See Park City_CAFR_ 2014.pdf

See ACC530_CAFR Project_S15.doc

Pls help me answer the Part 8-Part 10 of the CAFR project.

ACCT530- Accounting for Public Sector Entities CAFR Project Due Friday, April 10, 2015 (5:00 pm) Objective: Analyze the CAFR of your selected city. The case is a Group Assignment. Sharing of work between groups is prohibited (see below for policy). Requirements: 1. Address each of the requirements located at the end of the document. 2. Format: o The paper should read as if one person wrote it, not as each section done by different members of the group. o Sections to include: 1) Executive Summary ( page) 2) City Overview (1/2-1 page) 3) Answers to the questions (see below). Be brief and concise, note page # of CAFR for answers. 4) Conclusion as to quality of report and financial health of the city 5) Appendices, if applicable o Tables can be included within the text or included as appendices. o Other items requested: o Peer evaluation (see bblearn.uidaho.edu). Each member must fill one out. It can be delivered to me individually or sent as an email. o o Deliver a physical copy to me and send an electronic copy bblearn. Proper reference, both within the paper and a reference page, should follow the Publication Manual of the American Psychological Association. 1) Reference Desk: BF76.7.P83 o As syllabus states, \"The case will be graded for reasonable conclusions, supported by careful research. 20% is deducted from case grade for each class period that the case is late. Each group is to prepare their own case and information sharing between groups, i.e., joint work, is NOT allowed. 1 Cheating, plagiarizing (using someone else's work as it if were your own), willingly providing inappropriate help to other students, and other acts of academic dishonesty (such as free riding) are serious offenses that violate this policy, university regulations, and the Student Code of Conduct. It is your responsibility to understand these terms and to ask questions if you have them before submitting your work. For this class, any violations will result in a \"0\" on the assignment or exam on the first offense and an \"F\" in the course for any subsequent offense. In addition, it is the policy of the department of accounting to forward all incidences of academic dishonesty to the department chair and the Dean of Student Affairs. Requirements: Part 1: 1. What are the 3 main sections of the CAFR? Page 3 of PDF Introductory section Financial section Statistical section 2. Review the introductory section of the CAFR: Was the city's annual report of the previous year awarded a \"certificate of achievement for excellence in financial reporting\" by the Government Finance Officers Association? What is the significance of this award? Page viii of the report Yes. The Certificate of Achievement is a prestigious national award that recognizes conformance with the highest standards for preparation of state and local government financial reports. What are the key issues addressed in the letter of transmittal? Page i of the report The issue addressed is the city need to maintains a comprehensive system of internal controls to provide reasonable, but not absolute, assurance against loss of assets or material misstatement in the financial statements. 3. Review the financial section of the CAFR: Which, if any, independent audit firm performed an audit of the CAFR? Page i of the report PETK-Piercy Bowler Taylor & Kern performed an audit of the CAFR Did the city receive an \"unqualified\" audit opinion? If not, why not? Page 128 of the report Yes, the city receive an \"unqualified\" audit opinion. Does the report contain MD&A? If so, what are the key issues addressed? Page 4 of the report Yes, the key issue addressed in MD&A is to facilitate a better understanding of the City's financial position and results of operations for the year ended June 30, 2014. Does the report provide reconciliation between total governmental net position per the government-wide statement of net position and total governmental fund 2 balances per the governmental funds balance sheet? If so, what are the main reconciling items? Page 30 of the report Yes, the main reconciling items are capital assets, other long-term assets. What are the major governmental funds maintained by the city? Does the city's fund structure conform to its organizational structure? Page 6 of the report General fund Debt service fund Capital projects fund Yes, they are conformed. Does the report include \"required supplementary information'? If so, what are the main areas addressed? Page 69 of the report Yes. The main areas addressed the required supplementary information is a publicly available financial report. Does the report include \"combining statements\"? If so, what is the nature of these statements? Page 79 of the report Yes, there have Combining Balance Sheet, Combining Statement of Revenues, Expenditures and Changes in Fund Balances, Combining Statement of Net Position, Combining Statement of Revenues, Expenses and Changes in Net Position, and Combining Statement of Cash Flows. Does the report include other supplemental information? If so, what types of information are in this section of the report? Page 77 of the report Yes. The supplemental information includes the combining and individual nonmajor fund statements and schedules. 4. Review the statistical section of the CAFR: What is the population of the city being reported on? Page 119 of the report The population of the city being reported is 7,873. Who is the city's major employer? Page iii of the report The city's major employer-types are accommodation and food service, arts/entertainment and recreation, retail trade, real estate technical services, and government. What types of information are included in the statistical section? Page 94 of the report The statistical section includes the financial trends, revenue capacity, debt capacity, demographic and economic information, and operating information. This part of the City's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements and note disclosures says about the City's overall financial health. Part 2: 3 1. In which section of the CAFR are the budget-to-actual comparisons of the major funds? Financial Section Which accounting basis did the city follow to prepare its annual operating budget? Page 50 of the report Budgets are prepared on the modified accrual basis of accounting according to accounting principles generally accepted in the United States (GAAP) for governmental funds. Are the actual amounts on a GAAP or a budgetary basis? Do the statements include a reconciliation of any differences between GAAP and budgetary amounts? If so, what are the largest reconciled items? Are the reported variances based on the original budget or the year-end amended budget? 2. Does the CAFR include budget-to-actual comparisons of nonmajor funds? If so, in what section? No, it doesn't include budget-to-actual comparisons of nonmajor funds. 3. Does the city encumber goods or services that have been ordered but have not yet been received? How, if at all, are encumbrances reflected on the governmental fund balance sheet? How, if at all, are they reflected on the government-wide statement of net positions (Assets)? No, there have no information talks about the encumbrance. 4. Do encumbrances that remain outstanding at year-end lapse? That is, do the amounts that will be expended in the following year, when the goods or services are received, have to be rebudgeted in the following year? How can you tell? No, it doesn't. Part 3: 1. What are the main sources of the city's revenues, including those from both governmental and business-type activities? Page 12 of the report. The main sources of the city's revenues are taxes, charges for services, operating and capital contribution and grants, investment and other income. 2. How are revenues from property taxes accounted for (i.e., as a single amount, or in multiple categories?) Identify the various categories and indicate the percentage breakdown. (e.g., residential property taxes are 50% of the total property tax revenues.) Page 11 of the report. The revenues from property taxes accounted for a single amount 3. Does the report discuss the accounting basis for recognizing revenues? 4. Does the city government-wide statement of net position or governmental-fund balance sheet report \"deferred revenue\" (or deferred inflows of resources)? If so, what is the most likely reason this amount has been deferred? Page 4 of the report 4 Yes, the Statement of Net Position includes all of the City's assets, liabilities, and deferred inflows and outflows of resources, with the difference reported as net position. 5. What is the city's property tax rate? Page 11 of the report The city's property tax rate is 53.8%. 6. At what % of fair market value is real property assessed? Page 12 of the report The real property assessed 51.7% of the fair market value. 7. When are property taxes due? When do interest and penalties begin to accrue? Page 73 of the report The property taxes due at November 30 and the interest and penalties begin to accrue from January 1. 8. By what percentage did each of the three largest sources of tax revenue increase over the last ten years? Page 97 of the report The tax revenue includes property taxes, increased resort taxes, and additional resort taxes. 9. Did the government generate revenue from traffic fines? As best you can tell, are these revenues reported in the government-wide statements as program revenues (e.g., associated with police or public safety) or as general revenues? No, they didn't. 10. What is the total fund balance in the general fund? Can this amount be appropriated and spent for any purpose? Explain. Part 4: 1. How does the city classify its governmental expenditures, by function or by \"object? Are the classifications approximately the same in both the government-wide and fund statements\" 2. What was the city's largest expenditure for the fiscal year (FY)? By how much did this increase or decrease from the prior FY? Since FY 5 years ago? Can you draw any inferences from this comparison as to the efficiency and effectiveness of the city in providing this service? If not, what other information would you need to make such a judgment? 3. What are the major differences in expenditures/expenses (i.e., reconciling items) as they are reported in the governmental fund and the government-wide statements? 4. On what basis does the city account for its inventories (purchases or consumption method)? Does the city maintain a \"fund balance-non-spendable\" amount for inventories? 5. On what basis does it account for insurance or other prepaid items in its governmental funds? How can you tell? 6. To and from which funds or component units have there been general fund transfers? 7. Does the city report depreciation as an expense in its government-wide statements? If not, why not? 5 8. What types of other financing sources and uses does the city report in the general funds? What effect do these items have on the net change in fund balance for the year? Part 5: 1. How many capital projects funds does the city maintain? How can you tell? Are any of these major funds? If so, for what purposes are they maintained? 2. How many debt service funds does the city maintain? How can you tell? Are any of these major funds? If so, for what types of obligations are they maintained? 3. How are the capital projects and debt service funds reported in the government-wide statement of net positions? 4. Select one of the more recently established (and larger) capital projects funds (a major fund, if there is one). From where did the fund receive most of its resources? Did the city acquire or construct new capital assets using resources of this fund? If so, in what amount? Does this fund have any long-term debts associated with it? If so, does the city maintain a debt service fund to account for the resources to service the debt? 5. Did the city issue additional long-term debt to support governmental activities during the year? Did it repay any long-term debt used to support governmental activities? 6. What amount does the city report on its governmental funds statements as special assessments receivable? What amount does the city report as revenues from special assessments? Do you think the city will have a significant problem in collecting the special assessments? Explain. Part 6: 1. What are the principal classes of capital assets associated with governmental activities the city reports in its financial statements? 2. What was the total amount of capital assets used in governmental activities added during the year? What was the amount retired? 3. What is the city's threshold policy on capitalizing general capital assets and intangible assets? 4. How much depreciation did the city charge in its government-wide statements on capital assets use in governmental activities? 5. Did the city capitalize infrastructure assets acquired during the year? Did it capitalize such assets acquired in prior years? 6. Judging from the disclosures pertaining to investments, does the city have any investments that appear to be especially risky? In your judgment, to which risk (e.g., credit risk, interest rate risk, foreign currency risk) is the exposure of the city the greatest? 7. Does the city own any \"unusual\" securities such as derivatives\"? Has it entered into repurchase agreements? If so, does the report contain an explanation of these transactions? How many capital projects funds does the city maintain? How can you tell? Are any of these major funds? If so, for what purposes are they maintained? Part 7: 6 1. Per the city's schedule of long-term obligations, what is the total long-term obligation for both governmental and business-type activities? Does this amount reconcile with the long-term liabilities as reported on the government-wide statement of net position? Page 68 The total long-term obligation for governmental activities is $51,682,823. The total long-term obligation for business-type activities is $60,347,195. It does not reconcile with the long-term liabilities. 2. In addition to bonds payable, what other kinds of long-term debt for governmental activities did the city report in its statement of net position? Page 24 There still have compensated absences, contract payable, general obligation bonds, and revenue bonds that report in city's statement of net position. 3. Did the city increase or decrease its long-term borrowings during the year? What was the effect on total long-term liabilities at year end? Explain. 4. Does the city have any lease obligations outstanding? Are these accounted for as operating or capital leases? Can you determine if any of these leases were initiated during this year? What is the amount of payments related to capital leases? No, the city doesn't have any lease obligations outstanding. Part 8: 1. Indicate the activities accounted for in both internal service funds and major enterprise funds. Comment on whether any of these activities could also have been accounted for in a general or other governmental fund. 2. How are the internal service fund activities reported in the government-wide statement of net position? How are they reported in the proprietary funds statement of net positions? 3. Did any of the internal service funds report significant operating surpluses of deficits for the year? Were any accumulated significant net assets balances over the years not invested in capital asset? 4. Were any of the city's enterprise funds \"profitable\" during the year? If so, what has the city done with the \"earnings\"? Has it transferred them to the general fund? 5. Does the city have revenue bonds outstanding that are related to business-type activities? If so, for what activities? 6. Do the financial statements include a statement of cash flows for proprietary funds? Is the statement on a direct or an indirect basis? In how many categories are the cash flows presented? Which of these categories resulted in net cash inflows? Which related in net cash outflows? 7. What was the total operating income? What was total net cash provided by operating activities? What accounts for the largest difference between these two amounts? Part 9: 1. Does the city maintain any permanent funds? If so, are they major or nonmajor funds and for what purposes? 2. Does the city maintain any fiduciary funds? If so, for what purposes? 7 3. Does the city contribute to one or more pension plans? Are they defined benefit or defined contributions plans? If they are defined benefit plans, are they single employer (maintained by the government itself) or multiple employer plans? 4. Does the city report pension expenses or expenditures? If so, in which fund or funds? 5. Does the city report pension liabilities? If so, in which fund or funds? 6. Does the CAFR include the financial statements of the pension plans? Does it indicate that the pension plans issue their own reports and that these are publicly available? 7. Did the pension fund investments have a \"good year\"? 8. Does the CAFR indicate that city provides other postemployment benefits? If so, what is the nature of these benefits? How are they reported? 9. Does the city maintain any agency funds? How many and for what purposes? Part 10: 1. Do the notes to the financial statements indicate the component units and other related entities that are included within the reporting entity? Do they indicate any units that are not included? Do they explain why these units are included or excluded? 2. How are the component units presented in the government-wide financial statements? 3. How are they presented in the fund statements? 4. What schedules or other information does the government report as required supplementary information (RSI)? 5. Report the following ratios: a. Net debt per capita b. Net debt to fair value of property c. Net debt to assets d. Debt service to total expenditures - General and debt service funds. e. Net assets//expenses f. Unrestricted net assets/expenses g. Unreserved fund balance/revenues - general fund h. Governmental revenues per capita i. Interest coverage - revenue bonds j. Operating ratio - enterprise funds 6. From ratios calculated in question 6, do you recommend the city to purchase 1) general obligation or 2) revenue bonds? 8 Comprehensive Annual Financial Report Park City Municipal Corporation, Utah Fiscal Year Ended June 30, 2014 PARK CITY MUNICIPAL CORPORATION, UTAH COMPREHENSIVE ANNUAL FINANCIAL REPORT (Including Single Audit, Internal Control and Compliance Reports and Supplementary Information) for fiscal year ended June 30, 2014 Prepared by: Finance Department Lori W. Collett Finance Manager Rebecca Gillis Accounting Manager Marina Smith Analyst PARK CITY MUNICIPAL CORPORATION, UTAH COMPREHENSIVE ANNUAL FINANCIAL REPORT June 30, 2014 CONTENTS Page INTRODUCTORY SECTION Transmittal Letter Principal Officials Organization Chart Certificate of Achievement i x xi xii FINANCIAL SECTION Independent Auditors' Report on Financial Statements and Supplementary Information Management's Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Statement of Net Position Statement of Activities Governmental Fund Financial Statements Balance Sheet Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Proprietary Fund Financial Statements Statement of Net Position Reconciliation of the Statement of Net Position - Proprietary Funds to the Statement of Net Position Statement of Revenues, Expenses, and Changes in Net Position Reconciliation of the Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds to the Statement of Activities Statement of Cash Flows Fiduciary Fund Financial Statements Statement of Fiduciary Net Position Notes to the Basic Financial Statements Note A - Summary of Significant Accounting Policies Note B - Cash, Cash Equivalents and Investments Note C - Notes Receivable Note D - Capital Assets Note E - Long-Term Obligations Note F - Retirement Plans Note G - Defined Contribution Plans (Continued) 2 4 23 25 29 30 31 32 33 35 36 37 38 39 41 43 51 55 56 58 69 70 C O N T E N T S - Continued Note H - Commitments and Contingencies Note I - Intergovernmental Revenues Note J - Interfund Loans Note K - Risk Management Note L - Budget Reconciliation Note M - Interfund Transfers Note N - Taxes Note O - Unavailable Revenue Note P - Conduit Debt Note Q - Pollution Remediation Note R - Subsequent Events Supplementary Information - Combining and Individual Non-Major Fund Statements and Schedules Governmental Funds Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Budgetary Comparison Schedules Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: Sales Tax Revenue and Refunding Bonds Debt Service Fund General Obligation Debt Service Fund Capital Improvements Fund Lower Park Avenue Redevelopment Capital Projects Fund Main Street Redevelopment Capital Projects Fund Municipal Building Authority Capital Projects Fund Equipment Replacement Capital Improvements Fund Internal Service Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows Fiduciary Fund Statement of Changes in Assets and Liabilities (Continued) 71 71 71 72 72 73 73 74 74 74 76 79 80 81 82 83 84 85 86 87 89 90 91 93 C O N T E N T S - Continued Page STATISTICAL SECTION Schedule 1 - Net Position by Component Schedule 2 - Changes in Net Position Schedule 3 - Fund Balances of Governmental Funds Schedule 4 - Changes in Fund Balances of Governmental Funds Schedule 5 - General Government Tax Revenues by Source Schedule 6 - Assessed Value of Taxable Property Excluding Fee-In-Lieu Schedule 7 - Assessed Value of Taxable Property Including Fee-In-Lieu Schedule 8 - Taxable Sales by Category Schedule 9 - Direct and Overlapping Property Tax Rates Schedule 10 - Direct and Overlapping Sales Tax Rate Schedule 11 - Principal Property Taxpayers Schedule 12 - City Tax Revenue Collected by County Schedule 13 - Property Tax Levies and Collections Schedule 14 - Ratios of Outstanding Debt by Type Schedule 15 - Ratios of General Bonded Debt Outstanding Schedule 16 - Direct and Overlapping Governmental Activities Debt Schedule 17 - Legal Debt Margin Information Schedule 18 - Pledged-Revenue Coverage Schedule 19 - Water Fund Refunding Revenue Bonds Schedule 20 - Demographic and Economic Statistics Schedule 21 - Principal Employers Schedule 22 - Full-time Equivalent City Government Employees by Function Schedule 23 - Population Statistics Schedule 24 - Transient Room Capacity as a Percentage of Population Schedule 25 - Historical Pledged Taxes Schedule 26 - Operating Indicators by Function Schedule 27 - Capital Asset Statistics by Function Schedule 28 - Schedule of Insurance in Force Schedule 29 - Five-Year Financial Summaries (Continued) 95 96 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 C O N T E N T S - Continued Page SINGLE AUDIT, INTERNAL CONTROL AND COMPLIANCE REPORTS Schedule of Expenditures of Federal Awards 126 Notes to Schedule of Expenditures of Federal Awards 127 Schedule of Findings and Questioned Costs 128 Independent Auditors' 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 129 Independent Auditors' Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance In Accordance With OMB Circular A-133and Schedule of Expenditures of Federal Awards 131 Independent Auditors' Report on Compliance with the State of Utah Legal Compliance Guidelines 133 Schedule of Expenditures of State Awards 136 INTRODUCTORY SECTION GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City's MD&A can be found immediately following the report of the independent auditors. Profile of Park City Municipal Corporation, Utah Park City Municipal Corporation is governed by an elected mayor and five-member council. The City was chartered March 15, 1884, under the provisions of the Utah Territorial Government and the City operates under a council-manager form of government. Policy-making and legislative authority are vested in the governing council. The governing council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring both the City's manager and attorney. The City's manager is responsible for carrying out the policies and ordinances of the governing council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments. The council and mayor are elected on a nonpartisan basis. Council members and the mayor serve four-year staggered terms. Elections are held every odd number year. The City provides many municipal services including police, parks, recreation, library, water, public improvements, streets, planning, zoning, golf course, transportation and parking, and administrative services. This report includes the financial statements of the funds required to report on those activities, organizations and functions which are related to the City and are controlled by or financially accountable to the City Council. The Park City Municipal Building Authority, the Park City Redevelopment Agency, the Park City Housing Authority and the Park City Water Service District are chartered under Utah law as separate governmental entities. However, this report includes the financial statements of these entities, since the City Council is the appointed board for all four agencies, and they are financially accountable to the City. The State of Utah, Summit County, Wasatch County, Park City School District, Park City Fire Protection District, Snyderville Basin Special Recreation District and Snyderville Basin Water Reclamation District are overlapping governments that provide services to City residents; however, they are separately controlled, and they are not financially accountable to the City; therefore, they are not included in this report. Budgetary Control The City Council is required to adopt a final budget by no later than June 22 of the fiscal year. This annual budget serves as the foundation of the City's financial planning and control. Budgets are prepared for all governmental fund types including the general fund, capital improvements funds and debt service funds. The City Council approves all City budgets at the department level (general government, public safety, public works and recreation and library). Budgetary control is maintained at the department level where expenditures may not legally exceed appropriations. Department heads may make transfers within a department. The City Council may amend the budget by ordinance during the budget year, but must hold a public hearing to increase a governmental fund's budget before it can pass the ordinance. ii Local Economy Park City is located in Summit County, Utah, in the heart of the Wasatch Mountains, 30 miles east of Salt Lake City and 40 minutes by freeway from the Salt Lake International Airport. In 1869, silver bearing quartz was discovered in the area, of what is now Park City, and a silver mining boom began. From the 1930's through the 1950's, the mining boom subsided due to the decline of silver prices, and Park City came very close to becoming a historic ghost town. During that time, the residents began to consider an alternative to mining, and began developing Park City into a resort town. Park City is one of the western United States premier multi-season resort communities with an area of eighteen square miles and a permanent resident population of approximately 7,873. World renowned skiing is the center of activity being complemented throughout the year with major activities and events, such as the Sundance Film Festival, Kimball Arts Festival, concerts, sporting events, along with a variety of other winter and summer related activities. Tourism is the major industry in Park City, with skiing, lodging facilities and restaurants contributing significantly to the local economy. Park City is the home of two major ski resorts (Park City Mountain Resort and Deer Valley Resort) with a third area (The Canyons Resort) located only one mile north of the City limits. In 2002, Salt Lake City hosted the 2002 Winter Olympic Games with two athletic venues in Park City and another just north of the City limits. Deer Valley Resort hosted the slalom, aerial, and mogul competitions; Park City Mountain Resort hosted the giant slalom, snowboarding slalom and snowboarding halfpipe; and the Utah Winter Sports Park (Summit County) hosted ski jumping, luge and bobsled events. Deer Valley Resort hosted the 2014 Freestyle Ski World Cup event for the eighth year in a row in February 2014. Deer Valley Resort took second place as the best resort in North America in Ski Magazine's resort review. Deer Valley ranked first for five consecutive years between 2007 and 2011. It also marks fourteen consecutive years that Deer Valley has finished in the top three. The Park City Mountain Resort is located in the heart of Park City and hosted the U.S. Grand Prix for slopestyle and halfpipe prior to the 2014 Sochi Winter Olympic Games. The resort was ranked number five, overall, and the best resort for a family vacation. The Canyons Resort, placed tenth, which made the third year in a row that all three of Park City's resorts have finished in the top ten. Major employer-types in the City include accommodation and food service, arts/entertainment and recreation, retail trade, real estate, technical services and government. Unemployment data was unavailable for Park City; however, the current Summit County unemployment rate is estimated at 3.1 percent. The current State of Utah rate is 3.5 percent and the national rate is 5.9 percent. iii Economic Trends Growth has accelerated in the last decade; Wikipedia.com refers to Park City as one of the most affluent and lively resort towns in the United States. Park City has seen some strong growth over the past eight years in the ski industry. Encouraging tourism and the ski industry are objectives for Park City as well as for the State of Utah. With its close proximity to Salt Lake City and Salt Lake International Airport, Park City is a major contributor to these goals. Figures show last ski season was the third best in Utah state history. Total statewide skier days were 4,161,585, up 3.4 percent from the 2012-2013 season, ending above four million for the seventh time in the last nine years. The 2013-2014 season, marked a turn around after two years of decline, due to below average snowfall. City area resorts experienced a 3.7 percent increase in skier visits. Park City resorts claim approximately 44.2 percent of the total Utah market share, 1,838,641 skier days. To put this in context, Utah's record was 4,249,190 set during the 2006-2007 season, prior to the recession. With the local economy dependent on tourism and skiing, employment in Park City tends to decline in the spring and summer months. The City has been mitigating this by diversifying recreational activities in the \"off-season\". This year the City hosted the Triple Crown Girls Fast Pitch Softball World Series for the twelfth year. This event draws teams from California, Arizona, Colorado, Oklahoma, Idaho, Utah and Texas. Each year is bigger and better than the last. Other events include Park City Marathon Road Race, Intermountain Cup Mountain Bike Races and the Endurance 100 Mountain Bike Race. Park City is the only city qualified as a Gold Level Ride Center by the International Mountain Bicycling Association. The service population is much larger due to the number of secondary homeowners and visitors within Park City. The City has approximately 130 restaurants, 181 shops, 20 private art centers and a community-sponsored art center. Many of Park City's restaurants are award winning and among the finest in the inter-mountain west. The Chamber of Commerce estimates that the community has a nightly capacity for 28,275 guests. In the last ten year's nightly capacity has increased by 11.1 percent. Please see Schedule 24 on page 119 of the Statistical Section of this report. The Sundance Film Festival made its 33rd annual appearance in Park City in January 2014. A recent study by the University of Utah's Bureau of Economic and Business Research reveals the 2014 festival generated an overall economic impact of $63.9 million for the State of Utah, up from 2013, but still down from the record of $92.2 million reported after the 2009 festival. Sundance and Park City Municipal Corporation have formally agreed that Park City will remain festival headquarters through the 2026 film festival and, importantly, Sundance agreed to schedule future film festivals, beginning in 2015, to avoid overlapping with the Martin Luther King holiday, a popular ski weekend. This change is estimated to generate $4.2 million in additional economic activity for the greater Park City area. The festival presents high quality, independent films. Nationally known actors, directors, writers and other members of the film industry conduct and attend workshops, classes, seminars, dinners and premiers that are open to the public. The cultural event attracted over 45,352 attendees this year, down slightly from the 2013 attendance of 45,947 with an estimated 69.4 percent coming from out of state. iv The Kimball Arts Center sponsored its 44th annual three-day Park City Arts Festival in August 2013. The Park City Arts Festival is Utah's oldest and the longest running arts festival in the West. In the last decade, this event has grown substantially and this year attracted an estimated 58,500 visitors. This was an increase of 1.7 percent over the previous year. The festival featured 215 of North America's top artists. This is one of the most attended annual events in Utah and includes an art auction and gala, and a 5K run for the arts. Closely connected to the tourist and ski industries in Park City is the real estate industry. During the past ten years, building activity within the City has fluctuated from a low of $40.9 million in 2011, because of the recession, to a high of $239.7 million in 2007. Building activity over the last decade has averaged $107.8 million per year. In the first nine months of calendar year 2014, approximately 34.1 percent of the $104.8 million in building activity has been in residential construction. The remaining 65.9 percent consists of remodeling, expanding and miscellaneous construction. The residential construction total valuation of approximately $35.7 million consisted of both single and multi-family homes. Easy access to Salt Lake City has intensified the role for Park City as a bedroom community. This role and the current economy have shifted emphasis to the construction of residential homes. Notes: The 2014 number is from January 2014 through September 2014 only. For activity by fiscal year, please see Schedule 26 of the Statistical Section. According to the latest statistics by the Park City Board of Realtors, residential lots sold in Park City range from an average of $337,250 in the Prospector area to an average of $3,400,000 for lots in Empire Canyon. Condominiums range in average sales price from $162,663 to $3,105,196, depending upon location. Depending upon the area, single-family homes range from an average sales price of $820,075 to $5,820,125. Overall, in the second quarter of 2014 the volume of single-family homes sold was down 29.0 percent, but the median sales price increased by 36.0 percent, over the second quarter of 2013. In contrast, condominium sales showed a volume increase of 8.0 percent, and the median sales price was up 11.0 percent. v Long-term Financial Planning Affordable Care Act (ACA) - Employer Shared Responsibility Provisions The Affordable Care Act (ACA) outlines rules for employers on positions that would be required to include health coverage (over 30 hours/week). The City currently employs several groups of employees who could be eligible for coverage under the new law. Over the last year, the City formed an Affordable Care Act Committee, to determine eligible employees, examine hours worked, service levels and increased costs for health care. Each position that fit the ACA criteria was evaluated and in many cases hours were reduced, schedules changed, and/or additional employees have been hired to reduce the total hours worked by one individual and eliminate health coverage eligibility. In limited cases, it was impossible to reduce the hours worked by one position to eliminate health coverage eligibility without a large impact on service levels. The departments most impacted are the Transit, Streets and Parks departments. A severe impact to service levels would occur if all eligible employees had their hours cut below the ACA threshold. The Affordable Care Act Committee and the City Manager recommended a hybrid approach, offering health insurance to some eligible employees and cutting back the hours of others. This option provided 24 employees with health insurance and minimized reductions in service levels. The increased cost of health insurance due to the ACA is a large expense the City must manage going forward. State and Federal Legislative Actions - State and Federal legislative actions continue to pose a major fiscal risk to the City's ability to plan. The State's efforts continue to focus on the redistribution of tax revenues from affluent municipalities and school districts to more underprivileged entities. Several bills were defeated this year with intense lobbying by the City. It is certain this type of legislation will continue and intensify. Several water rights bills were defeated during the Utah Legislature session in 2014. Most referred to further defining water rights and how the government interacts with water owners. These bills would have greatly complicated the process of obtaining additional water for the City. Relevant Financial Policies Through a combination of the Additional Resort Communities Sales Tax, the extension of the Lower Park Avenue Redevelopment Agency and the remaining Walkability General Obligation Bond proceeds, the City is likely to see an estimated $70-$85 million in capital project funding over the next ten years. While these improvements are essential to improved services and continued economic growth, City Council is aware that the uses of these funds have been restricted to capital improvement projects. Capital projects most often place a burden on the ongoing operating costs of the City. The operating burden varies from project to project with impacts evaluated as part of the Budgeting for Outcomes (BFO) process. Maintaining the longrange sustainability of the City's services is a high priority. vi Major Initiatives Richardson Flat Tailings - Prospector Drain - OU4 Council reviewed, approved and signed the Proposed Administrative Order of Consent (Settlement Agreement) for Richardson Flat Tailings Prospector Drain Site Operable Unit 4, Mine and Mill Waste (OU4). Park City Municipal Corporation, Environmental Protection Agency (EPA), U.S. Fish and Wildlife Service, Bureau of Land Management and Utah Department of Environmental Quality negotiated this agreement. This Settlement Agreement provides for the preparation and performance of an Engineering Evaluation/Cost Analysis (EE/CA) and a removal action for mine tailings. The Prospector Drain is a shallow ground water drain located beneath a portion of a historic mine's tailings pond with residences built on the surface. The project will include site characterization, risk assessment, removal action alternatives and their respective costs, and implementation and completion of the mine waste removal. In addition, a Natural Resource Damage Assessment (NRDA) must be done that will determine compensatory restitution for damages to natural resources. Update on Major Projects Deer Valley Drive - The Deer Valley Drive Reconstruction project includes the reconstruction of Deer Valley Drive including water infrastructure as well as walkable, functional and aesthetic improvements to the street. The project was divided into two phases. The first phase was completed in December of 2013, this included replacement of the existing collapsed storm drain, replacement of the gas line (work and design were performed by Questar Gas), replacement of the existing distribution water line, pedestrian modifications at the round-about, left turn lane at the intersection of Deer Valley Drive and Deer Valley Drive North, bus pullouts, pedestrian lighting (from the round-about to Sunnyside Drive) update of signage and road resurfacing. Phase one was partially funded with $1.0 million in federal funds, $1.6 million in water service fees, $0.7 million Additional Resort Sales Tax (ARST) and funds transferred from the General Fund of $0.4 million. It is the recommendation of the City Manager and the CIP Committee to use the ARST as the potential funding source of $1.0 million for phase two. The design of the second phase started in February 2014, and will include additional pedestrian lighting, crosswalks, possible bus shelters/bus stop amenities, cleaning of the creek, landscaping improvements along the corridor and a new arched entry feature near the intersection of Deer Valley Drive and Deer Valley Drive North. Water Projects - Water quality and delivery continue to be a top priority for Park City. With the rate of development that has occurred over the past few years, future water needs have been identified and the cost of these improvements is being fairly distributed between users and new development. Capital spending in the Water Fund is reflective of the City's continuing commitment to secure Park City's water needs through improvements to the City's water infrastructure. The Water Fund Financial Model is reviewed and updated annually to assess the long-range operating and capital needs of the Water Fund to determine future water rate increases and bonding needs. vii Seasonal Transit Employee Housing - The City broke ground on the transit housing project at the public works facility on Iron Horse Drive on April 11, 2013. The project is the first of its kind ever funded by the United States Department of Transportation Federal Transit Administration. The City received a grant of $1.5 million to fund the construction of 13 units for seasonal transit employees. The City will contribute $0.3 million of the total project cost of $1.8 million. Park City Transit employs 100 plus employees yearly; a substantial number of these are bus operators. The availability of housing has been quite helpful in recruiting and retaining bus drivers for the winter months. The transit housing facility has many sustainable design features including high performance windows and doors, 50.0 percent recycled content for primary structural steel members, 25.0 percent recycled content for secondary steel, 93.0 percent highefficiency boiler and a hydronic heating system. The project includes photovoltaics and a highly reflective roof membrane to offset energy costs. The units are fully furnished, with a rooftop garden and patio. The project was completed in February 2014, and residents were moving in by April 2014. Walkability Projects - Approximately $7.9 million has been utilized to fund 27 substantially completed projects. Staff presented a walkability update to Council, which included the remaining walkability project list and proposed project timeline. Council indicated they were in favor of moving forward with the listed walkability projects and were comfortable adopting a bond resolution to issue the remaining $7.2 million of voter approved Walkability General Obligation Bonds. In August 2013, the City issued General Obligation Bonds Series 2013A ($7.2 million for walkability projects) and 2013B ($1.9 million for General Obligation Refunding Bonds). Library Renovation and Expansion - This work started in April of 2014 and the estimated completion date is June 2015. The construction budget is $6.8 million, with a total budget of $9.3 million. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Park City Municipal Corporation for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013. The Certificate of Achievement is a prestigious national award that recognizes conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both accounting principles generally accepted in the United States and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate of Achievement for the last twenty-six consecutive years, fiscal years 1987-2013. We believe that our current Comprehensive Annual Financial Report continues to conform to the Certificate of Achievement program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. viii PARK CITY MUNICIPAL CORPORATION, UTAH Park City Municipal Building 445 Marsac Avenue Park City, Utah 84060 MAYOR AND CITY COUNCIL AS OF JUNE 30, 2014 Name Term Expires Mayor Jack Thomas 445 Marsac Avenue Park City, Utah 84060 January 2018 Councilors Cindy Matsumoto PO Box 4647 2816 Silver Cloud Drive Park City, Utah 84060 January 2018 Tim Henney PO Box 3927 Park City, Utah 84060 January 2018 Dick Peek 750 River Birch Court Park City, Utah 84060 January 2016 Andy Beerman PO Box 1570 310 Park Avenue Park City, Utah 84060 January 2016 Liza Simpson PO Box 1468 510 Main Street Apt B Park City, Utah 84060 January 2016 __________________ Diane Foster, City Manager Mark Harrington, City Attorney Lori W. Collett, Finance Manager x PARK CITY MUNICIPAL CORPORATION, UTAH The above organizational structure also accurately depicts the Park City Redevelopment Agency and the Park City Municipal Building Authority structure. xi xii FINANCIAL SECTION 1 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Members of the City Council Park City Municipal Corporation, Utah We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Park City Municipal Corporation (the City) as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. An audit performed in accordance with applicable professional standards is a process designed to obtain reasonable assurance about whether the City's basic financial statements are free from material misstatement. This process involves performing procedures to obtain audit evidence about the amounts and disclosures in the basic financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the basic financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the basic financial statements to enable the design of 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 the accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the basic financial statements. Management's Responsibility for the Financial Statements. Management is responsible for the preparation and fair presentation of the basic 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 basic financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility. Our responsibility is to express an opinion on the basic 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 basic financial statements are free from material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof, and the budgetary comparison information for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. 7050 Union Park Ave., Suite 140 Salt Lake City, UT 84047 801-990-1120 pbtk.com Other Matters. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4-21 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. 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 Information. Our audit was conducted for the purpose of forming our opinion on the financial statements that collectively comprise the City's basic financial statements. The introductory section, other supplementary information, as listed in the table of contents, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplementary information, as listed in the table of contents, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplementary information as listed in the table of contents is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards. In accordance with Government Auditing Standards, we have also issued our report dated December 11, 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's internal control over financial reporting and compliance. Salt Lake City, Utah December 11, 2014 3 PARK CITY MUNICIPAL CORPORATION, UTAH MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) June 30, 2014 The following narrative is presented to facilitate a better understanding of the City's financial position and results of operations for the year ended June 30, 2014. When read in conjunction with the letter of transmittal and the notes to the financial statements, the financial highlights, overview and analysis should assist the reader to gain a more complete knowledge of the City's financial performance. FINANCIAL HIGHLIGHTS The City's government-wide net position (the amount by which assets and deferred outflows exceed liabilities and deferred inflows) as of June 30, 2014, was $279,943,946. Of this amount, $58,983,553 (unrestricted net position) is available to meet ongoing financial obligations. The City's government-wide net position increased by $12,399,275. Of this amount, business-type activities increased by $4,501,586, a rise of 5.5 percent, and the governmental activities increased by $7,897,689 a rise of 4.3 percent when compared to last fiscal year. The City's governmental funds reported a combined ending fund balance of $47,483,774 an increase of $8,260,320 (21.1 percent) compared to the beginning of this year's fund balance amount. The increase in fund balance in comparison to last fiscal year is attributable to an increase in unassigned fund balance for the general fund and an increase to the committed fund balance for capital projects. Of the combined total fund balance, $6,670,716 is available for spending at the discretion of the City (unassigned fund balance). The General Fund is the primary operating fund of the City. The unassigned fund balance of the General Fund at June 30, 2014, totaled $6,670,716 and is 26.0 percent of the General Fund total revenues for the year and 14.0 percent of total governmental fund balance. The City's total debt had a net increase of $3,354,504 during fiscal year 2014. This represents a 3.9 percent increase over the prior year, which is attributable to the effect of the normal reduction in principal balances from required debt service payments and refunding of the Series 2003 General Obligation Bonds. The decrease is offset by the issuance of $4,115,000 in Series 2014 Water Revenue Bonds, $7,170,000 in Series 2013A General Obligation Bonds and $1,930,000 in Series 2013B General Obligation Refunding Bonds. 4 PARK CITY MUNICIPAL CORPORATION, UTAH MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED), Continued June 30, 2014 OVERVIEW OF THE FINANCIAL STATEMENTS The financial section of this report includes four parts: 1) the independent auditors' report on financial statements and supplementary information; 2) this segment, management's discussion and analysis; 3) the basic financial statements; and 4) supplementary information. Within the basic financial statements are two distinct types of financial statements, 1) the government-wide financial statements, and 2) the fund financial statements. The notes to the financial statements are also an integral part of the basic financial statements. The City's basic financial statements are presented in accordance with Governmental Accounting Standards Board Statement No. 34 (GASB 34), Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, as amended. Immediately following the notes to the financial statements, the supplementary information includes balance sheets and income statements for nonmajor governmental funds, internal service funds, as well as other budgetary information. Government-wide Financial Statements: The government-wide financial statements provide a view of City finances as a whole, similar to a private-sector business. These statements include the Statement of Net Position and the Statement of Activities. The Statement of Net Position includes all of the City's assets, liabilities, and deferred inflows and outflows of resources, with the difference reported as net position. Net position (and the related change in net position from year to year) is probably the most important financial measurement to enable understanding of the financial position of the City, and whether financial position improves or deteriorates each year. To assess the overall health of the City, additional non-financial factors such as changes in the property tax base, the condition of the City's infrastructure, etc. should be considered. The Statement of Activities shows how the City's net position changed as a result of its operations during the most recent fiscal year. To understand the basis of how these numbers are determined, it is important to note that changes in net position are reported whenever an event occurs that requires a revenue or expense to be recognized, regardless of when the related cash is received or disbursed (the accrual basis of accounting). For example, most revenues are reported when the revenues are legally due, even though they may not be collected for some time after that date; and an obligation to pay a supplier is reported as an expense when the goods or services are received, even though the bill may not be paid until sometime later. There are two distinct types of activities reflected in the government-wide statements, i.e. governmental activities, and business-type activities. Governmental activities are those supported primarily by taxes and intergovernmental revenues, while business-type activities are those in which all costs (or at least a significant portion of costs) are intended to be recovered through user fees and charges. The governmental activities for Park City Municipal Corporation include General Government (Council, Mayor, City Attorney, Human Resources, Technical and Customer Services, Budget, Debt and Grants, 5 PARK CITY MUNICIPAL CORPORATION, UTAH MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED), Continued June 30, 2014 Building, Economy, Community and Environment, Planning, Engineering, Finance, Quinns Recreation Complex and Non-departmental); Public Safety (Police and Communications Center); Public Works (Streets, Snow Removal, Parks, Building Maintenance); Library and Recreation. The business-type activities include Water, Transportation and Parking, and Golf. The Park City Municipal Building Authority, the Park City Redevelopment Agency, the Park City Housing Authority and the Water Service District are chartered under Utah law as separate governmental entities. However, the government-wide financial statements include the financial statements of these entities, since the City Council is the appointed board for all four agencies, and these entities are financially accountable to the City. The government-wide financial statements can be found on pages 23-26 of this report. Fund Financial Statements: The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues and expenditures, or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based on the purposes for which the funds are to be spent as well as by how the activities are to be controlled. The three broad categories of funds are: governmental funds, proprietary funds and fiduciary funds. Governmental Funds - At the fund level, the focus is on changes in short-term spendable resources and the balance available to spend, rather than the long-term focus used for determining government-wide numbers. Because the focus is so different between fund statements and government-wide statements, reconciliation, between the two types of statements is necessary to understand how the numbers differ. Such reconciliations are provided for the reader on pages 30 and 32. The City has three governmental type funds. These are the general fund, the debt service funds and the capital projects funds. Five of these are considered major funds: General Fund, Sales Tax Revenue and Refunding Debt Service Fund, Park City General Obligation Debt Service Fund, Capital Projects Improvement Fund and Lower Park Avenue Redevelopment Agency Capital Projects Improvement Fund. The basic governmental fund financial statements can be found on pages 29-33 of this report. A summary of other funds (nonmajor funds) is combined into one \"Other Governmental Funds\" column. The composition of the nonmajor funds is shown in combining statements later in the report in the supplementary information section on pages 79-87. The General Fund is used to account for all financial resources of the City that are not accounted for by a separate specialized fund. More specifically, the general fund is used to account for ordinary operations such as collection of tax revenues and general government expenditures. The City adopts an annual appropriated budget for the general fund. On page 33, a budgetary comparison statement has been provided for the general fund to demonstrate budgetary compliance. 6 PARK CITY MUNICIPAL CORPORATION, UTAH MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED), Continued June 30, 2014 Debt Service Funds are used to account for the accumulation of resources for the payment of general obligation bonds, special assessment bonds and sales tax revenue and refunding bonds. Therefore, this fund is set up to accumulate the resources used to pay both the interest and principal on bond debt. Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital improvements. These funds do not account for capital improvements financed by the proprietary funds. Proprietary Funds provide the same type of information as the government-wide financial statements, only in more detail. The City uses both enterprise funds and internal service funds. The basic proprietary fund financial statements can be found on pages 3539 of this report. Enterprise Funds are used to account 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 City currently operates enterprise funds for the City-owned water system, public tra