the City of Anna are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The City's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Proprietary funds and similar component units apply Financial Accounting Standards Board (FASB) pronouncements. The following is a summary of the more significant policies: 1. The Re ortin Entity The accompanying financial statements present all funds relevant to the operations of the City and its component units as defined by GASB Statement 61: The Financial Reporting Entity: Omnibus an amendment to of GASB Statements 14 and 34. Component units are fiscally dependent upon the City and there is potential for a financial burden or benefit relationship. Based on the criterion stated above, the Anna Community Development Corporation ("CDC") and the Anna Economic Development Corporation ("EDC") are component units of the City. The CDC and EDC are nonprofit organizations established to act on behalf of the City of Anna under the Development Corporation Act of 1979, section 4B and 4A, respectively. Both component units are considered special revenue funds of the City and are presented as blended governmental -type funds. The blended methodology was selected after evaluation of the "substantively the same" and financial burden or benefit relationship criteria. It should be noted that when the blended method is used, transactions of the component unit are presented as if they were executed directly by the primary government. 2. Government -Wide and Fund Financial Statements The government -wide financial statements (i.e. the statement of net position and the statement of changes in net position) report information on all the non -fiduciary activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the City is financially accountable. The statement of activities demonstrates the degree to which direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes or other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. 19 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Major individual governmental funds are required to be reported in separate columns in the fund financial statements. 3. Measurement Focus Basis of Accounting and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue when all of the eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they become both measurable and available as net current assets. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. Gross receipts and sales taxes are considered measurable when in the hands of intermediary collecting government and are recognized as revenue at that time. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Exceptions to this general rule include; (1) accumulated unpaid vacation, sick pay, and other employee amounts which are not accrued; and (2) principal and interest on general long-term debt which are recognized when due. Proprietary funds distinguish operating revenues and expenses from non -operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. All revenues not meeting this definition are reported as non -operating revenues and expenses. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. Unbilled utility services receivables related to water, wastewater, and sanitation services are recorded at year-end. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted funds first, then unrestricted resources as they are needed. 4. Fund Accounting The accounts of the City are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self -balancing accounts, which are comprised of each fund's assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Government resources are allocated to and for individual funds based on the purposes for which they are to be spent and the means by which spending activities are controlled. The City, for financial purposes, includes all of the funds relevant to the operations of the City of Anna. Funds designated as "major" funds for the City each year are considered particularly important due to the level of activity in these funds. The General Fund is always considered a major fund for the City. For 2013, the Capital Projects Fund and Utility Fund are also major funds. The various funds are grouped, in the financial statements in this report, into two fund categories as follows: 20 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) GOVERNMENTAL FUND TYPES General Fund The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund Accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. Capital Projects Fund Accounts for the acquisition and construction of governmental -type assets from expenditures of debt proceeds, capital grants, or other sources restricted for governmental type asset acquisition. Special Revenue Funds The Anna CDC is a special revenue fund that accounts for the accumulation of State of Texas 4A sales tax revenues and related community development expenditures. The Anna EDC is a special revenue fund that accounts for the accumulation of State of Texas 4B sales tax revenues and related economic development expenditures. PROPRIETARY FUND TYPES Utility Fund Accounts for operations (a) that are financed and operated in a manner similar to private business enterprises -where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The Utility Fund accounts for the water, sewer, and sanitation services provided by the City. 5. Cash and Cash Equivalents For purposes of the statement of cash flows, the City considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. Other deposits with longer maturities are classified as investments. 6. Inventory City inventory is maintained for water meters and other supplies in the Utility Fund. Inventory is recorded at cost with value adjusted on the first in, first out methodology. 7. Capital Assets, Property, plant and equipment used in governmental fund -type operations are shown on the statement of net position, rather than governmental funds. 21 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) All property, plant and equipment are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated property, plant and equipment are valued at their estimated fair value on the date donated. Depreciation is provided in the enterprise funds in amounts sufficient to relate the cost of the i deprecable assets to operations over their estimated service lives on the straight-line basis. The service lives by type of asset are follows: Depreciable Asset Category Life in Years Buildings 20 Water & Sewer System infrastructure 35 Equipment 3-20 Streets m 8. Long Term Liabilities Long-term liabilities expected to be financed from governmental fund types are shown on the statement of net position, rather than governmental funds. Principal payments for this debt are expensed on the fund financial statement, but this expense is removed for the government -wide statement of activities. 9. Due To and From Funds Outstanding balances between funds at the end of the fiscal year are referred to as either "due to/from other funds". Any residual balances between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances". 10. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for unpaid accumulated sick leave since the City will not pay any unused amounts when employees separate from service with the City. Vacation pay is accrued in the government -wide and proprietary financial statements. 11. Fund Balances The City has adopted Governmental Accounting Standards Board (GASB) StatementNo. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54). This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes in the fund financial statements for governmental type funds. It does not apply for the government -wide financial statements or proprietary type funds. GASB 54 requires the fund balance amounts to be properly reported within one of the following fund balance categories: Nonsper2dable -such as fund balance associated with inventories, prepaids, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned}. Restricted -fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation, 22 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Committed - fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the City Council (the City's highest level of decision -making authority), Assigned -fund balance classcation authorized for City Manager use to be used for specific purposes but do not meet the criteria to be classified as restricted or committed, and UTaassigrzed -hind balance is the residual classification for the government's general fund and includes all spendable amounts not contained in the other classifications, and other funds that have total negative fund balances. 12. Budget and Bud etary Accounting The official city budget is prepared for adoption for the Governmental Fund Type and the Proprietary Fund Type during the month of September. 13. Revenue Recognition — Propert t Property taxes attach as an enforceable lien on property as of January 1. Taxes are levied on October 1 and are due and payable at that time. All unpaid taxes levied October 1 become delinquent February 1 of the following year. Property tax revenues are recognized when they become available. Available includes those property tax receivables expected to be collected within sixty days after year-end. NOTE B -CASH, CASH EQUIVALENTS, AND POOLED INVESTMENTS As of September 30, 2013, the City maintains banking accounts at Texas Star Bank, Independent Bank, and the state -operated Texpool system. The City's investments are limited to demand deposits and certificates of deposits in financial institutions that are members of the FDIC. At September 30, 2013, City's deposits held in its depository banks totaled $12,551,612 with $788,650 insured by the Federal Deposit Insurance Corporation. Securities have been pledged in the City's name by the depository banks to collateralize 100% of all remaining deposits. Summary of deposits with financial institutions: Primary government cash and cash equivalents $ 9,686,493 Primary government pooled investments 5077265 Restricted cash 21359,654 Less: petty cash (11800) Deposits with financial institutions 12,5511612 Add: petty cash 17800 Total primary government cash and other deposits $ 121553,412 The Texas State Comptroller of Public Accounts exercises oversight responsibility over TexPool (pooled investments). Oversight includes the ability to significantly influence operations, designations of management and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. The Advisory Board members review the investment policy and management fee structure. Standard and Poor's rates TexPool at AAAm. 23 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) To maintain the rating, weekly portfolio information must be submitted to Standard and Poor's and the office of the Comptroller of Public Accounts for review. TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized cost rather than the market value to report net assets to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. The City's pooled investments at September 30, 2013, are comprised of governmental investment pools in the Texas Local Government Investment Pool (TexPool) as follows: Carrying Amount & Fair Value Public fund investment pools: TexPool General Account $ 328,083 TexPool Building Fund 38,864 TexPool Sewer Capital Improvement Fund 140,318 Not Total public funds investment pools: $ 5079265 Custodial credit risk Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City's investment policy requires collateralization of certificates of deposit or demand deposits, to be held by an independent safekeeping agent. The safekeeping bank may not be within the same holding company as the banks from with the securities are pledged. City deposits over and above amounts insured by the Federal Deposit Insurance Corporation (FDIC) are collateralized by securities held by the City's safekeeping agent. haterest rate risk Through its investment policy, the City manages its exposure to fair value losses arising from increasing interest rates by limiting the duration of investments within its investment portfolio to a maturity period no greater than three years for the Debt Service Fund, no greater than the final expenditure date for bond proceeds held in a Capital Projects Funds, and no greater than 270 days for all other funds. Credit risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. According to the City's investment palicy, to mitigate credit risk, funds shall be invested in the following types of investments: 1) state or local investment pools 2) direct obligations of the U.S. government 3) bonds with maturities less than two years and guaranteed by the U.S. government 4) certificates of deposits with maturities less than two years 5) repurchase agreements collateralized with U.S. treasury securities with terms less than 90 days 6) SEC registered, AM -rated money market mutual funds with a dollar -weighted average portfolio maturity of 90 days or less, and 7) fixed rate or discount notes with a maturity of two years or less pledged or otherwise guaranteed by any of the following federal agencies: Federal National Mortgage Association, Federal Home Loan Bank, Federal Farm Credit Bank, Student Loan Marketing Association, and the Federal Home Loan Mortgage Corporation. 24 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Concentration of credit risk Concentration of credit risk is the risk of loss attributed to the magnitude of investment in a single issuer. The City investment policy requires investment funds to be fully collateralized. NOTE C —PROPERTY TAX REVENUE Property and personal taxes are billed and collected by the Collin County Tax Assessor/Collector. The total property tax levy for the 2012/2013 tax year was $2,438,503, At September 30, 2013, $2,420,674 of the tax has been collected, which is 99.3%. Ad valorem taxes are levied from valuations assessed as of January 1 and recognized as revenue on the date of the levy on October 1. Property tax receivables are recognized when the City has an enforceable claim against the property owner. In the governmental funds, property tax revenue is recognized in the fiscal period for which the taxes are levied, provided that they become available. Available means collected within the current period, or expected to be collected soon enough thereafter, to be used to pay current liabilities. The City's availability period is sixty days. Taxes collected prior to the levy date to which they apply are recorded as deferred revenues and recognized as revenue of the period to which they apply. Current taxes are levied by October 1 and become delinquent if unpaid on February 1. Taxes unpaid as of February 1 are subject to penalty and interest as the City Council provides by ordinance. The penalty is 6% for the first month, and increased 1% per month up to a 12% maximum. Under state law, property taxes levied on real property constitutes a lien on the real property which cannot be forgiven without specific approval of the state legislature. NOTE D -RECEIVABLES Receivables at September 30, 2013, consisted of the following: Property tax Sales tax Primary Government Other ry Capital Governmental - General Fund Projects Fund Type Funds $ 40,814 $ - $ 61637 $ 97,891 - 97,890 Proprieta Fund Franchise tax and other 83,943 Court fines 441,547 Loans (long-term) - - 88,353 - Utility bills - - - 474,627 Gross receivables 664,195 - 192,880 4743627 Less: Allowance for uncollectibles (419,950) - - (107,841) Net receivables $ 244,245 $ - $ 1923880 $ 366,786 25 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE E - CAPITAL ASSETS GOVERNMENTAL FUND TYPE ACTIVITIES Governmental fund type capital asset activity for the year ended September 30, 2013 was as follows: Nondepreciable assets: Land Construction in progress Depreciable assets: Park improvements Buildings Furniture and fixtures Streets and drainage Machinery and equipment Totals at historical cost Less: Accumulated depreciation Governmental fund type capital assets, net Retirements, Beginning Transfers, and Balance Additions Reclassifications Ending Balance 2681103 $ - $ 2,032,630 86,768 2,251,630 (69,708) 2,2685690 2,916,332 43,260 - 2,959,592 113759278 12,024 69,708 1,457,010 165,987 44,714 - 210,701 14,520,181 760,068 - 157280,249 21058,655 91,572 (101,934) 2,0489293 22,8871728 314719371 (101,934) 26,257,165 (6171 %786) (1,170,030) 985601 (71791,215) $ 16,167,942 $ 2,301,341 $ (3,333) $ 18,465,950 PROPRIETARYFUND TYPE ACTIVITIES Proprietary fund type capital asset activity for the year ended September 30, 2013 was as follows: Nondepreciable assets: Land and easements Retirements, $ 362,913 $ - $ - $ 362,913 507,719 1,532,026 (465,909) 1,573,835 5,620 - - 5,620 486,244 - - 486,244 774,712 392,171 (2060) 191389223 51994,665 - - 51994,665 16,851,929 127,705 - 169979,634 939,796 - - 939,796 119888,533 499,435 465,909 12,8537877 37,8121131 2,551,337 (2060) 40,3347807 (7,033,294) (19165,380) 28,660 (85170,014) $ 30,778,837 $ 11385,957 $ - $ 32,1649793 26 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Depreciation for general fixed assets is included as an expense for governmental activities on the statement of activities. Depreciation for proprietary type funds are included in both the fund financial statements and on the statement of activities. Depreciation expense was charged to functions/programs of the primary government as follows: Goverrzrnental activities: Streets $ 73408 Parks 183,577 Police 127,516 General government 26,925 Fire 78,106 Economic development 18,329 Inspections 15569 Total depreciation expense - governmental activities $ 1,1709030 Bus•i�zess-type activities: Water and sewer $ 1,165,380 Total depreciation expense - business -type activities $ 151655380 NOTE F -LONG-TERM DEBT The City has outstanding general obligation bonds, revenue bonds, notes payable, capital leases, and certificates of obligation for the acquisition of capital assets and the construction of major capital facilities. The following is a schedule of future debt service requirements to maturity: Total Governmental Activities Business -Type Activities Fiscal Year Ended 2014 $ 2015 2016 2017 2019-2023 2024-2028 2029-2033 2034-2038 2039-2040 Principal Interest 961,649 $ 11272,157 $ 1,462,776 1,177,494 11517,903 15137,794 l 9516?236 1,108,705 1,495,724 152559035 71807,057 6,005,481 81345,500 2,940,101 5,038,750 963,410 Principal 415,652 $ 422,776 444,153 408,736 389,474 2,087,057 1,9837000 590,000 Interest Principal Interest 257,292 $ 545,997 $ 1,014,865 2411032 11040,000 936,462 224,566 11073,750 913,228 2529868 1,107,500 855,837 312,194 1,106,250 942,841 1,327,613 5,720,000 4,6771868 499,682 6,362,500 2,440,419 43,100 41448,750 920,310 11126,250 293,618 - - 11126,250 2937618 405,000 35,709 - - 4059000 35,709 5) 29,6761844 $ 16,189,504 $ 617407848 $ 31158,347 $ 225935,997 $ 13,031,157 27 2019-2023 2024-2028 2029-2033 2034-2038 2039-2040 Principal Interest 961,649 $ 11272,157 $ 1,462,776 1,177,494 11517,903 15137,794 l 9516?236 1,108,705 1,495,724 152559035 71807,057 6,005,481 81345,500 2,940,101 5,038,750 963,410 Principal 415,652 $ 422,776 444,153 408,736 389,474 2,087,057 1,9837000 590,000 Interest Principal Interest 257,292 $ 545,997 $ 1,014,865 2411032 11040,000 936,462 224,566 11073,750 913,228 2529868 1,107,500 855,837 312,194 1,106,250 942,841 1,327,613 5,720,000 4,6771868 499,682 6,362,500 2,440,419 43,100 41448,750 920,310 11126,250 293,618 - - 11126,250 2937618 405,000 35,709 - - 4059000 35,709 5) 29,6761844 $ 16,189,504 $ 617407848 $ 31158,347 $ 225935,997 $ 13,031,157 27 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The following is a summary of the terms of the City's long-term debt at September 30, 2013: Coverttmenta(Activities: Balance Original Year of Final September 30, Due Within Purpose Amount Issue Maturity Interest Rate 2013 One Year 2005 Combination Tax and Limited Surplus Revenue Certificates of $ 24480,000 2005 2/15/2026 3.5%n-5?5% $ 1,865,000 $ 110,000 Obligation 2007 Certificate of Obligation I AM000 2007 2/15/2027 3.95% to 15% 9704000 85,000 2007 Revenue Bond 3704000 2007 2/15/2027 395%n to 15% 250,000 MOW Capital lease for Groundmaster 70,758 2010 2013 5,38% 2011 Tax Revenue Certificates of 360,000 2011 2/15/2026 3.34% 3524000 8,000 Obligation 2009 Tax and Revenue Certificate of 900,000 2009 2/15/2026 4.28% (to 15% 790M0 35,000 Obligation on 02/15/2018) Fire rescue truck note 55,000 2009 2/3/2014 5.00%n 12,115 12,115 EDC - Note payable 3354000 2012 1 1/14/2021 4,465% 284,210 29,504 EDC - Note payable 410A00 2008 2018 5% 244,523 36,762 CDC - Sales Tax Revenue Refunding 333,000 64,000 Bonds- Series 2012A 3964000 2012 2/15/2018 3.25% CDC - Sales Tax Revenue Bonds - Series 2012B $ 1,655,000 2012 2032 3,30% 1 A40MO 15.000 Compensated absences 113,965 1134965 Total Governmental Activities $ 6,854,813 $ 529,346 Business -Type Activities: 1976 Junior Lien Waterworks and Sewer System Revenue Bonds 1976 General Obligation Water Bonds 2005 GTUA contract Series 2006 GTUA contract revenue bonds 02&15) Series 2007 GTUA contract revenue bonds 2007 GTUA contract 2007 GTUA contract 2007 GTUA contract 2008 GTUA contract CGMA Pipeline Project Phase I CGMA Pipeline Project Phase II CGMA Pipeline Project Phase III 2009 combination tax and revenue refunding bond 2012 combination tax and revenue certificates of obligation Backhoe note Total Business -Type Activities Original Year of Final Issue Maturi Balance September 30, Due Within Interest Rate 2013 One Year 76 9/30/2014 $ 95,000 195% $ 5,000 $ 5,000 100MO 1976 9/30/2016 5% 15,000 5,000 24885,000 2005 5/l/2028 4.42% 1180,000 95,000 2,125,000 2006 6/l/2026 2.95%n-3.75% 1,5504000 95,000 760,000 2007 5/I/2027 3.07%n-5.57%a 620,000 304000 1,105,000 2007 5/1/2027 3.07%n-5.57°lr 915,000 45,000 2,325,000 2007 6/1/2028 2.95%-4.1% 1*905,000 95,000 3,365,000 2007 5/I/2032 3,07%-5.62%n 3,210,000 50,000 540,000 2008 9/30/2027 2.29%-5.74% 440,000 20,000 7004000 2008 10/1/2028 2.29%n-5.74% 537,500 23350 168,750 2008 9/30/2040 5.69%-5.83 2,168,750 - 1,250,000 2008 10/1/2036 2.67%n-5.62%n I,105,000 474500 4.28% (to 15%4,165,000 2009 2/15/2026 on 02/15/2018) 4,065,000 25,000 4,210,000 2013 2/15/2033 $ 87,344 2009 2/2/2014 Total general debt (Governmental Type and Business -Type Activities) 1.5%-2.5%a 4,210,000 - 5% 9,747 9,747 22,935,997 545,997 $ 29390,810 $ 1,075,343 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Long-term debt activity for the year ended September 30, 2013 is as follows: Beginning Due Within Balance Additions Reductions Ending Balance One Year Governmental activities: 2005 Combination Tax and Limited Surplus Revenue Certificates of Obligation 2007 Certificate of Obligation 2007 Revenue Bond 2011 Tax Revenue Certificates of Obligation EDC - FY12 Bank note payable - 4.465% a.p.r. Matures 11/14/2021 - Original issue - $335,000 Capital lease for Groundmaster EDC - FY08 Bank note payable - 5% a.p.r. Matures 2019 - Original amount was $380,300 2009 Tax and Revenue Certificate of Obligation Fire rescue truck note CDC - Sales Tax Revenue Refunding Bonds- Series 2012A CDC Sales Tax Revenue Bonds- Series 2012B Other liabilities Total Governmental activity long term liabilities $ ],975,000 $ $ (110,000) $ 1,865,000 $ 110,000 1,055,000 - (85,000) 970,000 85,000 270,000 - (20,000) 250,000 20,000 3604000 - (81000) 352,000 8,000 312,427 - (28,217) 284,210 29,504 19,904 - (19,904) - 279,754 - (35,231) 244,523 36,762 825*000 (359000) 790,000 355000 23,642 (11,527) 12,115 125115 396,000 - (63,000) 333,000 64,000 1,6555000 (159000) 1,640,000 15,000 1059878 8,087 - 113,965 113,965 $ 7,277,605 $ 8,087 $ (430,879) $ 648549813 $ 529,346 Beginning Due Within Balance Additions Reductions Ending Balance One Year Business -type activities: 1976 Junior Lien Waterworks and Sewer System Revenue Bonds $ 109000 $ - $ (5,000) $ 51000 $ 51000 1976 General Obligation Water Bonds 20,000 - (51000) 15,000 5,000 2005 GTUA contract 21180,000 - - 21180,000 95,000 Series 2006 GTUA contract revenue bonds (12&15) 11640,000 - (90,000) 19550,000 95,000 Series 2007 GTUA contract revenue bonds 650X0 - (30,000) 620,000 30,000 2007 GTUA contract 960,000 - (45,000) 915,000 459000 2007 GTUA contract 1,995,000 - (90,000) 1,905,000 95,000 2007 GTUA contract 3,260,000 - (50,000) 3,2109000 50,000 2008 GTUA contract 460,000 - (20,000) 440,000 2000 CGMA Pipeline Project Phase I 560,000 - (22,500) 5375500 23,750 CGMA Pipeline Project Phase II 2,168,750 - - 21168,750 - CGMA Pipeline Project Phase III 1,150,000 - (45,000) 1,105,000 47,500 2009 combination tax and revenue refunding bond 41090,000 - (25,000) 41065,000 MAO 2012 combination tax and revenue certificates of obligation - 41210,000 - 4,210,000 - Backhoe note 28,525 - (18,778) 94747 91747 Total business -type activities long term liabilities $ 194172,275 $ 4,210,000 $ (446,278) $ 22,935,997 $ 545,997 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) CONTRACTUAL OBLIGATIONS WITH GREATER TEXOMA UTILITYAUTHORITY Under the terms of long term water supply and sewer service contracts between the City and Greater Texoma Utility Authority (GTUA), the city recognizes that GTUA has an undivided ownership interest in the City's water system and sewer collection and treatment facility equivalent to the percentage of the total cost of the facility provided by GTUA through the issuance of GTUA bonds. The City has a contractual obligation to make payments specified by the contract to GTUA to pay the principal and interest on the bonds, maintain a Reserve Fund for the security and payment of bonds similarly secured, pay the administrative and overhead expenses of GTUA directly attributable to the bonds, and pay any extraordinary expenses incurred by GTUA in connection with the bonds. Under terms of the contracts the City's obligation to make payments to GTUA, as well as GTUA's ownership interest in the facilities terminates, when all of GTUA's bonds issued in connection with construction of the facilities have been paid in full, are retired, and are no longer outstanding. Collin Grayson Municipal Alliance Transmission Water Pipeline In 2004, the City, along with the City of Van Alstyne, Howe, and Melissa, formed a group called the Collin Grayson Municipal Alliance (" CGMA' ). CGMA entered into a long-term contractual obligation with GTUA for the purpose of providing funds for the construction of a transmission water pipeline that will provide water to CGMA cities. The cost of the pipeline is being funded in four phases. Each CMGA city was required to make payments to GTUA in an amount equivalent to 25% of the total obligation to cover their portion of the cost of the obligation until the pipeline project was completed. As water continues to flow to each CGMA city, the City shall be charged it's percentage or fraction share of debt service on the obligation based upon: the amount of water to be paid by the City under its water contract (i.e. the greater of its minimum take -or -pay amount or the actual amount of water taken) divided by the total amount of water to be paid by all CGMA cities. The sum of the four (4) fractional amounts shall always equal 100% of the debt service on the contractual obligation with GTUA. The billing rates for each City will be calculated to provide funds necessary to cover the contractual obligation, interest, repairs, maintenance, and production costs. At the end of the contractual obligation with GTUA, the City will own an undivided interest in the transmission water pipeline based on the percentage of water it utilized and paid for during the contract term. The contract will expire and the transfer of ownership will occur during the fiscal year ended September 30, 2040, as long as no new debt is issued. CDC Series 2012A Sales Tax Revenue Refunding Bonds On August 23, 2012, Series 2012A Sales Tax Revenue Refunding Bonds were obtained by the CDC in the amount of $396,000. $377,983 of the proceeds from the sale of the bonds were used to refund the CDC's outstanding Texas Leverage Fund Loan in order to restructure such indebtedness. The issuance's net present value has the CDC incurring $3,382 of additional costs after paying all issuance and other costs on the Bonds. The refunded loan and interest due thereon, are to be paid from funds deposited with the Escrow Agent. The entire refunded loan principal was redeemed on August 23, 2012. Debt service for the sales tax revenue bonds will be funded from pledged state tax revenue. NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) CDC Series 2012E Sales Tax Revenue Bonds On August 23, 2012, Series 2012B Sales Tax Revenue Bonds were obtained by the CDC in the amount of $1,655,000. Proceeds from the sale of the bonds are to be used for City of Anna parks and other open space improvements. Debt service for the sales tax revenue bonds will be funded from the pledge of net revenue to be received from the State of Texas sales taxes received by the CDC. Series 2012, $4,210, 000 Combination Tax and Revenue Certificates of Obligation Dated December 20, 2012, these proprietary fund certificates of obligation were issued to fund water and sewer system improvements. Proceeds of the debt are recorded in, and expended by the Capital Projects Fund. This twenty- year debt has interest rates of 1.5% to 2.5% that will be paid each February and August 15"'. Average yield is 2.24%. Principal is paid every February 151h. The debt is to be repaid with Utility Fund revenues. Final maturity is on February 15, 2033. NOTE G —PRIOR PERIOD ADJUSTMENTS The Anna CDC and Anna EDC are component units of the City. Prior to fiscal year 2013, the EDC and CDC were discretely presented in a separate column in the government wide financial statements. Effective October 1, 2012, both component units are considered special revenue funds of the City and are presented as blended governmental -type funds. This change in presentation requires that CDC and EDC equity at the beginning of fiscal year 2013 be incorporated into the governmental -type fund balances and governmental - type activities net position as follows: Governmental Fund Types Fund balances - beginning as previously reported $ 2,733,904 Adjustment to include beginning LOU fund balance 351,517 Adjustment to include beginning CDC fund balance 19935,024 Fund balances - beginning as adjusted $ 510203445 Govermnental Government -wide effects Activities Net Position - beginning as previously reported $ 13,532,171 Adjustment to include beginning EDC net position 630,488 Adjustment to include beginning CDC net position (16,905) Net Position - beginning as adjusted $ 14,145,754 NOTE H —FUND BALANCES AND RESTRICTED NET POSITION Governmental -Type Fund Balances The City authorized the CiTy Administrator to designate certain fund balances as assigned. Excluding unassigned fund balances, the following describes the City's fund balance classifications at September 30, 20134 Non -spendable Fund Balance The CDC Special Revenue Fund has $88,353 long-term note receivable due from a local business and is thus classified as non -spendable. 31 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Restricted Fund Balances All fund balances in spendable form for the Capital Projects, Debt Service, and Special Revenue funds are restricted for the intended purpose of these funds. Restricted Fund Balances of $232,160 for the General Fund represents assets restricted by law or by agreements with third parties. The following describes the various fund balance restrictions for the General Fund: Impact fees for park improvements Eastside Park improvements Fire Department improvements State Seizure funds held in trust Impact fees for street improvements Public Education Government Fees Child safety programs Municipal court building security Court bond funds held in trust 0 113,901 12,507 295203 4,095 22,055 25,214 6,533 11,728 4,373 Municipal court technology 1,658 Sweetwater Crossing funds held in trust 876 Law enforcement officer training fund 17 $ 232,160 Committed Fund Balances The City Council has committed $123,127 of General Fund fund balance for 2014 revenue stabilization iii the event of budget shortfalls. This contingency amount must be expended in accordance with Section 7.08 of the Anna City Charter. The City Council has also committed $435,000 of General Fund fund balance for 2014 City building renovations. Negative Fund Balances The Capital Projects Fund has a negative $87,302 fund balance at September 30, 2013 that was caused by the timing of payables to construction contractors. The City annual budget is adopted and amended as necessary to ensure any negative fund balances are only temporary in nature. The Debt Service Fund also has $415 negative fund balance that is considered inconsequential. Proprietary Fund Net Position Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. At September 30, 2013, the City's proprietary fund net position was restricted for the following purposes: • The Utility Fund has restricted deposits held intrust by GTUA in the amount of $1,864,979 that will be used for water and sewer system capital improvements and repayment of contractual obligations. 32 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) • The Utility Fund has restricted net position in the form of cash deposits, pooled investments, and due from other fund balances totaling $6,493,858 that will be used for water and sewer system capital improvements and debt service related to such improvements. Amounts due from the Capital Projects Fund are restricted because that fund holds assets related to Utility Fund's FYI debt issuance at September 30 2013. The balance is comprised of the following Statement of Net Position balances: Restricted pooled investments $ 140,318 Restricted cash for capital improvements 2,3595654 Due from other funds 3,993,886 $ 6,493,858 NOTE I — INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS Interfund balances at September 30, 2013 are as follows: Receivable Fund Payable Fund Amount General Utility $ 2025080 General Capital Projects 278,171 Utility Debt Service 1,600 Utility Capital Projects 4,1949366 For services earned/paid on behalf of other fund. For services earned/paid on behalf of other fund. For services earned/paid on behalf of other fund. For Utility Fund debt proceeds held by another fund. The net internal balances between governmental and proprietary type funds presented above is $3,993,886. Interfund transfers during September 30, 2013 are as follows; Transfer In Fund Transfer Out Fund General Capital Projects Debt Service Capital Projects Utility CDC General Capital Projects CDC Capital Projects NOTE J —RISK MANAGEMENT Amount Purpose $ 135300 To transfer assets. 92,000 To assist in park improvement expenditures. 50,000 To assist in 2013 debt service. 1,600,232 To assist in park improvement expenditures. 1,489,156 To transfer Utility Fund assets held by another fund. The City is exposed to various risks of loss related to litigation, theft, property damage, errors and omissions, injuries, and natural disasters. The City's insurance is by membership in the Texas Municipal League, a public entity risk pool operated by the Texas Municipal League Board for the benefit of governmental units in Texas. Insurance in effect at September 30, 2013 is summarized as follows: Workers compensation, general liability, automobile liability, personal property, law enforcement liability, and errors and omissions. There were no settlements in excess of the insurance coverage in any of the three prior fiscal years. 33 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE K — PENSION PLAN Plan Description The City provides pension benefits for all of its full-time employees through a nontraditional, joint contributory, hybrid defined benefit plan in the statewide, Texas Municipal Retirement System (TMRS), one of 849 total cities as of 2012 administered by TMRS, an agent multiple -employer public employee retirement system. TMRS issues stand-alone financial reports annually and these can be obtained by request at the following address: TMRS, P.O. Box 149153, Austin, Texas 78714-9153. Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City - financed monetary credits, with interest. At the date the plan began the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150% or 200%) of the employee's accumulated contributions. In addition the City can grant as often as annually another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employer's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of his/her salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer -financed monetary credits with interest were used to purchase an annuity. The plan provisions are adopted by the governing body of the City within options available in the statutes governing TMRS and within the actuarial constraints also in the statutes. Plan provisions for the City were as follows: Deposit Rate: Matching Ratio (City to Employee): Member Vested After: Retirement Eligibility: Contributions 7% 2 to 1 5 years of service Minimum age 60 with 5 years of service Any age with 20 years of service Under the state law governing TMRS, the actuary annually determines the City contribution rate. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 25-year amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Both the employees and the City make contributions monthly. 34 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. (i.e. December 31, 2012 valuation is effective for rates beginning January 1, 2013). Funding Status and Fundin Progress Even though the substance of the City's plan is not to provide a defined benefit in some form, additional disclosure is appropriate due to the nontraditional nature of the defined contribution plan which had an initial unfunded pension benefit obligation to the monetary credits granted by the City for services rendered before the plan began and which can have additions to the unfunded pension benefit obligation through the periodic adoption of increases in benefit credits and benefits. Statement No. 5 of the Governmental Accounting Standards Board (GASB 5) defines pension benefit obligation as a standardized disclosure measure of the actuarial present value of pension benefits, adjusted for the effects ofprojected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of public employee pension plans, assess programs made in accumulating sufficient assets to pay benefits when due and make comparisons among public employee pension plans. Contributions by the City were $241,009 or 10.9% of the covered payroll of $2,209,974 as required by the actuarial valuation. The total fiscal year 2013 payroll was $2,328,827, Actuarial Information (December 31 2012) Actuarial Cost Method Amortization Method GASB 25 Equivalent Single Amortization Period rti Amozation Period for new gains/losses Asset Valuation Method Investment Rate of Return Projected Salary Increase Includes Inflation At Cost -of -Living -Adjustments City -specific Assumptions: Payroll growth assumption Supplemental Death Benefits Fund Projected Unit Credit Level Percent of Payroll 25.3 Years —Closed Period 30 years 10-year smoothed market Varies by Age and Service The City also participates in the cost sharing multiple -employer defined benefit group -term life insurance plan operated by TMRS known as the Supplemental Death Benefit Fund (SDBF). The City elected, by ordinance, to provide group -term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November I of any year to be effective the following January 1. 3S NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The death benefit for active employees provides a lump-surn payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death); retired employees are insured for $7,500; this coverage is an "other postemployment benefit." or OPEB NOTE L —SUBSEQUENT EVENTS Subsequent events have been evaluated through the date of issuance which is the date of the auditor's report, and there is one subsequent event to disclose as follows: Issuance of Series 2014, $4,165, 000 Combination Tax and Revenue Certificates of Obligation Dated February 27, 2014, these Utility Fund certificates of obligation were issued to fund water and sewer system improvements. This issuance will increase the required debt service for the City's Utility Fund as follows: Year Principal Interest Totals 2014 $ - $ _ $ _ 2015 - 2275370 227,370 2016 755000 154,275 229,275 2017 75,000 152,775 227,775 2018 80,000 151,225 2313225 2019-23 4155000 727,513 131425513 2024-28 11225,000 604,500 118295500 2029-33 15875,000 277,500 231525500 2034 42%000 8,400 4285400 Totals: $ 4,165,000 $ 2,3035558 $ 614689558 36 REQUIRED SUPPLEMENTARY INFORMATION City of Anna, Texas Budgetary Comparison Schedule Budget and Actual - General Fund For the Year Ended September 30, 2013 Revenues Taxes: Property Sales Franchise Building permits Developer and impact fees Court Intergovernmental Parks Other development fees Fire Rentals Police Grants Other revenue Investment earnings Total revenues Expenditures Current: Police Administrative and general Development and animal control Fire Streets Parks Ambulance Court Capital outlays: Debt service: Principal retirement Interest expense Total expenditures Excess of revenues over (under) expenditures Other financing sources (uses) Released seizure funds Transfers in (out) Total other financing sources(uses) Net changes in fund balance Fund balance - beginning Fund balances - ending Original Budget $ 2,106,203 500,000 340,000 324,000 158,000 144,300 96,450 12,200 49,100 75,000 20,839 12,300 28,000 16,750 21,225 31904,367 1,241,956 813,419 437,081 6235250 1731000 1131887 1141800 109,812 1329737 9 1,904 3,779,846 124,521 124,521 2,646,250 $ 2,7701771 Variance with Amended Budget - Amended Actual Positive Budget Amounts (Negative) $ 23106,203 $ 21146,922 $ 40,719 560,000 574,649 145649 340,000 353,482 13,482 486,000 5663587 80,587 158,000 2037428 45,428 144,300 117,518 (26,782) 962450 883738 (73712) 12,200 63,421 51,221 499100 693334 205234 75,000 56,178 (18,822) 20,839 202839 - 17,725 20,047 25322 28,000 165510 (119490) 16,750 122352 (4,398) 21,225 11,875 (91350) 491319792 4,321,880 1907088 19308,856 122903492 18,364 829,930 852,871 (22,941) 437,081 5592414 (122,333) 6783250 563,564 114,686 1859391 201,294 (15,903) 116,335 1209030 (39695) 113,513 110,446 3,067 1092812 1085391 1,421 168,446 4579780 (289,334) 19,904 19,904 - 3,9673518 452845186 (316,668) 164,274 37,694 (126,580) 15500 (106,000) (106,000) 58,274 2,646,250 $ 217049524 , (78,700) (63,200) (25,506) 21646,250 $ 21620,744 Notes to the budgetary comparisonn schedule: This schedule was prepared on the n:odtfied-accrual basis of accour:ting and thus has no reconcilie:g items with General Fund amotents on the Statement of Revenues, Expenditures, and Changes in Fund Balances presented on page 14. Unappropriated expenditures ivere capital outlays for a park land purchase with accumulated restricted fiends for such acquisitions and more contract inspection services needed for increased FY2013 buidling activity. 15500 , 27,300 42,800 (83,780) See independent auditor's report. 37 CITY OF NNA, TEXAS Required Supplementary Information September 30, 2013 The pension benefit obligation shown below is similar in nature to the standardized disclosure measure required by GASB 5 for defined benefit plans except that there is no need to project salary increases since the benefit credits earned for service to date are not dependent upon future salaries. The calculations were made as part of the actuarial valuation as of December 31, 2012. Schedule of Funding Progress for TMRS Ratio of Unfunded (Funded) Actuarial Accrued Percentage Annual Covered to Annual Valuation Date Value of Assets Liability Unfunded Funded Payroll Covered 12/31/2012 2,2459021 3,355,957 (1,110,936) 51.90% 291403886-66.90% 12/31/2011 $ 15808,421 $ 2,921,658 $ (151139237) 52.40% $ 21124,976-61.90% 12/31/2010 $ 11326,200 $ 2,557,000 $ (1,195,000) 60.30% $ 1,982,000-53.30% 12/31/2009 $ 908,000 $ 138293000 $ (9215000) 55.60% $ 1,655,000-49.60% COMBINING STATEMENTS -GOVERNMENTAL FUNDS CITY OF ANNA, TEXAS COMBINING BALANCE SHEET NON -MAJOR GOVERNMENTAL TYPE FUNDS ASSETS Cash and cash equivalents Accounts receivable - Net Ad valorem taxes Sales tax Note Receivable -Local business Total current assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Due to other funds Deferred revenue Total liabilities Fund balances: Non -spendable Restricted for: Economic development Community development Unassigned Total fund balances Total liabilities and fund balances SEPTEMBER 309 2013 Debt Service Fund 6,63? 7,822 1,600 6,637 8,237 Community Development Corporation $ 336,678 Economic Development Corporation Total Other Governmental Funds $ 317,062 $ 654,925 48,945 48,945 97,890 88,353 473,976 238 88,353 88,591 88,353 297,032 (415) 385,385 $ 7,822 $ 473,976 88353 366,007 847,805 - 1,600 94,990 96,916 - 88,353 365,919 365,919 - 297,032 (415) 365,919 750,889 $ 3663007 $ 847,805 CITY OF ANNA, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON -MAJOR GOVERNMENTAL TYPE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2013 REVENUES Taxes Ad valorem Sales and use Other income Rentals Interest earned Total revenues EXPENDITURES Operating: General government Promotions Contract services Capital Outlays: Debt Service: Principal retirement Interest expense Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers In (Out) - General Fund Transfers In (Out) - Capital Projects Fund Total other financing sources (uses) Net change in fund balances Fund balances beginning, October 1 (restated) Debt Service Fund Community Economic Development Development Corporation Corporation Total Other Governmental Funds 287,324 2879324 574,648 11,547 - 115547 30,000 305000 412 65744 625 79781 350,469 3053615 317,949 974,033 ha 1,827 42,421 11,419 55,667 205875 24,624 451499 16,975 619391 783366 23,250 116,101 139,351 269,524 78,000 63,449 410,973 184,722 60,201 26,562 271,485 456,073 241,722 3039546 19001,341 (105,604) 63,893 14,403 (27,308) 50,000 (1,600,232) - (1,550,232) 50,000 (11613,532) - (13563,532) (55,604) (13549)639) 14,403 (1)590,840) 555189 1,935,024 351,516 2,3411729 Fund balances ending, September 30 $ (415) $ 385,385 $ 3653919 $ 750,889 COMPLIANCE AND INTERNAL CONTROLS SECTION ��. Susan La Follett, CPA— Partner Rod Abbott, CPA— Partner a nd Abbott PLLC Certified Public Accountants INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GO VERNMENTA UDITING STANDARDS To the City Council City of Anna, Texas We have audited, in accordance with the 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, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Anna, Texas (the City), as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements and have issued our report thereon dated March 25, 2014, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described below as finding 20134, we identified a certain deficiency in internal control that we consider to be a material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the following deficiency to be a material weakness: Finding 20134 — $593,188 of accounts payable for the Capital Projects Fund was not identified and recorded at September 30, 2013. 41 A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from 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 or other matters that are required to be reported under Government Auditing Standards. City of Anna, Texas Response to Findings The City's response is as follows: The number and scope of projects activity within the Capital Projects Fund during 2013 caused a strain in staff and a weakness was exposed. Staff is now better informed and has a more clear understanding of what needs to happen with capital projects balances at year-end. We will draft a guide on how to handle year-end payables in the Capital Projects Fund to avoid this problem in the future. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Tom Bean, Texas March 25, 2014 42 Item No. 7 City Secretary's use only City of Anna City Council Agenda Staff Report HOMETOWN Council Meeting: March 25, 2014 Account Code #: N/A Budgeted Amount: N/A AGENDA SUBJECT: Review 2015 Budget Calendar Staff Contact: Clayton Fulton Date Prepared: 3/20/14 Exhibits: QYes ❑No SUMMARY: The Local Government Code and our City Charter provide guidelines for the process of adopting the annual budget. In order to fund our annual budget, the City must also adopt a property tax rate (tax rate). The process for adopting the tax rate is stipulated in the Tax Code. Adopting the budget and tax rate goes hand in hand, therefore the budget calendar presented below incorporates the requirements of Texas Code and our City Charter for adopting the annual budget and tax rate. The calendar highlights the important dates and deadlines that must be met in order to pass the FY 15 budget and tax rate in the early part of September 2014. Dates in blue highlight various requirements that staff will complete; dates in gray highlight public meetings with the City Council; dates in orange are publication dates; and dates in red are holidays. Every effort has been made to keep to our regularly scheduled council meetings. The only exceptions are July 29 and September 2. This is to ensure that adequate time and attention are devoted to the budget process prior to its adoption. Additionally, the proposed schedule provides for the budget and tax rate adoption in early September. The early time table allows council and staff the ability to modify the schedule as needed while maintaining our ability to adopt and establish the budget in a timely manner. Additionally, staff is beginning work on the budget one month earlier than last year. This is done so that council and staff can hold additional budget workshops on our regularly scheduled council meetings. We will provide 7 budget oriented workshops prior to submittal of the draft budget on July 22. G U Q m Ila C V- .Q C � • C to m C C 6 0 y C''',, T m' O c M � N r 6) 0 U O 0 O U N s .3 Ln O) m `y E 5 0 _T o U 0 0 h � a. Tn U 0 a O > U .O � , mIQ ro > E r 00 a) ro c 0 0 42 42 a m M0 /0OC�� � W W to t0 N N y IfO O. O N N � p � a p p m O ch � tV N y ro E W j c N N LO LL O c m - c\i d to to N M 0 f N N to to M O N M M N r N h N N tV N M .V Qomm L p a Ofop 0 U AVOO �5 y .ro ro .n o` a N N N m p N O ril t .0 N p IQ) rn N LO N U) co r 00 N co O d N M N 0) to M 0 r N c`) r �BA t` IT1' 00 N N 0:1 C. r- �t N p N N a) C N Q' 0 Iz _- 'co O r N N N 00 N M N NM 'N M o) L7 iV N Gl fV �U C on O U 0 ch a) c u X M E.,': U r I� O a N N m X O O C 0 G N a a) U N U 0 C C m Q 0 `c N h 941 N 1— a m ro N a O m 0 a Q 0) iV 0) N r IVIII M to N M O h <f N N O � N M co to N O 117111 N N fV C>t a) Z 0 m y X Ca i 1 a) O (D ro o a) m C X C 0) y 0) c 0 .E a) O a) E c) K E c � a Z Q. G O ,U O v0.. L ' N N W I me . �® i MEN U) a) m a X{OUR.} FTOME'I'OW N Council Meeting: Account Code # _ Amount: March 25I 2014 Item No. 8 City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: City Manager Exhibits: X Yes ❑ No AGENDA SUBJECT: Briefing/Discussion regarding Collin County roadway bond projects. SUMMARY: In 2007, Collin County approved a bond program designed to assist cities in Collin County with the construction of certain roadway infrastructure projects. Staff will provide an update regarding a potential opportunity to fund improvements to Ferguson Parkway and FM 455 (west of US 75) with the fiends from the Collin County bond program. Council Meeting: March 25, 2014 Account Code #: N/A Budgeted Amount: N/A Item No. 9 Ciry Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Philip Sanders Date Prepared: 3-20-14 Exhibits: ❑Yes ❑ No CLOSED SESSION (EXCEPTIONS): Under Tex. Gov't Code Chapter 551, the City Council may enter into closed session to discuss any items listed or referenced on this agenda under the following exceptions: a. consult with legal counsel regarding pending or contemplated litigation and/or on matters in which the duty of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with Chapter 551 of the Government Code (Tex. Gov't Code §551.071) b. discuss or deliberate the purchase, exchange, lease, or value of real property (Tex Gov't Code §551.072) c, discuss or deliberate Economic Development Negotiations: (1) To discuss or deliberate regarding commercial or financial information that the City has received from a business prospect that the City seeks to have locate, stay, or expand in or near the territory of the City of Anna and with which the City is conducting economic development negotiations; or (2) To deliberate the offer of a financial or other incentive to a business prospect described by subdivision (1). (Tex. Gov't Code §551.087); proposed retail development; Villages of Hurricane Creels.. d. discuss or deliberate personnel matters: City Secretary Update. Gov't Code §551.074). The council further reserves the right to enter into executive session at any time throughout any duly noticed meeting under any applicable exception to the Open Meetings Act. Council Meeting: March 25, 2014 Account Code #: N/A Budgeted Amount: N/A Item No. 10 City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Philip Sanders Date Prepared: 3-20-14 Exhibits: ❑Yes ❑ No AGENDA SUBJECT: Consider/Discuss/Action on any items listed on posted agenda for March 25, 2014 Workshop Session or any Closed Session occurring during this Regular Meeting, as necessary. SUMMARY: RECOMMENDATION: Council Meeting: March 25I 2014 Account Code #: N/A Budgeted Amount: N/A AGENDA SUBJECT: Adjourn. SUMMARY: Item No, 11 City Secretary's use only City of Anna City Council Agenda Staff Report Staff Contact: Philip Sanders Date Prepared: 3-20-14 Exhibits: ❑Yes ❑ No RECOMMENDATION: Staff recommends a motion to adjourn. 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All persons desiring to address the council are requested to sign below and fill out an Opinion/Speaker Registration Form. Please hand the Opinion/Speaker Registration Form to the City Secretary prior to the start of the City Council Meeting. l►1 ADDRESS 71 IIN 4 Cody Webb �gP� l�E'car, Hol1Oa.q ciY(lQ