Draft Audit Book

City of Borger

Borger, Texas

Audited Financial Statements
and Supplementary Information

September 30, 2018

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CITY OF BORGER
COMPREHENSIVE ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED SEPTEMBER 30, 2017

Table of Contents .......................................................................................................................... 3

Independent Auditors Report.....................................................................................................................................7
Management’s Discussion and Analysis .................................................................................................................10

Basic Financial Statements......................................................................................................... 31

Statement of Activities ............................................................................................................................................34
Balance Sheet ..........................................................................................................................................................36
Conciliation of the Balance Sheet to Statement of Net Assets ................................................................................37
Statement of Revenues, Expenditures, and Changes in Fund Balance ....................................................................38
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental
Funds to the Statement of Activities........................................................................................................................39
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund .............40
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Capital Projects Fund.42
Statement of Net Position ........................................................................................................................................42
Statement of Revenues, Expenditures, and Changes in Net Position ......................................................................43

Notes to the Financial Statements ............................................................................................. 45

Statement of Cash Flows .......................................................................................................................................45
Note A - Summary of Significant Accounting Policies .......................................................................................46

Reporting Entity ..................................................................................................................................................46
Discretely Presented Component Unit.................................................................................................................46
Government-Wide & Fund Financial Statements ................................................................................................46
Measurement Focus, Basis of Accounting, and Financial Statement Presentation..............................................47
Governmental Funds............................................................................................................................................47
Proprietary Funds ................................................................................................................................................47
Budgetary Data ....................................................................................................................................................48
Use of Estimates ..................................................................................................................................................48
Cash Equivalents .................................................................................................................................................48
Use of Restricted Cash.........................................................................................................................................48
Equity in Pooled Cash and Investments ..............................................................................................................48
Property Taxes Receivable ..................................................................................................................................48
Proprietary Fund Accounts Receivable ...............................................................................................................48
Capital Assets and Depreciation ..........................................................................................................................48
Inventories ...........................................................................................................................................................49
Long Term Debt ..................................................................................................................................................49
Pensions ...............................................................................................................................................................49
Fund Balances......................................................................................................................................................49
Sales Tax Revenue...............................................................................................................................................49

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Accrued Vacations...............................................................................................................................................50
Deferred Outflows/Inflows of Resources ............................................................................................................50
Equity Classifications ..........................................................................................................................................50
Risk Management ................................................................................................................................................50
Commitments and Contingencies ........................................................................................................................51
Note B - Cash Deposits and Investments .............................................................................................................51
Cash Deposits ......................................................................................................................................................51
Interest Rate Risk.................................................................................................................................................51
Custodial Credit Risk...........................................................................................................................................51
Borger Economic Development Corporation ......................................................................................................51
Investments ..........................................................................................................................................................52
Other Investments................................................................................................................................................53
NOTE C - Receivables...........................................................................................................................................54
Accounts Receivable - Net ..................................................................................................................................54
Property Tax Receivable......................................................................................................................................54
Other Receivables................................................................................................................................................54
Note D - Interfund Transfers and Balances ........................................................................................................55
Note E - Capital Assets ..........................................................................................................................................55
Government Activities.........................................................................................................................................55
Business-type Activities ......................................................................................................................................56
Component Unit ..................................................................................................................................................56
Note F - Long Term Debt ......................................................................................................................................57
Government Activities.........................................................................................................................................57
Business-type Activities ......................................................................................................................................58
Note G - Commitments..........................................................................................................................................61
Construction Commitments .................................................................................................................................61
Operating Lease Commitments ...........................................................................................................................61
Note H - Transfer Station Compliance Statement ..............................................................................................62
Note I - Pension Plan and Other Post Employment Benefits .............................................................................62
Pension Trust Fund ..............................................................................................................................................62
Supplemental Death Benefits Fund .....................................................................................................................66
Note J - Discretely Presented Component Unit...................................................................................................66
Note K - New Standards Implementation............................................................................................................67
Note L - Subsequent Pronouncements .................................................................................................................68

Required Supplemental Information ........................................................................................ 69

Schedule of Pension Contributions ......................................................................................................................70

Supplementary Inforamtion ...................................................................................................... 73

Non-Major Funds Combining Balance Sheet ..........................................................................................................77
Non-Major Funds Statement of Revenues, Expenditures, and Changes in Fund Balance.......................................81

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Budgetary Comparison Schedule - Tourism Fund...................................................................................................85
Budgetary Comparison Schedule - Park, Recreation, and Special Projects Fund ...................................................86
Budgetary Comparison Schedule - Police Club 100 Fund ......................................................................................87
Budgetary Comparison Schedule - Fire Equipment Fund .......................................................................................88
Budgetary Comparison Schedule - Emergency Operations Fund............................................................................89
Budgetary Comparison Schedule - Municipal Court Security Fund........................................................................90
Budgetary Comparison Schedule - Interest and Sinking Service Fund ...................................................................91
Budgetary Comparison Schedule - Municipal Court Technology Fund..................................................................92
Budgetary Comparison Schedule - Hotel/Motel Occupancy Tax Fund...................................................................93
Budgetary Comparison Schedule - Capital Equipment Fund ..................................................................................94
Budgetary Comparison Schedule - Water and Sewer Utility Fund .........................................................................96

Other Information - Supplementary Schedules ....................................................................... 97

Schedule of Delinquent Taxes Receivable ..............................................................................................................98
Schedule of Asset Valuation, Tax Rate, Tax Levy, and Percent Collected .............................................................99
Water and Sewer Utilities System Customer Statistics .........................................................................................100
Schedule of Insurance Coverage............................................................................................................................103

Compliance Information .......................................................................................................... 105

Report of Independent Auditors on Compliance and 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 ................................................................................................................................................107
Official Roster .......................................................................................................................................................108

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CPAs/ADVISORS

Anderson Hill, LLP/ 2732 82nd Street, Suite B
Lubbock, TX 79414
main 806.771.4000 fax 806.771.4005

REPORT OF INDEPENDENT AUDITORS

To the Honorable Mayor and
Members of the City Council
City of Borger, Texas

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 City of Borger,
Texas (City), as of and for the year ended September 30, 2018, 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 did not
audit the financial statements of Borger Economic Development Corporation, a discretely presented
component unit, which represent 5 percent, 8 percent and 2 percent, respectively, of the assets, net
position, and revenues of the City’s government wide financial statements. Those financial statements
were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar
as it relates to the amounts included for Borger Economic Development Corporation, is based solely
on the report of the other auditors. 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 of 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

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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 entity’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.

Opinions

In our opinion, based on our audit and the report of other auditors, the financial statements referred
to above present fairly, in all material respects, the respective financial position of the governmental
activities, the business-type activities, the discretely presented component unit, each major fund, and
the aggregate remaining fund information of the City, as of September 30, 2018, and the respective
changes in financial position and, where applicable, cash flows thereof and the respective budgetary
comparison for the General Fund and Capital Projects Fund for the year then ended in accordance with
accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis (page 11-30), and pension information (pages 70 and 71) 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 evidence
sufficient to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise City’s basic financial statements. The accompanying supplementary information
as identified in the table of contents (Pages 74-95) is presented for purposes of additional analysis and
is not a required part of the basic financial statements. Such information is the responsibility of

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management and was derived from and relates directly to the underlying accounting and other records
used to prepare the financial statements. The information has been subjected to the auditing
procedures applied in the audit of the financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records
used to prepare the financial statements or to the financial statements themselves, and other
additional procedures in accordance with auditing standards generally accepted in the United States
of America by us and the other auditors. In our opinion, based on our audit, the procedures performed
as described above, and the report of other auditors the supplementary information (page 74-95) is
fairly stated in all material respects in relation to the financial statements as a whole.
The supplementary schedules as identified in the table of contents (Pages 98-103, 109) 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 issued our report dated April 26, 2019 on
our consideration of City’s internal control over financial reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts and grant agreements, and other matters. The
purpose of that report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on the internal control
over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City’s internal control over financial
reporting and compliance.

Anderson Hill, LLP

Lubbock, Texas
May 17, 2019

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FY 2017 – 2018 Audit
Management’s Discussion and Analysis

City of Borger, Texas
Form of Government - Council/Manager

September 30, 2018

Marvin “Bubba” Dickson Karen Felker
Mayor Mayor Pro-Tem
Council Member Place 2
Council Member Place 4

Charles “Pete” Loftis James Marrs, II Milton Ooley
Council Member Council Member Council Member
Place 1
Place 3 Place 5

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Honorable Mayor, Members of the City Council, and Citizens,

The City of Borger’s Charter requires an annual audit of the City’s financial activities at
the end of each fiscal year. An independent certified public accountant in accordance with
accounting principles generally accepted in the United States of America must conduct the audit.
This publication of the City of Borger’s Financial Statements for the year then ended September
30, 2018 fulfills that requirement for the 2017-2018 fiscal year.

Management relies on the City’s accounting system and its internal controls to adequately
safeguard assets and provide reasonable assurance of proper recording of financial transactions
and assumes full responsibility for the information contained in this Report. Anderson Hill,
LLP, has issued an unmodified or “clean” opinion on the City of Borger’s financial statements
for the year ended September 30, 2018.

This section of the City of Borger’s annual financial report is the Management’s
Discussion and Analysis (MD&A). The MD&A presents discussion and analysis from City
Management regarding the City’s financial performance, the Independent Auditor’s Report, and
the City’s basic financial statements during the fiscal year that ended on September 30, 2018
with comparative information for the fiscal year ended September 30, 2017.

FINANCIAL HIGHLIGHTS

 Total Net Position1 of the City of Borger equals $40.5 million, up from $38.0 million
from FY 2016-2017. This is a result of $99.4 million in assets and deferred outflows less
$58.9 million in liabilities and deferred inflows.

 The State of Texas does not provide for a statutory debt limit for cities. The truth-in-
taxation criterion specifies that debt (interest & sinking) requirements must be met first,
then operations. The property tax rate to meet these needs cannot exceed $2.50 per $100
valuation. As of September 30, 2018, the City has debt totaling of $7.7 million2 secured
and paid by the levy and collection of a direct and continuing ad valorem tax on all
taxable property within the City. This is a decrease in debt from $8.4 million last year as
the City did not restructure any existing debt or issue any additional debt. Based on a
population of 13,251 (2010 Census) the per capita tax supported debt for the City is
$580.17 and the ratio of tax supported debt to assessed value is 1.65%3.

 In FY2013-2014 the City issued $38.2 million in revenue bonds for water infrastructure
improvements. With that issuance, the City as of September 30, 2018 had remaining
principle in the amount of $33.7 million4 secured by the revenues generated from the
operation of the Water and Sewer Systems.

1 Government-Wide Statement of Net Position
2 Notes to Financial Statements: Note F – Long Term Debt
3 Outstanding debt divided by 2017 Adjusted Taxable Value
4 Notes to Financial Statements: Note F – Long Term Debt

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

 The City of Borger is compliant with the GASB 34 reporting model, which requires
accounting for depreciation of fixed assets within governmental activities5. Shown
within Note E – Capital Assets, the FY 2017-2018 governmental fixed asset year-end
balance is $36.7 million less accumulated depreciation of $17.1 million leaving $19.6
million in Net Assets for governmental activities.

 Financially, FY 2017-2018 was a positive year for the City. The City in all funds
collected $258,1916 more in revenues than the final budgeted revenue amounts and actual
expenditures were well below the final budgeted expenditures by $2,194,2157.

USING THIS ANNUAL REPORT

This discussion and analysis are written as an introduction to the City’s basic financial
statements, which consist of a series of financial statements, accompanying notes to the financial
statements, required supplementary information, combining statements, and other supplementary
information.

Reporting the City as a Whole

One of the most important questions asked about the City’s finances is “Is the City as a
whole better off or worse off as a result of the year’s activities?” The Government-wide
Statement of Net Position and the Statement of Activities (sometimes-referred to as government-
wide financial statements) provide information about the activities of the City as a whole and
represent a longer-term view of the City’s finances. The Statement of Net Position includes all
assets and all liabilities at the end of the year. The Statement of Activities specifically indicates
how the City’s net position changed during the fiscal year. All changes in the net position are
reported when the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows. Both of the government-wide financial statements distinguish between
functions of the City that are principally supported by taxes and intergovernmental revenues
(government activities) from functions that are intended to recover all or a significant portion of
their costs through user fees and charges (business-type activities). In generic terms, the
governmental-wide financial statements reflect the flow of total economic resources in a manner
similar to the financial reports of a private sector business or corporation.

Both of these statements report changes in the City’s net position (the difference between
assets and liabilities). The City’s net position provides 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. However, in a full
assessment of the overall health of the City, you should consider other non-financial factors as
well, such as changes in the City’s property tax base, strength of the local economy and the
condition of the City’s facilities.

5 Notes to Financial Statements: Note E - Capital Assets
6 Variance between final budgeted revenue amounts and the actual revenues collected in all funds
7 Variance between final budgeted expense amounts and the actual expenses in all funds.

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Reporting the City’s Most Significant Funds

Fund financial statements report the City’s operations in more detail than the
governmental wide statements. State laws and/or bond covenants require some funds to be
established and the City Council may also establish many other funds to help it control and
manage money for particular purposes or to show that it is meeting legal responsibilities for
using certain taxes, grants, and/or other funding sources. All of the funds of the City are be
divided into categories.

The City uses different accounting approaches for different types of funds:

Governmental Funds – Governmental funds, which use modified accrual accounting
method, account for essentially the same functions as reported as governmental activities
in the government-wide financial statements. However, unlike the government-wide
financial statements, governmental fund financial statements focus on current sources and
uses of spendable resources, as well as on balances of spendable resources available at
the end of the fiscal year. Such information may be useful in evaluating a government’s
near-term financing requirements.

Because the focus of governmental funds is narrower than that of the governmental-wide
financial statements, it is useful to compare the information presented for governmental
funds with similar information presented for governmental activities in the governmental-
wide financial statements. By doing so, the readers may better understand the long-term
impact of the government’s near-term financing decisions. The Governmental Funds
Balance Sheet and the Governmental Fund Statements of Revenues, Expenditures and
Changes in Fund Balances provide a reconciliation to facilitate this comparison between
governmental funds and governmental activities.

Enterprise Funds – Proprietary or enterprise funds are used to report the same functions
presented as business-type activities in the governmental-wide financial statements.
Proprietary funds provide the same type of information as the governmental-wide
financial statements, only in more detail. The proprietary fund financial statements
provide detailed information on the operation of the City’s Water and Sewer Systems as
well as the business-type capital related expenditures.

Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit
of parties outside the government. Fiduciary funds are not reflected in the government-
wide financial statements because the resources of those funds are not available to
support the City’s own operations or programs. The accounting used for fiduciary funds
is much like that used for proprietary funds. Individual fund data for the fiduciary funds
is provided in the form of combining statements elsewhere in this report.

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Component Unit – Component unit information for the Borger Economic Development
Corporation (BEDC) is presented in the Statement of Net Position and the Statement of
Activities. The BEDC is a component unit of the City of Borger and is specifically
governed by the Texas Development Corporation Act of 1979, as amended. The purpose
of the BEDC is to promote and develop industrial and manufacturing enterprises in order
to promote and encourage employment and the public welfare of the City.
The notes to the financial statements provide narrative explanations or additional data
needed for full disclosure and are an integral part of the government-wide and fund financial
statements.
In addition to the basic financial statements and accompanying notes, this report also
presents certain required supplementary information concerning the City’s progress in funding
its obligation to provide pension and other post-employment benefits to its employees.
In the other supplemental information section, the City has provided detailed historical
information such as tax receivables, tax levies, property values, water/sewer statistical
information and insurance coverage. The reports provide the user with information beyond the
realm of the traditional auditing requirements.

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

FINANCIAL ANALYSIS

The City as a Whole

The following table provides a comparison between the activities for FY 2016-2017 and
FY 2017-2018 under the GASB Statements 34, 37, & 38 since implementation by the City in
2003.

Changes in the City of Borger's Net Position

Governmental Business-type Totals
Activities Activities

Fiscal Year Fiscal Year Fiscal Year
2016-2017 2017-2018
2016-2017 2017-2018 2016-2017 2017-2018

Assets

Current Assets $ 6,646,342 $ 5,131,525 $ 4,640,441 $ 5,075,233 $ 11,286,783 $ 10,206,758
$ 67,195,466 $ 66,002,045 $ 87,669,982 $ 88,238,602
Non-Current Assets $ 20,474,516 $ 22,236,557 $ 569,641 $ 225,072 $ 2,444,645 $ 953,290
$ 72,405,548 $ 71,302,350 $ 101,401,410 $ 99,398,650
Deferred Pension Outflow $ 1,875,004 $ 728,218

Total Assets $ 28,995,862 $ 28,096,300

Liabilities: $ 1,834,341 $ 1,992,303 $ 2,572,669 $ 2,582,404 $ 4,407,010 $ 4,574,707
Current Liabilities $ 13,639,482 $ 10,945,488 $ 44,282,080 $ 41,651,628 $ 57,921,562 $ 52,597,116
Non-Current Liabilities $ 15,473,823 $ 12,937,791 $ 46,854,749 $ 44,234,032 $ 62,328,572 $ 57,171,823
Total Liabilities

Deferred Pension Inflow $ 433,002 $ 1,087,012 $ 131,550 $ 335,965 $ 564,552 $ 1,422,977
Defered Gain on Ref. $ 473,758 $ 334,348 $ 473,758 $ 334,348
-$ -$

Net Position : $ 10,975,041 $ 11,906,662 $ 19,411,373 $ 22,932,991 $ 30,386,414 $ 34,839,653
Invested in Cap. Assets $ 1,068,078 $ 2,681,751 $ 3,750,692 $ 1,092,884 $ 4,818,770 $ 3,774,365
Restricted $ 1,045,918 $ (516,916) $ 1,783,426 $ 2,372,130 $ 2,829,344 $ 1,855,214
Unrestricted $ 13,089,037 $ 14,071,497 $ 24,945,491 $ 26,398,005 $ 38,034,528 $ 40,469,232
Total Net Position

Total Liabilities $ 28,995,862 $ 28,096,300 $ 72,405,548 $ 71,302,350 $ 101,401,410 $ 99,398,380
and Net Position

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Detailed Changes in the City of Borger's Net Position
(in thousands)

Governmental Bu si ne ss-type Totals
Activities Activities
Fiscal Year Fiscal Year Fiscal Year Percent
2017-2018
2016-2017 2017-2018 2016-2017 2017-2018 2016-2017 2017-2018
63.46%
Re ve nu e s $ 6,048 $ 5,962 $ 10,119 $ 10,538 $ 16,167 $ 16,500 1.21%
Program Revenues: 307 $ 315 1.67%
Charges for Service $ 307 $ 315 $ - $ 434 0.00%
Op erating Grants
Capital Grants $ -$ - $ 434 $ 4,033 15.51%
General Revenues: 3,107 11.95%
Property Taxes $ 4,008 $ 4,033 $ 4,008 $ 1,248
Sales Taxes 3,272 $ 4.80%
Other Taxes $ 3,272 $ 3,107 $ 1,285 $ - 0.00%
Unfunded Pension $ 318 1.22%
Investment Earnings $ 1,285 $ 1,248 $ - $ 0.17%
Other Revenue 103 $ 45 0.00%
Disposal of Assets $ -$ - $ 315 $ - 100.00%
- $ 26,000
Total Revenues $ 59 $ 120 $ 44 $ 198 $ 25,457

$ 315 $ 45 $

$ -$ - $

$ 15,294 $ 14,830 $ 10,163 $ 11,170 $

Expenses

General/Staff Ser. $ 1,760 $ 1,580 $ 1,760 $ 1,580 6.70%
$ 7,544 $ 7,183 30.48%
Public Safety $ 7,544 $ 7,183 $ $ 1,031
$ 972 $ 1,254 4.38%
Streets $ 972 $ 1,031 $ 1,321 $ 1,792 5.32%
$ 1,985 $ 7.60%
Culture/Recreation $ 1,321 $ 1,254 $ $ 186 0.79%
$ 190 $ 79 0.34%
Solid Waste $ 1,985 $ 1,792 $ 79 $ 5.81%
$ $ 1,370 0.92%
Tourism $ 190 $ 186 $ 1,328 $ 216 37.66%
244 100.00%
Information Tech. $ 79 $ 79 8,874
8,514 23,565
Dep reciat ion $ 1,328 $ 1,370 23,937

Int. on Debt $ 244 $ 216

Water and Sewer $ 8,514 $ 8,874
8,514 $ 8,874
Total Expenses $ 15,423 $ 14,691 $

Excess/Deficiency $ (129) $ 139 $ 1,649 $ 2,296 $ 1,520 $ 2,435

Transfers $ 927 $ 843 $ (927) $ (843) $ -$ -
Change in Net Position $ 798 $ 982 $ 722 $ 1,453 $ 1,520 $ 2,435

Net Position Beginning $ 12,291 $ 13,089 $ 24,224 $ 24,946 $ 36,515 $ 38,035

Net Position Ending $ 13,089 $ 14,071 $ 24,946 $ 26,399 $ 38,035 $ 40,470

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Millions City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

The following chart represents graphically, how the City’s Total Net Position has
changed over time.

City of Borger Net Position

$45
$40
$35
$30
$25
$20
$15
$10

$5
$-

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Year ending September 30th

The City’s Governmental Activities
Governmental activities include all funds except business-type activities, fiduciary funds,

and the component unit of the BEDC. Examples include, but are not limited to, the General
Fund (Administration, Animal Control, Fire, Code Enforcement, Legal, Parks/Recreation,
Planning & Development, Police, Public Works, Refuse Collection, Municipal Court,
Emergency Management and various other departments), Tourism Fund, Special Projects Funds,
Grant Funds, Debt Service Funds, Capital Improvement and Capital Equipment Funds and
various other funds. The following charts graphically represent the City’s revenues and expenses
for FY 2017-2018 as well as a historical view of public safety expenditures for the last several
years.

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

The cost of all governmental activities this year was $15.8 million8 compared to $15.0
million for FY 2016-2017. However, as shown in the Statement of Revenues, Expenditures, and
Changes in Fund Balance, the amount that our taxpayers ultimately funded through property
taxes was only $4.0 million9. Those who directly benefited from programs or services, sales tax,
industrial district contracts, and other sources of revenue funded the balance of $10.8 million.

8 Statement of Revenues, Expenditures, and Changes in Fund Balance
9 Statement of Revenues, Expenditures, and Changes in Fund Balance

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Pursuant to GASB Statement 34, capital expenditures within governmental activities are
depreciated over their useful life.

The following chart graphically represents the City’s expenditures on governmental
activities for FY 2017-2018.

Public safety, which includes the Animal Control, Code Enforcement, Central Dispatch,
Police, Fire, Fire Prevention & Emergency Management, and Municipal Court Departments,
comprises about one-half of all expenditures for governmental activities. The following chart
represents a historical view of the cost to provide those basic governmental services for the last
several years.

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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Business-type Activities
The 2017-2018 Budget also included business-type activities (often referred to as Enterprise Funds)
from the operation of our water, and sewer systems. During FY 2017-2018 the operating income
from the City’s business-type activities was $3,797,44810. This amount was before any transfers
out to other funds for future capital projects or other non-operating expenses.

10 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds
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City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

For over fifty years, the Canadian River Municipal Water Authority (CRMWA) has worked
to serve its member cities and citizens of the Texas Panhandle and South Plains by providing a
dependable and safe source of municipal and industrial water. The City is an original member of
the CRMWA. Since its beginning, CRMWA has incurred debt for projects to secure, develop, and
deliver water to the eleven member cities. Currently, the City is obligated to the CRMWA for
bonded indebtedness of approximately $8.0 million11. The City funds this obligation on a monthly
basis as an expense of the Enterprise Fund. There are a number of bonds in varying stages of
maturity of which the last will be retired in February of 2031.

With Lake Meredith (one of the City’s major sources of industrial water) now recovering

11 Notes to Financial Statements: Note F – Long Term Debt
21

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

from a period of historically low levels, the acquisition of additional long-term water supplies will
continue to be one of our goals; however, no longer a high priority goal. We will continue to
facilitate this goal through a continued partnership with the CRMWA in the expansion of the John
C. Williams Well Field and through development of our own water resources through the
Northwest Well Field (NWWF) and other City owned water rights.

The City’s NWWF Project that was completed and placed into service during the 2015-2016
fiscal year significantly enhanced water supplies to our industrial customers and the western
portions of the system, but also provides a fourth source of water for the entire system. With the
completion of the NWWF Project, all of the City’s owned and leased water rights areas now have
pumping and transmission infrastructure constructed and operational. While there are still
significantly under developed areas, the City in the next few years should begin the search for
additional water rights for the long term.
CAPITAL ASSETS AND LONG-TERM DEBT MANAGEMENT
Capital Asset Comparison

At the end of FY 2017-2018, the City had $84,503,70412 invested in a broad range of
capital assets, including land, infrastructure, buildings, improvements other than buildings,
machinery and equipment, and various capital construction projects in progress. This amount
represents a net increase (including additions and deletions) of $1,658,813 over the previous
year.

12 Notes to Financial Statements: Note E – Capital Assets
22

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Capital Assets - Net of Accumulated Depreciation
S eptember 30, 2018

Governmental Bu si ne ss-type Total s
Activities Acti vi ti e s

Fiscal Year Fiscal Year Fiscal Year

2016-2017 2017-2018 2016-2017 2017-2018 2016-2017 2017-2018

Land $ 1,192,723 $ 1,192,723 $ 1,496,247 $ 1,496,247 $ 2,688,970 $ 2,688,970

Building/Imp rovement s $ 13,924,418 $ 14,101,632 $ 373,842 $ 384,113 $ 14,298,260 $ 14,485,745

Furnit ure/Equip ment $ 13,251,568 $ 14,104,003 $ 1,945,651 $ 1,982,380 $ 15,197,219 $ 16,086,383

Infrast uct ure $ 6,953,341 $ 7,002,408 $ 87,950,209 $ 89,394,750 $ 94,903,550 $ 96,397,158

Const. in Progress $ 9,078 $ 340,189 $ 618,657 $ 2,267,270 $ 627,735 $ 2,607,459

Total $ 35,331,128 $ 36,740,955 $ 92,384,606 $ 95,524,760 $ 127,715,734 $ 132,265,715
less accumulated
dep reciat ion $ (15,931,011) $ (17,146,412) $ (28,936,832) $ (30,615,599) $ (44,867,843) $ (47,762,011)

Cap ital Assets Net of $ 19,400,117 $ 19,594,543 $ 63,447,774 $ 64,909,161 $ 82,847,891 $ 84,503,704
Dep reciat ion

Long Term Debt Management

Currently, the City has $7.7 million in outstanding long-term debt payable from the levy
and collection of a direct and continuing ad valorem tax within the limit prescribed by law, on all
taxable property within the City. In FY 2017-2018 the City did not restructure any existing debt
and no additional debt was issued.

As described earlier, the City, under contractual agreements with the CRMWA, is
obligated for long-term debt of $8.0 million. The City fully funds these obligations from
operational revenues generated from business-type activities on a monthly basis.

Also as described earlier the City issued $38,200,000 in debt for the NWWF Project.
While this debt can be funded either from the levy and collection of a direct and continuing ad
valorem tax within the limit prescribed by law, on all taxable property within the City or from
operational revenues generated from business-type activities; the City has and intends to
continue to fully fund this debt from operational revenues generated from business-type
activities.

In November 2013 Standard and Poor’s issued a new AA-/Stable rating on Series 2013
Tax and Water Works General Obligation debt for $5,245,000. At that same time, the City’s
other debt obligations were also upgraded from A+(SPUR)/Stable to AA-(SPUR)/Stable.

23

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

City of Borger's Outstanding Debt

FY 2017-2018

City Outstanding Debt Remaining 2018-2019 Maturity
Principal Debt Service Year

Certificates of Obligation Series 2013 $ 2,320,000 $ 193,888 2033
218,300 2036
Certificates of Obligation Series 2016 $ 3,180,000 $ 486,900 2022
General Obligation Refunding Series 2016 $ 1,845,000 $ 56,444 2019

Happy State Bank Lease Purchase $ 54,241 $ 9,984 2033

Governmental-type Unamortized Bond Premium $ 288,640 $ 423,978 2039

Combination Tax and Limited Pledge Revenue Certificates 2,197,026
13,022
of Obligation, Taxable Series 2013 $ 4,220,000 $
3,599,542
Tax & Waterworks & Sewer System Surplus Revenue 2,634,026

Certificates of Obligation, Taxable Series 2014 $ 29,445,000 $ 965,516

Business-type Unamortized Bond Premium $ 318,350 $

Total General Obligation Debt $ 41,671,231 $

Less Self-Supporting Debt (100% Utility Funded) $ 33,983,350 $

Total Net General Obligation Debt (100% I&S Funded) $ 7,687,881 $

CRMWA Outstanding Debt $ 106,667 $ 75,642 2020
Conjuctive Use Groundwater Refunding Series 2010 $ 13,456 $ 13,456 2019
Conjunctive Use Groundwater Series 2009 $ 627,037 $ 36,428 2029
Conjuctive Use Groundwater Refunding Series 2017 $ 3,392,034 $ 209,328 2031
Conjuctive Use Groundwater Series 2011 $ 2,205,925 $ 72,586 2025
Revenue Refunding Series 2012 $ 1,647,701 $ 368,445 2027
Revenue Refunding Series 2014 $ 7,992,820 $ 775,885
Total CRMWA Obligated Debt

Total City and CRMWA Long-term Debt $ 49,664,051 $ 4,375,427

Comparison of Long-term Debt
S eptember 30, 2018

Governmental Business-type Totals
Activities Activities

Fiscal Year Fiscal Year Fiscal Year

2016-2017 2017-2018 2016-2017 2017-2018 2016-2017 2017-2018

General Obligation $ 8,318,624 $ 7,345,000 $ 8,318,624 $ 7,345,000

Leases & other debt $ 106,452 $ 54,241 $ 106,452 $ 54,241

Rev./Contract Bonds $ 35,024,953 $ 33,665,000 $ 35,024,953 $ 33,665,000
$ 9,008,448 $ 7,992,820
CRM WA Obligations $ 44,033,401 $ 41,657,820 $ 9,008,448 $ 7,992,820

Total $ 8,425,076 $ 7,399,241 $ 52,458,477 $ 49,057,061

24

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

STATUS OF CITY RESERVES
The following schedule is a listing of the City’s Governmental and Business-type

reserves with comparative information from last year. It should also be noted that capital
construction funds remaining from any recent debt issuances are not included. Inclusion of any
remaining proceeds from a debt issuance would artificially increase the total reserve balance, as
those funds are restricted for future capital projects.

In FY 2017-2018 the City conducted a new Cost of Service and Rate Study on Water,
Wastewater, and Refuse services. This study, aided in the design and assignment of operational
costs of providing those services to the appropriate customer class and provide an adequate
return, which will continue to strengthen the financial integrity of the City.

The City as a whole, ended FY 2017-2018 with audited Governmental fund balances and
Water/Sewer cash fund balances totaling $11.0 million which favorably compares to $10.7
million for FY 2016-2017. Both General Fund and Water/Sewer Fund balances increased and
pursuant to the City’s Financial Policy maintained an unrestricted reserve of 25% or more of the
ensuing year’s budgeted expenditures at 25.3% (General Fund) and 46.8% (Water/Sewer Fund)
respectively. There are two significant variances in the Tourism and Multi-Purpose Events
Center Fund. The City had previously invested $1,500,000 ($750,000 from the Tourism Fund
and $750,000 from the Capital Infrastructure Fund) with the Amarillo Area Foundation as seed
funding for the proposed Multi-Purpose Events Center Project. That Project is no longer being
pursued and the seed funding plus any accrued interest has been refunded by the Foundation
which accounts for the large variance in the Multi-Purpose Events Center Fund. The return of
$750,000 plus accrued interest accounts for the large variance to the Tourism Fund. The
remaining $750,000 plus accrued interest was returned to the Capital Infrastructure Fund which
is intentionally left out of this schedule resulting in the appearance of an overall loss in fund
balance of the Government Activities Group Fund Balance.

25

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

The following schedule lists each of the City’s funds separately with comparative
information from the previous year.

City of Borger's Statement of Fund Balances

FY 2017-2018

Govermental Activities Group Fiscal Year Fiscal Year Variance
2016-2017 2017-2018 Favorable
(Unfavorable)

General Fund $ 3,698,148 $ 3,749,141 $ 50,993
City Tourism Fund
Central Supply Fund $ 378,739 $ 1,235,486 $ 856,747
Park Recreation & Special Projects Fund
Police Club 100 Fund $ 31,361 $ 31,361 $ -
Fire Training/Equipment Fund
Emergency Operations Fund $ 22,181 $ 17,275 $ (4,906)
Municipal Court Security Fund
Debt Service Fund $ 1,136 $ 1,136 $ -
Fire Benevolent Fund
Police Benevolent Fund $ 254,274 $ 286,882 $ 32,608
Municipal Court Technology Fund
Hotel/Motel Occupancy Tax Fund $ 3,131 $ 3,131 $ -
Multi-Purpose Events Center Fund
Borger Community Designated Fund $ 58,978 $ 48,067 $ (10,911)
Capital Equipment Fund
Special Crime Fund $ 199,284 $ 273,816 $ 74,532
Total Government Activities Group Fund Balance
$ 8,282 $ 6,282 $ (2,000)

$ 6,103 $ 6,196 $ 93

$ 5,664 $ 3,503 $ (2,161)

$ -$ -$ -

$ 1,600,636 $ - $ (1,600,636)

$ 26,280 $ 98,507 $ 72,227

$ 455,888 $ 258,254 $ (197,634)

$ 16,585 $ 14,186 $ (2,399)

$ 6,766,670 $ 6,033,223 $ (733,447)

Business-type Activities Group

Water/Sewer Fund (cash fund balance) $ 3,590,571 $ 4,571,911 $ 981,340
Meter Deposits $ 363,704 $ 364,384 $ 680
Total Business-type Activities Group Fund Balance $ 3,954,275 $ 4,936,295 $
982,020

City as a Whole Total Fund Balance $ 10,720,945 $ 10,969,518 $ 248,573

* Does not include remaining proceeds of capital project funds.

Note the term “cash fund balance,” referenced to the Water/Sewer Fund Balance. All of the
schedules contained within this Audit reference the Water/Sewer Fund Balance inclusive of debt,
fixed assets, and depreciation. “Cash fund balance” as shown in this schedule is the difference
between the City’s total cash balance less fund balances of all other funds.

26

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

CURRENT EVENTS, THE BUDGET, UPCOMING CHALLENGES

Current Events

In August of 2018, the City Council along with City Administration conducted a Strategic
Visioning Workshop. The conclusion of the Workshop created a new a Mission, Vision, and
Strategic Pillars document which was subsequently officially adopted by the City Council. This
document and the Mission, Vision, and Pillars within will guide the direction of City Staff and
Departments as we move into the future.

The City’s elected and appointed officials considered many factors when setting the FY
2017–2018 Budget and tax rates. One of those factors was the economy. Borger’s economy has
been based on and intertwined with oil and the petro chemical industry since its inception; City
staff continually monitor national, state, and local economic indicators especially as those that
pertain to the petro chemical industry. Oil prices have been a concern and sales tax while volatile,
was only slightly depressed throughout FY 2017-2018.

The Borger Economic Development Corporation (BEDC), which shows up as a non-major
component in many of the tables contained within this Audit continues to be active and
successful in the recruitment and retention of businesses and companies. The BEDC went
through many changes in FY 2016-2017 including the loss of the CEO. In January 2018 a new
CEO was hired and along with several new Board members has changed, re-energized, and
expanded their focus. While the creation of primary jobs remains a top priority, expanded efforts
in other areas identified as critical to Borger and the surrounding area along with smaller
commercial and retail opportunities are actively being considered and funded. During FY 2017-
2018 a local lumber, building, and hardware store moved into the former big box property
previously owned by Wal-Mart. This move and expansion of the local store has greatly
enhanced the retention of market share of lumber, building, and hardware product sales. The
creation of a Small Business Incentives Program which grants up to $20,000 per business was
funded at $200,000 in FY 2017-2018. This Program provides up to a 50% reimbursement of the
business’s investment spurred a lot of local interest. During FY2017-2018 completed projects
were reimbursed in an amount of $148,325 with a few remaining projects not yet ready to claim
the reimbursement. The Program was funded again in FY 2018-2019 at $100,000.

Prior to the end of the FY 2016-2017 fiscal year the City began negotiating Chapter 380
agreement with a company to re-open a local bowling alley, restaurant, and entertainment center.
A second Chapter 380 agreement was also being negotiated for a new steakhouse. Both of these
Chapter 380 agreements were finalized and approved during FY 2017-2018. Beginning in the
second quarter of FY 2018-2019 these agreements for ad valorem and sales tax reimbursements
will enter the payout phase of the agreement. The City in the years to come will now take a
more active role in seeking out expansion and/or retention of new and existing commercial and
retail businesses.

27

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

Other economic activities include the creation of a Tax Incentive Investment/Re-
investment Zone (TIRZ). City staff actively worked on its creation throughout FY 2017-2018
and the Zone was officially created in December of 2018. The City also entered into agreements
with both the Borger Independent School District and Hutchinson County to financially
participate in the Zone. Each entity has agreed to participate diverting 100% of the increment
revenue to the TIRZ Fund. With three taxing entities participating, it is anticipated that over the
30-year term of the TIRZ, the Zone will generate approximately $13,000,000. The created TIRZ
Board will use these funds for business attraction and/or retention incentives and the
development of public and private infrastructure within the Zone. The TIRZ is centered on the
Central Business District and adjacent downtown area, but also extends both to the north and
south picking up key areas that are prime for re-development of business, public space, and
residential properties alike.

Also, in FY 2017-2018 the City partnered with the Omni-Tracks/Panhandle Northern Railway
(PNR) on a Consolidated Rail Infrastructure and Safety Improvements (CRISI) Program grant
application from the Federal Railroad Administration (FRA). The $4.2 million-dollar Project will
rehabilitate approximately 32 miles of PNR’s rail between Borger and the Burlington Northern
main line in Panhandle, Texas. The improved rail will allow for continued and enhanced safe
transportation of thousands of railcar loads of highly hazardous materials including methyl
mercaptan, anhydrous ammonia, refined gasoline, crude oil, isopentane, heptane, methanol,
liquefied petroleum gas, sulfuric acid, other flammable and corrosive liquids. The City was notified
in December of 2018 that the CRISI Grant was awarded and will reimburse approximately 50% or
$2.1 million dollars of the Project. The remaining amount of $2.1 million dollars for the Project
will be totally funded by PNR.

Budget

These factors along with others are always conservatively taken into account when adopting
the Budget. The City will use its revenues to finance programs we currently offer and expand
spending in hazard mitigation, programs that clean up rights-of-ways and highly visible areas of the
City, removal of junk and/or abandoned vehicles, and eliminating unsightly nuisances through
compliance and/or enforcement of ordinances. Even though most of the City’s physical buildings
are updated and modernized, infrastructure still continues to be a top priority. Over the next two to
three budget cycles we will complete a new Comprehensive Plan to guide the City’s development
for the next 15 to 20 years. Other strategic plans such as a Street Assessment Survey, a Master
Parks Plan and possibly even a Master Drainage Plan are actively being considered.

In FY 2017-2018 the City began replacement of old outdoor alerting sirens. These outdated
sirens will be replaced over a multi-year period with modern sirens and control equipment at an
estimated cost of $300,000. Recently FEMA has made available grant funding for initiatives,
planning, and projects. Hutchinson County is an eligible recipient and the City will be partnering
with Hutchinson County and the cities of Fritch and Stinnett on a joint grant application to place
warning sirens in all populated areas of the County.

28

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

The drought which ended during 2015 increased the emphasis on protection from wildfires;
several years ago, the City included a new Hazardous Mitigation line item in the Fire Department’s
budget. During the first few years of this program, this line item was funded at $50,000. The
program is designed to specifically target and mitigate excessive overgrowth of vegetation in the
rural/urban interface. The program has been widely accepted and many potential problem areas
around the City have been significantly cleaned up thus reducing the availability of excess fuel for a
wildfire and greatly improving the aesthetics of the area.

Upcoming Challenges

Succession planning and retention of long-term and/or highly qualified employees in the
modern marketplace will continue to present significant challenges. Active succession planning
requires a major investment in both time and financial resources. Previously over half of the City’s
key administrative staff was eligible to retire; however, in recent years, a number of new hires and
promotions have reduced that percentage to approximately 30%. Planned retirements in FY 2018-
2019 will likely reduce that percentage even further. The City must continue to recruit and invest
in qualified personnel in order to limit the loss of institutional knowledge due to future retirements
of long-term and/or the loss of employees. To address this issue, qualified assistants need to be
identified in all major departments. Currently, we have designated assistant managers/directors in
Administration, Police, Fire, Planning and Development, and Utilities departments; however, a
deficiency exists in the Finance, and Public Works departments.

During the FY 2016-2017 fiscal year, the City actively recruited a qualified Assistant City
Manager and during FY 2017-2018 an Assistant to the City Manager. This completed a City
Council directive to move from a traditional pyramid style management structure to a team style
management structure.

During FY 2018-2019, the City will begin the development of a new Comprehensive Plan.
Other future projects may include construction of a new Community Center, indoor sports facility,
and/or multi-field sports complex that would also greatly enhance quality of life issues and provide
large scale meeting or exhibit space and additional team sporting opportunities to attract tourism
and promote economic growth.

29

City of Borger, Texas
FY 2017 – 2018 Audit – Management’s Discussion & Analysis

CONTACTING THE CITY’S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, customers, investors,
and creditors with a general overview of the City’s finances and to show the City’s
accountability for the money it receives. If you have questions about this report or need
additional financial information, contact and of the named individuals below at the City of
Borger, 600 N. Main, PO Box 5250, Borger, Texas, 806-273-0900.

___________________________ Garrett Spradling
Scott M. Radach Assistant to the City Manager
Director of Finance City of Borger, Texas
City of Borger, Texas [email protected]
[email protected]
___________________________
___________________________ Eddie E. Edwards
Joe Price City Manager
Assistant City Manager City of Borger, Texas
City of Borger, Texas [email protected]
[email protected]

30

Basic Financial Statements

31

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32

CITY OF BORGER, TEXAS
GOVERNMENT-WIDE STATEMENT OF NET POSITION
September 30, 2018

Governmental Primary Government Total Component
Activities Bus ines s -Type 2018 Unit
Activities
$ 395,419 $ 980,373
ASSETS AND DEFERRED OUTFLOW 4,170,937 $ 76,814 $ 472,233 700,000
15,051 3,948,432 8,119,369 -
CURRENT ASSETS 260,576 - 15,051 -
Pooled cash and cash equivalents 278,483 1,042,226 1,302,802 375,989
In ves t ments 11,059 3,088 281,571 5,151
Inventories 5,131,525 4,673 15,732
Accounts receivables, net 2,061,513
Other receivables 190,092 5,075,233 10,206,758
Other current assets 2,444,179 -
20,451 210,543 -
Total Current Assets 7,743 1,072,433 3,516,612 -
- 782,624
NONCURRENT ASSETS - 7,743 1,594,456
Restricted assets 19,594,543 64,909,161 - 2,377,080
Cas h 22,236,557 66,002,045
In v es t ments 84,503,704 -
Other receivables 728,218 225,072 -
Other noncurrent assets 728,218 225,072 88,238,602 $ 4,438,593
Capital assets, net $ 28,096,300 $ 71,302,350
953,290 $ 16,248
Total Noncurrent Assets 953,290 -
-
DEFERRED OUTFLOWS OF RESOURCES $ 99,398,650
Deferred outflows from pensions -
-
Total Deferred Outflows from Pensions 175,600
191,848
Total Assets and Deferred Outflows
-
LIABILITIES, DEFERRED INFLOWS AND NET POSITION -
-
CURRENT LIABILITIES $ 488,412 $ 247,453 $ 735,865 900,700
Accounts payable 35,523 - 35,523 900,700
Sales tax payable 257,852 343,250 1,092,548
Accrued payroll 72,622 85,398 72,622
Payroll taxes and benefits payable 35,108 - 283,608 -
Accrued interest 375,575 457,217 -
Accrued vacation 727,211 248,500 -
Current portion of long-term debt 81,642 2,646,622
1,992,303 1,919,411 2,028,012
Total Current Liabilities 4,574,707 -
2,582,404 -
NONCURRENT LIABILITIES 3,185 367,569 -
Utility customer deposits 405 364,384 405
Unearned revenue - 1,318,033
Unfunded retirement obligation 3,981,228 5,211,713 3,346,045
Long term debt due after one year 6,960,670 1,230,485 47,017,429
40,056,759 $ 4,438,593
Total NonCurrent Liabilities 10,945,488 52,597,116
41,651,628
Total Liabilities 12,937,791 57,171,823
44,234,032
DEFERRED INFLOWS OF RESOURCES 1,087,012 -
Deferred inflows from pensions - 335,965 1,422,977
Deferred gain on refinancing 334,348
Total Deferred Inflows of Resources 1,087,012 670,313 334,348
1,757,325
Net Position 11,906,662 22,932,991
Invested in capital assets, net of related debt 273,816 - 34,839,653
Restricted for debt service 273,816
Restricted for capital outlay 1,034,466 1,092,884
Other restricted 1,373,469 - 2,127,350
Unres tricted (516,916) 1,373,469
2,372,130 1,855,214
Total Net Position 14,071,497
26,398,005 40,469,502
Total Liabilites, Deferred Inflows and Net $ 28,096,300
Pos ition $ 71,302,350 $ 99,398,650

See accompanying notes to the financial statements.

33

CITY OF BORGER, TEXAS
GOVERNMENT-WIDE STATEMENT OF ACTIVITIES
Year Ended September 30, 2018

Functions and Programs Expens es Charges for Program Revenues Capital
Services Grants and
PRIMARY GOVERNMENT $ 641,159 Operating Contributions
Governmental Activities 79,012 Grants and
A dminis tration 235,733 Contributions
Information Systems 97,584
Fleet Services 115,728 $ 21,348 $- $-
Engineering 489,087 - - -
Facilities Maintenance 234,673 - - -
Planning and Zoning 224,681 - -
Animal Control 575,737 14,453 - -
Code Enforcement - - -
Central Dispatch 2,924,366 - -
Police 2,493,132 20,245 - -
Fire and Fire Prevention 7,788 - -
Emergency Management 201,473 120,108 -
Municipal Court 528,395 201,165 140 -
Public Works General 246,454 313,118 -
Streets 785,332 210 -
Sanitation 607,721 - - -
Solid Waste Transfer Station 1,183,932 - - -
Youth, Community and Recreation Centers 532,138 - -
Parks 721,784 195,170 - -
Economic Development and Tourism 185,908 - - -
Interest Expense 216,286 - - -
Unallocated Depreciation 1,370,489 2,050 -
2,013,345 - -
Total Governmental Activities 14,690,804 3,280,666 - -
-
Business Type Activities 7,174,309 68,103 - -
Water and Sewer 1,699,995 19,047
Interest Expense 315,308 433,556
8,874,304 - -
Total Primary Government - -
$ 23,565,108 - - 433,556
Component Unit:
$ 883,641 5,961,648 - $ 433,556
Borger Economic Development Corporation
10,538,201 $ 315,308
-

10,538,201

$ 16,499,849

$ - $ - $ (433,556)

General Revenues (Expenses):
Taxes :
Sales
Property - General
Property - Debt Service
Fran chis e
Occupancy
Other
Investment Earnings
Other Revenue (Expense)
Transfers, Net

Total General Revenues and Transfers

Change in Net Position
Net Position - Beginning

Net Position - End

See accompanying notes to the financial statements.

34

Net (Expenses) Revenues and
Changes in Net Position

Primary Government Component
Unit

Governmental Bus ines s -Type Total
Activities Activities

$ (619,811) $- $ (619,811) $ -
(79,012) - (79,012) -
(235,733) - (235,733) -
(83,131) - (83,131) -
(115,728) - (115,728) -
(468,842) - (468,842) -
(226,885) - (226,885) -
(104,573) - (104,573) -
(374,572) - (374,572) -
- -
(2,924,016) - (2,924,016) -
(2,180,014) - (2,180,014) -
- -
(201,473) - (201,473) -
(333,225) - (333,225) -
(246,454) - (246,454) -
(785,332) - (785,332) -
1,405,624 - 1,405,624 -
2,096,734 - 2,096,734 -
(461,985) - (461,985) -
(702,737) - (702,737) -
(185,908) - (185,908) -
(216,286) (216,286)
(1,370,489) - (1,370,489) -

(8,413,848) 3,797,448 (8,413,848) -
(1,699,995) -
- 3,797,448
- 2,097,453 (1,699,995) -

- 2,097,453 2,097,453 -

(8,413,848) (6,316,395)

- - - (1,317,197)

3,107,365 - 3,107,365 1,037,552
3,012,591 - 3,012,591 -
1,020,396 - 1,020,396 -
- -
925,750 - 925,750 -
311,594 - 311,594 -
10,150 198,420 10,150
120,140 - 318,560 7,574
44,963 (843,359) 44,963 (63,909)
843,359
(644,939) - -
9,396,308
1,452,514 8,751,369 981,217
982,460 24,945,491
13,089,037 2,434,974 (335,980)
$ 26,398,005 38,034,528 3,682,025
$ 14,071,497
$ 40,469,502 $ 3,346,045

See accompanying notes to the financial statements.

35

CITY OF BORGER, TEXAS
BALANCE SHEETS
GOVERNMENTAL FUNDS
September 30, 2018

ASSETS General Capital Other Total
Fund Project Nonmajor Governmental
ASSETS Fund
Pooled cash $ 249,943 Funds Funds
Inves tments 3,523,919 $-
Inventories - - $ 208,455 $ 458,398
Utility receivables, net 147,039 - 628,123 4,152,042
Other receivables 289,545 - 15,051 15,051
Restricted asets - - 147,039
Pool cash - - 289,545
Investments 121,877
Other receivables - 919,664 68,215 190,092
$ 4,210,446 1,524,515 2,444,179
Total Assets 1,625
$ 374,148 $ 1,043,166 6,118 7,743
LIABILITIES AND FUND BALANCE - $ 2,450,477 $ 7,704,089
$-
LIABILITIES 55,876 8,700 $ 149,649 $ 523,797
Accounts payable 27,691 - - 8,700
Accounts payable from restricted cash - 72,622
Payroll taxes and benefits payable 405 - 16,746 27,691
Sales tax payable 3,185 - - 405
Other payables 461,305 8,700 - 3,185
Utility Customer Deposits -
- - 636,400
Total Liabilities - 1,034,466 166,395
- 273,816
FUND BALANCES - 273,816 1,034,466
Restricted for debt service - - 1,373,469
Restricted for capital outlay 3,749,141 -
Other restricted 3,749,141 - 1,373,469 636,797
Unrestricted - reported in special $ 4,210,446 1,034,466 3,749,141
revenue funds $ 1,043,166 636,797 7,067,689
Un res tricted - $ 7,704,089

Total Fund Balances 2,284,082
$ 2,450,477
Total Liabilities and Fund Balances

See accompanying notes to the financial statements.

36

CITY OF BORGER, TEXAS
RECONCILIATION OF THE BALANCE SHEET OF
GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET ASSETS
September 30, 2018

Total Fund Balance - Governmental Funds $ 7,067,689

Amounts reported for governmental activities in the statement of net assets 19,594,543
are different because:
113,535
Net capital assets used in governmental activities are not financial
resources and therefore are not reported in the funds (7,832)
(35,108)
Utility Unbilled Accounts Receivable (257,852)
(375,575)
Certain liabilities are not due and payable in the current period and therefore (3,981,228)
are not reported in the funds. Those liabilities include: (1,087,012)
728,218
Accounts payable (7,687,881)
Sales Tax Payable $ 14,071,497
Accrued Interest
Accrued Salaries
Accrued Vacation
Unfunded Defined-Benefit Retirement Obligations
Deferred Inflows from Pensions
Deferred Outflows from Pensions
Bond and Note Obligations

Net Position of Governmental Activities

See accompanying notes to the financial statements.

37

CITY OF BORGER, TEXAS
STATEMENTS OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUNDS
Year Ended September 30, 2018

REVENUES General Capital Other Total
Taxes: Fund Project Nonmajor Governmental

Property $ 3,004,741 Fund Funds Funds
Sales 3,107,365
Franchis e 925,750 $- $ 1,017,478 $ 4,022,219
Occupancy - - - 3,107,365
Other 20,918 - - 925,750
Charges for Service 5,704,789 - 311,594
Penalties, Fines and Forfeitures 189,516 - 311,594 20,918
Licenses, Fees, and Permits 42,486 - - 5,723,836
Intergovernmental Grants and Subsidies 200,250 - 195,171
Other Grants and Contributions 2,050 - 19,047 42,486
Investment Income 63,080 - 5,655 200,390
Other Income 44,961 - 114,918
- 120,139
Total Revenues 13,305,906 16,897 140 44,961
- 112,868
EXPENDITURES 433,900 40,162 14,829,747
Current 78,922 16,897 -
235,823 433,900
General Government: 97,541 - 1,506,944 78,922
A dminis trat ion 278,587 - 235,823
Information Systems 486,835 - - 97,541
Fleet Services - - 278,587
Engineering 234,777 - - 486,835
Facilities Maintenance 225,845 - -
Planning and Zoning 592,357 - 234,777
2,979,751 - - 225,845
Public Safety 2,514,229 - 592,357
Animal Control 201,458 - - 2,991,616
Code Enforcement 520,405 - - 2,548,766
Central Dispatch - - 201,458
Police 241,056 - 11,865 520,405
Fire and Fire Prevention 785,769 - 34,537
Emergency Management 604,759 - 241,056
Municipal Court 1,185,006 - - 785,769
- 604,759
Public Works 909 - - 1,185,006
General - -
Streets 524,908 - - 2,558
Sanitation 724,053 -
Solid Waste Transfer Station - 1,649 524,908
Recycling - - 724,053
- - 252,221
Culture and Recreation 1,208 -
Youth, Community and Recreation Centers 1,564,914 252,221 1,578,026
Parks -
- - 11,904 954,431
Economic Development and Tourism 1,300
Capital Outlay 12,948,098 1,564,914 954,431
1,300 15,780,919
Capital Purchases 357,808 (1,548,017)
Debt Service 1,267,907 (951,172)
(756,815) 2,173,653
Principal and Interest 450,000 239,037 (1,780,294)
Administrative Fees 2,173,653 2,623,653
(306,815) (1,023,479)
Total Expenditures 625,636 - 843,359
50,993
Excess (Deficit) of Revenues over Expenditures 408,830 (1,023,479) (107,813)
3,698,148 $ 1,034,466
OTHER FINANCING SOURCES (USES) $ 3,749,141 (784,442) 7,175,502
Transfers Out
Transfers In 38 3,068,524 $ 7,067,689

Total Other Financing Sources (Uses) $ 2,284,082

Net Change in Fund Balance

Fund Balance, Beginning of Year
Fund Balance, End of Year

See accompanying notes to the financial statements.

CITY OF BORGER, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
Year Ended September 30, 2018

Net Changes in Fund Balance - Governmental Funds $ (107,813)

Amounts reported for governmental activities in the Statement of Activities 1,564,915
are different because:
(1,370,489)
Governmental funds report capital outlays as expenditures. In the 171
Statement of Activities, the cost of assets are allocated over their
estimated useful lives in the form of depreciation. 737,195

Depreciation is recognized on the Statement of Activities by (2,726)
allocating the cost of the assets over their estimated useful lives (8)
but is not a Governmental Fund Expense
2,250
The change in accrued utility accounts receivable is reported on (14,866)
the Statement of Activities but is not reflected in the Governmental funds 16,623
1,958,004
Debt service is an expenditure for governmental funds consisting (654,010)
of both interest expense and principal for the Notes Payable. The principal (1,146,786)
portion reduces long-term debt on the Governmental Activities Statement of $ 982,460
Net Position and is not an expense on the Statement of Activities

Certain liabilities are not due and payable in the current period and therefore
the changes are not reported in the funds. Those liabilities include:
Accounts Payable
Sales Tax Payable
Accrued Interest
Accrued Salaries
Accrued Vacation
Unfunded Defined-Benefit Retirement Obligations
Deferred Inflows from Pensions
Deferred Outflows from Pensions

Change in Net Position of Governmental Activities

See accompanying notes to the financial statements.

39

CITY OF BORGER, TEXAS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
GENERAL FUND
Year Ended September 30, 2018

Original Final Actual Variance
Budget Budget Favorable
$ 3,004,741 (Unfavorable)
REVENUES $ 2,897,000 $ 3,008,750 3,107,365
Taxes : 925,750 $ (4,009)
3,250,000 3,110,000 20,918 (2,635)
Property 5,704,789 15,250
Sales 900,000 910,500 189,516 10,918
Franchis e 42,486
Other 12,000 10,000 200,250 (101,761)
Charges for Service 63,080 (9,484)
Penalties, Fines and Forfeitures 5,794,300 5,806,550 2,050 4,186
Licenses, Fees, and Permits 44,961 (1,500)
Intergovernmental Grants and Subsidies 240,500 199,000 21,580
Investment Income 13,305,906 (700)
Other Grants and Contributions 21,800 38,300 (17,289)
Other 433,900
190,750 201,750 78,922 (85,444)
Total Revenues 235,823
20,000 41,500 97,541 (41,198)
EXPENDITURES 278,587 1,843
Current 5,000 2,750 486,835 19,008
24,385
General Government: 60,000 62,250 234,777 5,863
Administration 225,845
Information Systems 13,391,350 13,391,350 592,357 100,331
Fleet Services 2,979,751
Engineering 381,602 392,702 2,514,229 (809)
Facilities Maintenance 80,765 80,765 201,458 25,200
Planning and Zoning 252,706 254,831 520,405 31,114
121,926 121,926 87,334
Public Safety 293,000 284,450 241,056 106,999
Animal Control 522,016 587,166 785,769 16,961
Code Enforcement 604,759 20,879
Central Dispatch 228,628 233,968 1,185,006
Police 305,845 251,045 (15,156)
Fire and Fire Prevention 633,621 623,471 909 28,419
Emergency Management 3,042,485 3,067,085 23,826
Municipal Court 2,534,303 2,621,228 524,908 27,609
206,094 218,419 724,053 2,798
Public Works 592,834 541,284
General 1,208 39,792
Streets 192,400 225,900 96,371
Sanitation 929,678 814,188 12,948,098
Solid Waste Transfer Station 643,110 628,585 20,792
Recycling 1,206,665 1,212,615 357,808
15,707 622,361
Culture and Recreation 3,707 (756,815)
Youth, Community and Recreation Centers 562,600 450,000 536,917
Parks 814,474 564,700
820,424 (306,815) (35,924)
Capital Outlay 10,000 (450,000)
Capital Purchases 22,000 50,993
13,570,459 (485,924)
Total Operating Expenses 13,570,459 3,698,148
(179,109) $ 50,993
Excess (Deficit) of Revenue over Expenditures (179,109) $ 3,749,141

OTHER FINANCING SOURCES (USES) (720,891) (720,891)
Transfers Out 900,000 900,000
Transfers In
179,109 179,109
Total Other Financing Sources (Uses)
$ -$ -
Net Change in Fund Balance

Fund Balance, Beginning of Year

Fund Balance, End of Year

See accompanying notes to the financial statements.

40

CITY OF BORGER, TEXAS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
CAPITAL PROJECTS FUND
Year Ended September 30, 2018

REVENUES Original Final Actual Variance with
Grants and Contributions Budget Budget Final Budget
Interest Income $- $- $-
16,897 Favorable
Total Revenues 10,000 10,000 16,897 (Unfavorable)
10,000 10,000
$-
900,000 900,000 6,897
900,000 900,000
(890,000) (890,000) 6,897

EXPENDITURES - - 1,564,824 (664,824)
Capital Outlay - - 1,564,824 (664,824)
(1,547,927) (657,927)
Capital Purchases - -
$ (890,000) $ (890,000) - -
Total Operating Expenditures 2,173,563 2,173,563
2,173,563 2,173,563
Excess (Deficit) of Revenue over Expenditures $ 1,515,636
625,636
OTHER FINANCING SOURCES (USES)
Transfers Out 408,830
Transfers In $ 1,034,466

Total Other Financing Sources

Net Change in Fund Balance

Fund Balance, Beginning of Year
Fund Balance, End of Year

See accompanying notes to the financial statements.

41

CITY OF BORGER, TEXAS
STATEMENT OF NET POSITION
PROPRIETARY FUND
September 30, 2018

ASSETS AND DEFERRED OUTFLOW Water and
Sewer Utility
CURRENT ASSETS
Pooled Cash and Cash Equivalents Fund
Inv es tments
Accounts Receivables, Net: $ 76,814
Other Receivables 3,948,432
1,042,226
Total Current Assets 7,761
5,075,233
NONCURRENT ASSETS
Restricted Cash 20,451
Restricted Investments 1,072,433
Capital Assets, Net 64,909,161
66,002,045
Total NonCurrent Assets
225,072
DEFERRED OUTFLOWS OF RESOURCES 225,072
Deferred Outflows from Pensions $ 71,302,350

Total Deferred Outflows from Pensions $ 247,453
85,398
Total Assets and Deferred Outflows 248,500
81,642
LIABILITIES, DEFERRED INFLOWS AND NET POSITION
1,919,411
CURRENT LIABILITIES 2,582,404
Accounts Payable
Accrued Payroll Expenses 364,384
Accrued Interest 1,230,485
Accrued Vacation 40,056,759
Current Portion of Long-Term Debt 41,651,628
44,234,032
Total Current Liabilities
335,965
NONCURRENT LIABILITIES 334,348
Utility Customer Deposits 670,313
Unfunded Retirement Obligation
Long Term Debt Due After One Year 22,932,991
1,092,884
Total Noncurrent Liabilities 2,372,130
Total Liabilities 26,398,005
$ 71,302,350
DEFERRED INFLOWS OF RESOURCES
Deferred Inflows from Pensions
Deferred Gain on Refinancing

Total Deferred Inflows of Resources

NET POSITION Total Net Position
Invested in Capital Assets, Net of Related Debt
Restricted for Capital Improvements
Unrestricted

Total Liabilities, Deferred Inflows and Net Position

See accompanying notes to the financial statements.

42

CITY OF BORGER, TEXAS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
PROPRIETARY FUND
Year Ended September 30, 2018

OPERATING REVENUES Operating Income Water and
Charges for Service Sewer Utility
Industrial Water Sales Total Nonoperating Revenues (Expenses)
Late Charges Income Before Transfers Fund
Tapping and Surcharge Fees
Other and Miscellaneous Total Operating Transfers $ 4,627,642
Change in Net Position 5,674,550
Total Operating Revenues 105,698
Net Position - End of Year 27,510
OPERATING EXPENSES 536,357
Salaries and Wages
Employee Benefits 10,971,757
Utilities
Departmental Operating Costs 2,010,689
Professional and Technical Services 648,724
Repairs and Maintenance 664,294
Other Purchased Services
Property and Facility 1,266,552
General and Administrative Supplies 153,744
Rental and Lease Agreements 200,546
Bad Debt Expense 160,775
Depreciation and Amortization 16,261
167,023
Total Operating Expenses 16,166
100,181
NONOPERATING REVENUES (EXPENSES)
Investment Income 1,769,354
Interest Expense
7,174,309
TRANSFERS 3,797,448
Transfers Out
198,420
Net Position - Beginning of Year (1,699,995)

(1,501,575)

2,295,873

(843,359)

(843,359)

1,452,514
24,945,491

$ 26,398,005

See accompanying notes to the financial statements.

43

CITY OF BORGER, TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
Year Ended September 30, 2018

CASH FLOWS FROM OPERATING ACTIVITIES Water and
Receipts from Customers Sewer Utility
Payments to and On Behalf of Employees
Payments to Suppliers and Contractors Fund

Net Cash Provided By Operating Activities $ 10,654,900
(2,104,607)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES (3,211,548)
Transfers, Net 5,338,745

Net Cash Used By Noncapital Financing Activities (843,359)
(843,359)
CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES
Interest Paid (1,703,796)
Prinicpal Payments on Debt (2,057,231)
(3,761,027)
Net Cash Used By Capital Financing Activities
(3,233,741)
CASH FLOWS FROM INVESTING ACTIVITIES 2,043,500
Purchase of Capital Assets
Proceeds from Investments 198,420
Investment Income (991,821)
(257,462)
Net Cash Provided By Investing Activities
Net Decrease in Cash and Cash Equivalents 354,727
$ 97,265
Cash and Cash Equivalents at Beginning of Year
$ 76,814
Cash and Cash Equivalents at End of Year 20,451

Cash Summary abd Cash Equivalents $ 97,265
Unrestricted cash
Restricted cash $ 3,797,448

Cash and Cash Equivalents at End of Year 1,769,354

Reconciliation of Operating Income to Net Cash Flows (174,881)
Provided by Operating Activities (3,246)
Operating Income 7,714
Adjustments to Reconcile Operating Income to Net 1,906
Cash Provided by Operating Activities 3,916
Depreciation and Amortization
Changes in (139,410)
Accounts Receivable 680
Other Receivables
Accounts Payable 548,984
Accrued Payroll Expenses (573,901)
Accrued Vacation $ 5,338,745
Deferred Revenue
Utility Customer Deposits
Deferred Inflows/Outflows from Pensions
Unfunded Retirement Obligation

Net Cash Provided by Operating Activities

See accompanying notes to the financial statements.

44

Notes to the Financial Statements

45

CITY OF BORGER, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity - The City of Borger, Texas (City) is a municipal corporation governed by a Council-Manager
form of government. The City, incorporated in October 1926, is located in the Panhandle part of the State,
occupies a land area of approximately 8.7 square miles and serves a population exceeding 13,250. The City is
empowered to levy a property tax on both real and personal properties located within its boundaries. It also is
empowered by State statute to extend its corporate limits by annexation, which occurs when deemed appropriate
by the City Council.

The City Council (the Council) is elected by the public and it has the authority to make decisions, appoint
administrators and managers, and significantly influence operations. It also has the primary accountability for
fiscal matters. Therefore, the City is a financial reporting entity as defined by the Governmental Accounting
Standards Board.

This reporting entity which consists of the City (the primary government), organizations for which the City is
financially accountable and other organizations for which the nature and significance of their relationship with
the City are such that exclusion could cause the City’s financial statements to be misleading or incomplete.

Discretely Presented Component Unit - The Component Unit Columns in the Government-Wide Financial
Statements include financial data from the City’s component unit. They are reported in a separate column to
emphasize that they are legally separate from the City. The Component Unit is included in the reporting entity
because the primary government is financially accountable and is able to impose its will (significantly influence
operations and/or activities) on the organization.

The Borger Economic Development Corporation (BEDC) is a legally separate entity formed to
create, manage, operate and supervise programs and activities to promote, assist, and enhance economic
development within and around the City. The Council appoints the board members and its operations
and budget are approved by the Council. Copies of the Borger Economic Development Corporation’s
separately issued financial statements may be obtained from the City Secretary or from the Borger
Economic Development Corporation, 1111 Penn Avenue, Borger, Texas, 79008. GASB Statement 14
requires portions of the BEDC component unit financial information to be presented along with the City
information.

Government-Wide and Fund Financial Statements - The government-wide financial statements (GWFS)
(i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary
activities of the City. 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. All activities, both governmental and business type, are reported in the GWFS using the
economic resources measurement focus and the accrual basis of accounting, which includes long-term assets
and receivables as well as long-term debt and obligations. The GWFS focus more on the sustainability of the
City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment
is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or
segment. Program revenues include: 1) charges to customers or applicants who use the segment and 2) grants
and contributions that are restricted to meeting the operational or capital requirements of a particular function or
segment. Taxes and other items not properly included among program revenues are reported instead as general
revenues. The general revenues support the net costs of the functions and segments not covered by program
revenues.

46

Separate financial statements are provided for governmental funds. Major individual governmental funds and
major individual enterprise funds are reported as separate columns in the fund financial statements.

Measurement Focus, Basis of Accounting, and Financial Statement Presentation - The GWFS are reported
using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund
financial statements (FFS). Revenues are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the
year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility
requirements have been met. Property taxes and interest associated with the current fiscal period are all
considered susceptible to accrual and have been recognized as revenues of the current fiscal period. All other
revenue items are considered measurable and available only when the City receives cash.

Governmental Funds are those through which most of the governmental functions of the City are financed.
The City reports the following major governmental funds:

The General Fund - The general fund is the City’s primary operating fund. It accounts for all financial
resources except those required to be accounted for in another fund. The General Fund presented in the
financial statements consists of several individual funds: General, Government Gross Receipts Tax,
Municipal Court Bonds, Payroll, Revenue Clearing, and Disbursement funds.

Capital Project Fund - This fund accounts for the City’s capital projects and capital asset purchases for
the City’s Governmental funds.

Additionally, the City reports the following non-major governmental funds:

Special Revenue Funds are used to account for the proceeds of specific revenue sources other than
special assessments or major capital outlays that are restricted to expenditures for specified purposes.

Debt Service Fund is used to account for the accumulated resources and related payments of principal
and interest on long-term general obligation debts of the City.

Proprietary funds are those through which most of the costs of providing the services are funded through
charges for services. The City reports the following proprietary funds.

Water and Sewer Utility Fund - The Water & Sewer Utility Fund is used to account for the provision of
water and sewer services to the residents of the City

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial
statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the
government’s water, sewer, and various other functions of the government. Elimination of these charges would
distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services, or
privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally
dedicated resources are reported as general revenues rather than as program revenues. Likewise, general
revenues include all taxes.

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. The principal operating revenues of the City’s enterprise funds
and internal service funds are charges to customers for sales and services. The utilities also recognize as operating
revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating

See accompanying notes to the financial statements.

47

expenses for enterprise funds and internal service funds include the cost of sales and services, administrative
expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported
as non-operating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted
resources first, then unrestricted resources as they are needed.

Budgetary Data - Annual budgets are adopted on a basis consistent with accounting principles generally
accepted in the United States of America for the proprietary funds, with the exceptions of capital outlays being
considered a budgeted line item and depreciation is not. Governmental funds are budgeted on a basis appropriate
for the specific funds. All annual appropriations lapse at the end of the fiscal year.

The City Manager annually submits to the City Council a proposed operating budget for the upcoming fiscal
year. Public hearings are conducted to obtain taxpayer comments, and the budget is legally enacted through
passage by the City Council. Council action is required for the approval of a supplementary appropriation.

All budget amounts presented in the budget comparison statement reflect the final budget after legally authorized
adjustments to the original budget during the year. Budgetary control is maintained by department with all
budget supplements to be approved by the City Council. Management may make administrative transfers and
increases or decreases in accounts within categories, as long as expenditures do not exceed budgeted
appropriations at the fund level. No significant budget adjustments were made during the fiscal year.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Cash Equivalents - Cash equivalents are defined as short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three months or less when purchased which
present an insignificant risk of changes in value because of changes in interest rates.

Use of Restricted Cash - When the City incurs an expense for which it may use either restricted or unrestricted
assets, it uses the restricted assets first whenever they will have to be returned if they are not used.

Equity in Pooled Cash and Investments - The City pools the resources of various funds in order to facilitate
the management of cash and enhance investment earnings. Records are maintained which reflect each fund’s
equity in the pooled account.

Property Taxes Receivable - The value of all real and business property located in the City is assessed annually
on January 1 in conformity with Subtitle E of the Texas Property Code. Property taxes are levied on October 1
on those assessed values and the taxes are due upon receipt of the tax bill. The taxes are considered delinquent
if not paid by the end of January. At the City’s fiscal year end, all property taxes receivable are considered
delinquent and an account for an allowance for uncollectible taxes is adjusted to counter the receivable. The
property taxes are recorded in the General Fund and Debt Service Fund as appropriate.

Proprietary Fund Accounts Receivable - Within the Water and Sewer Utility Fund, services rendered and
billed but not collected as of the close of the fiscal year are accrued and this amount is reflected in the accounts
receivable balance. Amounts billed are reflected as accounts receivable net of an allowance for uncollectible
accounts.

Capital Assets and Depreciation - Capital assets, including public domain infrastructure (e.g. streets, bridges,
sidewalks and other assets that are immovable and of value only to the City) are defined as assets with an initial,
individual cost exceeding $5,000 and an estimated useful life in excess of one year. These capital assets are
reported in the GWFS and in the proprietary FFS. Capital assets are recorded at cost or estimated historical cost

See accompanying notes to the financial statements.

48