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CAFR - Comp Ann Financial Report D'i:i~~E ~<k~ MEMORANDUM January 3, 2006 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Submission of Fiscal Year Ended June 30, 2005 Comprehensive Annual Financial Report (CAFR), Parking Facilities Financial Statements, Management Letter and Responses to Management Letter Finance Director Ken TeKippe is transmitting the Fiscal Year 2005 Comprehensive Financial Report (CAFR), Parking Facilities Financial Statements, Management Letter and City Responses to the Management Letter. The City's independent auditor found no instances of material non-compliance with all applicable laws, regulations, contracts, and grants; and issued an unqualified opinion on the financial statements. The auditor's report also notes that there are no material weaknesses in the City's internal control structure. As part of the annual audit, the Auditor provides comments in a management letter for improving the financial management system of the City. The Auditor's comments are attached, as well as Finance Department responses. - [I it l/}! / I ILl '''II /, /, Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Kenneth J. TeKippe, Finance Director ) ., \ .i' ,.-.'-) . D~~~E ~~~ Memorandum TO: Michael C. Van Milligen, City Manager Kenneth J. TeKippe, Finance Director ~""t:f:.. !)-.. ~ ~ SUBJECT: Submission of Fiscal Year Ended June 30, 2005 Comprehensive Annual Financial Report (CAFR), Parking Facilities Financial Statements, Management Letter and Responses to Management Letter FROM: DATE: January 3, 2006 INTRODUCTION The purpose of this memorandum is to submit the Fiscal Year 2005 CAFR and Parking Facilities Financial Statements audited by Eide Bailly, LLP, and to enclose the Auditor's Management Letter along with the City Finance staff's response. The City's independent auditor found no instances of material non-compliance with all applicable laws, regulations, contracts, and grants; and issued an unqualified opinion on the financial statements. The auditor's report also notes that there are no material weaknesses in the City's internal control structure. BACKGROUND The City of Dubuque is required to have an annual audit in accordance with generally accepted auditing standards, Chapter 11 of the Code of Iowa, Government AuditinQ Standards and U.S. Office of Management and Budget (OMB) Circular A-133. This Comprehensive Annual Financial Report is in conformance with the standards set by OMB Circular A-133. This federal regulation mandates audit standards for federal programs. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Separate financial statements are required for Parking Facilities and Dubuque Metropolitan Area Solid Waste Agency and have been received. The financial information for these entities is included in the City of Dubuque CAFR. AUDITOR'S MANAGEMENT LETTER As part of the annual audit, the Auditor provides comments in a management letter for improving the financial management system of the City. The Auditor's comments are enclosed as well as Finance Department responses. ACTION STEP It is recommended that the City Council receives and files the Fiscal Year 2005 reports identified above and receives and files this communication and related enclosures. Copies of the financial statements for the Dubuque Metropolitan Area Solid Waste Agency are available in the Finance Department if desired by Council members. KJT/jmg Enclosures: Fiscal Year 2005 CAFR Parking Facilities Financial Statements Auditor Management Letter Responses to Comments in Auditor Management Letter 2 ~~%duE ~<k-~ Memorandum TO: Michael C. Van Milligen, City Manager Kenneth J. TeKippe, Finance Director ~c9. ~~ SUBJECT: Responses to Audit Management Letter-Fiscal Year Ended June 30, 2005 FROM: DATE: January 3, 2006 INTRODUCTION Responses to the "other comments" section of the November 8, 2005 management letter issued by Eide Bailly LLP subsequent to completion of the Fiscal Year 2005 audit of the City are hereby submitted. BACKGROUND A separate section in the Comprehensive Annual Financial Report (CAFR) for Fiscal Year 2005 details specific findings and recommendations as well as City responses. Pages 106-108 of the report provide this information. In addition to the comments in the report, a management letter dated November 8, 2005 was issued which includes more general comments relative to improving the City's overall accounting and control systems. DISCUSSION Finance Department responses to the Auditor's other comments (listed in italics) follow: Conversion of Accountino Records Auditor comment The City maintains its records using the cash basis of accounting. However, in order to comply with accounting principles generally accepted in the United States of America, the comprehensive annual financial report (CAFR) must be prepared using the modified accrual/accrual basis of accounting. Eide Bailly LLP currently posts all adjustments at year-end which are necessary to convert the City's cash-basis amounts to the amounts used in the CAFR. At this time, the City is preparing the workpapers needed to convert the accounting records to the modified accrual/accrual basis at year-end. Eide Bailly LLP posts the journal entries and prepares the financial statements. Although it may require increased staffing levels, we encourage the Finance Department to continue in their advancement of converting to the modified accrual/accrual basis and preparation of the financial statements required in the CAFR. City of Dubuque response As noted in the management letter, City staff prepared all workpapers to convert records to the modified accruallaccrual basis. City staff will continue to work towards converting records from cash to GAAP at year end and preparation of the financial statements. The size of the City's professional accounting staff limits available resources to fully accomplish this goal. The audit engagement arrangement, which ends with the current audit (FY'05), provides for the auditing firm to convert the records and prepare the financial statements. The recent upgrade in accounting software and continued staff development may assist in our efforts to implement the recommendation. However, the limited number of professional accounting staff will most likely result in the audit firm continuing to prepare the financial statements. We will be soliciting multi-year bids for future audits and will consider the auditor comment in the Request For Proposal issued within the next couple months. Capital Assets Auditor comment The City has a centralized custodian in the Finance Department who maintains a record of the City's capital assets, including additions and deletions made during the year. During the 2003 fiscal year, the City adopted Governmental Accounting Standards Board Statement No. 34. This statement increased the complexity of the capital assets by requiring governmental infrastructure and depreciation on governmental capital assets be reported. Due to this increased complexity, the City's capital assets records should be closely reviewed for errors by management with knowledge of capital asset policies. In addition, summaries of beginning balances, additions, deletions, transfers, and ending balances for the governmental activities should be provided. The compilation and review of all of the City's capital asset records, including department summaries, should be completed prior to the beginning of the October audit fieldwork. City of Dubuque response The Assistant Finance Director and I will continue to work closely with the individual primarily assigned to maintain capital asset records for the City to continue completing 2 records by October audit fieldwork. The auditors indicated verbally that significant improvement has been made by City staff in this area. The City will prepare a comprehensive summary by fund rather than the detail now provided by department. SMG as an AQent Auditor comment During the fiscal year 2005, SMG was hired as an agent to manage the Five Flags Center. Since SMG acts strictly as an agent for the City, SMG should follow all City policies. During our review of SMG expenditures, several invoices did not contain information required by City policy. It is recommended that the City Finance Department review SMG policies to ensure compliance with City policies. Periodically, the Finance Department should also review the cash receipts and disbursements for large and unusual items. City of Dubuque response The Assistant Finance Director and I will work with Gil Spence, Leisure Services Director, and SMG employees to review policies. In addition, a periodic Finance review of large and unusual cash receipts and disbursements will be implemented. New Governmental Accountina Standards Board (GASB) Statements Auditor comment The Governmental Accounting Standards Board (GASB) has issued six statements not yet implemented by the City of Dubuque. The statements, which might impact the City, are as follows: GASB Statement No. 42 Auditor comment Accountina and Financial Reportina for Impairment of Capital Assets and for Insurance Recoveries issued November 2003, will be effective for the City for the fiscal year ending June 30, 2006. This statement establishes accounting and financial reporting standards for impairment of capital assets and also clarifies and establishes accounting requirements for insurance recoveries. City of Dubuque response The City Finance Department will coordinate with the CPA audit firm any information required by GASB 42. Since the implementation is next fiscal year, time is available to research any requirements applicable to the City of Dubuque. 3 GASB Statement No. 43 Auditor comment Financial Reoortina for Postemolovment Benefit Plans Other Than Pension Plans issued April 2004, will be effective for the City for the fiscal year ending June 30, 2008. This statement establishes uniform financial reporting standards for other postemployment benefit (OPEB) plans and supersedes the interim guidance included in Statement No. 26. This statement affects reporting by administrators or trustees of OPEB plan assets or by employers or sponsors that include OPEB plan assets as trust or agency funds in their financial reports. City of Dubuque response The City Finance Department will coordinate with the CPA audit firm any information required by GASB 43. Since the implementation is three fiscal years away, time is available to research any requirements applicable to the City of Dubuque. GASB Statement No. 44 Auditor comment Economic Condition Reoortina: The Statistical Section issued May 2004, will be effective for the City for the fiscal year ending June 30, 2006. This statement amends previous guidance regarding preparation of the statistical section for governments that issue a comprehensive annual financial report. City of Dubuque response The City Finance Department will coordinate with the CPA audit firm any information required by GASB 44. Since the implementation is next fiscal year, time is available to research any requirements applicable to the City of Dubuque. GASB Statement No. 45 Auditor comment Accountina and Financial Reoortina bv Emolovers for Postemolovment Benefits Other Than Pensions issued June 2004, will be effective for the City for the fiscal year ending June 30, 2009. This statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. 4 City of Dubuque response The City Finance Department will coordinate with the CPA audit firm any information required by GASB 45. Since the implementation is four fiscal years away, time is available to research any requirements applicable to the City of Dubuque. GASB Statement No. 46 Auditor comment Net Assets Restricted bv Enablina Leaislation issued December 2004, will be effective for the City for the fiscal year ending June 30, 2006. The statement clarifies the definition of a legally enforceable enabling legislation restriction. It also specifies the accounting and financial reporting requirements for the restrictions and for any changes in them. City of Dubuque response The City Finance Department will coordinate with the CPA audit firm any information required by GASB 46. Since the implementation is next fiscal year, time is available to research any requirements applicable to the City of Dubuque. GASB Statement No. 47 Auditor comment Accountina for Termination Benefits issued June 2005, establishes accounting standards for termination benefits. For termination benefits provided through an existing defined benefit OPEB plan, the provisions of this statement should be implemented simultaneously with the requirements of Statement No. 45. For all other termination benefits, this statement is effective for the fiscal year ending June 30, 2006. City of Dubuque response The City Finance Department will coordinate with the CPA audit firm any information required by GASB 47. Since the implementation is next fiscal year, time is available to research any requirements applicable to the City of Dubuque. KJT/jmg 5 .~~>>~ EideBailly;" ~ C:I'A~ & BUSINr:SS ADVISOR::; To the Honorable Mayor and Members of the City Council City of Dubuque Dubuque, Iowa We have audited the financial statements of the City of Dubuque, Iowa, for the year ended June 30, 2005, and have issued our report thereon dated November 8, 2005. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under Auditinl!: Standards Generallv Accepted in the United States of America and OMB Circular A-133 As stated in our engagement letter dated July 14, 2005, our responsibility, as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute, assurance about whether the financial statements are Ifee of material misstatement and are fairly presented in accordance with accounting principles generally accepted in the United States of America. Because an audit is designed to provide reasonable, but not absolute, assurance and because we did not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. We also considered internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-B3. As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we perfonned tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the detennination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit. Also, in accordance with OMB Circular A-133, we examined, on a test basis, evidence about the City's compliance with the types of compliance requirements described in the US Office of Management and Budget (OMB) Circular A-i33 Compliance Supplement applicable to each of its major federal programs for the purpose of expressing an opinion on the City's compliance with those requirements. While our audit provides a reasonable basis for our opinion, it does not provide a legal determination on the City's compliance with those requirements. PEOPLE. PRINCIPLES. POSSIBILITIES. www.eideboilly.com 3999 Pennsylvania Ave., Suite 100 I Dubuque, Iowa 52002-2639 I Phone 563.556.1790 I Fax 563.557.7842 I EOE To the Honorable Mayor and Members of the City Council City of Dubuque Page 2 Significant Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City of Dubuque, Iowa, are described in Note I to the linancial statements. No new accounting policies were adopted, and the application of existing policies was not changed during the year ended June 30, 2005. We noted no transactions entered into by the City during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly Irom those expected. Audit Adjustments For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures. An audit adjustment mayor may not indicate matters that could have a significant effect on the City's linancial reporting process (that is, cause future financial statements to be materially misstated). In our judgment, none of the adjustments we proposed, whether recorded or unrecorded by the City, either individually or in the aggregate, indicate matters that could have a significant effect on the City's financial reporting process. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditor's report. Weare pleased to report that no such disagreements arose during the course of our audit. Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. To the Honorable Mayor and Members of the City Council City of Dubuque Page 3 Issues Discussed Prior to Retention of Independent Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship, and our responses were not a condition to our retention. Difficulties Encountered in Performing the Audit We encountered no difficulties in dealing with management in performing and completing our audit. Other Comments We have included additional comments regarding the financial statements and operations. These comments are not a result of in-depth study of any specific areas but are based on observations made during the course of our audit. Our observations indicate that overall financial operations of the City continue to be conducted in an efficient and effective manner. This report, a public record by law, is intended solely for the information and use of the officials, employees, and citizens of the City of Dubuque, Iowa, and other parties to whom the City of Dubuque, Iowa, may report. This report is not intended to be and should not be used by anyone other than these specified parties. As always, we will be happy to discuss these or any other topics at your convenience. We would like to take this opportunity to express our appreciation to you and your staff for the fine cooperation that we received during the course of the audit. We look forward to many years of continued service to the City of Dubuque, Iowa. ~~~L.I' Dubuque, Iowa November 8, 2005 CITY OF DUBUQUE, IOWA YEAR ENDED JUNE 30, 2005 OTHER COMMENTS Conversion of AccountiDl! Records The City maintains its records using the cash basis of accounting. However, in order to comply with accounting principles generally accepted in the United States of America, the comprehensive annual financial report (CAFR) must be prepared using the modified accrual/accrual basis of accounting. Eide Bailly LLP currently posts all adjustments at year-end which are necessary to convert the City's cash-basis amounts to the amounts used in the CAFR. At this time, the City is preparing the workpapers needed to convert the accounting records to the modified accrual/accrual basis at year-end. Eide Bailly LLP posts the journal entries and prepares the financial statements. Although it may require increased staffing levels, we encourage the Finance Department to continue in their advancement of converting to the modified accrual/accrual basis and preparation of the financial statements required in the CAFR. Capital Assets The City has a centralized custodian in the Finance Department who maintains a record of the City's capital assets, including additions and deletions made during the year. During the 2003 fiscal year, the City adopted Governmental Accounting Standards Board Statement No. 34. This statement increased the complexity of the capital assets by requiring govenunental infrastructure and depreciation on governmental capital assets be reported. Due to this increased complexity, the City's capital assets records should be closely reviewed for errors by management with knowledge of capital asset policies. In addition, summaries of beginning balances, additions, deletions, transfers, and ending balances for the governmental activities should be provided. The compilation and review of all of the City's capital asset records, including department summaries, should be completed prior to the beginning of the October audit fieldwork. SMG as an Al!ent During fiscal year 2005, SMG was hired as an agent to manage the Five Flags Center. Since SMG acts strictly as an agent for the City, SMG should follow all City policies. During our review of SMG expenditures, several invoices did not contain information required by City policy. It is recommended that the City Finance Department review SMG policies to ensure compliance with City policies. Periodically, the Finance Department should also review the cash receipts and disbursements for large and unusual items. New Governmental Accountinl! Standards Board (GASB) Statements The Governmental Accounting Standards Board (GASB) has issued six statements not yet implemented by the City of Dubuque. The statements, which might impact the City, are as follows: Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries issued November 2003, will be effective for the City for the fiscal year ending June 30, 2006. This statement establishes accounting and financial reporting standards for impairnlent of capital assets and also clarifies and establishes accounting requirements for insurance recoveries. CITY OF DUBUQUE, lOW A YEAR ENDED JUNE 30, 2005 OTHER COMMENTS Statement No. 43, Financial Reportingfor Postemployment Benefit Plans Other Than Pension Plans issued April 2004, will be effective for the City for the fiscal year ending June 30, 2008. This statement establishes uniform financial reporting standards for other postemployment benefit (OPEB) plans and supersedes the interim guidance included in Statement No. 26. This statement affects reporting by administrators or trustees of OPEB plan assets or by employers or sponsors that include OPEB plan assets as trust or agency funds in their financial reports. Statement No. 44, Economic Condition Reporting: The Statistical Section issued May 2004, will be effective for the City for the fiscal year ending June 30, 2006. This statement amends previous guidance regarding preparation of the statistical section for governments that issue a comprehensive annual financial report. Statement No. 45, Accounting and Financial Reporting by Employers Jar Postemployment Benefits Other Than Pensions issued June 2004, will be effective for the City for the fiscal year ending June 30, 2009. This statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. Statement No. 46, Net Assets Restricted by Enabling Legislation issued December 2004, will be effective for the City for the fiscal year ending June 30, 2006. This statement clarifies the definition of a legally enforceable enabling legislation restriction. It also specifies the accounting and financial reporting requirements for the restrictions and for any changes in them. Statement No. 47, Accounting fi,r Termination Benefits issued June 2005, establishes accounting standards for termination benefits. For termination benefits provided through an existing defined benefit OPEB plan, the provisions of this statement should be implemented simultaneously with the requirements of Statement No. 45. For all other tennination benefits, this statement is effective for the fiscal year ending June 30, 2006. The City's management has not yet determined the effect these statements will have on the City's financial statements. CITY OF DUBUQUE, IOWA Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2005 Prepared by: Department of Finance CITY OF DUBUQUE, IOWA Table of Contents INTRODUCTORY SECTION Table of Contents Letter of Transmittal City Organizational Chart Officials Certificate of Achievement for Excellence in Financial Reporting FINANCIAL SECTION Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Balance Sheet - Governmental Funds Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Assets and Liabilities Notes to Financial Statements Required Supplementary Information Schedule of Receipts, Expenditures, and Changes in Balances - Budget and Actual (Budgetary Basis) - Governmental Funds and Enterprise Funds Notes to Required Supplementary Information - Budgetary Reporting Combining and Individual Fund Statements Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Combining Statement of Net Assets - Nonmajor Enterprise Funds Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Nonmajor Enterprise Funds Combining Statement of Cash Flows - Nonmajor Enterprise Funds Combining Statement of Net Assets - Internal Service Funds Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Internal Service Funds Combining Statement of Cash Flows - Internal Service Funds Statement of Changes in Assets and Liabilities - Agency Fund Exhibit Pal!e 1-2 3-14 IS 16 17 18-19 20-27 I 28 2 29 3 30 3-1 31 4 32 4-1 33 5 34-35 6 36 7 37-38 8 39 40-63 64 65 A-I 66-67 A-2 68-69 B-1 70 B-2 71 B-3 72-73 C-I 74 C-2 75 C-3 76 D-I 77 I CITY OF DUBUQUE, IOWA Table of Contents Table Pal!e STATISTICAL SECTION (Unaudited) Government-wide Information Government-wide Expenses by Function Government-wide Revenues Fund Information General Governmental Expenditures by Function General Governmental Revenues by Source General Governmental Tax Revenues by Source Property Tax Levies and Collections Taxable and Assessed Value of Property Property Tax Rates - Direct and Overlapping Governments Principal Taxpayers Special Assessment Billings and Collections Computation of Legal Debt Margin Ratio of Net General Obligation Bonded Debt to Taxable Value and Net General Obligation Bonded Debt Per Capita Ratio of Annual Debt Service Expenditures for General Obligation Bonded Debt to Total General Governmental Expenditures Computation of Direct and Overlapping Bonded Debt - General Obligation Bonds Revenue Bond Coverage - Parking Bonds Property Value, Construction Permits, and Bank Deposits Demographic Statistics Schedule ofInsurance in Force Miscellaneous Statistics 1 78 2 79 3 80 4 81 4A 82 5 83 6 84 7 85 8 86 9 87 10 88 II 89 12 90 13 91 14 92 15 93 16 94 17 95-96 18 97 COMPLIANCE SECTION Report on Internal Control over Financial Reporting and on Compliance and other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 98-99 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 100-101 Schedule of Expenditures of Federal Awards 102-104 Notes to the Schedule of Expenditures of Federal Awards 105 Schedule of Findings and Questioned Costs 106-108 2 Finance Department City Hall 50 West 13th Street Dubuque, Iowa 52001-4864 (563) 690-6789 TDD www.cityofdubuque.org THE CITY Of' C --=~,_~___ Du I3 (J("lU E ""- ~~~ November 8, 2005 Honorable Mayor, City Council Members and Citizens of the City of Dubuque The Comprehensive Annual Financial Report (CAFR) of the City of Dubuque, Iowa, for the fiscal year ended June 30, 2005, is hereby submitted. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data is accurate in all material respects, and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. The CAFR is presented in four sections: Introductory Section, Financial Section, Statistical Section and Compliance Section. The Introductory Section includes this transmittal letter, the City's organizational chart, the list of principal officials, a Certificate of Achievement for Excellence in Financial Reporting from the Governmental Finance Officers Association of the United States and Canada and a table of contents. The Financial Section includes the independent auditor's report, management's discussion and analysis, the basic financial statements, required supplementary information and other supplementary information. The Statistical Section includes unaudited financial and demographic information, generally presented on a multi-year basis. The City is required to undergo an annual single audit in conformity with the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Information related to this single audit, including the Schedule of Expenditures of Federal A wards, findings and recommendations, and the auditor's report on internal control over financial reporting and compliance with requirements applicable to laws, regulations, contracts, and grants, are included in the Compliance Section of this report. This report includes all funds of the City of Dubuque, as well as its component unit. Component units are legally separate entities for which the City of Dubuque is financially accountable. The City provides a full range of services including; police and fire protection, sanitation services, the construction and maintenance of roads, streets, and infrastructure, inspection and licensing functions, maintenance of grounds and buildings, municipal airport, library, recreational activities and cultural events. In addition to general government activities, the municipality owns and operates enterprises for a water system, water pollution control facility, stormwater system, parking facilities, refuse collection, and public transportation. Beginning with the 2001 fiscal 3 Service People Integrity Responsibility Innovation Teamwork year, the City is required by its Vision Iowa contract to report its America's River Project funds as a separate enterprise fund. Also, the governing body is financially accountable for the operations ofthe Dubuque Library Board, Airport Commission, Civic Center Commission, Cable TV Commission, Transit Board, and the Park and Recreation Commission. These activities are not legally separate entities, and therefore are included in the reporting entity. This report includes the Dubuque Metropolitan Area Solid Waste Agency (DMASW A) as a discretely presented component unit. The discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the City of Dubuque and to differentiate its financial position and results of operations from those of the City. The City of Dubuque appoints a voting majority to the DMASW A governing board and operates the landfill. Generally Accepted Accounting Principals (GAAP) require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Dubuque's MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE GOVERNMENT The City of Dubuque is located on the Mississippi River in northeast Iowa, adjacent to the states of Illinois and Wisconsin. The City was founded by Julien Dubuque in 1785 and is the oldest City in Iowa. The City of Dubuque has a unique combination of the old and new, ranging from cable cars, Victorian architecture, and a Civil War shot tower, to an enclosed shopping mall, riverboat casino, and a pari-mutuel dog track with a slot machine casino. Dubuque has a stable and diversified manufacturing base and is the major tri-state retail center. Employment growth was strong throughout the year, as Dubuque ended the fiscal year with an unemployment rate of approximately 4.8 percent. The City of Dubuque currently has a land area of 29.46 square miles, including the 700 acres recently annexed, and a census 2000 population of 57,686. As the largest City in the tri-state area, Dubuque serves as the hub of a trade area with a population estimated at 250,000. The City of Dubuque is empowered to levy a property tax on real property located within the City limits. The City has operated under a council-manager form of government since 1920. Policymaking and legislative authorities are vested in the governing council, which consists of a mayor and a six-member council. The governing council is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring the City Manager, Corporation Counsel, and City Clerk. The City Manager is responsible for overseeing the day-to- day operations of the government, for making recommendations to the City Council on the budget and other matters, for appointing the heads of the government's departments, and for hiring employees. The council is elected on a non-partisan basis. Council members are elected to four-year staggered terms with three council members elected every two years. The mayor is elected to a four-year term. Four of the council members are elected within their respective wards; the mayor and the two remaining council members are elected at large. 4 ECONOMIC CONDITION AND OUTLOOK Development of Dubuque Industrial Center West continues. The first phase of the 550-acre development of City owned land made 135 acres available for medium to heavy industrial uses and 2005-2006 development will result in another 100 acres available for sale. Dubuque Area Industrial Development Corporation has sold its 40,000 square foot speculative industrial building located on twelve acres of Dubuque Industrial Center West to Walter Development. The McGraw-Hill Company completed a 330,000 square foot warehouse and distribution center at Dubuque Industrial Center West in 2002. Also, the development of 17 acres by Alliant Energy and construction of their new operations facility was completed. Giese Manufacturing constructed a 30,000 square foot manufacturing facility on a 5-acre site in 2003. The Adams Company completed a 50,000 square foot manufacturing facility in 2004. The former Vessel Systems constructed a new 31,000 square foot manufacturing facility. In 2005, the City will complete construction of Synergy Court, creating four industrial lots available for development. Tri-State Industries began construction of a 30,000 square foot manufacturing facility on one of the completed lots on Synergy Court. The John G. Bergfeld Recreation Area provides recreation opportunity for employees who work in the park, as well as the public. Amenities included in the Recreation Area include Bergfeld Park and Trail system along with a pavilion, pond and two fishing piers. Dubuque Industrial Center West complements the city-owned, 100-acre Dubuque Technology Park located on the south side of Dubuque adjacent to U.S. 151161. The Tech Park has four occupants: Advanced Data-Comm, Cartegraph, Integreat, and McLeod USA. Eagle Window & Door moved into a 400,000 square foot manufacturing facility in the Kerper Boulevard Industrial Park, in 2000. This $17,000,000 project added 168 employees. Flynn Ready Mix constructed a new state-of-the-art facility on Kerper Court in 2002. Quebecor World expanded its operations in 2003 into the former McGraw-Hill facility on Kerper Boulevard with a $28 million investment in remodeling and equipment. Barnstead International expanded operations in 2003, increasing employment by 23 positions and moving the Ever Ready Thermometer Company to Dubuque. In 2005 the City of Dubuque completed construction of the new Municipal Services Center. This 124,600 square foot facility provided for the co-location of water, transit, streets and solid waste services. This facility is also equipped to serve as an emergency operations center for the city. CIGNA, occupying a new 115,000 square foot office building in downtown Dubuque, sold its retirement services business to Prudential Financial, who assumed the job creation contract requirements of the city and state. In 2003 SISCO, a Dubuque based third-party insurance administrator, renovated the historic Town Clock Building adjacent to their downtown Dubuque facility. The renovation provided SISCO the potential to house another 100 employees. Other downtown development includes the construction of the three-story Harbor View Building at 300 Main Street in 2002. The building is home to the Dubuque Area Chamber of Commerce and the Greater Dubuque Development Corporation and offers additional office space for lease. The $2.5 million renovation of the basement, first and second floors of the Cooper Wagon Works building (Bricktown) at Third and Main Street was completed in 2002. The building houses a restaurant, lounge, and banquet facilities. The Iowa Inn, former downtown YMCA, located at 5 9th and Iowa Street, underwent a $3.3 million renovation to convert to 33 units for low-income senior housing in 2002. Since 2002, Pepper Sprout Restaurant offers gourmet dining in a renovated historic building in the Old Main District. Cafe Manna Java is a bakery and coffee shop serving light lunch and dinner since 2003. "Lot I," a historical renovation of a building at First and Main, was completed in 2004. The former Weber Paper building has been adaptively reused to house Shepherd Publishing, which brought 70 jobs to downtown Dubuque, Platinum Services and River City Gift Shop. Heartland Financial USA completed the $10 million renovation of the former Walsh hardware store on 13th and Central in 2004. The company, which provides services to its banks throughout the country has committed to employing 45 new positions within five years although by mid 2005 they had created 69 new positions. Construction and historic restoration of the Gronen Buildings along Main Street will result in the creation of six plus storefronts as well as the creation of 30 affordable downtown housing units. Construction is underway for a new downtown public elementary school. When completed, this school will be the first fine arts magnet charter school. The City has worked in collaboration with a local lender to formulate the Washington Neighborhood Revitalization District. Efforts will focus improved housing as well as adaptive reuse of several warehouse structures into housing units. On Dubuque's west side, development of 330,000 square feet of retail space in Asbury Plaza began in July 2001. The plaza encompasses 190 acres and is anchored by Hy-Vee Food Store. Hallmark; Michael's; Old Navy; Bed, Bath & Beyond; Dress Barn; Famous Footwear; Pier One; Petco; Sally Beauty Supply; EB Games; and Next Generation Wireless were added to the Asbury Plaza since 2001. Kohl's Department Store opened in October 2004. Star Cinema, a new state of the art 14 screen movie complex and Hudson's Classic Grill opened for business mid 2005. Additional restaurants including, Red Robin Gourmet Burgers, are scheduled to open late 2005. Menards relocated to a new 162,340 square foot retail facility on the west side in May 2002, with Hobby Lobby taking over its old facility. With the recent economic growth, the City has annexed almost 4,000 acres since 1995. In contrast, only 40 acres were annexed in the first half of the 1990's. This is consistent with the non-residential construction numbers in the community. From 1990-1998 the City averaged 350,000 square feet of non-residential construction per year. In the five years from 1999-2004, the City has averaged almost 1,000,000 square feet of non-residential construction per year. MAJOR INITIATIVES For the Year. The City of Dubuque staff, following the adopted priorities ofthe Mayor and City Council, has been involved in a variety of projects throughout the year. These projects reflect the City's commitment to continue to provide high quality services to the citizens of Dubuque within the budget guidelines set by the Mayor and City Council. Downtown revitalization continued as a high priority of City Council, with programs such as the Downtown Rehabilitation Loan Program and Facade Grant Program providing incentives for property improvement in the downtown area. The opening of Eighth Street to traffic through the plaza was the first phase of a multi-million-dollar update of the Town Clock Plaza to meet the 6 current development and functional needs of the downtown. The second phase was to open the Town Clock Plaza from Fifth to Eighth Street to vehicle traffic, which was completed and opened to traffic in August 2002. The City continued implementation of major parking expansion to meet the increased parking demand in the downtown area. Included in the expansion was a three-level, 240-space addition to the existing parking ramp at Fifth and Iowa Street, and construction of a new 400 space parking ramp facility at Third and Iowa Street, which opened in June 2002. The City also sponsored a downtown visioning process in conjunction with state and local partners. A downtown master plan was completed in 2004. The Five Flags Civic Center transitioned to private management in July 2004 with SMG becoming the City's agent to manage the facility. Construction for the last phase of the Northwest Arterial, from JFK Road to U.S. 52, was completed in September 2002. The Southwest Arterial Environmental Assessment was completed in 2005. Using a $1. 9 million federal appropriation, the City has contracted for preliminary design with Earth Tech. American Eagle Airlines has maintained its four flights per day to Chicago's O'Hare Airport. In the past year the airline industry continued to struggle and underwent monumental economic losses, causing them to request incentives, cut flights and declare bankruptcies. The ever increasing cost of fuel raises the load factor break-even point to almost 75% for cities of our size. The Airport held meetings with the business leaders in Dubuque who indicated a belief that air connectivity is an essential component of a vital, growing business community. Business leaders reminded us that transportation infrastructure is economic development and commercial air service must remain a priority for our community and region. We share the same goal - a regional airport that provides commercial air service at competitive fares, expanded connectivity to multiple hubs and flight frequency required by national and global businesses. Airport staff is currently nearing completion on the Environmental Assessment (EA) for the land acquisition required for the terminal area. The EA generally takes up to one year, and we are optimistically looking at finalizing this project at the end of2005. The Airport Master Plan was approved by the Airport Commission in 2004. The new jet bridge has been assisting passengers since late June 2005 providing commercial flyers the convenience of the bridge without the outside elements while boarding the American Airlines regional jet. The Airport is currently constructing a snow removal storage building. This building will house equipment and supplies for winter operations which is being funded through an Airport Improvement Grant with 95% coming from the federal government and 5% through Passenger Facility Charges. 7 Implementation of the City Council's Neighborhood Reinvestment Strategy continued to provide many 'quality of life' improvements for residents. The Community Oriented Policing Program expanded to include other City departments in landlord training and building code enforcement. Dubuque is one of the safest places to live in the Midwest, and 15 police officer positions have been added since 1994 to implement new programs and enhance police coverage. The Housing and Community Development Department continued housing rehabilitation efforts, including various home ownership initiatives. During the past fiscal year, 13 families were assisted in purchasing their first home through use of Community Development Block Grant (CDBG) and Federal Home Loan Bank award funds. The Department provides approximately $4 million annually in rental assistance for lower-income families, utilizing funding from the HUD Section 8 Program. A $2.4 million award received in FY04 from HUD's Lead Hazard Reduction Program has resulted in completion of more than 100 'lead-safe' housing units, reducing lead paint hazards in housing occupied by young children. The City assisted Gronen Restoration to obtain $2.4 million in Low Income Housing Tax Credits from the Iowa Finance Authority. This award helped fund a $5.3 million adaptive re-use of the former Dubuque Casket Factory into 35 affordable apartments. And the Washington Revitalize! initiative, to organize a resident-based reinvestment strategy for the Washington Neighborhood, had a successful kick-off in FY05. In total, the Housing and Community Development Department invested more than $9.2 million in homeowner and rental activities, matched by approximately $1 million in private contributions. The America's River project is a public/private partnership between the City of Dubuque, the Dubuque County Historical Society, the Dubuque Area Chamber of Commerce, and Dubuque County to carry out a comprehensive $188 million riverfront development in the Port of Dubuque. A $40 million Vision Iowa Grant from the State ofIowa, with $20 million going to the City, has leveraged additional state and federal grants. This area already includes historic sites, such as a Civil War Shot Tower, the William M Black steamboat, National Mississippi River Museum and Aquarium, Dubuque Star Brewery, and the Ice Harbor. Recent progress on riverfront development included the following: . Port of Dubuque Master Plan A strategic plan for the Port of Dubuque with land uses, economic analyses, and design standards was adopted in 2002. . National Mississippi River Museum and Aquarium-opened June 2003 The National Mississippi River Museum and Aquarium is a world-class interpretive facility for the entire Mississippi River. The Center boasts 15 aquariums, including five that measure 30 feet across. A dynamic immersion theater surrounds visitors with the story of the Mississippi River's creation, its floods, its history, and its underwater life. An outdoor wetland features natural and living history with floating laboratories and classrooms. Stream tables let visitors create their own rivers, and the educational overnight program lets visitors sleep on a "Boat and Breakfast" on a national historic landmark steamboat. 8 . Heritage Trail Riverfront System Fifteen and one-half miles of an 18-mile extension of the Heritage Trail from the north end of Dubuque through downtown, to the Mines of Spain State Recreation Area have been built since 1999. The bikelhike trail has both off-road and on-street segments. The Heritage Trail Riverfront System, with links to riverfront parks and the Port of Dubuque, is a major recreational amenity and alternative transportation system for the community. . River's Edge Plaza-opened in 2002 Construction was completed on a 5,000 square foot plaza outside the floodwall gate at the historic Ice Harbor. This plaza serves as the City's riverfront gateway, as well as a landing for large steamboats. . Mississippi Riverwalk-opened in 2003 Construction was completed in 2003 for the one-mile Mississippi Riverwalk Recreational Trail at the Port of Dubuque. This 15-foot wide promenade includes benches, historic lighting, shade structures, and cascading stairs to the river. . Grand Harbor Resort and Waterpark-opened November 2002 A 196-room seven-story hotel, and a 24,000 square foot indoor water park were opened. . Grand River Center-opened October 2003 The 115,000 square foot education and conference center has an exhibit hall, ballroom, meeting rooms, pre-function space, and underground and surface parking. . Star Brewery Building-$6.5 renovation A proposal for a mixed-use complex was received in November 2002 for the renovation and reuse of the 40,000 square foot historic building. The Alexander Company supervised an initial $1 million rehabilitation. A request for proposals was issued in October 2005 to find a developer to complete the project. . Phase II Riverfront Development Phase II development is underway. The City purchased approximately 20 acres of former logging and saw mill operations in 2003 and demolished the structures. The City also purchased the Adams Company, and relocation of this company was completed in 2004. Stealth Racing property was purchased in 2005. These acquisitions were made possible through federal grants of over $2.3 million. For the Future. The Mayor and City Council will continue to take action to achieve their goals of maintaining a strong local economy, sustaining stable property tax levies, and enhancing the safety and security of citizens through neighborhood vitality. The City staff will work to implement the City Council's vision that Dubuque is a "Masterpiece on the Mississippi." A program of comprehensive service reviews has continued as a vehicle for analyzing City services, identifying opportunities for improvement, and determining areas of possible cost reductions. 9 The goal of the service review program is to ensure that services desired by the citizens are provided in the most cost effective and efficient method possible. The City Council's goals for the next five years and beyond include the following: . Improved connectivity: transportation and telecommunications . Planned and managed growth . Diverse, strong Dubuque economy . Riverfront development . Partnering for a better Dubuque Specific programs are being implemented by City staff to meet the City Council's five-year goals. Some of the most significant programs include: . Riverfront Development - The City has partnered with several other agencies to enhance one of Dubuque's greatest treasures, the Mississippi riverfront area. A $188 million comprehensive plan for riverfront improvements has been substantially completed. Redevelopment is guided by the Port of Dubuque Master Plan. A $39 million renovation of the Dubuque Greyhound Park and Casino is underway including a $12 million privately owned Hilton Garden Hotel . Industrial Park Development - The City has acquired over 900 acres of industrial land and has completed the first phase of construction for these industrial parks. City staff and the Greater Dubuque Development Corporation are working to attract new businesses and meet the expansion needs of current businesses. The GDDC recently completed a $2.3 million fundraising campaign to support their operations. The next phase of the Dubuque Industrial Center West is currently under construction and will include rail accessible sites. . Neighborhood Reinvestment - The highly successful Community Oriented Policing and Uptown Recreation programs will continue. Park improvements will continue with over $10.5 million budgeted over the next five years to add new parks to the system, expand parks and further improve the existing parks. Work will continue on neighborhood empowerment programs, including property management and tenant training. The City Street, Historic Preservation and Housing programs are also being expanded to affect quality of life improvements at the neighborhood level. . Downtown Redevelopment - Dubuque's downtown, situated between the Mississippi River and tall tree-lined bluffs, is the home to many unique and historic buildings as well as being the center of commerce and tourism. The City Council adopted Vision Downtown, a community consensus for the future of Downtown Dubuque, in December 2001. The Downtown Master Plan was approved by the City Council in February 2004. 10 . Transportation Improvements - The City will maintain its aggressive program to improve local streets. Plans are in place to reconstruct or overlay 60 miles of streets over the next five years. In a 16-year period from 1990-2006, the City will have completed 69 percent of the streets. All of the traffic signals along U.S. 20 will have been interconnected by the end of 2004 to improve traffic flow and lessen travel delays. Other new roadway connections, such as a new connection off University Avenue to U.S. 20 will be constructed. U.S. 20 is being widened to five lanes from the Northwest Arterial to old U.S. 20 in 2004 to improve safety. Corridor studies are completed for the Southwest Arterial and the Julien Dubuque Bridge four-lane replacement. The City, in partnership with local stakeholders, also has implemented a comprehensive way-finding signage program throughout the City with mOT support. Something very dramatic is happening to Dubuque that will significantly increase its growth potential and the ability for the creation of wealth for all citizens. Up to 1999 Dubuque had no four-lane connection to an interstate highway system. By 2005 there will be five, four-lane connections. Expanded U.S. Highway 151 provides Dubuque with a four-lane link to Madison, Wisconsin (1-90-94), and Cedar Rapids, Iowa (1-80), by 2005. The four-lanes of U.S. Highway 20 from Dubuque to Fort Dodge, Iowa (1-35) was completed in 2003. U.S. Highway 61 was opened as a four-lane from Dubuque to Davenport, Iowa (1-80) in 1999. The four-lane of U.S. Highway 218 from Waterloo, Iowa to Mason City, Iowa (1-35) connects to U.S. Highway 20 and opened in 2003. . Acknowledgements During the past year, Dubuque was recognized by several national organizations for its leadership, business climate and quality of life. These acknowledgments include: Officials from the City of Dubuque accepted an award at the National League of Cities meetings in Nashville for being named a 2003 Crown Community by American City & County magazine. This award recognizes city or county projects that exemplifY "the best that local government has to offer its residents." Dubuque and the America's River project was also featured in the December issue of American City and County magazine. In May, Dubuque was ranked 6th nationwide in Expansion Management magazine's 2004 Quality of Life Quotient and earned the publication's highest acknowledgment - as-Star Community. The Quality of Life Quotient takes into account the preferred lifestyle of the majority of the country's workforce and places emphasis on issues of importance to the average American such as affordable housing and good schools. Dubuque took the top honor in the Housing Affordability category, while the City's schools placed 7th nationwide. Dubuque joins a list of just 50S-Star Communities in the entire United States. According to the Milken Institute, Dubuque ranks number one in high-tech growth among a field of 96 similarly sized U.S. metropolitan areas. Dubuque took over the number one spot after climbing from number 14 last year and number 18 in 200 I. According to Milken, Dubuque's listing is due to a high-tech growth rate that is more than 80 percent higher than 11 the U.S. average. The Institute measured the total dollar amount oftechnological goods and services during the five-year period between 1997 and 2002. Dubuque moved ahead by almost 50 spots from its 2001 position to its new rank of 40th in Forbes Magazine's 2003 Best Places edition. According to Forbes, Dubuque's cost of doing business is also very favorable with a rank of I3 out of 168 cities in the United States. Dubuque gained 22 spots last year and moved ahead by another 25 this year despite the addition of74 new communities into the small city category. The Port of Dubuque has been named the 2005 EP A Region 7 Phoenix Award winner for innovative brownfield redevelopment. All of this is being done while the City maintains fiscal integrity. Through efficient operations, revenue diversification, and debt reduction, the City has not increased its share of the average homeowners property taxes in ten years. These are a few of the many activities being addressed by the community, City Council, and City staff to improve the quality oflife in Dubuque. FINANCIAL INFORMATION Internal Control. City management is responsible for establishing and maintaining internal controls to ensure that the assets of the government are protected from loss, theft or misuse, and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (I) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Single Audit. As a recipient of federal and state financial assistance, the City of Dubuque's government is responsible for ensuring that adequate internal controls are in place to ensure compliance with applicable laws, regulations, contracts, and grants related to those programs. These internal controls are subject to periodic evaluation by management. As a part of the City's single audit described earlier, tests are made to determine the adequacy of internal controls, including that portion related to federal programs, as well as to determine that the government has complied with applicable laws, regulations, contracts, and grants. The results of the government's single audit for the fiscal year ended June 30, 2005, provided no instances of material weaknesses in internal control over compliance, or significant violations of applicable laws, regulations, contracts and grants. Budgeting Controls. In addition, the government maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. All funds are included in the annual appropriated budget. The level of budgetary control (that is the level at which expenditures 12 cannot legally exceed the appropriated amount) is established by state programs. The government also maintains an encumbrance accounting system as one technique for accomplishing budgetary control. Encumbered amounts lapse at year-end, however, encumbrances generally are re- appropriated as part of the following year's budget. As demonstrated by the statements and schedules included in the financial section of this report, the City continues to meet its responsibility for sound financial management. Cash Management. Cash temporarily idle during the year was invested in demand deposits, certificates of deposit, federal agency obligations, and authorized mutual funds. The City received cash basis investment earnings of $1 ,504,620 for the year. The investment policy adopted by the City Council stresses the importance of capital preservation. The policy directives intend to minimize credit and market risks while maintaining a competitive yield on the portfolio. Accordingly, deposits were either covered by federal depository insurance or collateralized. All collateral on uninsured deposits was held either by the State Treasurer, the government, its agent, or a financial institution's trust department in the government's name. All of the investments subject to risk categorization were classified in the category of lowest credit risk as defined by the Governmental Accounting Standards Board. The non-classified investments include mutual funds. Risk Management. The City of Dubuque is a member of a statewide risk pool for local governments, the Iowa Communities Assurance Pool (ICAP). The coverage for general and auto liability, as well as public official and police professional liability are acquired through this pool. Worker's compensation coverage up to $450,000 for each accident is provided through self- insurance. The accumulated reserve provision for such claims equaled $3,756 as of June 30, 2005. The City has also established a self-insurance plan for medical, dental, prescription drug, and short-term disability. The accumulated reserve provision for such claims equaled $338,490 as of June 30, 2005. All self-insured health plans are certified as actuarially sound and certificates of compliance have been filed with the State of Iowa. OTHER INFORMATION Independent Audit. State Code requires an annual audit by independent certified public accountants or the State Auditor. The accounting firm of Eide Bailly LLP conducted the audit for fiscal year 2005. In addition to meeting the requirements set forth in state statutes, the audit also was designed to meet the requirements of OMB Circular A-l33, Audits of States, Local Governments, and Non-Profit Organizations. The independent auditor's report on the basic financial statements and combining fund statements is included in the Financial Section of this report. The auditor's report related specifically to the single audit is included in the Compliance Section. Awards. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Dubuque, Iowa, for its Comprehensive Annual Financial Report for the fiscal year ended June 13 30, 2004. This was the 17th consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Bond Rating. The rating for the City's outstanding general obligation bonded debt was upgraded by Moody's Investors Service to "Aa2" from a previous rating of "Aa3" in September 2003 This upgrade was due in part to the City's sound financial position, anticipated growth of the City's tax base and low overall debt burden. Acknowledgments. We compliment the staff of the Finance Department for their assistance in preparing this report. We also commend the Mayor and City Council and all department and division managers for their interest and support in planning and conducting the financial operations of the City of Dubuque in a responsible and progressive manner. We also thank the independent certified public accountants, Eide Bailly LLP, whose competent assistance and technical expertise have enabled the production of this report. Sincerely, (l1~)j ~/zlli___ I~J.~~ Kenneth J. TeKippe, CPA Finance Director Michael C. Van Milligen City Manager 14 15 ... C C o III Q) ;:BE ~.~ ; "'Q)e. .ElI)Q) .5 0 C .2 C '$-Q) =2E ~c; ...oe. Q)uQ) 'lii 0 ;: III C C 0 ~ Q) ~ ~ E u IE c. 'c 0 0 Qj ::s c > E ~ 0 Q) E ~ t: "" C Q) 8- '" "0 0 ~ <3 E 0 U ... ~ 0 ~ < .g ..c: ~ -= ~ <3 0 C = "~ .0 Q) :c ..c: Cl Ol ... U ::I "a; Q) D. Z E ~ W ~ 0 E:: 0::: -< N ..J W - C) ~ 0 <( ~ Z Z :J <( ~ 0 :E u 0 ~ ~ ~ U U ;;;J 0' ;;;J ~ ;;;J ~ ... Q) ... III Cl Q) ~ l'lI Cl ~ C l'lI 0 0 C l'lI C ts ::s :::iE;:: l'lI ~ ~ 0 ~ ~ :::iE is U E .- ~ Qj Q) ~ C U.o C 0 .c ... '" C Ol "0 ~ ;: :J cU 0 ::I U E J!l III aJ 0 III ... .- Q) e. III D. ... 0 ~ U ... c C III Q) l'lI'" E E.ct: ::s.2' l'lI ::c II:: g- o c Q) ... E .!It: ~~ Q) o ... ~cc 011._ ~ Q) g'Se.E '-Eot: III _ l'lI ::SEQ)e. 00>Q) ::cU~o en 0)'" -"cC -.:.- Q) o ... E ;:3:t: U c l'lI .- e. .- Cl :EcQ) ::SwO lL ... C III Q) SBE -.- t: l'lI ~ l'lI Q)Q)e. ::Cll)Q) o ... c Q) Q)E .!: t: lI.l'lI e. Q) o >.c " Q) C E Q) Q) e'0l Q) '" E ffi w:::; ... c Q) Q) u E =t: o l'lI lLe. Q) o ... c Q) Q) u E ct: ~ l'lI .- e. 1I.Q) o ... C ClIllQ) .5 B E c.- t: c ~ l'lI l'lIQ)e. -lI)Q) lL 0 ...... u c c .- ~ Q) E e. E oot: c_ l'lI oQ)e. U > Q) wQ)o o E C Q).Q - '" ~:~ UlC C)~ C '" :gffi '" ~ D.f- oIlQ)... U C III C Q) C l'lI E :8;t: l'lI... l'lI "'ce. Q).- Q) e.l'lIo O:::iE ... C ClIllQ) C Q) E .- u... ".- ... =~l'lI ::SQ)e. lDlI)Q) o III B... .- C ~ Q) Q) E lI)t: !! ::s Q) III 0 'Qj ...I ~ C .$ 0 C :.;::::J Q) t: ctI Uco~ "D. " .- Q) .2: c:: U CITY OF DUBUQUE, IOWA OFFICIALS JUNE 30, 2005 CITY COUNCIL Terrance M. Duggan Daniel E. Nicholson Ann E. Michalski John H. Markham Roy D. Buol Joyce E. Connors Patricia A. Cline COUNCIL APPOINTED OFFICIALS Michael C. Van Milligen Barry A. Lindahl William G. Blum James A. O'Brien JeaJUle F. Schneider DEPARTMENT MANAGERS Andrew D. Perry Cynthia M. Steinhauser Dawn L. Lang Richard R. Russell David J. Heiar KennethJ. TeKippe E. Daniel Brown Mary Rose Corrigan David W. Harris, Jf. Kelly R. Larson Christine A. Kohlmann Gil D. Spence Susan A. Henricks Donald J. Vogt Randall K. Peck Laura B. Carstens Kim B. Wadding Gus N. Psihoyos Robert M. Green Jonathan R. Brown Mayor Council Member - At Large Council Member - At Large Council Member - 1" Ward Council Member - 2"d Ward Council Member - 3 cd Ward Council Member - 4th Ward City Manager Corporation Counsel City Solicitor Assistant City Attorney City Clerk Airport Manager Assistant City Manager Budget Director Building Services Manager Economic Development Director Finance Director Fire Chief Health Services Manager Housing and Community Development Manager Human Rights Director Information Services Manager Leisure Services Manager Library Director Operations & Maintenance Manager Personnel Manager Planning Services Manager Police Chief Public Works Director Water Department Manager Water Pollution Control Plant Manager 16 Certificate of Achievement for Excellence in Financial Reporting Presented to City of Dubuque, Iowa For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2004 A Certificate of Achievement for Excellence in Financia! Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and [mancia! reporting. ~~;e:~ President ~/~ Executive Director 17 ~~>>~ EideBailly", ~ ePAs & BUSINESS ADVISORS INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Dubuque, Iowa We have audited the accompanying financial statements 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 of Dubuque, Iowa, (the City) as of and for the year ended June 30, 2005, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of the City of Dubuque, Iowa. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the tinancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Dubuque, Iowa, as of June 30, 2005, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2005, on our consideration of the 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 and should be considered in assessing the results of our audit. PEOPLE. PRINCIPLES. POSSIBILITIES. 18 www.eidebailly.com 3999 Pennsylvania Ave., Suite 100 I Dubuque, Iowa 52002-2639 I Phone 563.556.1790 I Fax 563.557.7842 I EOE CITY OF DUBUQUE MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2005 This section of the City of Dubuque annual financial report presents our discussion and analysis of the City's financial performance during the fiscal year that ended on June 30, 2005. Please read it in conjunction with the transmittal letter at the front ofthis report and the City's financial statements found in the next section of this report. FINANCIAL HIGHLIGHTS . The assets of the City of Dubuque exceeded its liabilities at the close of the fiscal year by $391,744,414 (net assets). This was an increase of$14,444,640 over net assets at June 30, 2004. Unrestricted net assets at June 30, 2005 in the amount of $24,091,600 may be used to meet the City's ongoing obligations to citizens and creditors. . The expenses of the general fund exceeded revenues by $5,430,458. . The ending general fund balance was $16,875,587. . Within the City's business-type activities, revenues exceeded expenses and transfers by $3,087,037. . For the year, the revenues of the City's governmental activities exceeded expenses and transfers by $11,357,603. . The City's debt increased by $6,737,635 due to the issuance of new debt exceeding principal payments. OVERVIEW OF THE FINANCIAL STATEMENTS The City's basic financial statements consist of government-wide financial statements, fund financial statements, and notes to the financial statements. This discussion and analysis is intended to serve as an introduction to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview ofthe City's finances, in a manner similar to private-sector business. The paragraphs below provide a brief description of the government-wide financial statements. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. To assess the overall health of the City you need to 20 consider additional non-financial factors such as changes in the City's property tax base and the condition of the City's infrastructure. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods such as uncollected taxes and earned but unused vacation leave. The govermnent-wide financial statements include not only the City itself (known as the primary govermnent), but also one other legally separate entity, the Dubuque Metropolitan Area Solid Waste Agency, for which the City of Dubuque is considered financially accountable. Financial information for the Agency is reported separately from the financial information presented for the primary government. The Dubuque Metropolitan Area Solid Waste Agency issues separate financial statements. The government-wide financial statements are divided into two categories: Governmental activities. This category consists of services provided by the City that are principally supported by taxes and intergovermnental revenues. Basic City services such as police, fire, public works, planning, parks, library, and general administration are governmental activities. Business-type activities. These activities are supported primarily by user fees. The services provided the City in this category include water, sewer, stormwater, refuse, parking, transit and America's River Project. Fund Financial Statements A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with legal requirements for financial transactions and reporting. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmentalfunds. Govermnental funds are used to account for essentially the same functions reported as governmental activities in the govermnent-wide financial statements. However, unlike the govermnent-wide financial statements, govermnental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. Because the focus of govermnental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for govermnental 21 funds with similar information presented for governmental activities in the government- wide financial statements. By doing so, readers may better understand the long-term impact of the City's near term financial decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances are followed by a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains three individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, employee benefits fund, and community development fund, all of which are considered to be major funds. Data from all other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City legally adopts an annual budget by function. A budgetary comparison schedule has been provided. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprises funds to account for its sewer, water, stormwater and refuse utilities. Enterprise funds are also used for transit, parking, and America's River Project. Internal service funds are accounting devices used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its general/engineering service, garage service, stores/printing, health insurance, and workers' compensation. The City's internal service funds predominately benefit the governmental activities and have been included in the governmental activities in the government-wide financial statements. 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 programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City has one fiduciary fund, an agency fund reporting resources held for the Dubuque Racing Association for improvements at the greyhound racing facility. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Required supplementary information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the budget and actual results of the City. 22 Other information. The combining statements referred to earlier in connection with non- major governmental funds, non-major enterprise funds, and internal service funds, as well as an individual agency fund statement, are presented immediately following the required supplementary information. GOVERNMENT -WIDE FINANCIAL ANALYSIS Net assets. As noted earlier, net assets may serve as a useful indicator of a government's financial position when observed over time. In the case of the City, assets exceeded liabilities by $391,744,414 at the close of the most recent fiscal year. The largest part of the City's net assets (87.5%) reflects its investment in capital assets such as land, buildings, infrastructure, machinery, and equipment less any related debt used to acquire those assets that are still outstanding. These capital assets are used to provide services to the citizens and are not available for future spending. CITY OF DUBUQUE'S NET ASSETS Governmental Activities Busmess-typeActivities Total 2005 2004 Restated 2005 2004 2005 2004 Restated Current and other assets S 69,638.300 S 68,710,687 S 16,054,939 S 13,707,120 S 85,693,239 S 82,417,807 Capitalasscts 267.976.516 250,817 .a1B 100,940,871 99.003,374 368,917,.381 349,821,252 TotaJassets 337,614.816 319.528.565 116,995.810 112.710,494 454.610.626 432.239,059 Loog-term liabilities 31,300,556 25,838,997 9.461,414 8,249,016 40,761,970 34,088,013 Otherliabiliries 21,014,870 19.747,781 1,089.372 1,103,491 22.104,242 20,851,272 Total liabilities 52.315.426 45,586.778 10,550,786 9,352,507 62.866.212 54.939,285 Netasscts: invested in capital assets, net of related debt 249.881,646 231,863.231 93,036,089 92.301,043 342,911,735 324,164,274 Restricted 24,180,874 30,755,897 554,205 554,005 24,735,079 31,309,902 U....ttk1ed 11.236,870 11.322,659 12.854,130 10,502,939 24,091,600 21,825,598 Total net 1Wet5 $ 285,299,390 S 273,941,787 S 106.445,024 S 103,357,987 S 391,144.414 $ 317,'J99,774 A portion of the City's net assets (6.3%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of net assets (6.2%) may be used to meet the City's ongoing obligations to citizens and creditors. At the close of fiscal years 2005 and 2004, the City is able to report positive balances in all three categories of net assets, both for the government as a whole and separate governmental and business-type activities. Governmental activities. Governmental activities increased the net assets of the City by $11,357,603 or 78.6% of the total increase in net assets in 2005 and $21,050,297 or 111.7% of the total increase in net assets in 2004. Taxes are the largest source of governmental revenues with property taxes of $19,767,492 in 2005. Other governmental revenues included gaming of$1 1,694,105, local option sales taxes of$6,963,124, hotel/motel tax of $1 ,383,660 and $8,360,969 of charges for services. 23 Governmental expenses during 2005 totaled 59,881,400. The largest programs were public safety of $18,636,877, public works of $17,088,983, and community and economic development of $9,680,046. The State of Iowa changed the reporting requirements for expenses from four to eight programs effective with the 2003 fiscal year. CITY OF DUBUQUE CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Governmental Activities Busincs&-lYPCActivitics Total 2005 2004 Restated 2005 2004 2005 2004 Restated Revenues: Program revenues Charges for seJVk:cs S 8,360,969 S 8,334.877 S 14,050,012 S 14,781,910 S 22,410,981 S 23,116,787 Operating gnmtl and contributiotu 14,603,106 12,197,307 651,967 825,538 15.255,073 13,022,845 Capital granlll and contributions 6.,919.296 5,153,258 3,030,378 11,001,676 9,949,674 16,160,934 General revenues pmperty..... 19.767,492 18,588,367 19.761,492 18,588,367 Local option sales tax 6,963.124 7,105,183 6,963,124 7,JOS,183 Hotellmoteltax 1,383.660 1.314,114 1,383,660 1,314,114 Utility ftanchise fees 1,310,064 862.275 1,310,064 862.275 Gaming 11.694.105 11,521,022 11,694.105 1I,SZI,022 Unrestricted investment earnings 1,190,337 480,546 322,884 181,674 1.513,221 662,210 Gain on sale of capital ilS5CtS 170,642 175,231 3. 25 170,678 175,256 00" 560,789 638,681 560,789 638,681 Total rcvenUCI 72.923.584 66,370,861 18,055,277 26,796,823 90,978,861 93,167,684 Expenses: PubticW'ety 18,636,877 16,605,481 18,636,877 16,605,481 Public works 17,088,983 12,847,410 17,088,983 12,847,410 Health and social services 654,469 1,290,619 654,469 1,290,619 Culture and recreation 8,474,183 7,849,1l4 8,474,183 7,849,114 Community and economic development 9,680,046 12,662,552 9,680,046 12,662,552 GencrallCM:I'DDICDI 4,048,475 3,773,136 4,048,475 3,773,136 Interest em long-term debt 1,298.,367 1.248,498 1,298.367 1.248,498 Sewage disposal works 4.656,172 5,282,016 4,656,172 5.282,016 Walerutility 4,232,489 4,368,738 4,232,489 4,368,738 Stonnwaler utility 1,114,811 1,184,968 1,114,811 1,184,968 Parking facilities 1,604,071 1,655,429 1,604,071 1,655,429 America', River Project 515.570 1,064,701 515,570 1,064,701 Refuse collection 2,202,800 2,238,254 2,202,800 2,238,254 Tl'$l$it system 2,326,908 2,257,078 2,326,908 2,257,078 Total expenses 59.881.400 56.276,810 16,652,821 18,051,184 76,534,221 74.327,994 Increase in net asaests before tranSfC11 13,042,184 10,094,051 1,402.,456 8,745,639 14,444,640 18,839,690 Transfers 0,684,581) 10,956,246 1.684.581 (I0,95(i.246) Increase (decrease) in net aasets 11,357,603 21,050,297 3,087,037 (2,210,607) 14,444,640 18,839,690 Net assets, beginning. WI restated 273,941,787 252.891,490 103,357,987 105,568,594 377,299,774 358,460,084 Nel usel$, ending $ 285,299,390 $ 273.941,787 $ 106,445,024 S 103,357,987 S 391,744,414 S 377,299,774 Business-type activities. Business type activities increased net assets by $3,087,037 while the City's net assets increased by $14,444,640 at June 30, 2005. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS Governmentalfunds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. 24 The City's governmental funds reported a combined fund balance of $47,469,348 at June 30,2005. A portion of the fund balance is reserved and not available for new spending because it has already been committed for encumbrances, endowments, debt service and state statute restricted purposes. The general fund's fund balance reserve goal is 10% of budgeted annual expenditures. Our balance is slightly higher than the goal at year-end. The unreserved fund balance of special revenue employee benefits fund decreased by $8,830 to $110,709. The unreserved fund balance of special revenue community development decreased by $124,324 to $2,20 1,107. Proprietary funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The combined net assets of the enterprise funds at June 30, 2005 totaled $106,445,024 of which 12.1 % ($12,854,730) is unrestricted. The net assets of the internal service funds are $402,091, a $637,123 decrease from the 2004 total net assets. The unrestricted net assets of the internal service funds are $355,805 (88.5%). The sewer disposal works had an increase in net assets of $1,124,835 for total net assets of $38,370,802 at June 30, 2005. The water utility had a decrease in net assets of $692,294 for total net assets of$23,489,414. The stormwater utility had an increase in net assets of $3,074,386 for total net assets of$21,410,766. The parking facilities had an increase in net assets of$327,819 for total net assets of $13,394,535. The America's River Project had a decrease in net assets of$702,454 for total net assets of $4,603,038. BUDGETARY HIGHLIGHTS There were two amendments to the City's 2004-2005 budget. The first amendment was passed in September 2004 to reflect operating and capital budget carryovers (continuing appropriation authority) from 2004 and amends the FY 2005 budget for operating and capital City Council actions since the beginning of the first year. The second budget amendment was passed in May 2005 to reflect City Council actions since the first budget amendment, encumbrance carryovers from FY 2004 and amendments to add additional appropriation authority due to increased revenues. The final budget for total revenues and other sources increased $41,546,156 from the original budget. The increase was primarily attributable to revenue associated with capital projects and operating carryovers which mainly include grants to intergovernmental funds. The final budget for total expenditures increased $58,295,127 from the original budget. The increase was primarily attributable to purchase order encumbrances carryover, capital projects and operating carryovers from the prior year and expenditures associated with new grants received. 25 Actual revenues were $30,869,682 less than the final amended budget, and expenditures were $57,917,848 less than the final amended budget due primarily to projected capital projects not completed by fiscal year end. CAP IT AL ASSET AND DEBT ADMINISTRA nON Capital assets. The City's investment in capital assets for its governmental and business- type activities as of June 30, 2005, amounts to $368,917,387 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure, machinery and equipment. Additional information on the City's assets can be found in the note 5 to the financial statements in this report. CAPITAL ASSETS (net of accumulated depreciation) Governmental Activities Busin~typeActivitics Total 2005 2004 21)05 2004 2005 2004 Lond $ 52.513,574 $ 51,590,495 S 3,411,921 S 2.161,610 $ 55.925,495 $ 53,752,105 Buildings 67.601.837 66,898,139 59,932.136 59,175,806 127,533,973 126,673,945 Improvements other than buildings 10,304,947 9.673,385 52,580,851 49.170,825 62,885,798 59,444,210 Machinery and equipmeut 21,652,249 20,726,641 45,987,759 44,071,371 67,640,008 64,798,012 Infrastsucture 166,714,268 162,045,913 166,714,268 162,045,913 Construction in progress 18,594,470 5,058,662 6,223,942 7,.344,646 24,818,412 12,403,308 Accumulated depreciation (69,404.829) (65,175,35n (67,195,738) (64,120,884) (l36,600.S6n (129.296,241) $ 267,976.516 $ 250,817 ,878 S 100,940,871 $ 99,003.374 S 368.917.387 $ 349.821.252 Major expenditures during 2004-2005 were for the Municipal Services Center, Fremont Avenue Street, Ice Harbor West Road and Trail, Bell Street, University Avenue Street, Dubuque Industrial Center West improvements, water, sewer and stormwater projects, and new runway maintenance vehicle at the airport. Long-term debt. At year end the City had $38,273,031 of debt outstanding. This is an increase of $6,737,635 from June 30, 2004. New debt issued during the current year included $1,750,000 for stormwater projects and $7,265,000 for Dubuque Industrial Center West improvements. The City's bond rating continued at Aa2 for the issue. The City continues to operate well under the State debt capacity limitations. The State limits the amount of general obligation debt outstanding to 5% of the assessed value of all taxable property in the community. Thus our debt capacity is $133,148,662. With general obligation debt of $37,123,031 we are utilizing 27.9% of this limit. Additional information on the City's long-term debt can be found in note 6 of this report. ECONOMIC FACTORS The City's unemployment rate ended the fiscal year at 4.8%, the same rate for the prior year, and is slightly higher than the State of Iowa rate of 4.6%, but lower than the 5.0% national rate. The City continues to enjoy growth in assessed valuation of taxable property net of exemptions (6.0% for total of $1 ,656,434). The minimum monthly refuse rate increased 26 $0.91 to $8.51. Sewer rates increased 4% and water rates increased 5%. The stormwater fee initiated in fiscal year 2004 did not change in fiscal year 2005. Requests for information. This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, 50 West 13th Street, Dubuque, Iowa 52001-4864. 27 CITY OF DUBUQUE, IOWA STATEMENT OF NET ASSETS JUNE 30, 2005 Component Unit Dubuque Primary Government Metropolitan Governmental Business-type Area Solid Activities Activities Total Waste Agency ASSETS CURRENT ASSETS Cash and pooled cash investments $ 35,146,648 $ 12,508,957 $ 47,655,605 $ 5,241,312 Receivables Property tax Delinquent 196,977 196,977 Succeeding year 16,200,141 16,200,141 Accounts and other 1,889,893 2,107,912 3,997,805 254,608 Special assessments 426,739 426,739 Accrued interest 296,412 75,914 372,326 65,576 Notes 874,678 874,678 Intergovernmental 3,133,935 580,773 3,714,708 Internal balances 176,141 (176,141) Inventories 182,971 398,282 581,253 Prepaid items 17,642 5,037 22,679 Total Current Assets 58,542,177 15,500,734 74,042,911 5,561,496 NONCURRENT ASSETS Temporarily restricted cash and pooled cash investments 242,915 554,205 797,120 3,467,761 Permanently restricted cash and pooled cash investments 22,391 22,391 Notes receivable 10,830,817 10,830,817 Capital assets Land 52,513,574 3,411,921 55,925,495 1,003,524 Buildings 67,601,837 59,932,136 127,533,973 44,349 Improvements other than buildings 10,304,947 52,580,851 62,885,798 7,406,807 Machinery and equipment 21,652,249 45,987,759 67,640,008 2,106,659 Infrastructure 166,714,268 166,714,268 Construction in progress 18,594,470 6,223,942 24,818,412 Accumulated depreciation (69,404,829) (67,195,738) (136,600,567) (5,613,065) Total Noncurrent Assets 279,072,639 101,495,076 380,567,715 8,416,035 Total Assets 337,614,816 116,995,810 454,610,626 13,977,531 See notes to financial statements. EXHlliIT 1 Component Unit Dubuque Primary Government Metropolitan Governmental Business-type Area Solid Activities Activities Total Waste Agency LIABILITIES CURRENT LIABILITIES Accounts payable $ 3,499,754 $ 884,160 $ 4,383,914 $ 85,992 Accrued payroll 627,286 157,944 785,230 20,398 Notes payable 45,455 45,455 General obligation bonds payable 870,000 385,000 1,255,000 Revenue bonds payable 210,000 210,000 Tax increment financing bonds payable 410,516 410,516 Accrued compensated absences 2,325,284 287,153 2,612,437 46,286 Accrued interest payable 134,208 47,268 181,476 1utergovernmental payable 41,775 41,775 79,037 Unearned revenue Succeeding year property tax 16,200,141 16,200,141 Other 511,706 511,706 Total Current Liabilities 24,666,125 1,971,525 26,637,650 231,713 NONCURRENT LIABILITIES Notes payable 576,756 576,756 General obligation bonds payable 24,032,241 7,652,594 31,684,835 Revenue bonds payable 926,667 926,667 Landfill closure and postclosure care 2,605,333 Tax increment financing bonds payable 3,040,304 3,040,304 Total Noncurrent Liabilities 27,649,301 8,579,261 36,228,562 2,605,333 Total Liabilities 52,315,426 10,550,786 62,866,212 2,837,046 NET ASSETS Invested in capital assets, net of related debt 249,881,646 93,036,089 342,917,735 4,948,274 Restricted for/by Bond ordinance 150,526 554,205 704,731 Employee benefits 110,709 110,709 Community development 13,985,965 13,985,965 Streets 2,212,370 2,212,370 Capital projects 6,905,484 6,905,484 Franchise agreement 526,241 526,241 Endowments Expendable 73,628 73,628 Nonexpendable 22,391 22,391 Other 193,560 193,560 State statute 323,543 Minority interest 1,332,187 Unrestricted 11,236,870 12,854,730 24,091,600 4,536,481 Total Net Assets $ 285,299,390 $ 106,445,024 $ 391,744,414 $ 11,140,485 28 CITY OF DUBUQUE, lOW A STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2005 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Functions/Programs Primary government Governmental activities Public safety $ 18,636,877 $ 1,900,938 $ 592,610 $ Public works 17,088,983 3,371,073 5,310,117 6,412,164 Health and social services 654,469 116,699 79,697 Culture and recreation 8,474,183 2,143,246 114,052 85,053 Community and economic development 9,680,046 297,549 8,371,012 422,079 General government 4,048,475 531,464 135,618 Interest on long-term debt 1,298,367 Total governmental activities 59,881,400 8,360,969 14,603,106 6,919,296 Business-type activities Sewage disposal works 4,656,172 4,552,587 959,099 Water utility 4,232,489 4,224,074 453,990 Stormwater utility 1,114,811 684,570 815,806 Parking facilities 1,604,071 1,889,937 America's River Project 515,570 26,061 267,709 Refuse collection 2,202,800 2,283,677 Transit system 2,326,908 389,106 651,967 533,774 Total business-type activities 16,652,821 14,050,012 651,967 3,030,378 Total primary government $ 76,534,221 $ 22,410,981 $ 15,255,073 $ 9,949,674 Component unit Dubuque Metropolitan Area Solid Waste Agency $ 3,209,500 $ 2,637,197 $ 12,090 $ General revenues Property taxes Local option sales tax Hotel/motel tax Utility franchise fees Gaming Unrestricted investment earnings Gain on sale of capital assets Otlier Transfers Total general revenues and transfers Change in net assets Net assets, beginning, as restated Net assets, ending See notes to financial statements. EXHIBIT 2 Net (Expense) Revenne and Changes in Net Assets Primary Government Component Unit Dubuque Metropolitan Area Solid Waste Agency Governmental Business-type Activities Activities Total CITY OF DUBUQUE, IOWA EXHIBIT 3 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2005 Special Revenue Other Employee Community Governmental General Benefits Development Funds Total ASSETS Cash and pooled cash investments $ 15,297,305 $ 89,419 $ 1,802,652 $ 16,408,143 $ 33,597,519 Receivables Property tax Delinquent 165,697 24,504 6,776 196,977 Succeeding year 14,241,051 1,591,816 367,274 16,200,141 Accounts and other 1,770,158 11,464 1,781,622 Special assessments 426,739 426,739 Accrued interest 112,361 65,474 109,804 287,639 Notes 11,699,446 6,049 11,705,495 Intergovernmental 879,275 110,900 2,143,760 3,133,935 Due from other funds 394,635 394,635 Inventories 93,190 93,190 Advances to other funds 377,354 377,354 Prepaid items 5,394 12,248 17,642 Restricted cash and pooled cash investments 265,306 265,306 Total Assets $ 33,336,420 $ 1,705,739 $ 13,690,720 $ 19,745,315 $ 68,478,194 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 1,146,398 $ $ 101,661 $ 933,494 $ 2,181,553 Accrued payroll 509,690 18,572 55,387 583,649 Intergovernmental payable 41,775 41,775 Due to other funds 201,213 356,324 557,537 Deferred revenue Succeeding year property tax 14,241,051 1,591,816 367,274 16,200,141 Other 362,481 3,214 1,078,496 1,444,191 Total Liabilities 16,460,833 1,595,030 120,233 2,832,750 21,008,846 FUND BALANCES Reserved forlby Encumbrances 2,792,099 543,612 2,041,086 5,376,797 Long-term notes receivable 10,825,768 5,049 10,830,817 Advances 377,354 377,354 Bond ordinance 150,526 150,526 Franchise agreement 19,327 19,327 Endowments 22,391 22,391 Unreserved Designated for Future equipment and capital maintenance 7,926,870 7,926,870 Future cash flow 3,236,000 3,236,000 Undesignated reported in General fund 2,543,264 2,543,264 Special revenue funds 110,709 2,201,107 3,465,417 5,777,233 Debt service fund (56,320) (56,320) Capital projects funds 11,191,461 11,191,461 Permanent funds 73,628 73,628 Total Fund Balances 16,875,587 110,709 13,570,487 16,912,565 47,469,348 Total Liabilities and Fund Balances $ 33,336,420 $ 1,705,739 $ 13,690,720 $ 19,745,315 $ 68,478,194 See notes to financial statements. 30 CITY OF DUBUQUE, IOWA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2005 Total fund balances - governmental funds Amounts reported for the governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Cost of capital assets Accumulated depreciation Some of the City's revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures and therefore are deferred in the funds. Those revenues consist of: Property tax Special assessments Other Internal service funds are used by the City's management to charge the costs of equipment maintenance and self-insurance programs to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of: General obligation bonds Tax increment financing bonds Notes payable Accrued interest Compensated absences Net assets of governmental activities See notes to financial statements. $ 337,256,106 (69,325,876) 25,836 382,385 524,264 (24,902,241 ) (3,450,820) (622,211) (134,208) (2,325,284) EXHillIT 3-1 $ 47,469,348 267,930,230 932,485 402,091 (31,434,764) $ 285,299,390 31 CITY OF DUBUQUE, IOWA EXHmIT 4 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Special Revenue Other Employee Community Governmental General Benefits Development Funds Total REVENUES Taxes $ 19,978,702 $ 2,030,144 $ $ 7,421,289 $ 29,430,135 Special assessments 197,195 197,195 Licenses and pcnnits 1,078,722 1,078,722 Intergovernmental 3,955,521 2,905,531 11,509,306 18,370,358 Charges for services 5,754,725 163,817 5,918,542 Fines and forfeits 267,536 267,536 Investment earnings 687,926 130,884 378,881 1,197,691 Contributions 53,861 19,570 233,378 306,809 Gaming 11,679,105 15,000 11,694,105 Miscellaneous 633,214 21 29,381 910,689 1,573,305 Total Revenues 44,089,312 2,030,165 3,085,366 20,829,555 70,034,398 EXPENDITURES Current Public safety 18,569,478 82,768 18,652,246 Public works 17,137,700 246,537 3,917,002 21,30 I ,239 Health and social services 558,856 79,639 23,736 662,231 Culture and recreation 8,026,449 109,180 45,203 8,180,832 Community and economic development 1,946,577 2,392,982 5,485,911 9,825,470 General government 3,185,147 276 119,331 718,031 4,022,785 Debt service 95,563 2,914,825 3,0 I 0,388 Capital projects 8,226,840 8,226,840 Total Expenditures 49,519,770 276 2,947,669 21,414,316 73,882,031 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (5,430,458) 2,029,889 137,697 (584,761) (3,847,633) OTHER FINANCING SOURCES (USES) Issuance of bonds 7,277,665 7,277,665 Discount on bonds (58,487) (58,487) Transfers in 9,672,161 8,760 438,544 2,862,190 12,981,655 Transfers out (4,455,156) (2,047,479) (9,602,549) (16,105,184) Sale of capital assets 170,642 170,642 Total Other Financing Sources (Uses) 5,387,647 (2,038,719) 438,544 478,819 4,266,291 NET CHANGE IN FUND BALANCES (42,811) (8,830) 576,241 (105,942) 418,658 FUND BALANCES, BEGINNING, AS REST A TED 16,918,398 119,539 12,994,246 17,018,507 47,050,690 FUND BALANCES, ENDING $ 16,875,587 $ 110,709 $ 13,570,487 $ 16,912,565 $ 47,469,348 See notes to financial statements. 32 CITY OF DUBUQUE, IOWA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2005 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported as expenditures in governmental funds. However, in the statement of activities, the cost of capital assets is allocated over their estimated useful lives and reported as depreciation expense. In the current period, these amounts are: Capital assets expended in governmental funds Transfers of capital assets from enterprise funds Contributions from developers Depreciation expense $ 18,773,769 1,440,188 2,791,343 (5,770,675) In the statement of activities, only the gain or loss on the sale of capital assets is reported, whereas in the governmental funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the book value of the asset being disposed. Because some revenues will not be collected for several months after the City's fiscal year ends, they are not considered "available" revenues and are deferred in the governmental funds. Deferred revenues (increased) decreased by these amounts this year: Propcrty tax Special assessments Olher (5,795) (94,024 ) 27,020 Bond proceeds provide currcnt financial resources to governmental funds, but issuing debt increases long-tenn liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but it reduces long-tenn liabilities in the statement of net assets and does not affect the statement of activities. Also, governmental funds report the effect of issuance discounts when debt is first issued, whereas these amounts are deterred and amortized in the statement of activities. Bond proceeds Discounts on bonds issued Bond repayments (7,277,665) 58,487 1,769,960 Some items reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. These items consist of: Increase in accrued interest Amortization of bond discount Increase in compensated absences T ota] additional expenses (57,280) (660) (11,681) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service funds is reported with governmental activities. Change in net assets of governmental activities See notes to financial statements. EXHffiIT 4-1 $ 418,658 17,234,625 (66,920) (72,799) (5,449,218) (69,621) (637,122) $ 11,357,603 33 CITY OF DUBUQUE, IOWA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2005 Business-type Activities - Sewage Disposal Water Stormwater Parking Works Utility Utility Facilities ASSETS CURRENT ASSETS Cash and pooled cash investments $ 4,830,875 $ 1,232,121 $ 4,833,641 $ 1,093,633 Receivables Accounts 963,091 70 I ,208 93,501 47,375 Accrued interest 29,850 12,927 22,513 10,621 Intergovernmental Due from other funds 201,213 Inventories 387,879 Prepaid items 5,037 Total Current Assets 5,828,853 2,535,348 4,949,655 1,151,629 NONCURRENT ASSETS Restricted cash and pooled cash investments 554,205 Capital assets Land 175,671 76,697 1,827,344 1,296,209 Buildings 31,603,036 7,365,722 19,069,788 Improvements other than buildings 27,554,966 520,295 24,258,629 246,961 Machinery and equipment 6,342,170 32,522,386 907,215 651,206 Construction in progress 954,372 26,800 157,862 Accumulated depreciation (33,799,206) (16,885,005) (7,008,627) (6,019,829) Net Capital Assets 32,831,009 23,626,895 20,142,423 15,244,335 Total Noncurrent Assets 32,831,009 23,626,895 20,142,423 15,798,540 Total Assets 38,659,862 26,162,243 25,092,078 16,950,169 EXHIDIT 5 Enterprise Funds America's River Proj ect Other Enterprise Funds Total Governmental Activities- Internal Service Funds $ 1,001 $ 517,686 $ 12,508,957 $ 1,549,129 32,140 270,597 2,107,912 108,271 3 75,914 8,773 580,773 580,773 201,213 10,403 398,282 89,781 5,037 33,144 1,379,459 15,878,088 1,755,954 554,205 36,000 3,411,921 1,893,590 59,932,136 52,580,851 5,564,782 45,987,759 125,239 5,080,030 4,878 6,223,942 (3,483,071) (67,195,738) (78,953) 5,080,030 4,016,179 100,940,871 46,286 5,080,030 4,016,179 101,495,076 46,286 5,113,174 5,395,638 117,373,164 1,802,240 (continued) 34 CITY OF DUBUQUE, IOWA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2005 Business-type Activities - Sewage Disposal Water Stormwater Parking Works Utility Utility Facilities LIABILITIES CURRENT LIABILITIES Accounts payable $ 166,095 $ 125,744 $ 16,620 $ 1,224 Accrued payroll 36,909 37,020 14,071 General obligation bonds payable 145,000 135,000 105,000 Revenue bonds payable 210,000 Accrued compensated absences 86,056 82,306 33,907 Accrued interest payable 6,362 20,516 20,390 Due to other funds Advances from other funds 377,354 Total Current Liabilities 289,060 773,786 172,136 384,592 NONCURRENT LIABILITIES General obligation bonds payable (net of discount of $30,824) 1,899,043 3,509, I 76 2,244,375 Revenue bonds payable (net of $13,333 deferred amount on refunding) 926,667 Total Noncurrent Liabilities 1,899,043 3,509,176 3,171,042 Total Liabilities 289,060 2,672,829 3,681,312 3,555,634 NET ASSETS Invested in capital assets, net of related debt 32,831,009 21,582,852 17,767,726 11,758,293 Restricted by bond ordinance 554,205 Unrestricted 5,539,793 1,906,562 3,643,040 1,082,037 Total Net Assets $ 38,370,802 $ 23,489,414 $ 21,410,766 $ 13,394,535 See notes to financial statements. EXHffiIT 5 (continued) Enterprise Funds America's River Project Other Enterprise Funds Total Governmental Activities- Internal Service Funds $ 510,136 $ 64,341 $ 884,160 $ 1,318,201 69,944 157,944 43,637 385,000 210,000 84,884 287,153 47,268 38,311 377,354 510,136 219,169 2,348,879 1,400,149 510,136 5,080mO (476,992) $ 4,603,038 219,169 4,016,179 1,160,290 $ 5,176,469 $ 7,652,594 926,667 8,579,261 10,928,140 1,400,149 93,036,089 554,205 12,854,730 106,445,024 $ 46,286 355,805 402,091 35 CITY OF DUBUQUE, IOWA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Business-type Activities - Sewage Disposal Water Stormwater Parking Works Utility Utility Facilities OPERATING REVENUES Charges for sales and services $ 4,543,091 $ 4,201,500 $ 658,598 $ 1,888,328 Other 9,496 22,574 25,972 1,609 Total Operating Revenues 4,552,587 4,224,074 684,570 1,889,937 OPERATING EXPENSES Employee expense 1,740,854 1,702,100 125,136 663,883 Utilities 475,864 428,441 87,833 Repairs and maintenance 331,835 92,177 46,976 Supplies and services 913,418 969,800 565,745 126,138 Insurance 91,230 78,871 34,996 Depreciation 1,102,971 858,053 329,421 436,234 Total Operating Expenses 4,656,172 4,129,442 1,020,302 1,396,060 OPERATING INCOME (LOSS) (103,585) 94,632 (335,732) 493,877 NONOPERATING REVENUES (EXPENSES) Intergovernmental 5,408 Investment earnings 128,277 57,124 73,607 44,203 Contributions 3 Interest expense (103,047) (94,509) (208,011) Gain (Joss) on disposal of assets 36 Total Nonoperating Revenues (Expenses) 128,316 (45,923) (15,494) (163,808) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 24,731 48,709 (351,226) 330,069 CAPITAL CONTRIBUTIONS 959,096 453,990 810,398 TRANSFERS IN 225,455 105,223 2,851,845 TRANSFERS OUT (84,447) (1,300,216) (236,631) (2,250) CHANGE IN NET ASSETS 1,124,835 (692,294) 3,074,386 327,819 NET ASSETS, BEGINNING 37,245,967 24,181,708 18,336,380 13,066,716 NET ASSETS, ENDING $ 38,370,802 $ 23,489,414 $ 21,410,766 $ 13,394,535 See notes to financial statements. EXHIBIT 6 (221,789) (651,522) (821,028) (635,882) 2,223,484 1,896,234 1,102,976 6,181,733 (2,376,899) (496,709) (4,497,152) (1,240) (702,454) (45,255) 3,087,037 (637,122) 5,305,492 5,221,724 103,357,987 1,039,213 $ 4,603,038 $ 5,176,469 $ 106,445,024 $ 402,091 36 CITY OF DUBUQUE, IOWA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Business-type Activities - Sewage Disposal Water Stormwater Parking Works Utility Utility Facilities CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 4,242,234 $ 4,037,596 $ 641,464 $ 1,881,961 Cash payments to suppliers for goods and services (1,769,736) (1,613,014) (652,407) (300,519) Cash payments to employees for services (1,742,868) (1,694,201) (125,136) (664,746) Other operating receipts 9,496 22,574 25,972 1,609 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 739,126 752,955 (110,107) 918,305 CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES Transfers from other funds 225,455 105,223 2,851,845 Transfers to other funds (84,447) (1,300,216) (236,631 ) (2,250) Proceeds from interfund balances Payment of interfund balances (238,005) Intergovernmental grant proceeds NET CASH PROVIDED (USED) BY NONCAPIT AL FINANCING ACTIVITIES 141,008 (1,432,998) 2,615,214 (2,250) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets 36 Acquisition and construction of capital assets (802,967) (394,226) (1,967,201) Proceeds from issuance of debt 1,732,500 Payment of debt (140,000) (80,000) (300,000) Interest paid (103,321 ) (79,748) (205,954) Contributions 3 Intergovernmental grant proceeds 5,408 NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES (802,928) (637,547) (389,041) (505,954) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 123,597 58,431 60,394 40,437 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 200,803 (1,259,159) 2,176,460 450,538 CASH AND CASH EQUIVALENTS, BEGINNING 4,630,072 2,491,280 2,657,181 1,197,300 CASH AND CASH EQUIVALENTS, ENDING $ 4,830,875 $ 1,232,121 $ 4,833,641 $ 1,647,838 EXHIBIT 7 Enterprise Funds Governmental America's Other Activities- River Enterprise Internal Project Funds Total Service Funds $ $ 2,618,651 $ 13,421,906 $ 7,626,325 (515,570) (1,442,169) (6,293,415) (6,469,010) (2,540,678) (6,767,629) (1,676,352) 26,061 59,397 145,109 125,390 (489,509) (1,304,799) 505,971 (393,647) 36 (1,560,191) (436,593) (5,161,178) 1,732,500 (520,000) (389,023) 29,079 29,082 274,380 279,788 (1,256,732) (436,593) (4,028,795) 8 19,662 302,529 41,959 (46,039) 1,522,604 (314,617) 1,000 563,725 11,540,558 1,863,746 $ 1,001 $ 517,686 $ 13,063,162 $ 1,549,129 (continued) 37 CITY OF DUBUQUE, IOWA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Business-type Activities - Sewage Disposal Water Stormwater Parking Works Utility Utility Facilities RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ (103,585) $ 94,632 $ (335,732) $ 493,877 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Depreciation 1,102,971 858,053 329,421 436,234 Change in assets and liabilities (Increase) decrease in receivables (300,857) (163,904) (17,134) (6,367) (Increase) decrease in inventories and prepaid items (6,894) Increase (decrease) in accounts payable 42,611 (36,831 ) (86,662) (4,576) Increase (decrease) in accrued liabilities (2,014) 7,899 (863) Total Adjustments 842,711 658,323 225,625 424,428 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 739,126 $ 752,955 $ (110,107) $ 918,305 NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Contributions of capital assets from other funds and outside sources $ 959,096 $ 453,990 $ 1,717,613 $ 36,057 $ Contributions of capital assets to other funds $ 84,447 $ - $ See notes to financial statements. EXHmIT 7 (continued) Enterprise Funds America's River Project Enterprise Funds Total Governmental Activities- Internal Service Funds Other $ (489,509) $ (],856,570) $ (2,]96,887) $ (676,572) 5]5,220 3,24],899 9,067 5,265 (482,997) 28,003 3,602 (3,292) (5],372) 9,594 (75,864) 287,849 ]8,090 23,] ]2 9,378 55],77] 2,702,858 282,925 $ (489,509) $ (],304,799) $ 505,97] $ (393,647) $ $ $ 3,130,699 $ $ 2,226,899 $ $ 2,347,403 $ 38 CITY OF DUBUQUE, IOWA STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND JUNE 30, 2005 EXHmIT 8 ASSETS Cash and pooled cash investments $ 678,010 Accrued interest 3,794 Total Assets $ 681,804 LIABILITIES Due to other agency $ 681,804 See notes to financial statements. 39 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 The notes to financial statements contain a summary of significant accounting policies and other notes considered necessary for an understanding of the financial statements of the City and are an integral part of this report. The index to the notes is as follows: I. Summary of Significant Accounting Policies 2. Deficit Fund Equity 3. Cash on Hand, Deposits, and Investments 4. Interfund Balances and Transfers 5. Capital Assets 6. Long-term Debt 7. Risk Management 8. Commitments and Contingent Liabilities 9. Post-Employment Health Care Benefits 10. Employee Retirement Systems II. Conduit Debt 12. Landfill Closure and Postclosure Care 13. Vision Iowa Grant 14. Leases Where City is Lessor 15. Restatement of Beginning Balances 16. New Governmental Accounting Standards Board (GASB) Standards 40 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The City of Dubuque, Iowa, is a municipal corporation governed by an elected mayor and a six-member council. As required by accounting principles generally accepted in the United States of America, these financial statements present the City and its component unit, an entity for which the City is considered to be financially accountable. The City has no blended component units. The discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the City. The component unit also has a June 30 year end. Discretely Presented Component Unit The Dubuque Metropolitan Area Solid Waste Agency was created under the provisions of Chapter 28E of the Code of Iowa by the City of Dubuque and Dubuque County. The Agency's purpose is to provide solid waste management for the Dubuque metropolitan area. The City appoints a voting majority of the Agency's governing board and has authority over those persons responsible for the day-to-day operations of the Agency. The Agency is presented as a proprietary fund type. Complete financial statements for the Agency may be obtained from the City of Dubuque. City of Dubuque Finance Department 50 West 13th Street Dubuque, Iowa 52001 Jointly Governed Organizations The City also participates in several jointly governed organizations that provide goods or services to the citizenry of the City but do not meet the criteria of a joint venture since there is no ongoing financial interest or responsibility by the participating governments. City officials are members of the following boards and commissions: City of Dubuque Conference Board Dubuque County E-911 Committee Dubuque Drug Task Force Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component unit. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. (continued on next page) 41 CITY OF DUBUQUE, lOW A NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants, contributions, and interest restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and a fiduciary fund, even though the latter is excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing ofrelated cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, interest, special assessments, and grants are susceptible to accrual. Sales taxes are considered measurable and available at the time the underlying transaction occurs provided they are collected by the City within 60 days after year-end. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Employee Benefits Fund is used to account for pension and related employee benefit costs for those employees paid wages from the General Fund. The Community Development Fund is used to account for the use of Community Development Block Grant funds as received from federal and state governmental agencies. (continued on next page) 42 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 The City reports the following major proprietary funds: The Sewage Di,posal Works Fund is used to account for the operations of the City's sewage disposal works and services. The Water Utility Fund is used to account for the operations of the City's water facilities and services. The Stormwater Utility Fund is used to account for the operations of the City's stormwater servIces. The Parking Facilities Fund is used to account for the operations of the City-owned parking ramps and other parking facilities. The America's River Project is used to account for the construction of all projects covered by the Vision Iowa Grant, including all matching funds.. Additionally, the City reports the internal service fund type. Internal service funds are used to account for general, garage, stores/printing, health insurance, and worker's compensation insurance services provided by one department to other departments of the City on a cost-reimbursement basis. Fiduciary funds account for assets held by the City in a trustee or agency capacity for the benefit of others and cannot be used to support City activities. Fiduciary funds, other than agency funds, use the economic resources measurement focus and the full accrual basis of accounting. Agency funds use the full accrual basis of accounting but do not have a measurement focus and therefore report only assets and liabilities. The City reports an Agency Fund to account for assets held by the City as an agent for the Dubuque Racing Association. Private-sector standards of accounting and financial reporting issued prior to December I, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City's water and sewer function and various other functions of the City. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include I) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. (continued on next page) 43 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds and of the City's internal service funds are charges to customers for sales and services. Operating 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 nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Assets, Liabilities, and Eqnity Deposits and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Investments are stated at fair value or amortized cost. Amortized cost is used only for money market investments that have a remaining maturity at time of purchase of one year or less. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Property tax receivable is recognized in the funds on the levy or lien date, which is the date that the tax asking is certified by the City to the County Board of Supervisors. Current year delinquent property tax receivable represents unpaid taxes from the current year. The succeeding year property tax receivable represents taxes certified by the City to be collected in the next fiscal year for the purposes set out in the budget for the next fiscal year. By statute, the City is required to certify its budget to the County Auditor by March 15 of each year for the subsequent fiscal year. However, by statute, the tax asking and budget certification for the following fiscal year becomes effective on the first day of that year. Although the succeeding year property tax receivable has been recorded, the related revenue is deferred in both the government-wide and fund financial statements and will not be recognized as revenue until the year for which it is levied. (continued on next page) 44 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Property taxes are levied as of July I on property values assessed as of January I of the previous year. The tax levy is divided into two billings. The first billing is mailed on July I and the second billing is mailed on January I. The billings are considered due upon receipt by the taxpayer; however, the actual due date is based on a period ending three months after the tax bill mailing. On these dates (September 30 and March 31), the bill becomes delinquent, and penalties and interest may be assessed by the govermnent. Inventories and Prepaid Items Inventories included in the govermnental funds are valued at cost using the first-in, first-out (FIFO) basis. The costs of govermnental fund inventories are recorded as expenditures when consumed rather than when purchased. Inventories of materials and supplies in the enterprise funds are determined by actual count and priced on the FIFO basis. Inventories included in internal service funds are stated at the lower of cost (FIFO basis) or market and consist of consumable supplies. The cost of these supplies is recorded as an expense at the time they are removed from inventory for use. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. Restricted Assets Certain proceeds of the City's enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet/statement of net assets because their use is limited by applicable bond covenants. The "revenue bond operating" account is used to report resources set aside to subsidize potential deficiencies from the enterprise fund's operation that could adversely affect debt service payments. The "revenue bond sinking" account is used to segregate resources accumulated for debt service payments over the next twelve months. The "revenue bond reserve" account is used to report resources set aside to make up potential future deficiencies in the revenue bond sinking account. Certain assets of the special revenue funds are classified as restricted assets because their use is limited by the City's cable television franchise agreement. Certain assets of the Dubuque Metropolitan Area Solid Waste Agency are classified as restricted assets because their use is restricted by state statute for certain specified uses. (continued on next page) 45 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide statement of net assets and in the proprietary funds statement of net assets. Capital assets are defined by the government as assets with an initial, individual cost of more than $100,000 for infrastructure assets, $20,000 for building assets, and $5,000 for the remaining assets, and an estimated useful life of more than a year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repair that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is not included as part of the capitalized value of the assets constructed. Property, plant, and equipment of the primary government, as well as the component unit, is depreciated using the straight-line method over the following estimated useful lives: Assets Buildings Improvements other than buildings Machinery and equipment Infrastructure Years 40 to 125 15 to 50 2 to 30 15 to 75 Compensated Absences The City allows employees to accumulate earned but unused vacation and sick pay benefits. Vacation pay is payable to employees upon retirement or tennination. Sick pay is payable only upon retirement, in which event employees are paid for 25% of all eligible hours (50% in the case of police and fire employees). All vacation pay and applicable sick pay benefits are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, bond issuance costs, and deferred amounts on refunding, are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount and deferred amount on refundings. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. (continued on next page) 46 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Equity The Dubuque Metropolitan Area Solid Waste Agency's restricted net assets represent outside third-party restrictions and amounts restricted for minority interest of the Agency. The Agency is restricted to using certain amounts for purposes specified by state statute. The net assets restricted for minority interest is calculated at 22.7% of unrestricted net assets, based on the 1976 revenue bond resolution authorizing the issuance of revenue bonds for the construction of the landfill. In the fund financial statements, govenunental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subj ect to change. Budgets and Budgetary Accounting The budgetary comparison and related disclosures are reported as Required Supplementary Information. During the year ended June 30, 2005, disbursements did not exceed the amounts budgeted in any function. NOTE 2 - DEFICIT FUND EQUITY The following funds had deficit fund balances/net assets amounts as of June 30, 2005: Special Revenue Tax Increment Financing $ 141,352 Debt Service 56,320 Internal Service General Service 9,588 NOTE 3 - CASH ON HAND, DEPOSITS, AND INVESTMENTS Cash on Hand. Cash on hand represents authorized change funds and petty cash funds used for current operating purposes. The carrying amount at year-end was $15,983 for the City and $450 for the Dubuque Metropolitan Area Solid Waste Agency. Deposits. At year-end, the City's carrying amount of deposits was $27,265,294 and the bank balance was $30,470,408. The City's deposits in banks at June 30, 2005, were entirely covered by federal depository insurance or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. This chapter provides for additional assessments against the depositories to insure there will be no loss of public funds. The carrying amount of deposits for the Dubuque Metropolitan Area Solid Waste Agency was $8,708,623 and the bank balance was $8,922,789. The Agency's deposits in banks at June 30, 2005, were entirely covered by federal depository insurance or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. (continued on next page) 47 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Investments. As of June 30, 2005, the City had the following investments and maturities. (The City assumes callable bonds will not be called): Investment Maturities (In Years) Investment Tvoe Less than 1 1 to 5 6 to 10 More than 10 Total Mutual Funds - U.S. Treasury $ 393,043 $ $ $ $ 393,043 Mutual Funds- Federal Agency 560,964 560,964 u.s. Treasury Securities 124,790 498,500 623,290 Federal Agency Obligations 2,059,987 10,586,080 691,843 6,898,359 20,236,269 Corporate Stock 58.283 58.283 $ 3 1~7 067 $ 11 084 580 $ 691 843 $ 6,898,359 $_ 21,lP 1,819 The City and the Dubuque Metropolitan Solid Waste Agency are authorized by statute to invest public funds in obligations of the United States govermnent, its agencies and instrumentalities; certificates of deposit or other evidences of deposit at federally insured depository institutions approved by the City Councilor Board of Trustees and the Treasurer of the State of Iowa; prime eligible bankers acceptances; certain high rated commercial paper; perfected repurchase agreements; certain registered open-end Inanagement investment companies; certain joint investment trusts; and warrants or improvement certificates of a drainage district. Corporate stock was donated to the City to establish the Ella Lyons Peony Trail Permanent Trust Fund. Interest Rate Risk. The City's investment policy limits the investments of operating funds (funds expected to be expended in the current budget year of within fifteen months ofreceipt) in instruments that mature within 397 days. Funds not identified as operating funds may be invested in instruments with maturities longer than 397 days, but the maturities shall be consistent with the needs and use of the City. Credit Risk. The City's investment policy limits investments in commercial paper and other corporate debt to the top two highest classifications. The City did not invest in any commercial paper or other corporate debt during the year. Concentration of Credit Risk. The City's investment policy does not allow for a prime bankers' acceptance or commercial paper and other corporate debt balances to be greater than ten percent of its total deposits and investments. The policy also limits the amount that can be invested in a single issue to five percent of its total deposits and investments. The City held no such investments during the year. Custodial Credit Risk - Deposits. In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City's deposits are entirely covered by federal depository insurance or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. This chapter provides for additional assessments against the depositories to insure there will be no loss of public funds. Custodial Credit Risk -Investments. For an investment, this is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City had no custodial risk with regards to investments, since all investments were held by the City or its agent in the City's name. (continued on next page) 48 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Due to legal and budgetary reasons, the general fund is assigned a portion of the investments earnings associated with other funds. These funds are the employee benefits, community development, tort liability, road use tax, cable TV, general construction, refuse collection, transit system, general service, garage service, and stores/printing funds. The Dubuque Metropolitan Area Solid Waste Agency had no investments at June 30, 2005. A reconciliation of cash and investments as shown on the government-wide statement of net assets for the primary government and statement of fiduciary assets and liabilities follows: Cash on hand Carrying amount of deposits Carrying amount of investments $ 15,983 27,265,294 21.871.849 $ . 49.ll3J2~ $ 47,655,605 797,120 22,391 678.010 $ 49.153.126 Total Government-wide Cash and pooled cash investments Cash and pooled cash investments - temporarily restricted Cash and pooled cash investments - permanently restricted Fiduciary Cash and pooled cash investments Total A reconciliation of cash and investments as shown on the government-wide statement of net assets for the Dubuque Metropolitan Solid Waste Agency follows: Cash on hand Carrying amount of deposits $ 450 8.708.623 $ 8.709.073 $ 5,241,312 3.467.761 $ 8.7Q2,Q73 Total Cash and pooled cash investments Cash and pooled cash investments - temporarily restricted Total NOTE 4 - INTERFUND BALANCES AND TRANSFERS Interfund balances at June 30, 2005, include amounts due to/from other funds and advances due to/from other funds. Due to/from other funds balances represent amounts due to the general fund from the tax increment financing fund ($297,203), the debt service fund ($59,121), and the garage service fund ($38,311), for deficit pooled cash balances, and amounts due to the water utility fund from the general fund ($201,213) for excess transfers. Advances to/from other fund balance of$377,354 represent amounts due to the general fund from the water utility fund for a construction loan. (continued on next page) 49 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Interfund transfers for the year ended June 30, 2005, consisted of the following: Transfer from Nonmajor Employee Governmental Water Stormwater General Benefits Funds Utility Utility Transfer to General $ $ 2,047,479 $ 5,829,455 $ 1,297,278 $ Employee benefits 8,760 Community development 210,000 78,544 Nonmajor governmental 1,940,145 919,107 2,938 Sewage disposal works 24,598 200,857 Water utility 105,223 Stormwater utility 156,662 1,787,968 America's River Project 1,178,065 515,345 200,574 Nonmajor enterprise 945,686 157,290 $ 4,455,156 $ 2,047,479 $ 9,602,549 $ 1,300,216 $ 200,574 Transfer from America's Nonrnajor Internal Parking River Enterprise Service Facilities Project Funds Funds Total Transfer to General $ $ $ 496,709 $ 1,240 $ 9,672,161 Employee benelits 8,760 Community development 150,000 438,544 Nonmajor governmental 2,862,190 Sewage disposal works 225,455 Water utility 105,223 Stonnwater utility 907,215 2,851,845 America's River Project 2,250 1,896,234 Nonmajor enterprise I, I 02,976 $ 2,250 $ 1,057,215 $ 496,709 $ 1,240 19,163,388 Transfer to governmental activities capital assets from Sewage Disposal Warks, Stormwater Utility, and America's River Project. 1,440,188 $ 20,603,576 (continued on next page) 50 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 In the fund financial statements, total transfers out of $20,603,576 are greater than total transfers in of $19,163,388 because of the treatment of transfers of capital assets to the governmental activities capital assets. During the year, capital assets related to Sewage Disposal Works, with a book value of $84,447; Stormwater Utility, with a book value of $36,057; and America's River Project, with a book value of $1,319,684 were transferred to governmental activities capital assets. No amounts were reported in the governmental funds as the amounts did not involve the transfer of financial resources. However, the Sewage Disposal Works, Stormwater Utility, and America's River Project did report a transfer out for the capital resources given. Transfers are used to (I) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. During the year ended June 30, 2005, according to grant requirements the City made various transfers into the America's River Project Fund to finance capital assets. When completed, these capital assets are transferred to their respective fund. During the year ended June 30, 2005, the City made various transfers into the General Fund from the Nonmajor Governmental Funds, Water Utility, and Nonmajor Enterprise to fund a portion of the new public works building. NOTE 5 - CAPITAL ASSETS Capital asset activity for the year ended June 30, 2005, was as follows: Primary Government: Governmental activities: Beginning Balance Transfers In Transfers Out Increases Decreases Ending Balance Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated $ 636,927 25,362,025 $ 52,513,574 18,594,470 $ 51,590,494 5,058,663 $ 286, I 53 $ 56,649,157 286.153 25,998,952 (11.826.218) 71.108,044 Capital assets, being depreciated: Buildings Improvements other than bui Idings Machinery and equipment Infrastructure Total capital assets, being depreciated 66,898,139 416,113 9,673,384 575,468 20,726,641 184,126 162,045,913 259.344,077 1.175,707 287,585 67,601,837 (21,672) 56,095 1,980,244 5,068,452 (1,217,090) (400,097) 10,304,947 2 I ,652,249 166,714,268 (21.672) 7.392.376 (1.617,187) 266,273,301 (continued on next page) 51 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Beginning Transfers Transfers Ending Balance In Out Increases Decreases Balance Less accumulated depreciation for: Buildings $ (16,82 1,460) $ $ $ (1,059,890) $ $ (17,88 I ,350) Improvements other than buildings (3,453, I 89) (330,710) (3,783,899) Machinery and equipment (8,933,620) (21,672) 21,672 (1,498,308) 1,160,618 (9,271,310) Infrastructure (35,967,089) (2890834) 389 653 (38,468,270) Total accumulated depreciation (65 175358) (21672) 21672 ( 5 779 742) 1,550,27 I (69,404,829) Total capital assets, being depreciated, net 194168719 I 154035 1,6 I 2,634 (66,916) 196,868,472 Govemmental activities capital assets, net $ 250 817 876 L I 440 188 $ $ . ~!l)_U SR6 $ (11 893.1311 $ 2f> 7.916..iUl Business-type activities: Beginning Transfers Transfers Ending Balance In Out Increases Decreases Balance Capital assets, not being depreciated: Land $ 2,161,610 $ $ $ 1,250,3 11 $ $ 3,411,921 Construction in progress 7 ,344,645 (2 262 956) 5437847 (4295,594) 6,223,942 T ota] capital assets, not being depreciated 9506,255 (2262956) 6688 158 (4,295,594) 9,635,863 Capital assets, being depreciated: Buildings 59,775,806 156,330 59,932,136 Improvements other than buildings 49,770,826 2,8 I 6,4 I 5 (6,390) 52,580,851 Machinery and equipment 44071371 907,2 I 5 (84.447) 1 254 63 I (161,01 I) 45,987.759 Total capital assets, being depreciated 153618003 907.215 (84.447) 4227376 (167.401) 158500,746 Less accumulated depreciation for: Bui]dings (34,147,717) (946,700) (35,094,4 I 7) Improvements other than buildings (13, I 94,(96) (954,020) 6,390 (14,141,726) Machinery and equipment (16,779,072) (I 341 179) 160,656 ( I 7 ,959,595) T ota] accumulated depreciation (64120885) (3,24 1,899) 167046 (67,195,738) Total capital assets, being depreciated, net 89 497 I 18 907215 (84447) 985.477 (355) 9IJ05,008 Business~typc activities capita] assets, nct j; 99003,,}?} L ~Q].215 $ (2 34 L403) L Ul7J 635 $ (4 295,249) $100,94087.1 (continued on next page) 52 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Depreciation expense was charged to functions/programs for the primary govermnent as follows: Govermnental activities: Public safety Public works Health and social services Culture and recreation Community and economic development General govermnent Capital assets held by the govermnent's internal service funds are charged to various functions based on their usage of their assets Total depreciation expense - govermnental activities $ 480,716 3,680,996 4,056 1,472,933 22,716 109,258 9,067 $ 5.779.742 Business-type activities: Sewage disposal works $ 1,102,971 Water utility 858,053 Stormwater utility 329,421 Parking facilities 436,234 Refuse collection 156,122 Transit system 359,098 Total depreciation expense - business-type activities $ 3.241.899 Component Unit: Beginning Ending Balance Increases Decreases Balance Dubuque Metropolitan Area Solid Waste Agency: Capital assets, not being depreciated: Land $ 552,528 $ 450,996 $ $ 1,003,524 Construction in progress 1.071.772 441.269 0,513,041) Total capital assets, not being depreciated 1,624.300 892,265 0,513,041) 1.003.524 Capital assets, being depreciated: Buildings 44,349 44,349 Improvements other than buildings 5,893,766 1,513,041 7,406,807 Machinery and equipment 2,034.151 368,716 (296.208) 2.1 06,659 Total capital assets, being depreciated 7,972.266 1,881,757 (296.208) 9.557,815 Less accumulated depreciation for: Buildings (44,349) (44,349) Improvements other than buildings (3,842,871) (421,022) (4,263,893) Machinery and equipment 0,324,208) (235,581 ) 254,966 (1.304,823) Total accumulated depreciation (5.211,428) (656,603) 254,966 (5,613,065) Total capital assets, being depreciated, net 2,760.838 1.225.154 (41.242) 3.944.750 Dubuque Metropolitan Area Solid Waste Agency capital assets, net $ 4.385.138 $ 2.JJ 7,419 $ (1.554.283) $ 4 948,274 Depreciation expense of $656,603 was charged to the Dubuque Metropolitan Area Solid Waste Agency. (continued on next page) 53 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 NOTE 6 - LONG-TERM DEBT General Obligation Bonds. The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business-type activities. The original amount of general obligation bonds issued in prior years was $29,590,000. During the year, general obligation bonds totaling $9,015,000 were issued to fund stormwater utilities facilities and improvements. General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds generally are issued as serial bonds with varying amounts of principal maturing annually and with interest payable semi-annually. General obligation bonds outstanding at June 30, 2005, are as follows: Amount Amount Date of Interest Originally Outstanding Pumose Issue Maturitv Dates Rates Issued End of Year Corporate purpose 07/01/95 05/01/96-05/01/05 4.90% $ 2,000,000 $ Corporate purpose 06/01/00 06/01/02-06/01/20 5.80-5.88 2,750,000 2,370,000 Corporate purpose 11/01/00 06/0 I /02-06/0 I /20 5.13-5.25 6,265,000 5,380,000 Corporate purpose 12/27/01 06/01/05-06/01/21 4.00-4.90 9,500,000 8,830,000 Corporate purpose 01/09/02 06/0 I /04-06/0 I /21 4.00-4.95 2,860,000 2,580,000 Corporate purpose 03/26/02 06/01/03-06/01/21 3.75-5.00 1,000,000 905,000 Corporate purpose and refunding 12/03/02 06/01/03-06/01/17 3.00-4.30 3,105,000 2,045,000 Corporate purpose 10/15/03 06/01/04-06/0 1/23 3.20-4.75 2, II 0,000 1,925,000 Corporate purpose 04/18/05 06/01/06-06/0 I /24 2.50-5.00 9.015.000 9.015.000 $ 38 605 000 $ 33 050000 Annual debt service requirements to maturity for general obligation bonds are as follows: Fiscal Year Ending Governmental Activities Business-type Activities June 30 Princioal Interest Princioal Interest 2006 $ 870,000 $ 1.175,859 $ 385,000 $ 367,516 2007 1,160,000 1,1 03,494 415,000 344,994 2008 1,220,000 1,055,380 425,000 329,339 2009 1,305,000 1,004,004 440,000 312,684 2010 1,375,000 948,353 450,000 294,926 2011-2015 7,720,000 3,766,285 2,555,000 1,171,186 2016-2020 9,625,000 1,799,658 2,505,000 562,354 2021-2024 1.685.000 78.663 915.000 96.395 Total $24, 96cQ, 000_ $ 10 931,696 $ &,090 000 $ 3479,394 (continued on next page) 54 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Tax Increment Financing Bonds. The City issues tax increment financing bonds to provide funds for urban renewal projects. The City pledges property tax revenues from the tax increment financing districts to pay debt service. These bonds generally are issued as serial bonds with varying amounts of principal maturing annually and with interest payable semi-annually. The original amount of tax increment financing bonds issued in prior years was $4,568,538. Tax increment financing bonds outstanding at June 30, 2005, are as follows: Amount Amount Date of Interest Originally Outstanding Purpose Issue Maturitv Dates Rates Issued End of Year Advanced Data- Comm 03/18/99 12/31/01-06/30/11 6.0% $ 900,000 $ 580,778 Categraph Systems 12/01/99 12/31/01-12/31/10 8.8 360,000 237,031 Eagle Window & Door 02/15/00 12/31/02-06/30/12 9.1 3,168,538 2,493,011 Vessel Systems 12/30/03 12/30/05-06/30/15 8.0 140.000 140.000 $ 4.568.538 $ 3.450.820 Annual debt service requirements to maturity for tax increment financing bonds are as follows: Fiscal Year Ending Governmental Activities June 30 Principal Interest 2006 $ 410,516 $ 285,466 2007 445,447 250,533 2008 483,426 212,553 2009 524,722 171,258 2010 569,630 126,350 2011-2015 1.017.079 122.971 Total $ 3.450.820 L-lJ69 131 Revenue Bonds. The City also issues bonds where the City pledges income derived from the acquired or constructed assets to pay debt service. These bonds generally are issued as serial bonds with varying amounts of principal maturing annually and with interest payable semi-annually. Revenue bonds outstanding at June 30, 2005, are as follows: Amount Amount Date of Interest Originally Outstanding Purpose Issue Maturitv Dates Rates Issued End of Year Parking facilities 03/01/98 05/0 1/98-05/01/1 0 4.55-4.75% $ 2.515.0Q(L $ 1.150.000 (continued on next page) 55 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Revenue bond debt service requirements to maturity are as follows: Fiscal Year Ending Business-Tvpe Activities June 30 Principal Interest 2006 $ 210,000 $ 53,525 2007 220,000 43,970 2008 230,000 33,850 2009 240,000 23,155 2010 250,000 I 1,875 Total $ U 50 000 $ 166 375 Notes Payable. Notes payable have been issued to provide funds for economic development and for the purchase of capital assets. Notes payable at June 30, 2005, are as follows: Amount Amount Date of Interest Originally Outstanding Purpose Issue Maturitv Dates Rates Issued End of Year Economic development 02/13/04 06/01/05-06/0 1/15 4,07% $ 500,000 $ 454,545 Economic development 06/30/04 12/30/05-06/30/15 8.00 182,000 167,666 $ 682,000 L 622,211 Annual debt service requirements to maturity for notes payable are as follows: Fiscal Year Ending Governmental Activities June 30 Principal Interest 2006 $ 45,455 $ 32,182 2007 57,891 30,914 2008 58,905 28,049 2009 60,003 25,102 2010 61,190 22,064 2011-2015 338,767 56,459 Total $ 622,2 Il $ 194,770 (continued on next page) 56 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Changes in Long-term Liabilities. Long-term liability activity for the year ended June 30, 2005, was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: General obligation bonds $ 19,010,000 $ 7,265,000 $ (1,315,000) $ 24,960,000 $ 870,000 Less: Unamortized discounts (58,487) 728 (57,759) Total general obligation bonds 19,010,000 7,206,513 (1,314,272) 24,902,241 870,000 Tax increment financing bonds 3,820,394 (369,574) 3,450,820 410,516 Notes payable 695,000 12,666 (85,455) 622,211 45,455 Compensated absences 2,313,603 2,325,284 (2,313,603) 2,325,284 2,325,284 :l.25 838.997 L9 544.463 ~-L4 082 90<1) ~31 300.556 $ 3.651.255 Bnsiness-type activities: General obligation bonds $ 6,660,000 $ 1,750,000 $ (320,000) $ 8,090,000 $ 385,000 Less: Unamortized discounts (37.250) (17.500) 2.344 (52,406) Total general obligation bonds 6,622.750 1.732.500 (317.656) 8,037,594 385.000 Revenue bonds 1,350,000 (200,000) 1,150,000 210,000 Less: Deferred amounts on refunding (16.000) 2,667 (13.333) Total revenue bonds 1.334.000 (197.333) 1,136,667 210.000 Compensated absences 292.266 287.153 (292.266) 287.153 287.153 $ 8.249.016 $ 2.019.653 ~_JaQ.L255J $ 9.461.414 $ 882.153 For the governmental activities, compensated absences are generally liquidated by the general fund, community development fund, and section Vlll housing fund. NOTE 7 - RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the government carries commercial insurance and participates in a local government risk pool. The City has established a Health Insurance Reserve Fund for insuring benefits provided to City employees and covered dependents which is included in the Internal Service Fund Type. Health benefits were self-insured up to an individual stop loss amount of $85,000, and an aggregate stop loss of $5,957,233 for 2005. Coverage from a private insurance company is maintained for losses in excess of the stop loss amount. All claims handling procedures are performed by a third-party claims administrator. Incurred but not reported claims have been accrued as a liability based upon the claims administrator's estimate. Settled claims have not exceeded commercial coverage in any of the past three fiscal years. The estimated liability does not include any allocated or unallocated claims adjustment expense. (continued on next page) 57 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 The City has established a Workers' Compensation Reserve Fnnd for insuring benefits provided to City employees which is included in the Internal Service Fund Type. Workers' compensation benefits were self-insured up to a specific stop loss amount of $450,000, and an aggregate stop loss consistent with statutory limits for 2005. Coverage from a private insurance company is maintained for losses in excess of the stop loss amount. All claims handling procedures are performed by a third-party claims administrator. Incurred but not reported claims have been accrued as a liability based upon the claims administrator's estimate. Settled claims have not exceeded commercial coverage in any of the last three fiscal years. The estimated liability does not include any allocated or unallocated claims adjustment expense. All funds of the City participate in both programs and make payments to the Health Insurance Reserve Fund and the Workers' Compensation Reserve Fund based on actuarial estimates of the amonnts needed to pay prior- and current-year claims. The claims liability of $809,868 in the Health Insurance Reserve Fund and $491,537 in the Workers' Compensation Reserve Fund is based on the requirements of Governmental Accounting Standards Board Statement No.1 0, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in reported liabilities for the fiscal years ended Jnne 30, 2004 and 2005, are summarized as follows: Liabilities at June 30, 2003 Claims and changes in estimates during fiscal year 2004 Claim payments Health Workers' Insurance Compensation Reserve Fund Reserve Fund $ 757,944 $ 281,128 4,587,080 301,154 (4,636,770) (273,962) 708,254 308,320 5,219,324 581,291 (5.117,710) (398,074) lL._ 809,868 $ 491 537 Liabilities at June 30, 2004 Claims and changes in estimates during fiscal year 2005 Claim payments Liabilities at June 30, 2005 The City is a member in the Iowa Communities Assurance Pool, as allowed by Chapter 670.7 of the Code of Iowa. The Iowa Communities Assurance Pool (Pool) is a local government risk-sharing pool whose 509 members include various governmental entities throughout the State ofIowa. The Pool was formed in August 1986 for the purpose of managing and funding third-party liability claims against its members. The Pool provides coverage and protection in the following categories: general liability, automobile liability, automobile physical damage, public officials' liability, police professional liability, property, inland marine, and boiler/machinery. There have been no reductions in insurance coverage from prior years. (continued on next page) 58 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Each member's annual casualty contributions to the Pool fund current operations and provide capital. Annual operating contributions are those amounts necessary to fund, on a cash basis, the Pool's general and administrative expenses, claims, claims expenses and reinsurance expenses due and payable in the current year, plus all or any portion of any deficiency in capital. Capital contributions are made during the first six years of membership and are maintained to equal 300 percent of the total current members' basis rates or to comply with the requirements of any applicable regulatory authority having jurisdiction over the Pool. The Pool also provides property coverage. Members who elect such coverage make annual operating contributions which are necessary to fund, on a cash basis, the Pool's general and administrative expenses and reinsurance premiums, all of which are due and payable in the current year, plus all or any portion of any deficiency in capital. Any year-end operating surplus is transferred to capital. Deficiencies in operations are offset by transfers from capital and, if insufficient, by the subsequent year's member contributions. The City has property insurance coverage in addition to the Pool. The City's property and casualty contributions to the risk pool are recorded as expenditures from its operating funds at the time of payment to the risk pool. The City's annual contributions to the Pool for the year ended June 30, 2005, were $470,009. The Pool uses reinsurance and excess risk-sharing agreements to reduce its exposure to large losses. The Pool retains general, automobile, police professional, and public officials' liability risks up to $250,000 per claim. Claims exceeding $250,000 are reinsured in an amount not to exceed $1,750,000 per claim and $5,000,000 in aggregate per year. For members requiring specific coverage from $2,000,000 to $10,000,000, such excess coverage is also reinsured. Property and automobile physical damage risks are retained by the Pool up to $100,000 each occurrence, each location with excess coverage reinsured on an individual-member basis. The Pool's intergoverrnnental contract with its members provides that in the event a casualty claim or series of claims exceeds the amount of risk-sharing protection provided by the member's risk-sharing certificate, or in the event that a series of casualty claims exhausts total members' equity plus any reinsurance and any excess risk-sharing recoveries, then payment of such claims shall be the obligation of the respective individual member. As of June 30, 2005, settled claims have not exceeded the risk pool or reinsurance company coverage since the Pool's inception. Members agree to continue membership in the Pool for a period of not less than one full year. After such period, a member who has given 60 days' prior written notice may withdraw from the Pool. Upon withdrawal, payments for all claims and claims expenses become the sole responsibility of the withdrawing member, regardless of whether a claim was incurred or reported prior to the member's withdrawal. Members withdrawing within the first six years of membership may receive a partial refund of their capital contributions. If a member withdraws after the sixth year, the member is refunded 100 percent of its capital contributions. However, the refund is reduced by an amount equal to the annual operating contribution which the withdrawing member would have made for the one-year period following withdrawal. (continued on next page) 59 CITY OF DUBUQUE, lOW A NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES Grants The City has received financial assistance from numerous federal and state agencies in the form of grants and entitlements. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the general fund or other applicable funds. However, in the opinion of management, liabilities resulting from disallowed claims, if any, will not have a material effect on the City's financial position as of June 30, 2005. Litigation The City's corporation counsel reported that as of June 30, 2005, various claims and lawsuits were on tile against the City. The corporation counsel estimated that all potential settlements against the City not covered by insurance would not materially affect the financial position of the City. The City has authority to levy additional taxes (outside the regular limit) to cover uninsured judgments against the City. Construction Contracts The City has recognized as a liability only that portion of construction contracts representing construction completed through June 30, 2005. The City has additional commitments for signed construction contracts of $5,341,730 as of June 30, 2005. These commitments will be funded by federal and state grants, cash reserves, and bond proceeds. NOTE 9 - POST-EMPLOYMENT HEALTH CARE BENEFITS In addition to providing pension benefits, the City provides certain health care benefits for retired disabled police officers and firefighters as mandated by the Code of Iowa. The cost of health care benefits for retired disabled police officers and firefighters is recognized as an expenditure as claims are paid. As of June 30, 2005, 57 retirees were eligible for these benefits, and the cost of the benefits for the fiscal year ended June 30, 2005, totaled $185,591. NOTE 10 - EMPLOYEE RETIREMENT SYSTEMS MFPRSI The City contributes to the Municipal Fire and Police Retirement System of Iowa (the Plan), which is a cost-sharing, multiple-employer defined benefit pension plan administered by a Board of Trustees. The Plan provides retirement, disability, and death benefits which are established by state statute to plan members and beneficiaries. The Plan issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to Municipal Fire and Police Retirement System of Iowa, 2836 104'h Street, Des Moines, Iowa, 50322. (continued on next page) 60 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Plan members are required to contribute 9.35% of earnable compensation. The City was required to contribute 24.92% of earnable compensation in 2005, 20.48% of earnable compensation in 2004, and 17.00% of earnable compensation in 2003. Contribution requirements are established by state statute. The City's contributions to the Plan for the years ended June 30, 2005, 2004, and 2003, were $2,286,369, $1,782,373, and $1,425,337, respectively, which met the required minimum contribution for each year. IPERS The City contributes to the Iowa Public Employees Retirement System (IPERS) which is a cost-sharing multiple-employer defined benefit pension plan administered by the State of Iowa. IPERS provides retirement and death benefits which are established by state statute to plan members and beneficiaries. IPERS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to IPERS, P.O. Box 9117, Des Moines, Iowa, 50306-9117. Plan members are required to contribute 3.70% of their annual covered salary, and the City is required to contribute 5.75% of annual covered payroll. Contribution requirements are established by state statute. The City's contributions to IPERS for the years ended June 30, 2005, 2004, and 2003, were $979,669, $950,155, and $918,374, respectively, equal to the required contributions for each year. NOTE 11 - CONDUIT DEBT From time to time, the City has issued Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of June 30, 2005, there were three series of Industrial Revenue Bonds outstanding, with an aggregate principal amount payable of $6,200,000. NOTE 12 - LANDFILL CLOSURE AND POSTCLOSURE CARE State and federal laws and regulations require the Dubuque Metropolitan Area Solid Waste Agency to place a final cover on each cell of its landfill site when filled and to perform certain maintenance and monitoring functions at the site for thirty years after closure. Although closure and postclosure care costs will be paid only near or after the date that each cell stops accepting waste, the Agency reports a portion of these closure and postclosure care costs as an operating expense in each period based on landfill capacity used as of each statement of net assets date. The $2,605,333 reported as landfill closure and postclosure care liability at June 30, 2005, represents the cumulative amount reported to date based on the use of 96% of the estimated capacity of cells 3 and 4, the use of 75% of the estimated capacity of cells 5 and 6, and the use of 10% of the estimated capacity of cells 7 and 8. The Agency will recognize the remaining estimated cost of closure and postclosure care of $1,382,467 as the remaining capacity is filled. (continued on next page) 61 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 These amounts are based on what it would cost to perform all closure and postclosure care in 2005. The Agency expects to close cells 3 and 4 in 2007, cells 5 and 6 in 20 II, and cells 7 and 8 in 20 15. The Agency is making plans to construct a second generation of cells to extend the life of the landfill to 2050. Actual cost may be higher due to inflation, changes in technology, or changes in regulations. The agency has begun to accumulate resources to fund these costs in accordance with state and federal financial assurance requirements. At June 30, 2005, funds have been restricted for closure and postclosure costs in the amount of $3, 144,218, which exceeds the liability currently recognized. NOTE 13 - VISION IOWA GRANT The City, along with the Dubuque County Historical Society, has entered into a $40 million Vision Iowa Grant for the construction of the America's River Project. As part of the agreement, the City has issued $12,360,000 in general obligation bonds and is to receive approximately $20 million of the grant proceeds, with the Historical Society receiving the remaining proceeds. As of June 30, 2005, the City has received $19 million of the grant proceeds. The remaining grant proceeds were received in November of 2005. NOTE 14 - LEASES WHERE CITY IS LESSOR The City of Dubuque leases riverfront property, airport property (hangars and terminal space), farm land, parking areas, space for antennas on top of water towers, and concession areas under operating leases. The most significant lease is the lease of the greyhound racing and gambling facility and related parking area to the Dubuque Racing Association (DRA). The City's cost of the leased DRA assets total $10,144,771. The carrying amount of the assets at June 30, 2005 is $8,008,429, with $142,423 of depreciation expense during the year ended June 30, 2005. The DRA lease amount is based on the associations gross gambling receipts. During the year ended June 30, 2005, the DRA lease generated $6,586,477 in lease revenue. NOTE IS - RESTATEMENT OF BEGINNING BALANCES The restatement of the Govermnental Activities Net Assets was due to the inclusion of the Dog Track Depreciation Fund as a capital projects fund in prior year. The Dog Track Depreciation Fund is correctly shown as an agency fund in the current year. Govermnental Activities Net assets June 30, 2004, as previously reported Adjustment Effect of reporting Dog Track Depreciation Fund as an Agency Fund $ 275,117,693 (1J 75,906) Net assets June 30, 2004, as restated 1-273.241 787 (continued on next page) 62 CITY OF DUBUQUE, IOWA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 NOTE 16 - NEW GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STANDARDS The Governmental Accounting Standards Board (GASB) has issued six statements not yet implemented by the City of Dubuque. The statements, which might impact the City of Dubuque, are as follows: Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries issued November 2003, will be effective for the City for the fiscal year ending June 30, 2006. This statement establishes accounting and financial reporting standards for impairment of capital assets and also clarifies and establishes accounting requirements for insurance recoveries. Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans issued April 2004, will be effective for the City for the fiscal year ending June 30, 2008. This statement establishes uniform financial reporting standards for other postemployment benefit (OPEB) plans and supersedes the interim guidance included in Statement No. 26. This statement affects reporting by administrators or trustees of OPEB plan assets or by employers or sponsors that include OPEB plan assets as trust or agency funds in their financial reports. Statement No. 44, Economic Condition Reporting: The Statistical Section issued May 2004, will be effective for the City for the fiscal year ending June 30, 2006. This statement amends previous guidance regarding preparation of the statistical section for governments that issue a comprehensive annual financial report. Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions issued June 2004, will be effective for the City for the fiscal year ending June 30, 2009. This statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. Statement No. 46, Net Assets Restricted by Enabling Legislation issued December 2004, will be effective for the City for the fiscal year ending June 30, 2006. This statement clarifies the definition of a legally enforceable enabling legislation restriction. It also specifies the accounting and financial reporting requirements for the restrictions and for any changes in them. Statement No. 47, Accounting for Termination Benefits issued June 2005, establishes accounting standards for termination benefits. For tennination benefits provided through an existing defined benefit OPEB plan, the provisions of this statement should be implemented simultaneously with the requirements of Statement No. 45. For all other termination benefits, this statement is effective for the fiscal year ending June 30, 2006. The City's management has not yet determined the effect these Statements will have on the City's financial statements. 63 REQUIRED SUPPLEMENTARY INFORMATION CITY OF DUBUQUE, IOWA SCHEDULE OF RECEIPTS, EXPENDITURES, AND CHANGES IN BALANCES- BUDGET AND ACTUAL (BUDGETARY BASIS) GOVERNMENTAL FUNDS AND ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Final to Budgeted Amounts Actual Actual Original Final Variance RECEIPTS Property tax $ 15,713,796 $ 15,655,91 I $ 15,655,91 I $ 57,885 Tax increment financing 3,362,575 3,390,876 3,390,876 (28,301 ) Other city tax 9,575,795 9,809,863 9,809,863 (234,068) Licenses and pennits 2,885,271 2,817,834 2,887,834 (2,563) Use of money and property 14,748,129 I 1,896,877 12,555,193 2,192,936 Intergovernmental 19,089,741 22,297,156 44,973,094 (25,883,353) Charges for fees and service 17,504,032 20,303,342 20,826,968 (3,322,936) Special assessments 260,415 445,000 1,295,127 (1,034,712) Miscellaneous 2,795,157 5,314,093 5,409,727 (2,614,570) Total Receipts 85,934,911 91,930,952 116,804,593 (30,869,682) EXPENDITURES Public safety 18,121,165 17,835,933 18,315,879 194,714 Public works 8,649,805 8,103,282 9,238,461 588,656 Health and social services 658,776 739,708 883,594 224,818 Culture and recreation 7,023,186 7,703,052 7,624,647 601,461 Community and economic development 9,358,450 8,530,293 9,498,579 140,129 General government 4,344,465 3,985,166 4,445,618 101,153 Debt service 2,973,012 2,883,177 2,973,182 170 Capital projects 24,056,792 18,336,342 55,340,550 31,283,758 Business-type activities 18,633,672 25,325,091 43,416,661 24,782,989 Total Expenditures 93,819,323 93,442,044 151,737,171 57,917,848 EXCESS (DEFICIENCY) OF RECEIPTS OVER (UNDER) EXPENDITURES (7,884,412) (1,511,092) (34,932,578) 27,048,166 OTHER FINANCING SOURCES, NET 9,166,003 2,286,265 3,047,720 6,118,283 EXCESS (DEFICIENCY) OF RECEIPTS AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES 1,281,591 775,173 (31,884,858) 33,166,449 BALANCE, BEGINNING 44,964,228 44,964,228 44,964,228 BALANCE, ENDING $ 46,245,819 $ 45,739,401 $ 13,079,370 $ 33,166,449 64 CITY OF DUBUQUE, IOWA NOTES TO REQUIRED SUPPLEMENT ARY INFORMATION - BUDGETARY REPORTING FOR THE YEAR ENDED JUNE 30, 2005 The budgetary comparison is presented as Required Supplementary Information in accordance with Govermnent Accounting Standards Board Statement No. 41 for govermnents with significant budgetary perspective differences resulting from not being able to present budgetary comparisons for the General Fund and each major Special Revenue Fund. The Code of Iowa requires the adoption of an annual budget on or before March 15 of each year which becomes effective July 1 and constitutes the appropriation for each function specified therein until amended. The legal level of control (the level on which expenditures may not legally exceed appropriations) is the function level for the City as a whole, rather than at the fund or fund type level. The internal service fund or agency fund activity is not included in the adopted budget. The City's budget is prepared on the cash basis of accounting with an adjustment for accrued payroll following required public notice and hearings. After the initial annual budget is adopted, it may be amended for specified purposes. Budget amendments must be prepared and adopted in the same manner as the original budget. Management is not authorized to amend the budget or to make budgetary transfers between functions without the approval of the City Council. Management may make budgeting transfers between funds as long as the transfers are within the same function. The City has adopted a policy relative to budgetary control and amendment which provides for control at the line-item level and review of the current year's budget at the time the next year's budget is prepared. This usually results in amending the appropriations of all functions to adjust to current conditions. Supplemental appropriations are only provided when unanticipated revenues or budget surpluses become available. Appropriations as adopted lapse at the end of the fiscal year. The budget for the fiscal year ended June 30, 2005, was amended two times during the year to allow the City to increase function expenditures by $58,295,127, primarily for the carry-forward of unfinished capital improvement projects and expenditure of additional grants for capital improvements. The following is a reconciliation of the budgetary basis to the modified accrual basis of accounting: Modified Governmental Enterprise Accrual! Funds Funds Budgetary Accrual Accrual Moditied Basis Adjustments Basis Accrual Basis Accrual Basis Total Receipts/revenues $ 85,934,911 $ (69,075) $ 85,865,836 $ 70,034,398 $ 15,831,438 $ 85,865,836 Expenditures/expenses 93.819.323 (3.284.826) 90 534 497 73.882.031 16652466 90.534,497 Excess (deficiency) of receipts/revenues over under expenditures! expenses (7,884,412) 3,215,751 (4,668,661 ) (3,847,633) (821,028) (4,668,661 ) Other financing sources. net 9.166.003 (991647) 8.174.356 4266291 3.908.065 8174356 Net 1,281,591 2,224,104 3,505,695 418,658 3,087,037 3,505,695 Balance, beginning 44.964.228 105,444449 150,408.677 47050690 103.357.987 150,408677 Balance, ending 1- 46.245 81 9 $10766R5S1 $153914372 $ 47~469 148 $ 106445 024 $153914372 65 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. Road Use Tax Fund - This fund is used to account for state revenues allocated to the City for maintenance and improvement of City streets. Section VIII Housing Fund - This fund is used to account for the operations of federal Section VIII existing, voucher, and moderate rehabilitation projects. Tort Liability Fund - This fund is used to collect a special property tax levy which is then transferred to the General Fund. The General Fund accounts for the administration and payment of damage claims against the City. Special Assessments Fund - This fund is used to account for the financing of public improvements that are deemed to benefit primarily the properties against which special assessments are levied and to accumulate monies for the payment of principal and interest on the outstanding long-term debt service. Tax Increment Financing Fund - This fund is used to account for the receipt of property taxes, for the payment of projects within the tax increment financing district, and for the payment of remaining principal and interest costs on the tax increment financing districts' long-term debt service. Cable TV Fund - This fund is used to account for the monies and related costs as set forth in the cable franchise agreement between the City of Dubuque and the cable franchisee. Library Expendable Gifts Trust - This fund is used to account for contributions given to the library to be spent for specific purposes. DEBT SERVICE FUND The debt service fund is used to account for the accumulation of resources and payment of general obligation bond principal and interest from governmental resources and special assessment bond principal and interest from special assessment levies when the government is obligated in some manner for the payment. NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS FUNDS Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds. Street Construction Fund - This fund is used to account for the resources and costs related to street capital improvements. General Construction Fund - This fund is used to account for the resources and costs related to non- assignable capital improvements. Airport Construction Fund - This fund is used to account for the resources and costs related to airport capital improvements. Sales Tax Construction Fund - This fund is used to account for the resources and costs related to capital improvements financed through the local option sales tax. PERMANENT FUNDS Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting City's programs. Ella Lyons Peony Trail Trust Fund ~ This fund is used for dividends and maintenance cost related to the City Peony Trail, per trust agreement. Library Gifts Trust Fund - This fund is used to account for testamentary gifts to the City library. CITY OF DUBUQUE, IOWA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2005 Road Section VIII Tort Use Tax Housing Liability ASSETS Cash and pooled cash investments $ 1,957,953 $ 492,298 $ 18,457 Receivables Property tax Delinquent 4,097 Succeeding year 367,274 Accounts and other Special assessments Accrued interest 1,911 Notes 6,049 Intergovernmental 375,375 191,224 Restricted cash and pooled cash investments Total Assets $ 2,333,328 $ 691,482 $ 389,828 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 80,361 $ 33,022 $ Accrued payroll 40,597 9,983 Intergovernmental payable 41,775 Due to other funds Deferred revenue Succeeding year property tax 367,274 Other 191,224 537 Total Liabilities 120,958 276,004 367,811 FUND BALANCES Reserved for/by Encumbrances RI,265 9,165 Long-term notes receivable 5,049 Bond ordinance Franchise agreement Endowments Unreserved, undesignated, reported in Special revenue funds 2,131,105 401,264 22,017 Debt service fund Capital projects funds Permanent funds Total Fund Balances 2,212,370 415,478 22,017 Total Liabilities and Fund Balances $ 2,333,328 $ 691,482 $ 389,828 EXHIBIT A-I $ $ 3,032 $ 6,886 $ 9,820 $ 775 4,807 297,203 59,121 382,384 504,000 351 382,384 300,235 515,693 9,820 60,247 163,193 150,526 19,327 687,645 (291,878) 343,721 171,543 (56,320) 687,645 (141,352) 526,241 171,543 (56,320) $ 1,070,029 $ 158,883 $ 1,041,934 $ 181,363 $ 3,927 (continued) 66 CITY OF DUBUQUE, IOWA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2005 Capital Projects Street General Airport Construction Construction Construction ASSETS Cash and pooled cash investments $ 1,870,064 $ 7,531,327 $ 31,214 Receivables Property tax Delinquent Succeeding year Accounts and other Special assessments Accrued interest 12,348 57,890 Notes Intergovernmental 926,481 431,089 Restricted cash and pooled cash investments Total Assets $ 2,808,893 $ 7,589,217 $ 462,303 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 260,646 $ 59,787 $ 459,867 Accrued payroll Intergovennnental payable Due to other funds Deferred revenue Succeeding year property tax Other Total Liabilities 260,646 59,787 459,867 FUND BALANCES Reserved for/by Encumbrances 1,066,324 131,852 563,486 Long-term notes receivable Bond ordinance Franchise agreement Endowments Unreserved, undesignated, reported in Special revenue funds Debt service fund Capital projects funds 1,481,923 7,397,578 (561,050) Permanent funds Total Fund Balances 2,548,247 7,529,430 2,436 Total Liabilities and Fund Balances $ 2,808,893 $ 7,589,217 $ 462,303 EXHIBIT A-I (continued) Permanent Funds Sales Tax Construction Ella Lyons Peony Trail Trust Library Gifts Trust Total Nonmajor Governmental Funds $ 2,680,404 $ - $ - $ 16,408,143 6,776 367,274 11,464 426,739 18,114 455 111 109,804 6,049 219,591 2,143,760 76,177 19,276 265,306 $ 2,918,109 $ 76,632 $ 19,387 $ 19,745,315 $ 19,298 $ $ $ 933,494 55,387 41,775 356,324 367,274 1,078,496 19,298 2,832,750 25,801 2,041,086 5,049 150,526 19,327 10,391 12,000 22,391 3,465,417 (56,320) 2,873,010 11,191,461 66,241 7,387 73,628 2,898,811 76,632 19,387 16,912,565 $ 2,918,109 $ 76,632 $ 19,387 $ 19,745,315 67 CITY OF DUBUQUE, IOWA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Road Section VIII Tort Use Tax Housing Liability REVENUES Taxes $ $ $ 339,955 Special assessments Intergovernmental 4,791,782 4,586,615 Charges for services Investment earnings 15,621 Contributions Gaming Miscellaneous 203,650 26,552 Total Revenues 4,995,432 4,628,788 339,955 EXPENDITURES Current Public safety Public works 3,906,509 Health and social services Culture and recreation Conununity and economic development 4,655,784 General government 55,166 Debt service Capital projects Total Expenditures 3,961,675 4,655,784 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,033,757 (26,996) 339,955 OTHER FINANCING SOURCES (USES) Issuance of bonds Discount on bonds Transfers in Transfers out (5,056,406) (l00) (339,826) Total Other Financing Sources (Uses) (5,056,406) (l00) (339,826) NET CHANGE IN FUND BALANCES (4,022,649) (27 ,096) 129 FUND BALANCES, BEGINNING 6,235,019 442,574 21,888 FUND BALANCES, ENDING $ 2,212,370 $ 415,478 $ 22,017 EXHffiIT A-2 Special Revenue Police Tax Library and Fire Special Increment Expendable Debt Retirement Assessments Financing Cable TV Gifts Trust Service $ $ $ 3,362,736 $ $ $ 237,035 197,195 45,332 38,396 19,564 4,613 405 57,878 579,058 242,527 3,401,132 598,622 62,491 237,440 68 CITY OF DUBUQUE, IOWA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Capital Projects Street General Airport Construction Construction Construction REVENUES Taxes $ 2,088,938 $ $ Special assessments Intergovenunental 597,095 179,344 1,354,470 Charges for services 163,817 Investment earnings 50,687 124,055 725 Contributions 175,500 Gaming 15,000 Miscellaneous 65,807 35,622 Total Revenues 2,978,027 318,399 1,554,634 EXPENDITURES Current Public safety Public works Health and social services Culture and recreation Community and economic development Generalgovenunent 41,909 Debt service Capital projects 5,235,750 997,494 1,681,724 Total Expenditures 5,235,750 1,039,403 1,681,724 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,257,723) (721,004) (127,090) OTHER FINANCING SOURCES (USES) Issuance of bonds 7,265,000 Discount on bonds (58,487) Transfers in 869,156 520,000 46,724 Transfers out (184,347) (2,228,645) Total Other Financing Sources (Uses) 684,809 5,497,868 46,724 NET CHANGE IN FUND BALANCES (1,572,914) 4,776,864 (80,366) FUND BALANCES, BEGINNING 4,121,161 2,752,566 82,802 FUND BALANCES, ENDING $ 2,548,247 $ 7,529,430 $ 2,436 EXHffiIT A-2 (continued) Permanent Funds Total Ella Lyons Library Nonmajor Sales Tax Peony Trail Gifts Governmental Construction Trust Trust Funds $ 1,392,625 $ $ $ 7,421,289 197,195 11,509,306 163,817 76,742 2,262 479 378,881 233,378 15,000 910,689 1,469,367 2,262 479 20,829,555 82,768 3,917,002 23,736 856 45,203 5,485,911 718,031 2,914,825 311,872 8,226,840 311,872 856 21,414,316 1,157,495 1,406 479 (584,761) 7,277,665 (58,487) 49,951 2,862,190 (645,937) (9,602,549) (595,986) 478,819 561,509 1,406 479 (105,942) 2,337,302 75,226 18,908 17,018,507 $ 2,898,811 $ 76,632 $ 19,387 $ 16,912,565 69 NONMAJOR ENTERPRISE FUNDS Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises -- where the intent of the City Council is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or where the City Council has decided that periodic determination of net income is appropriate for accountability purposes. Refuse Collection Fund - This fund IS used to account for the operations of the City's refuse collection services. Transit System Fund - This fund is used to account for the operations of the City's bus and other transit services. CITY OF DUBUQUE, IOWA EXHIBIT B-1 COMBINING STATEMENT OF NET ASSETS NONMAJOR ENTERPRISE FUNDS JUNE 30, 2005 Total Other Refuse Transit Enterprise Collection System Funds ASSETS CURRENT ASSETS Cash and pooled cash investments $ 179,376 $ 338,310 $ 517,686 Receivables Accounts 243,034 27 ,563 270,597 Intergovermnental 580,773 580,773 Inventories 10,403 10,403 Total Current Assets 422,410 957,049 1,379,459 NONCURRENT ASSETS Capital assets Land 36,000 36,000 Buildings 1,893,590 1,893,590 Machinery and equipment 1,627,858 3,936,924 5,564,782 Construction in progress 4,878 4,878 Accumulated depreciation (1,071,831) (2,411,240) (3,483,071 ) Net Capital Assets 556,027 3,460,152 4,016,179 Total Assets 978,437 4,417,201 5,395,638 LIABILITIES CURRENT LIABILITIES Accounts payable 3,829 60,512 64,341 Accrued payroll 32,115 37,829 69,944 Accrued compensated absences 58,945 25,939 84,884 Total Liabilities 94,889 124,280 219,169 NET ASSETS Invested in capital assets, net of related debt 556,027 3,460,152 4,016,179 Unrestricted 327,521 832,769 1,160,290 Total Net Assets $ 883,548 $ 4,292,921 $ 5,176,469 70 CITY OF DUBUQUE, IOWA EXHffiIT B-2 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Total Other Refuse Transit Enterprise Collection System Funds OPERATING REVENUES Charges for sales and services $ 2,283,390 $ 329,996 $ 2,613,386 Other 287 59,110 59,397 Total Operating Revenues 2,283,677 389,106 2,672,783 OPERATING EXPENSES Employee expense 1,359,794 1,198,974 2,558,768 Utilities 842 53,056 53,898 Repairs and maintenance 182,028 284,079 466,107 Supplies and services 482,345 389,289 871,634 Insurance 21,669 42,057 63,726 Depreciation 156,122 359,098 515,220 Total Operating Expenses 2,202,800 2,326,553 4,529,353 OPERATING INCOME (LOSS) 80,877 (1,937,447) (1,856,570) NONOPERATING REVENUES (EXPENSES) Intergovernmental 1,185,741 1,185,741 Investment earnings 19,456 206 19,662 Loss on disposal of assets (355) (355) Total Nonoperating Revenues (Expenses) 19,456 1,185,592 1,205,048 INCOME (LOSS) BEFORE TRANSFERS 100,333 (751,855) (651,522) TRANSFERS IN 1,102,976 1,102,976 TRANSFERS OUT (496,709) (496,709) CHANGE IN NET ASSETS (396,376) 351,121 (45,255) NET ASSETS, BEGINNING 1,279,924 3,941,800 5,221,724 NET ASSETS, ENDING $ 883,548 $ 4,292,921 $ 5,176,469 71 CITY OF DUBUQUE, IOWA EXHmIT B-3 COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Total Other Refuse Transit Enterprise Collection System Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 2,302,889 $ 315,762 $ 2,618,651 Cash payments to suppliers for goods and services (694,102) (748,067) (1,442,169) Cash payments to employees for services (1,352,713) (1,187,965) (2,540,678) Other operating receipts 287 59,110 59,397 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 256,361 (1,561,160) (1,304,799) CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES Transfers from other funds 1,1 02,976 1,1 02,976 Transfers to other funds (496,709) (496,709) Payment of interfund balances (102,365) (102,365) Intergovernmental grant proceeds 1,171,789 1,171,789 NET CASH PROVIDED (USED) BY NONCAPIT AL FINANCING ACTIVITIES (496,709) 2,1 72,400 1,675,691 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (163,457) (273,136) (436,593) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 19,456 206 19,662 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (384,349) 338,310 (46,039) CASH AND CASH EQUIVALENTS, BEGINNING 563,725 563,725 CASH AND CASH EQUIVALENTS, ENDING $ 179,376 $ 338,310 $ 517,686 ( continued) 72 CITY OF DUBUQUE, IOWA COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2005 EXHmIT B-3 (continued) RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Depreciation Change in assets and liabilities (Increase) decrease in receivables Decrease in inventories Increase (decrease) in accounts payable Increase in accrued liabilities Total Adjustments NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Refuse Collection Total Other Enterprise Funds Transit System $ 80,877 $ (1,937,447) $ (1,856,570) 156,122 359,098 515,220 19,499 (14,234) 5,265 3,602 3,602 (7,218) 16,812 9,594 7,081 11 ,009 18,090 175,484 376,287 551,771 $ 256,361 $ (1,561,160) $ (1,304,799) 73 INTERNAL SERVICE FUNDS Internal service funds are used to account for the financing of goods or services provided by one department to other departments of the government and to other government units on a cost- reimbursement basis. General Service Fund - This fund is used to account for engineering, street, and general services supplied to other departments. Garage Service Fund - This fund is used to account for the maintenance and repair services for the City's automotive equipment. Stores/Printing Fund - This fund IS used to account for printing, supplies, and other servIces provided to other departments. Health Insurance Reserve Fund - This fund is used to account for the health insurance costs of the City. Workers' Compensation Reserve Fund - This fund IS used to account for the workers' compensation costs of the City. CITY OF DUBUQUE, IOWA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2005 General Garage Stores! Service Service Printing ASSETS CURRENT ASSETS Cash and pooled cash investments $ 13,283 $ $ 9,239 Receivables Accounts Accrued interest Inventories 85,448 4,333 Total Current Assets 13,283 85,448 13,572 NONCURRENT ASSETS Capital assets Machinery and equipment 125,239 Accumulated depreciation (78,953) Net Capital Assets 46,286 Total Assets 13,283 131,734 13,572 LIABILITIES CURRENT LIABILITIES Accounts payable 16,032 764 Accrued payroll 22,871 20,766 Due to other funds 38,311 Total Liabilities 22,871 75,109 764 NET ASSETS Invested in capital assets, net of related debt 46,286 Umestricted (9,588) 10,339 12,808 Total Net Assets (Deficit) $ (9,588) $ 56,625 $ 12,808 EXHffiIT C-l Health Workers' Insurance Compensation Reserve Reserve Total $ 1,034,626 $ 491,981 $ 1,549,129 108,271 108,271 5,461 3,312 8,773 89,781 1,148,358 495,293 1,755,954 125,239 (78,953) 46,286 1,148,358 495,293 1,802,240 809,868 491,537 1,318,201 43,637 38,311 1,400,149 809,868 491,537 338,490 $ 338,490 $ 3,756 3,756 $ 46,286 355,805 402,091 74 CITY OF DUBUQUE, lOW A COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2005 General Garage Stores! Service Service Printing OPERATING REVENUES Charges for sales and services $ 1,004,680 $ 1,226,974 $ 28,901 Other 448 Total Operating Revenues 1,004,680 1,227,422 28,901 OPERATING EXPENSES Employee expense 1,005,227 680,503 Utilities 19,290 Repairs and maintenance 11,887 Supplies and services 502,645 27,441 Insurance 8,794 Depreciation 9,067 Total Operating Expenses 1,005,227 1,232,186 27,441 OPERATING INCOME (LOSS) (547) (4,764) 1,460 NONOPERATING REVENUES Investment earnings INCOME (LOSS) BEFORE TRANSFERS (547) (4,764) 1,460 TRANSFERS OUT (1,240) CHANGE IN NET ASSETS (547) (6,004) 1,460 NET ASSETS (DEFICIT), BEGINNING (9,041) 62,629 11,348 NET ASSETS (DEFICIT), ENDING $ (9,588) $ 56,625 $ 12,808 EXHIBIT C-2 Health Workers' Insurance Compensation Reserve Reserve Total $ 5,034,847 $ 302,920 $ 7,598,322 124,832 110 125,390 5,159,679 303,030 7,723,712 1,685,730 19,290 11,887 5,226,587 581,340 6,338,013 303,314 24,189 336,297 9,067 5,529,901 605,529 8,400,284 (370,222) (302,499) (676,572) 25,160 15,530 40,690 (345,062) (286,969) (635,882) (1,240) (345,062) (286,969) (637,122) 683,552 290,725 1,039,213 $ 338,490 $ 3,756 $ 402,091 75 CITY OF DUBUQUE, IOWA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2005 General Garage Stores! Service Service Printing CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,004,680 $ 1,226,974 $ 28,901 Cash payments to suppliers for goods and services (594,314) (24,097) Cash payments to employees for services (1,001,008) (675,344) Other operating receipts 448 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 3,672 (42,236) 4,804 CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES Transfers to other funds (I ,240) Proceeds from interfund balances 38,311 NET CASH PROVIDED BY NONCAPIT AL FINANCING ACTIVITIES 37,071 CASH FLOWS FROM INVESTING ACTIVITIES Interest received NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,672 (5,165) 4,804 CASH AND CASH EQUIVALENTS, BEGINNING 9,611 5,165 4,435 CASH AND CASH EQUIVALENTS, ENDING $ 13,283 $ $ 9,239 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ (547) $ (4,764) $ 1,460 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Depreciation 9,067 Change in assets and liabilities Decrease in receivables (increase) decrease in inventories (54,233) 2,861 Increase in accounts payable 2,535 483 Increase in accrued liabilities 4,219 5,159 Total Adjustments 4,219 (37,472) 3,344 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 3,672 $ (42,236) $ 4,804 EXHIBIT C.3 Health Workers' Insurance Compensation Reserve Reserve Total $ 5,062,850 $ 302,920 $ 7,626,325 (5,428,287) (422,312) (6,469,010) (1,676,352) 124,832 110 125,390 (240,605) (119,282) (393,647) (1,240) 38,311 37,071 26,617 15,342 41,959 (213,988) (103,940) (314,617) 1,248,614 $ 1,034,626 $ 595,921 1,863,746 491,981 $ 1,549,129 $ (370,222) $ (302,499) $ (676,572) 9,067 28,003 28,003 (51,372) 101,614 183,217 287,849 9,378 129,617 183,217 282,925 $ (240,605) $ (119,282) $ (393,647) 76 AGENCY FUND The agency fund is used to report resources held by the City in a purely custodial capacity. Dog Track Depreciation Fund - This fund is used to account for the resources held for improvements at the greyhound racing facility. CITY OF DUBUQUE, IOWA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND FOR THE YEAR ENDED JUNE 30, 2005 EXHffiIT D-l Balance Balance Beginning End of Year Additions Deductions of Year DOG TRACK DEPRECIATION FUND ASSETS Cash and pooled cash investments $ 1,169,932 $ 141,585 $ 633,507 $ 678,010 Accrued interest 5,974 19,404 21,584 3,794 Total Assets $ 1,175,906 $ 160,989 $ 655,091 $ 681,804 LIABILITIES Due to other agency $ 1,175,906 $ 160,989 $ 655,091 $ 681,804 77 CITY OF DUBUQUE, IOWA GOVERNMENT-WIDE EXPENSES BY FUNCTION LAST THREE FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Health and Community Fiscal Public Public Social Culture and and Economic General Year Safetv Works Services Recreation Development Government 2003 (I) $ 15,817 $ 14,454 $ 816 $ 7,367 $ 9,432 $ 4,362 2004 16,605 12,847 1,291 7,849 12,663 3,773 2005 18,637 17,089 654 8,474 9,680 4,048 (I) Fiscal year 2003 was the first year of reporting the City's operation on a government-wide basis. Table 1 Interest on Sewage America's Long-Term Disposal Water Stormwater Parking River Refuse Transit Debt Works Utility Utilitv Facilities Proiect Collection System Total $ 1,605 $ 4,656 $ 4,214 $ $ 1,445 $ 415 $ 2,141 $ 2,155 $ 68,879 1,249 5,282 4,369 1,185 1,655 1,065 2,238 2,257 74,328 1,298 4,656 4,233 1,115 1,604 516 2,203 2,327 76,534 78 CITY OF DUBUQUE, IOWA GOVERNMENT-WIDE REVENUES LAST THREE FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 2 Operating Capital Unrestricted Fiscal Charges for Grants and Grants and Investment Year Services Contributions Contributions Taxes Gaming Earnings 2003(1)$ 19,894 $ 14,558 $ 15,386 $ 26,010 $ 9,540 $ 2,071 2004 23,117 13,023 16,161 27,869 11,631 679 2005 22,411 15,255 9,950 29,424 11,694 1,513 Gain on Sale of Fiscal Capital Year Assets Other Total 2003 (1)$ $ 1,228 $ 88,687 2004 175 639 93,294 2005 171 561 90,979 (I) Fiscal year 2003 was the first year ofreporting the City's operation on a government-wide basis. 79 CITY OF DUBUQUE, IOWA GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION (1) LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 3 Home and Fiscal Community Human Community Policy and Debt Year Protection Develooment Enviromnent Administration Service Total 1996 $ 12,202 $ 5,508 $ 10,060 $ 3,252 $ 3,750 $ 34,772 1997 12,082 5,856 11,050 3,891 3,492 36,371 1998 12,827 6,200 10,380 4,386 2,898 36,691 1999 13,343 6,599 15,136 3,981 2,747 41,806 2000 13,907 7,493 14,983 4,938 2,312 43,633 2001 15,064 8,653 16,410 5,442 2,882 48,451 2002 16,386 8,520 14,361 4,986 2,637 46,890 Community Health and and Economic General Fiscal Public Public Social Culture and Devel- Govern- Debt Year Safety Works Services Recreation ooment ment Service Total 2003(2)$ 15,279 $11,860 $ 749 $ 7,514 $ 9,011 $ 3,813 $ 3,678 $ 51,904 2004 16,764 10,724 722 7,470 11,924 4,227 3,423 55,254 2005 18,652 21,301 662 8,180 9,825 3,981 3,010 65,611 (I) Includes general, special revenue, and debt service funds. (2) The State of Iowa required cities to change from programs to functions during 2003. 80 CITY OF DUBUQUE, IOWA GENERAL GOVERNMENTAL REVENUES BY SOURCE (1) LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 4 Special Licenses Inter- Charges Fines Invest- Fiscal Assess- and Govern- for and ment Contri- Year Taxes ments (2) Permits mental Services Forfeits Earnings butions (2) 1996 $ 21,620 $ $ 717 $ 9,253 $ 5,491 $ 350 $ 1,686 $ 1997 24,772 507 11,454 6,637 358 1,596 1998 24,848 507 10,351 7,106 371 1,989 1999 25,629 580 10,375 7,843 337 1,948 2000 25,562 613 12,140 7,882 341 1,813 2001 26,800 576 13,769 8,127 369 2,720 2002 26,303 703 14,124 8,847 410 1,980 2003 22,263 561 754 14,398 5,134 466 1,465 385 2004 24,309 717 1,063 14,365 5,517 242 412 345 2005 25,949 197 1,079 16,239 5,755 268 942 131 Fiscal Year Gaming (3) Miscellaneous Total 1996 $ $ 765 $ 39,882 1997 1,487 46,811 1998 1,619 46,791 1999 1,926 48,638 2000 950 49,301 2001 1,988 54,349 2002 1,526 53,893 2003 9,405 1,107 55,938 2004 11,506 1,008 59,484 2005 11,679 1,472 63,711 (1) Includes general, special revenue, and debt service funds. (2) Special assessments and contribution revenues were included in miscellaneous revenue in years prior to 2003. (3) Gaming revenue was included in taxes and charges for services in years prior to 2003. 81 CITY OF DUBUQUE, IOWA GENERAL GOVERNMENTAL TAX REVENUES BY SOURCE (1) LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 4A Money and State Credits Mobile Replacement Hotel Utility Fiscal Property Replacement Homes Personal Prop. Sales Motel Franchise Year Tax (2) Tax Tax Exemotion Tax Tax Fees Total 1996 $ 14,928 $ 40 $ 32 $ 472 $ 5,318 $ 830 $ $ 21,620 1997 18,454 15 33 492 5,373 784 25,151 1998 18,562 42 37 494 4,856 857 24,848 1999 19,890 44 33 492 4,206 964 25,629 2000 20,519 45 32 492 3,489 985 25,562 2001 21,615 45 31 490 3,624 995 26,800 2002 21,020 45 31 459 3,797 951 26,303 2003 17,528 46 29 443 3,246 970 22,263 2004 18,510 24 29 17 3,553 1,314 862 24,309 2005 19,704 23 30 16 3,482 1,384 1,310 25,949 (I) Includes general, special revenue, and debt service funds. (2) Includes gaming revenues in years prior to 2003. 82 CITY OF DUBUQUE, IOWA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 5 Ratio of Total Tax Percent of Delinquent Collections Fiscal Total Tax Current Tax Current Taxes Tax Total Tax to Total Year Levy (1) Collections Collected Collections Collections (2) Tax Levy 1996 $ 15,182 $ 14,832 97.7% $ 118 $ 14,950 98.5% 1997 15,299 15,025 98.2 132 15,157 99.1 1998 15,538 15,426 99.3 172 15,598 100.4 1999 16,587 16,528 99.6 121 16,649 100.4 2000 16,497 16,380 99.3 115 16,495 99.9 2001 17,163 16,662 97.1 120 16,782 97.8 2002 17,147 16,941 98.8 127 17,068 99.5 2003 15,328 15,215 99.3 216 15,432 100.1 2004 16,208 15,937 98.3 II 15,948 98.4 2005 16,408 16,383 99.8 20 16,403 99.9 Ratio of Outstanding Delinquent Fiscal Delinquent Taxes to Total Year Taxes Tax Levy 1996 $ 232 1.5% 1997 274 1.8 1998 138 0.9 1999 129 0.8 2000 138 0.8 2001 150 0.9 2002 238 1.4 2003 130 0.8 2004 207 1.3 2005 196 1.2 (1) Includes tax increment levy. (2) Includes taxes collected in June by the County but not received by the City until July. 83 CITY OF DUBUQUE, IOWA TAXABLE AND ASSESSED VALUE OF PROPERTY LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 6 Ratio of Total Taxable Real Property Exemptions Total Value to Total Fiscal Taxable Assessed Real Taxable Assessed Assessed Year Value Value Property Value Value Value 1996 $ 1,151,187 $ 1,487,208 $ 10,467 $ 1,140,720 $ 1,487,208 76.70% 1997 1,23 7,246 1,750,830 10,405 1,226,841 1,750,830 70.07 1998 1,259,649 1,776,342 10,218 1,249,431 1,776,342 70.34 1999 1,354,421 1,987,466 10,319 1,344,1 02 1,987,466 67.62 2000 1,389,352 1,990,428 10,018 1,379,334 1,990,428 69.30 2001 1,377,518 2,014,897 10,194 1,367,324 2,014,897 67.86 2002 1,429,025 2,050,019 10,097 1,418,928 2,050,019 69.21 2003 1,540,206 2,317,926 10,141 1,530,065 2,317,926 66.01 2004 1,572,776 2,350,317 9,694 1,563,082 2,350,317 66.51 2005 1,666,033 2,575,400 9,599 1,656,434 2,575,400 64.32 84 CITY OF DUBUQUE, IOWA PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS TAX RATES PER $1,000 ASSESSED VALUE (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 7 Board Ratio of Dubuque of Education Dubuque Fiscal Dubuque School and Area I Dubuque City Year City District Independents Voc. Tech County Total to Total 1996 $11.78215 $ 13.70668 $ .74972 $ .49360 $ 6.13169 $ 32.86384 35.85% 1997 11.38153 12.39251 .70548 .50348 5.87236 30.85536 36.89 1998 11.40112 12.03974 .52563 .49951 5.54113 30.00713 37.99 1999 11.07340 11.98226 .50368 .48592 5.52169 29.56695 37.45 2000 10.71601 11.53111 .56187 .55128 5.54016 28.90043 37.08 2001 11.06712 12.17096 .50467 .56995 5.60750 29.92020 36.99 2002 10.76080 13 .50444 .54806 .57072 5.73669 31.12071 34.58 2003 10.21200 13.73882 .55492 .57507 5.60064 30.68145 33.28 2004 10.27303 13.84768 .61686 .57791 5.59515 30.91063 33.23 2005 10.07200 14.27491 .57269 .59804 6.08923 31.60687 31.87 Source: Dubuque County Auditor's Office. 85 CITY OF DUBUQUE, IOWA PRINCIPAL TAXPAYERS PAYABLE FISCAL YEAR 2005 (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 8 2005 Percentage of Assessed Total Assessed Taxpaver Type of Business Valuation Valuation Kennedy Mall Shopping Center $ 23,834 .93% Medical Associates Realty Health Services 17,880 .69 Otto A LLC Manufacturing 17,500 .68 Nordstrom, Inc. Warehouse Distributor 16,723 .65 American Trust and Savings Bank Bank 10,531 .41 Platinum Holdings Hotel and Waterpark 10,162 .39 Lexington Dubuque Publishing Distribution Facility 9,815 .38 Asbury Dubuque Strip Mall 9,095 .35 Minglewood Limited Partnership Pension Services 9,043 .35 U.S. West Communications Telecommunications 8.783 .34 Totals $ 133,366 sJTIi> Source: Dubuque County Auditor's Office. AlIiant Energy Power Company and Aquila Natural Gas Company are not on the above schedule. Effective 200 I utility companies pay excise tax on revenue to the state rather than property taxes. 86 CITY OF DUBUQUE, IOWA SPECIAL ASSESSMENT BILLINGS AND COLLECTIONS LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 9 Fiscal Year Special Assessment Billings Special Assessment Collected (1) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 $ 33 41 73 67 67 82 87 89 86 71 $ 147 378 179 644 203 698 657 558 793 224 (1) Includes prepayments. 87 CITY OF DUBUQUE, IOWA COMPUTATION OF LEGAL DEBT MARGIN JUNE 30, 2005 (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 10 Actual Valuations $ 2,662,973 Legal debt margin: Debt limitation - 5% of actual valuations $ 133,149 Debt applicable to limitation: Total bonded debt $ 38,327 Less: Revenue bonds 11.150) Total debt applicable to limitation * 37.177 Legal debt margin $ 95,9L2 * Includes general obligation bonds, tax increment financing bonds, notes payable, and lease obligations paid from general fund. 88 CITY OF DUBUQUE, IOWA RATIO OF NET GENERAL OBLIGATION BONDED DEBT TO TAXABLE VALUE AND NET GENERAL OBLIGATION BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS (UNAUDITED) Table 11 Ratio of Net Bonded Net Net Debt to Bonded Fiscal Population Taxable Bonded Taxable Debt Per Year (1)- Value (2) - Debt (3) - Value Capita 1996 59 $1,140,720 $ 14,200 1.24% $ 241 1997 59 1,226,841 11,755 0.96 199 1998 59 1,249,431 10,795 0.86 183 1999 56 1,344, I 02 8,545 0.64 153 2000 56 1,379,334 10,511 0.76 188 2001 58 1,367,324 9,005 0.66 155 2002 58 1,418,928 20,945 1.48 361 2003 58 1,530,065 19,865 1.30 343 2004 58 1,563,082 19,010 1.22 328 2005 58 1,656,434 24,960 1.51 430 - Amounts expressed in thousands. (I) U.S. Census Bureau. (2) From Table 6. (3) From Table 13. Amount does not include revenue bonds. 89 CITY OF DUBUQUE, IOWA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL OBLIGATION BONDED DEBT TO TOTAL GENERAL GOVERNMENTAL EXPENDITURES LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 12 Total Ratio of Total General Debt Service to Fiscal Debt Governmental General Governmental Year Principal Interest (] ) Service Expenditures (2) Expenditures 1996 $ 2,410 $ 757 $ 3,167 $ 34,772 9.11% 1997 2,295 662 2,957 36,371 8.13 1998 2,163 554 2,717 36,691 7.41 1999 2,073 440 2,513 41,806 6.01 2000 1,670 320 1,990 43,633 4.56 2001 1,755 406 2,161 48,451 4.46 2002 1,420 453 1,873 46,890 3.99 2003 1,083 1,248 2,331 51,904 4.49 2004 855 929 1,784 55,254 3.23 2005 1,315 903 2,218 65,611 3.38 (1) Excludes bond issuance and other costs. (2) Includes general, special revenue, and debt service funds. 90 CITY OF DUBUQUE, IOWA COMPUTATION OF DffiECT AND OVERLAPPING BONDED DEBT GENERAL OBLIGATION BONDS JUNE 30, 2005 (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 13 Net General Percentage Obligation Applicable Amount Bonded Debt to Applicable Jurisdiction Outstanding Government to Government Direct City of Dubuque $ 24,960 (1) 100.00% $ 24,960 Total $ 2A 960 $ 24,960 (1) Excluding general obligation bonds reported in the enterprise funds. 91 CITY OF DUBUQUE, IOWA REVENUE BOND COVERAGE PARKING BONDS LAST TEN FISCAL YEARS (AMOUNTS EXPRESSED IN THOUSANDS) (UNAUDITED) Table 14 Net Revenue Available Fiscal Gross Operating For Debt Debt Service Requirements Year Revenues ( 1 ) Exoenses (2) Service Princioal Interest Total Coverage (3) 1996 $ 1,152 $ 631 $ 521 $ 105 $ 198 $ 303 1.72 1997 1,175 551 624 110 191 301 2.07 1998 1,268 570 698 150 195 345 2.02 1999 1,303 584 719 155 98 253 2.84 2000 1,278 582 696 165 93 258 2.70 2001 1,552 717 835 170 86 256 3.26 2002 1,452 737 715 180 79 259 2.76 2003 1,484 847 636 190 71 261 2.44 2004 1,659 971 688 200 63 263 2.62 2005 1,934 960 974 210 54 264 3.69 (1) Total revenues (iucluding interest). (2) Total operating expenses exclusive of depreciation. (3) Coverage is computed by dividing net revenue available for debt service by debt service requirements. Bond ordinance requires 1.3 minimum coverage. 92 CITY OF DUBUQUE, IOWA PROPERTY VALUE, CONSTRUCTION PERMITS, AND BANK DEPOSITS LAST TEN FISCAL YEARS (UNAUDITED) Table 15 Property Value' Construction Permits Bank Deposits (2) Number Fiscal of Calendar Total Year Other(3) Residential Total (1) Permits Value' Year Deposits' 1996 $ 456,075 $ 1,031,133 $ 1,487,208 4,190 . $ 75,569 1995 $ 902,659 1997 519,104 1,231,726 1,750,830 2,039 34,950 1996 901,724 1998 521,327 1,255,015 1,776,342 1,572 35,647 1997 701,4020 1999 589,760 1,397,706 1,987,466 1,500 58,309 1998 782,248 2000 586,318 1,404,110 1,990,428 1,502 78,500 1999 842,165 2001 593,085 1,421,812 2,014,897 1,448 72,073 2000 934,240 2002 610,673 1,439,346 2,050,019 1,338 115,398 2001 1,019,491 2003 738,823 1,579,103 2,317,926 1,363 88,769 2002 1,078,409 2004 750,853 1,599,464 2,350,317 1,399 110,591 2003 1,231,045 2005 821,772 1,753,628 2,575,400 1,600 162,184 2004 1,322,225 . Amounts expressed in thousands. (1) Assessed value from Table 6. (2) Source: Federal Deposit Insurance Corporation. (3) Commercial, Industrial, and Miscellaneous Values (excludes utilities). . Hail and wind storm in August 1994, caused extensive roof and siding damage throughout the City, greatly increasing permit activity in 1994, 1995, and 1996. o In 1998, two major banks in the City were consolidated into larger bank corporations; deposits were recorded only at source of charter. 93 CITY OF DUBUQUE, IOWA DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) Table 16 Public Fiscal Per Capita Median School Unemployment Year Popnlation (I) Income (2) Age (!) Enrollment (3) Rate (4) 1996 59,084 $ 22,006 34 10,065 4.8% 1997 59,084 22,914 34 9,985 4.7 1998 59,084 24,362 34 9,857 3.1 1999 56,467 24,435 34 9,735 3.1 2000 56,467 25,691 34 9,697 2.7 2001 57,686 26,309 34 9,680 3.4 2002 57,686 26,760 37 9,906 3.6 2003 57,686 27,241 37 10,122 3.7 2004 57,686 . 37 10,428 4.8 2005 57,686 . 37 10,547 4.8 Data Sources: (1) Bureau of Census; 2000 Census. (2) U.S. Department of Commerce, Bureau of Economic Analysis. (3) Dubuque Community School District (4) Iowa Department of Employment Services. . Unavailable at report date. 94 CITY OF DUBUQUE, IOWA SCHEDULE OF INSURANCE IN FORCE JUNE 30, 2005 Insurer LIABILITY INSURANCE Iowa Connnunities Assurance Pool Iowa Connnunities Assurance Pool Iowa Connnunities Assurance Pool Iowa Connnunities Assurance Pool Iowa Connnunities Assurance Pool American International Speciality Lines Insurance Co. ACE USA United National Insurance Co. Cincinnati Insurance Companies Mount Vernon Fire Insurance Co. Policv Number IP041901414000003 IP035901414000003 IPOl590I4I4000003 IP039901414000003 IP040891414000003 CP0l233294 AAPN 00978632 LPO 0004225 NPL 2441713 CL2231997C Illinois Casualty Insurance Company LL 81285 Expiration Date 7/I 105 7/1/05 7/1/05 7/1/05 7/1/05 7/27107 7/1/05 7/1/05 8/1/07 4/16/06 5/1/06 Details of Coverage Municipal General Liability Includes EMT's and Ambulance Service Municipal Auto Liability Includes Transit Liability Comprehensive & Collision Public Official Liability Police Professional Lead Pollution Liability Airport Liability Public Officials Liability- Airport Med/Professional Liability Dram Shop Liability - Bunker Hill Dram Shop Liability - McAleece Park Table 17 Annual Liability Limits Prerni urn $ 5,000,000 Each Occurrence $ 470,009* 100,000 Aggregate Per Year 10,000 Deductible Per Occurrence 5,000,000 Each Accident 100,000 Aggregate 10,000 Deductible Per Accident Per Scheduled Motor Vehicles 5,000,000 Each Claim 100,000 Aggregate 10,000 Deductible Per Claim 5,000,000 Per Person! Agg. 100,000 Aggregate 10,000 Deductible Per Claim 1,000,000 Each Occurrence 8,125 2,000,000 Aggregate 2,500 Deductible 20,000,000 Aggregate Limit 46,400 2,500 Deductible 15,000 Deductible Aggregate 5,000,000 Each Occurrence/Aggregate 10,990 7,500 Deductible 1,000,000 Each Person 226 3,000,000 Total Limit 3,000,000 Each Common Cause/Aggregate 4,495 1,000,000 Each Common Cause 889 (continued) * Includes the premiums for all policies of the Iowa Communities Assurance Pool. 95 CITY OF DUBUQUE, IOWA SCHEDULE OF INSURANCE IN FORCE JUNE 30, 2005 Insurer Policy Number PROPERTY INSURANCE Cincinnati Insurance Co. CAP 580 1764 CRIME INSURANCE Allied Insurance BD7900575274 Fidelity and Deposit Company of Maryland CCP 006126200 BOILER INSURANCE Cincinnati Insurance Co. BEP 264 96 23 Expiration Date 7/1/05 7/1/05 7/1/05 7/1/05 Details of Coverage Comprehensive Business Policy Public Official Bond Public Official Bond Boiler & Machinery Table 17 (continued) Arumal Liability Limits Premium $ 180,600,328 Building & Contents $ 233,428 10,000 Deductible Per Occurrence 20,000,000 Earthquake 996,670 Business Interruption 2,283,000 EDP Equipment 3,425,154 Mobile Equipment 312,917 Camera Equipment 252,560 Paintings 3,264,366 Ordinauce/Law 100,000 All Employees 5,880 900,000 City Mauager 5,341 900,000 Finance Director 900,000 Assistant Finance Director 900,000 Budget Director 2,500,000 Per Accident 52,084 5,000 Deductible 96 CITY OF DUBUQUE, IOWA MISCELLANEOUS STATISTICS JUNE 30, 2005 (UNAUDITED) Table 18 Date of Incorporation Form of Government Population - 2000 Census Number of employees: Full Time Part Time/Seasonal 1837 Council/Manager - Ward 57,686 489 243 Area in square miles 29.4 City of Dubuque facilities and services: Miles of streets Number of street lights Number of traffic signals Culture and Recreation: Parks Park acreage Golf courses Swimming Pools Civic Center Fire Protection: Number of stations Number of fire personnel and officers Police Protection: Number of stations Number of police personnel and officers Sewerage System: Miles of sanitary sewers Miles of storm sewers Number of treatment plants Number of service connections Daily average treatment in gallons Maximum daily capacity of treatment plant in gallons Water System: Miles of water mains Number of service connections Number of fire hydrants Daily average consumption in gallons Maximum daily capacity of plant in gallons Public Transit System 290.2 1,631 III 44 855 I 2 I 6 90 I 101 170 152.1 I 21,000 8,500,000 13,500,000 312 21,016 2,770 7,720,000 18,000,000 Vehicles - 27 Facilities and services not included in the reporting entity: Education: Number of elementary schools Number of secondary schools Number of colleges Number of universities Number of theological seminaries Hospitals: Number of hospitals Number of licensed patient beds 17 8 4 I 2 2 421 97 ~~>>~ EideBailly:" ~ epAs & BUSINESS ADVISORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the City Council City of Dubuque, Iowa We have audited the financial statements of the govermnental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Dubuque, Iowa, as of and for the year ended June 30, 2005, which collectively comprise the City's basic financial statements and have issued our report thereon dated November 8, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the nonnal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we pertonned tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, non-compliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of non-compliance or other matters that are required to be reported under Government Auditing Standards. However, we noted a certain immaterial instance of non- compliance that is described in Part III of the accompanying Schedule of Findings and Questioned Costs. Comments involving statutory and other legal matters about the City's operations for the year ended June 30, 2005, are based exclusively on knowledge obtained from procedures performed during our audit of the financial statements of the City. Since our audit was based on tests and samples, not all transactions that might have had an impact on the comments were necessarily audited. The comments involving statutory and other legal matters are not intended to constitute legal interpretations of those statutes. PEOPLE. PRINCIPLES. POSSIBILITIES. www.eidebailly.com 3999 Pennsylvania Ave., Suite lOa I Dubuque, lowo 52002-2639 I Phone 563.556.1790 I Fox 563.557.7842. EOE 98 We noted certain matters that we reported to management of the City of Dubuque, Iowa, in a separate letter dated November 8, 2005. This report, a public record by law, is intended solely for the information and use of the officials, employees, and citizens of the City of Dubuque, Iowa, and other parties to whom the City of Dubuque, Iowa, may report, including federal awarding agencies and pass-through entities. This report is not intended to be and should not be used by anyone other than these specified parties. We would like to acknowledge the many courtesies and assistance extended to us by personnel of the City of Dubuque, Iowa, during the course of our audit. Should you have any questions concerning any of the above matters, we shall be pleased to discuss them with you at your convenience. ~~Ad' Dubuque, Iowa November 8, 2005 99 ~~>>~ EideBailly,,, ~ ePAs & BUSINESS ADVISORS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CmCULAR A- 133 To the Honorable Mayor and Members ofthe City Council City of Dubuque, Iowa Comoliance We have audited the compliance of the City of Dubuque, Iowa, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-I33 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2005. The City's major federal programs are identified in the summary of the independent auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether non-compliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City of Dubuque, Iowa, complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2005. However, the results of our auditing procedures disclosed an instance of noncompliance with those requirements that is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying Schedule of Findings and Questioned Costs as item I1-A-05. Internal Control Over Comoliance The management of the City of Dubuque, Iowa, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A-133. PEOPLE. PRINCIPLES. POSSIBILITIES. www.eidebailly.com 3999 Pennsylvania Ave., Suite 100 I Dubuque, Iowa 52002-2639 I Phone 563.556.1790 I Fax 563.557.7842. EOE 100 Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might he material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that non-compliance with applicable requirements of laws, regulations, contracts, and grants caused by error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report, a public record by law, is intended solely for the information and use of the officials, employees, and citizens of the City of Dubuque, Iowa, and other parties to whom the City of Dubuque, Iowa, may report, including federal awarding agencies and pass-through entities. This report is not intended to be and should not be used by anyone other than these specified parties. ~~.,(d' Dubuque, Iowa November 8, 2005 101 CITY OF DUBUQUE, IOWA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2005 CFDA Agency or Program Grantor/Program Number Pass-Through Number Expenditures Direct: Department of Commerce: Grants for Public Works and Economic Development Facilities 11.300 05-01-03816 $ 237.403 Department of Housing and Urban Development: Community Development Block Grants/ Entitlement Grants 14.218 B-XX-MC-19-0004 1.509.419 Community Development Block Grants/ Technical Assistance Program 14.227 SPG-1A-055PG23 27.000 Community Development Block Grants/ Brownfields Economic Development Initiative 14.246 B-02-SP-IA-0178 420.636 Fair Housing Assistance Program - State and Local 14.401 FF207K027006 47 .880 Lower Income Housing Assistance Program - Section 8 Moderate Rehabilitation 14.856 KC-9004MR-002 18,230 Lower Income Housing Assistance Program - Section 8 Moderate Rehabilitation 14.856 KC-9004MR-001 8,840 Lower Income Housing Assistance Program - Section 8 Moderate Rehabilitation 14.856 KC-9004MR-005 262.064 289.134 Section 8 Housing Choice Vouchers 14.871 KC-9004V 4.294.417 Lead-Based Paint Hazard Control in Privately-Owned Housing 14.900 IALHB0243-03 1.007.135 Department of Justice: Local Law Enforcement Block Grants Program 16.592 2004-LB-BX-0641 11.958 Bulletproof Vest Partnership Program 16.607 2003BUBX030 3.613 ( continued) 102 CITY OF DUBUQUE, IOWA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2005 CFDA Agency or Program Grantor/Program Number Pass-Through Number Expenditures Direct: (continued) Department of Justice: (continued) Public Safety Partnership and Community Policing Grants 16.710 200lSHWX0414 $ 28,904 Public Safety Partnership and Community Policing Grants 16.710 2000SHWX0668 22,426 5L330 Federal Drug Task Force Grant NA WC IAN 036 1,627 Department of Transportation: Airport Improvement Program 20.106 3-19-0028-34 65,627 Airport Improvement Program 20.106 3-19-0028-33 51,026 Airport Improvement Program 20.106 3-19-0028-36 433,242 Airport Improvement Program 20.106 3-19-0028-35 24,219 Airport Improvement Program 20.106 3-19-0028-37 626,983 1.201,097 Federal Transit - Capital Investment Grants 20.500 IA-90-X262 139,221 Federal Transit - Capital Investment Grants 20.500 IA-90-X252 162,423 301,644 Federal Transit - Formula Grants 20.507 IA-90-X282 663.188 Payments for Small Community Air Service Development 20.930 OST -2003-15065-148 518,335 Environmental Protection Agency: Brownfields Assessment and Cleanup Cooperative Agreements 66.818 BP98719701 112,205 Department of Homeland Security: Assistance to Firefighters Grant 97.044 EMW-2004-FG-04732 30.1 00 Total Direct 10,728.121 Indirect: Department of Justice: Governor's Office of Drug Control Policy and Dubuque County, Iowa: Violence Against Women Formula Grants 16,588 VW 04 7328 2,422 Public Safety Partnership and Community Policing Grants 16.710 2003CKW0467 2,585 (continued) 103 CITY OF DUBUQUE, IOWA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2005 CFDA Agency or Program Grantor/Program Number Pass-Through Number Expenditures Indirect: (continued) Department of Transportation: Iowa Department of Transportation: Highway Planning and Construction 20.205 STP-U-2100(621)- -70-31 $ 597,095 Federal Transit - Capital Investment Grants 20.500 03-0095-210-02 8,201 Governor's Traffic Safety Bureau: State and Community Highway Safety 20.600 05-04, TASK 12 20,609 Alcohol Traffic Safety and Drunk Driving Prevention Incentive Grants 20.601 04-410, TASK 15 3,550 Occupant Protection 20.602 I. 000 Safety Incentives to Prevent Operation of Motor Vehicles by Intoxicated Persons 20.605 04-163, TASK 27 2,309 Safety Incentives to Prevent Operation of Motor Vehicles by Intoxicated Persons 20.605 05-163, TASK 28 3.166 5.475 Department of Homeland Security: Dubuque County, Iowa: State Domestic Preparedness Equipment Support Program 97.004 96,680 Iowa Department of Public Defense: Public Assistance Grants 97.036 FEMA-DR-1420-IA 132,961 Public Assistance Grants 97.036 FEMA-DR-1420-IA 70,948 203,909 Hazard Mitigation Grant 97.039 1420-0002 6.353 Total indirect 947,879 Total $ I I 67(i,OOQ NA - Not Available See notes to the Schedule of Expenditures of Federal Awards. 104 CITY OF DUBUQUE, IOWA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2005 NOTE I-BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the City of Dubuque, Iowa, and is presented on the accrual basis of accounting. The information on this schedule is presented in accordance with the requirements of OMB Circular A-l33, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. NOTE 2 - SUBRECIPIENTS Of the federal expenditures presented in the schedule, the City of Dubuque, Iowa, provided federal awards to subrecipients as follows: Program Title Federal CFDA Number Amount Provided to Subrecioients Community Development Block Grants/ Entitlement Grants 14.218 $ 154,693 Community Development Block Grants/Brownfields Economic Development Iniative 14.246 $ 420,636 105 CITY OF DUBUQUE, IOWA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2005 Part I: Summary ofthe Iudepeudeut Auditor's Results: (a) Unqualified opinions were issued on the financial statements. (b) No material weaknesses in internal control over financial reporting were noted. (c) The audit did not disclose any non-compliance which is material to the financial statements. (d) No material weaknesses in internal control over the major programs were noted. (e) An unqualified opinion was issued on compliance with requirements applicable to each major program. (I) The audit disclosed an audit finding which is required to be reported in accordance with Office of Management and Budget Circular A-133, Section .51O(a). (g) Major programs were as follows: . CFDA Number 14.900 - Lead-Based Paint Hazard Control in Privately-Owned Housing . CFDA Number 14.871 - Section 8 Housing Choice Vouchers . CFDA Number 20.930 - Payments for Small Community Air Service Development (h) The dollar threshold used to distinguish between Type A and Type B programs was $350,280. (i) The City of Dubuque, Iowa, qualified as a low-risk auditee. Part II: Fiudinl!s and Ouestioned Costs for Federal Awards: INSTANCE OF NON-COMPLIANCE CFDA Number 14.900: Lead-Based Paint Hazard Control in Privately-Owned Housing Grant Number: IALHB0243-03 Department of Housing and Urban Development II-A-05 Reportinl! - The City of Dubuque is required to file a financial status report each quarter to report the transactions of this program. In reviewing these reports, we found that the City match of 25% was not properly reported on the form. Further, in reviewing the matching spreadsheets maintained by City personnel, we found that this documentation did not include all ofthe match of the City, and it did not agree to the financial status reports. Recommendation - We recommend that City staff update their matching records appropriately and include the proper match on the financial status reports. Response - Lead paint staff has reviewed the qualified City match contributions for HUD reporting and has corrected the applicable spreadsheets. Corrected Lead Based Paint Hazard Control Program financial status reports are being generated and will be reviewed with the Finance Director prior to submittal to HUD. Conclusion - Response accepted. 106 CITY OF DUBUQUE, IOWA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2005 Part III: Other Findinl!s Related to Statntorv Reportinl!: III-A-05 Official Depositories - A resolution naming official depositories has been approved by the City Council. The maximum deposit amounts stated in the resolution were not exceeded during the year ended June 30, 2005. III-B-05 Certified Budget - Function disbursements during the year ended June 30, 2005, did not exceed the amounts budgeted. III-C-05 Ouestionable Expenditures - No expenditures that may not meet the requirements of public purpose as defined in an Attorney General's opinion dated April 25, 1979, were noted. III-D-05 Travel Expense - No expenditures of City money for travel expenses of spouses of City officials or employees were noted. III-E-05 Business Transactions - Business transactions between the City and City officials or employees are detailed as follows: Name, Title, and Business Connection Transaction Description Amount John Zenner, employee, owner of building Building rent $ 3,540 Jan Anderson, employee, spouse is owner of Anderson Design & Consulting, Inc. Architect services $ 15,997 In accordance with Chapter 362.5(4) of the Code of Iowa, the transaction with John Zenner does not appear to represent a conflict of interest since the transaction was entered into through competitive bidding. The transaction with Anderson Design & Consulting, Inc., may represent a conflict of interest since it was not entered into through competitive bidding. Response - Finance management will remind City department managers of Chapter 362.5(4) of the Code of Iowa requirements, stating that business transactions totaling $1,500 or more in a fiscal year between the City and City officials or employees be competitively bid. Conclusion - Response accepted. III-F-05 Bond Coverage- Surety bond coverage of City officials and employees is in accordance with statutory provisions. The amount of coverage should be reviewed annually to insure that the coverage is adequate for current operations. III -G-05 Council Minutes - No transactions were found that we believe should have been approved in the Council minutes but were not. 107 CITY OF DUBUQUE, IOWA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2005 Part III: Other Findinl!s Related to Statutory Reportinl!: (continued) III-H-05 Deposits and Investments - No instances of non-compliance with the deposit and investment provisions of Chapters I2B and l2C of the Code of Iowa and the City's investment policy were noted. III-I-05 Revenue Bonds - No instances of non-compliance with the provisions of the City's revenue bond resolutions were noted. III-I-05 Solid Waste Fees Retainage - The Dubuque Metropolitan Area Solid Waste Agency, a component unit of the City, used or retained the solid waste fees in accordance with Chapter 455B.31O(2) of the Code ofIowa. 108 I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES FINANCIAL STATEMENTS JUNE 30, 2005 PEOPLE. PRINCIPLES. POSSIBILITIES. I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES Table of Contents Pal!e OFFICIALS INDEPENDENT AUDITOR'S REPORT 2-3 MANAGEMENT'S DISCUSSION AND ANALYSIS 4-7 FINANCIAL STATEMENTS Statement of Net Assets Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows Notes to Financial Statements 8 9 10 11-18 SUPPLEMENTARY INFORMATION Combining Statement of Net Assets Combining Statement of Revenues, Expenses, and Changes in Net Assets Bond Ordinance Requirements Schedule of Insurance Coverage Schedule of Statistical Data 19 20 21 22-23 24 REPORT ON BOND ORDINANCE COMPLIANCE 25 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS 26-27 SCHEDULE OF FINDINGS 28 I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES OFFICIALS Name Title Term Exoires Terrance M. Duggan Mayor December 2005 John H. Markham Daniel E. Nicholson Joyce E. Connors Council Member Council Member Council Member December 2005 December 2005 December 2005 Roy D. Buol Patricia A. Cline Ann E. Michalski Council Member Council Member Council Member December 2007 December 2007 December 2007 Michael C. Van Milligen City Manager Appointed by Council Barry A. Lindahl Corporation Counsel Appointed by Council Jeanne F. Schneider City Clerk Appointed by Council KennethJ. TeKippe Finance Director/Treasurer Appointed by City Manager Timothy M. Horsfield Parking Division Manager Appointed by City Manager I ~~>>~ EideBailly,c ~ I cri\~ & RU:iJ:-.JESS J\OVlSORS I I INDEPENDENT AUDITOR'S REPORT I To the Honorable Mayor and Members of the City Council: I We have audited the accompanying financial statements of the Parking Facilities of the City of Dubuque, Iowa, as of and for the year ended June 30, 2005, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. I I 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. I I As discussed in Note I, the financial statements referred to above present only the Parking Facilities of the City of Dubuque, Iowa, and are not intended to present fairly the financial position of the City of Dubuque and the changes in financial position and cash flows of its proprietary fund types in confonnity with accounting principles generally accepted in the United States of America. I I I In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Parking Facilities of the City of Dubuque, Iowa, as of June 30, 2005, and the changes in financial position and cash flows for the year then ended in confonnity with accounting principles generally accepted in the United States of America. I In accordance with Government Auditing Standards, we have also issued our report dated September 14, 2005, on our consideration of the Parking Facilities' internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. I I I I I PEOPLE. PRINCIPLES, POSSIBILITIES, www.eidebailly.com 3999 Pennsylvania Ave., Suite 100. Dubuque, Iowa 52002-2639' Phone 563.556.1790 I Fox 563.557.7842 I EOE 2 I I I I The management's discussion and analysis listed in the table of contents is not a required part of the financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. I Our audit was conducted for the purpose of forming an opinion on the financial statements of the Parking Facilities of the City of Dubuque. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. The combining financial statements have been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. The bond ordinance requirements, schedule of insurance coverage, and schedule of statistical data have not been subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we express no opinion on them. I I ~~'<:LT' I I Dubuque, Iowa September 14, 2005 I I I I I I I I I I 3 I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE PARKING FACILITIES MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2005 This section of the financial report of the City of Dubuque Parking Facilities presents our discussion and analysis of the financial performance during the fiscal year that ended on June 30, 2005. Please read it in conjunction with the financial statements of the City of Dubuque Parking Facilities found in this report. FINANCIAL HIGHLIGHTS . The assets of the Parking Facilities exceeded its liabilities at the close of the fiscal year by $13,394,535 (net assets). This was an increase of$327,819 over net assets at June 30, 2004. Unrestricted net assets at June 30, 2005 in the amount of $1,082,037 may be used to meet the ongoing obligations of the Parking Facilities. . Total operating and construction fund revenues exceeded expenses by $330,069. . Within the Parking Facilities' operating fund, revenues and transfers exceeded expenses by $130,117. . Within the Parking Facilities' construction fund, revenues and transfers exceeded expenses by $197,702. OVERVIEW OF THE FINANCIAL STATEMENTS The Parking Facilities' financial statements consist ofa statement of net assets, a statement of revenues, expenses, and changes in net assets and a statement of cash flows. This discussion and analysis is intended to serve as an introduction to the financial statements. This report also contains other supplementary information in addition to the financial statements themselves. The statement of net assets presents information on all of the Parking Facilities' assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position is improving or deteriorating. The statement ofrevenues, expenses, and changes in net assets presents information showing how the Parking Facilities' net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. The statement of cash flows reports cash receipts, cash payments and net changes in cash and cash equivalents resulting from four defined types of activities. It provides answers to such questions as where did cash come from, what cash was used for and what was the change in cash and cash equivalents during the reporting year. 4 I I I I I I I I I I I I I I I I I I I FINANCIAL ANALYSIS Net assets. As noted earlier, net assets may serve as a useful indicator of a facility's financial position when observed over time. In the case of the Parking Facilities, assets exceeded liabilities by $13,394,535 at the close of the most recent fiscal year. The largest part of the Parking Facilities' assets (87.8%) reflects its investment in capital assets such as land, buildings, machinery, and equipment less any related debt used to acquire those assets that are still outstanding. These capital assets are used to provide services to the citizens and are not available for future spending. PARKING FACILITIES NET ASSETS 2005 2004 Total Total Current and Other Assets $ 1,705,834 $ 1,245,163 Capital Assets 15,244,335 15,680,569 Total Assets 16,950,169 16,925,732 Long-term Liabilities 3,171,042 3,482,000 Other Liabilities 384,592 377,016 Total Liabilities 3,555,634 3,859,016 Net Assets: Invested in Capital Assets, Net of Related Debt 11,758,293 11,898,569 Restricted 554,205 554,005 Unrestricted 1,082,037 614,142 Total Net Assets $ 13,394,535 $ 13,066,716 The decrease in long-term liabilities reflects principal paid during the past year. Certain proceeds of revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the statement of net assets because their use is limited by applicable bond covenants. At the close of fiscal year 2005, the Parking Facilities reported total operating income of $493,877 and an increase in net assets of$327,819. 5 I I I I I I I I I I I I I I I I I I I PARKING FACILITIES CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 2005 Total 2004 Total Operating Revenues $ 1,889,937 $ 1,643,490 Operating Expenses 1,396,060 1,433,416 Operating Income 493,877 210,074 Nonoperating Revenues (Expenses) (163,808) (206,587) Income Before Transfers 330,069 3,487 Transfers from City of Dubuque 55,299 Transfers to City of Dubuque (2,250) (16,001) Change in Net Assets 327,819 42,785 Net Assets, Beginning 13,066,716 13,023,931 Net Assets, Ending $ 13,394,535 $ 13,066,716 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets. The Parking Facilities' investment in capital assets for its operating and construction funds as of June 30, 2005, amounts to $15,244,335 (net of accumulated depreciation). This investment in capital assets includes land, buildings, machinery and equipment. Additional information on the Parking Facilities' assets can be found in Note 4 to the financial statements in this report. CAPITAL ASSETS (net of accumulated depreciation) Land Buildings Improvements and other buildings Machinery and equipment Accumulated depreciation 2005 Total $ 1,296,209 19,069,788 246,961 651,206 (6,019,829) 2004 Total $ 1,296,209 19,069,788 246,961 651,206 (5,583,595) $ 15,244,335 $ 15,680,569 6 I I I I I I I I I I I I I I I I I I I During fiscal year 2003 the financial statements reflected a transfer in for the completion of a new parking ramp. Funding for the ramp was provided by a general obligation bond issue with repayment through tax increment financing. The general obligation bond debt for the new ramp is not reflected in these financial statements. Long-term debt. At year end the Parking Facilities had $3,486,042 of debt outstanding. This is a decrease of$295,958 from June 30, 2004. Additional information on the Parking Facilities' long-term debt can be found in Note 5 to the financial statements in this report. ECONOMIC FACTORS Revenue increased due to monthly rates increasing for three ramps (ranging from 5% to 13%) and a $2 increase in parking ticket fines. Revenue and expenses from parking enforcement activities were reflected with parking facilities beginning in fiscal year ended June 30, 2004. Previously this activity was part of the general fund of the City. Requests for information. This financial report is designed to provide a general overview of the Parking Facilities' finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Dubuque, Finance Director, 50 West 13th Street, Dubuque, Iowa 52001-4864. 7 I I I I I I I I I I I I I I I I I I I LIABILITIES CURRENT LIABILITIES Accounts payable Accrued payroll General obligation bonds payable Revenue bonds payable Accrued compensated absences Accrued interest payable Total Current Liabilities $ 1,224 14,071 105,000 210,000 33,907 20,390 384,592 NONCURRENT LIABILITIES General obligation bonds payable (net of discount of $20,625) Revenue bonds payable (net of $13,333 deferred amount on refunding) Total Noncurrent Liabilities 2,244,375 926,667 3,171,042 Total Liabilities 3,555,634 NET ASSETS Invested in capital assets, net of related debt Restricted by bond ordinance Unrestricted Total Net Assets 11,758,293 554,205 1,082,037 $ 13,394,535 8 I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2005 OPERATING REVENUES Charges for sales and services Other Total Operating Revenues OPERATING EXPENSES Employee expense Utilities Repairs and maintenance Supplies and services Insurance Depreciation Total Operating Expenses OPERATING INCOME NONOPERATING REVENUES (EXPENSES) Investment earnings Interest expense Total Nonoperating Revenues (Expenses) INCOME BEFORE TRANSFERS TRANSFERS TO THE CITY OF DUBUQUE CHANGE IN NET ASSETS NET ASSETS, BEGINNING NET ASSETS, ENDING See notes to financial statements. $ 1,888,328 1,609 1,889,937 663,883 87,833 46,976 126,138 34,996 436,234 1,396,060 493,877 44,203 (208,011) (163,808) 330,069 (2,250) 327,819 13,066,716 $ 13,394,535 9 I CITY OF DUBUQUE, IOWA I PARKING FACILITIES STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2005 I CASH FLOWS FROM OPERATING ACTIVITIES I Cash received from customers $ 1,881,961 Cash payments to suppliers for goods and services (300,519) Cash payments to employees for services (664,746) I Other operating receipts 1,609 NET CASH PROVIDED BY OPERATING ACTIVITIES 918,305 I CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES I Transfers to the City of Dubuque (2,250) CASH FLOWS FROM CAPITAL AND RELATED I FINANCING ACTIVITIES Payment of debt (300,000) Interest paid (205,954) I NET CASH USED FOR CAPITAL AND RELATED FINANCING ACTIVITIES (505,954) I CASH FLOWS FROM INVESTING ACTIVITIES Interest received 40,437 I NET INCREASE IN CASH AND CASH EQUIVALENTS 450,538 I CASH AND CASH EQUIVALENTS, BEGINNING 1,197,300 I CASH AND CASH EQUIVALENTS, ENDING $ 1,647,838 RECONCILIATION OF OPERATING INCOME TO NET I CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 493,877 I Adjustments to reconcile operating income to net cash provided by operating activities Depreciation 436,234 I Change in assets and liabilities Increase in receivables (6,367) Decrease in accounts payable (4,576) I Decrease in accrued liabilities (863) Total Adjustments 424,428 I NET CASH PROVIDED BY OPERATING ACTIVITIES $ 918,305 I 10 I I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 I NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I Reporting Entity I The financial statements include only those funds of the Parking Facilities and are not intended to present all funds of the City of Dubuque, Iowa. Basis of Accounting I I I I The Parking Facilities' accounting records are maintained on the cash basis. However, for financial reporting purposes, the accounting records have been adjusted to the accrual method, recognizing revenue when earned and expenses when liabilities are incurred. Budgets and Budgetary Accounting In accordance with the Code of Iowa, the City Council annually adopts a budget on the cash basis of accounting with an adjustment for accrued payroll following required public notice and hearing for all funds. The annual budget may be amended during the year utilizing similar statutorily prescribed procedures. I Formal and legal budgetary control is based upon nine major classes of expenditures known as functions, not by fund. These nine functions are public safety, public works, health and social services, culture and recreation, community and economic development, general government, debt service, capital projects, and business-type activities. I I Deposits and Investments The Parking Facilities' cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. I I I Restricted Assets Certain proceeds of revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the statement of net assets because their use is limited by applicable bond covenants. Capital Assets I Capital assets include property, plant, and equipment. Capital assets are defined by the government as assets with an initial, individual cost of more than $20,000 for building assets and $5,000 for the remaining assets, and an estimated useful life of more than a year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. I I I (continued on next page) 11 I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 I I I Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is not included as part of the capitalized value of the assets constructed. I Capital assets are depreciated using the straight-line method over the following estimated useful lives: Assets Years I Buildings hnprovements other than buildings Machinery and equipment 40 to 125 IS to 50 2 to 30 I Compensated Absences I I The Parking Facilities allow employees to accumulate earned but unused vacation and sick pay benefits. Such benefits are accrued when earned and are reported as liabilities. Equity Reservations of net assets represent amounts restricted by applicable bond covenants. I I NOTE 2 - DEPOSITS AND INVESTMENTS I I The Parking Facilities are authorized by state statute to invest public funds in obligations of the United States government, its agencies and instrumentalities; certificates of deposit or other evidences of deposit at federally insured depository institutions approved by the City Council; prime eligible bankers acceptances; certain high rated commercial paper; perfected repurchase agreements; certain registered open-end management investment companies; certain joint investment trusts; and warrants or improvement certificates of a drainage district. Investments are stated at fair value. I The Parking Facilities' investments are pooled with other investments of the City. It is, therefore, not possible to list the types of investments held by the Parking Facilities at June 30, 2005. I I Interest Rate Risk. The City's investment policy limits the investments of operating funds (funds expected to be expended in the current budget year or within IS months of receipt) in instruments that mature within 397 days. Funds not identified as operating funds may be invested in instruments with maturities longer than 397 days, but the maturities shall be consistent with the needs and use of the City. I Credit Risk. The City's investment policy limits investments in commercial paper and other corporate debt to the top two highest classifications. The City did not invest in any commercial paper or other corporate debt during the year. I (continued on next page) 12 I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Concentration of Credit Risk. The City's investment policy does not allow for a prime bankers' acceptance or commercial paper and other corporate debt balances to be greater than ten percent of its total deposits and investments. The policy also limits the amount that can be invested in a single issue to five percent of its total deposits and investments. The City held no such investments during the year. Custodial Credit Risk - Deposits. In the case of deposits, this is the risk that in the event of a bank failure, the government's deposits may not be returned to it. The City's deposits are entirely covered by federal depository insurance or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. This chapter provides for additional assessments against the depositories to insure there will be no loss of public funds. I I I I I I I I I I I I Custodial Credit Risk - Investments. For an investment, this is the risk that, in the event of the failure the counterparty, the government will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City had no custodial risk with regards to investments, since all investments were held by the City or the agent in the City's name. NOTE 3 - TRANSFERS Transfers for the year ended June 30, 2005, consisted of the following: Transfers from Parking Facilities to: America's River Project $ 2250 Transfers to the America's River Project were made according to grant requirements and represent the financing of capital assets. NOTE 4 - CAPITAL ASSETS Capital asset activity for the year ended June 30, 2005, was as follows: Capital assets, not being depreciated: Land Beginning Ending Balance Increases Decreases Balance $ 1.296.209 $ $ $ 1.296.209 19,069,788 19,069,788 246,961 246,961 65 L206 65 L206 19.967.955 19.967.955 Capital assets, being depreciated: Buildings Improvements other than buildings Machinery and equipment Total capital assets, being depreciated (continued on next page) 13 I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Beginning Ending Balance Increases Decreases Balance Less accumulated depreciation for: Buildings $ (5,174,385) $ (382,218) $ $ (5,556,603) Improvements other than buildings (94,452) (10,861) (105,313) Machinery and equipment (314,758) (43,155) (357,913) Total accumulated depreciation (5.583,595) (436234) (6,019,829) Total capital assets, being depreciated, net 14.384.360 (436.234) 13.948,126 Capital assets, net $ 15680569 $ (43623..11 $ $ 15244335 NOTE 5 - LONG-TERM DEBT General Obligation Bonds. The City issued general obligation bonds to provide financing for the acquisition and construction of parking facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds were issued as serial bonds with varying amounts of principal maturing annually and with interest payable semi-annually. General obligation bonds outstanding at June 30, 2005, are as follows: Amount Amount Date of Maturity Interest Originally Outstanding Pumose Issue Dates Rates Issued End of Year Corporate purpose 06/01/00 06/01/05-06/01/20 5.80-5.88% $ 2 750 000 $ 2370000 Annual debt service requirements to maturity for general obligation bonds are as follows: Fiscal Year Ending June 30 Principal Interest 2006 $ 105,000 $ 137,629 2007 115,000 131,539 2008 120,000 124,869 2009 125,000 117,910 2010 130,000 110,659 2011-2015 770,000 430,624 2016-2020 L005.000 182.094 Total L__ 2.370000 L 1.235324 (continued on next page) 14 I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Revenue Bonds. The City issued parking revenue bonds to provide financing for the acquisition and construction of parking facilities. These bonds were issued as serial bonds with varying amounts of principal maturing arrnually and with interest payable semi-arrnually. Parking revenue bonds outstanding at June 30, 2005, are as follows: Amount Amount Date of Maturity Interest Originally Outstanding Puroose Issue Dates Rates Issued End of Year Parking facilities 03/01/98 05/01/05-05/01/10 4.50-4.75% $ 2 515 000 $ 1 150000 Revenue bond debt service requirements to maturity are as follows: I I I I I I I I I I I I Fiscal Year Ending June 30 Principal Interest 2006 $ 210,000 $ 53,525 2007 220,000 43,970 2008 230,000 33,850 2009 240,000 23,155 2010 250,000 11,875 Total L LJ.5Q.QQQ L ~66 375 The resolution providing for the issuance of the revenue bonds includes the following provisions: a. A sum equal to one-tenth (1110) of the principal of all bonds maturing on May I next succeeding, plus a sum equal to one-fifth (1/5) of the interest corning due on the next succeeding interest payment date on all of the then outstanding bonds, shall be set aside into a restricted sinking account from the net revenue of the Operating Fund until the full amount of such installments is on hand. b. A restricted reserve account shall maintain the lesser of I) the maximum amount of principal and interest corning due in any fiscal year; or 2) ten percent of the proceeds of the sale ofthe bonds. c. $5,000 shall be set apart and paid into a restricted depreciation account from the balance of the net off-street parking revenues and net on-street parking revenues remaining after first making the required payments into the sinking account and the reserve account on the first day of each month of each year up to a maximum of $250,000. NOTE 6 - PENSION AND RETIREMENT BENEFITS The Parking Facilities of the City of Dubuque, Iowa, contribute to the Iowa Public Employees Retirement System (IPERS) which is a cost-sharing multiple-employer defined benefit pension plan administered by the State of Iowa. IPERS provides retirement and death benefits which are established by state statute to plan members and beneficiaries. IPERS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to IPERS, P.O. Box 9117, Des Moines, Iowa, 50306-9117. (continued on next page) 15 I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 I I Plan members are required to contribute 3.70% of their annual covered salary, and the Parking Facilities are required to contribute 5.75% of annual covered payroll. Contribution requirements are established by state statute. The Parking Facilities' contributions to IPERS for the years ended June 30, 2005, 2004, and 2003, were $24,021, $24,845, and $22,974, respectively, equal to the required contributions for each year. I I NOTE 7 - LEGAL COMPLIANCE WITH BUDGET I The City of Dubuque, Iowa, adopts a budget annually as required by Iowa law. The budget, which is prepared on the cash basis of accounting with an adjustment for accrued payroll, includes those funds of the Parking Facilities. I As required by Iowa law, the City prepares its budget based upon nine major classes of expenditures known as functions, not by individual fund. Therefore, the City must amend the budget only if the entire City's function amounts will be exceeded. For the year ended June 30, 2005, the City's actual disbursements were less than budgeted amounts for all functions, so the City has complied with legal budget requirements. I I NOTE 8 - RISK MANAGEMENT I The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the govermnent carries commercial insurance and participates in a local govermnent risk pool. I The City of Dubuque has established a Health Insurance Reserve Fund for insuring benefits provided to City employees and covered dependents which is included in the Internal Service Fund Type. Health benefits were self-insured up to an individual stop loss amount of $85,000 and an aggregate stop loss of $5,957,233 for 2005. Coverage from a private insurance company is maintained for losses in excess of the stop loss amount. All claims handling procedures are performed by a third-party claims administrator. Incurred but not reported claims have been accrued as a liability based upon the claims administrator's estimate. Settled claims have not exceeded commercial coverage in any of the past three fiscal years. The estimated liability does not include any allocated or unallocated claims adjustment expense. I I I The City of Dubuque has established a Workers' Compensation Reserve Fund for insuring benefits provided to City employees which is included in the Internal Service Fund Type. Workers' compensation benefits were self-insured up to a specific stop loss amount of $450,000, and an aggregate stop loss consistent with statutory limits for 2005. Coverage from a private insurance company is maintained for losses in excess of the stop loss amount. All claims handling procedures are performed by a third-party claims administrator. Incurred but not reported claims have been accrued as a liability based upon the claims administrator's estimate. Settled claims have not exceeded commercial coverage in any of the last three fiscal years. The estimated liability does not include any allocated or unallocated claims adjustment expense. I I I I (continued on next page) 16 I I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 I I All funds of the City participate in both programs and make payments to the Health Insurance Reserve Fund and the Workers' Compensation Reserve Fund based on actuarial estimates of the amounts needed to pay prior- and current-year claims. I I The City is a member in the Iowa Communities Assurance Pool, as allowed by Chapter 670.7 of the Code of Iowa. The Iowa Communities Assurance Pool (Pool) is a local government risk-sharing pool whose 509 members include various governmental entities throughout the State ofIowa. The Pool was formed in August 1986 for the purpose of managing and funding third-party liability claims against its members. The Pool provides coverage and protection in the following categories: general liability, automobile liability, automobile physical damage, public officials' liability, police professional liability, property, inland marine, and boiler/machinery. There have been no reductions in insurance coverage from prior years. I I Each member's annual casualty contributions to the Pool fund current operations and provide capital. Annual operating contributions are those amounts necessary to fund, on a cash basis, the Pool's general and administrative expenses, claims, claims expenses and reinsurance expenses due and payable in the current year, plus all or any portion of any deficiency in capital. Capital contributions are made during the first six years of membership and are maintained to equal 300 percent of the total current members' basis rates or to comply with the requirements of any applicable regulatory authority having jurisdiction over the Pool. I I I The Pool also provides property coverage. Members who elect such coverage make annual operating contributions which are necessary to fund, on a cash basis, the Pool's general and administrative expenses and reinsurance premiums, all of which are due and payable in the current year, plus all or any portion of any deficiency in capital. Any year-end operating surplus is transferred to capital. Deficiencies in operations are offset by transfers from capital and, if insufficient, by the subsequent year's member contributions. The City has property insurance in addition to the Pool. I I The Pool uses reinsurance and excess risk-sharing agreements to reduce its exposure to large losses. The Pool retains general, automobile, police professional, and public officials' liability risks up to $250,000 per claim. Claims exceeding $250,000 are reinsured in an amount not to exceed $1,750,000 per claim and $5,000,000 in aggregate per year. For members requiring specific coverage from $2,000,000 to $10,000,000, such excess coverage is also reinsured. Property and automobile physical damage risks are retained by the Pool up to $100,000 each occurrence, each location with excess coverage reinsured on an individual-member basis. I I I The Pool's intergovernmental contract with its members provides that in the event a casualty claim or series of claims exceeds the amount of risk-sharing protection provided by the member's risk-sharing certificate, or in the event that a series of casualty claims exhausts total members' equity plus any reinsurance and any excess risk-sharing recoveries, then payment of such claims shall be the obligation of the respective individual member. As of June 30, 2005, settled claims have not exceeded the risk pool or reinsurance company coverage since the Pool's inception. I I I (continued on next page) 17 I I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 Members agree to continue membership in the Pool for a period of not less than one full year. After such period, a member who has given 60 days' prior written notice may withdraw from the Pool. Upon withdrawal, payments for all claims and claims expenses become the sole responsibility of the withdrawing member, regardless of whether a claim was incurred or reported prior to the member's withdrawal. Members withdrawing within the first six years of membership may receive a partial refund of their capital contributions. If a member withdraws after the sixth year, the member is refunded 100 percent of its capital contributions. However, the refund is reduced by an amount equal to the annual operating contribution which the withdrawing member would have made for the one-year period following withdrawal. 18 CITY OF DUBUQUE, IOWA PARKING FACILITIES COMBINING STATEMENT OF NET ASSETS JUNE 30, 2005 Operating Construction Fund Fund Total ASSETS CURRENT ASSETS Cash and pooled cash investments $ 429,800 $ 663,833 $ 1,093,633 Receivables Accounts 47,375 47,375 Accrued interest 10,621 10,621 Total Current Assets 487,796 663,833 1,151,629 NONCURRENT ASSETS Restricted cash and pooled cash investments 554,205 554,205 Capital assets Land 1,296,209 1,296,209 Buildings 19,069,788 19,069,788 Improvements other than buildings 246,961 246,961 Machinery and equipment 651,206 651,206 Accumulated depreciation (6,019,829) (6,019,829) Net Capital Assets 15,244,335 15,244,335 Total Noncurrent Assets 15,798,540 15,798,540 Total Assets 16,286,336 663,833 16,950,169 I I I I I I I I I I I I I I I I I I I Operating Fund Construction Fund Total LIABILITIES CURRENT LIABILITIES Accounts payable Accrued payroll General obligation bonds payable Revenue bonds payable Accrued compensated absences Accrued interest payable Total Current Liabilities $ 1,224 $ $ 1,224 14,071 14,071 105,000 105,000 210,000 210,000 33,907 33,907 20,390 20,390 384,592 384,592 NONCURRENT LIABILITIES General obligation bonds payable (net of discount of $20,625) Revenue bonds payable (net of $13,333 deferred amount on refunding) Total Noncurrent Liabilities 2,244,375 2,244,375 926,667 3,171,042 926,667 3,171,042 Total Liabilities 3,555,634 3,555,634 NET ASSETS Invested in capital assets, net of related debt Restricted by bond ordinance Unrestricted 11,758,293 554,205 418,204 663,833 11,758,293 554,205 1,082,037 Total Net Assets $ 12,730,702 $ 663,833 $ 13,394,535 19 I CITY OF DUBUQUE, IOWA I PARKING FACILITIES COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS I FOR THE FISCAL YEAR ENDED JUNE 30, 2005 I Operating Construction Fund Fund Total OPERATING REVENUES I Charges for sales and services $ 1,888,328 $ $ 1,888,328 Other 1,122 487 1,609 Total Operating Revenues 1,889,450 487 1,889,937 I OPERATING EXPENSES I Employee expense 663,883 663,883 Utilities 87,833 87,833 Repairs and maintenance 46,976 46,976 I Supplies and services 104,337 21,801 126,138 Insurance 34,996 34,996 Depreciation 436,234 436,234 I Total Operating Expenses 1,374,259 21,801 1,396,060 I OPERATING INCOME (LOSS) 515,191 (21,314) 493,877 NONOPERATING REVENUES (EXPENSES) I Investment earnings 31,937 12,266 44,203 Interest expense (208,011) (208,011) Total Nonoperating Revenues (Expenses) (176,074) 12,266 (163,808) I INCOME (LOSS) BEFORE TRANSFERS 339,117 (9,048) 330,069 I TRANSFERS FROM (TO) OTHER FUNDS (209,000) 209,000 TRANSFERS TO THE CITY OF DUBUQUE (2,250) (2,250) I CHANGE IN NET ASSETS 130,117 197,702 327,819 I NET ASSETS, BEGINNING 12,600,585 466,131 13,066,716 I NET ASSETS, ENDING $ 12,730,702 $ 663,833 $ 13,394,535 I I 20 I I CITY OF DUBUQUE, IOWA PARKING FACILITIES BOND ORDINANCE REQUIREMENTS JUNE 30, 2005 I I I Following is a summary of the bond ordinance requirements of the parking revenue refunding bond issue dated March 1, 1998. I 1. A sum equal to one-tenth (1/10) ofthe principal of all bonds maturing on May 1 next succeeding, plus a sum equal to one-fifth (1/5) of the interest coming due on the next succeeding interest payment date on all of the then outstanding bonds, shall be set aside into a restricted sinking account from the net revenue of the Operating Fund until the full amount of such installments is on hand. I 2. A restricted reserve account shall maintain the lesser of 1) the maximum amount of principal and interest coming due in any fiscal year; or 2) ten percent of the proceeds of the sale of the bonds. I 3. $5,000 shall be set apart and paid into a restricted depreciation account from the balance of the net off-street parking revenues and net on-street parking revenues remaining after first making the required payments into the sinking account and the reserve account on the first day of each month of each year up to a maximum of $250,000. I 4. The City will cause an audit of such books and accounts of the Parking Facilities to be made by a certified public accountant not in the regular employ of the City showing the receipts and disbursements for each account of the Parking Facilities. The audit report required shall include, but not be limited to, the following: I I a. An evaluation of the manner in which the City has complied with the covenants of this resolution, including particularly the rate covenants included herein; I b. A statement of net revenues and current expenses; I c. Analyses of each fund and account created, including deposits, withdrawals, and beginning and ending balances; d. A statement of net assets; I e. The rates in effect at the end of the fiscal year, and the number of customers of the Parking Facilities; I f. A schedule of insurance policies and fidelity bonds in force at the end of the fiscal year, showing with respect to each policy and bond the nature of the risks covered, the limits of liability, the name of the insurer, and the expiration date; I g. An evaluation of the issuer's system of internal financial controls and the sufficiency of fidelity bond and insurance coverage in force; I I h. The names and titles of the principal officers of the City; and 1. A general statement covering any events or circumstances which might affect the financial status of the Parking Facilities. I 21 I I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES SCHEDULE OF INSURANCE COVERAGE FOR THE FISCAL YEAR ENDED JUNE 30, 2005 At June 30, 2005, the property of the Parking Facilities was insured through a blanket fire and extended coverage policy with the Cincinnati Insurance Company in the amount of $26,212,706. This policy expired July I, 2005. The Parking Facilities were also insured against general, vehicle, and personal liability through the Iowa Communities Assurance Pool. These policies expired July I, 2005. Also in force at June 30, 2005, was a self-funded workers' compensation plan and an employers' liability policy which expired July I, 2005. Listed below is a detailed schedule ofthe policies in effect at June 30, 2005: FIRE AND EXTENDED COVERAGE V ALVES Description Building and Structure Contents Total Concrete Parking Ramp 601-795 Iowa Street $ 7,747,500 $ 11,065 $ 7,758,565 Concrete Parking Ramp 801-899 Locust Street 5,454,240 46,081 5,500,321 Concrete Parking Ramp 501-599 Iowa Street 7,747,500 7,747,500 Concrete Parking Ramp 100 West Fourth Street 5.206.320 5.206.320 $ 26.155560 L. 57.146 $ 262]2,]0(2. BUSINESS INCOME on earnings - $297,900' at 601-795 Iowa Street- 80% co-insurance. on earnings - $221,500' at 801-899 Locust Street - 80% co-insurance. on earnings - $297,270' at 501-599 Iowa Street- 80% co-insurance. on earnings - $180,000' at 100 West Fourth Street - 80% co-insurance. · No change per Friedman Insurance. (continued on next page) 22 I I I I I I I I I I I I I I I I I I I CITY OF DUBUQUE, IOWA PARKING FACILITIES SCHEDULE OF INSURANCE COVERAGE (continued) FOR THE FISCAL YEAR ENDED JUNE 30, 2005 SYSTEMS BREAKDOWN COVERAGE - EQUIPMENT Each Occurrence $ 2,500,000 GENERAL LIABILITY INSURANCE BODILY INJURY - PROPERTY DAMAGE - PRODUCTS ICAP Each Occurrence $ 5,000,000 VEHICLES ICAP Each Occurrence $ 5,000,000 EXCESS WORKERS' COMPENSATION & EMPLOYERS' LIABILITY Each Accident Each Disease Limit Employers' Liability $ 450,000 Retention $ 450,000 Retention Workers' Compensation - Statutory $ 1,000,000 FIDELITY BOND COVERAGE Each employee $ 100,000 City Manager, Budget Director, Finance Director, and Assistant Finance Director - $900,000 additional. The above insurance policies have been renewed through July 1, 2006. 23 I CITY OF DUBUQUE, IOWA I PARKING FACILITIES SCHEDULE OF STATISTICAL DATA FOR THE FISCAL YEAR ENDED JUNE 30, 2005 I I Number of Customers: (Estimated) Locust Ramp: Cash customers 22,628 I Monthly customers 156,000 Iowa Ramp: I Cash customers 42,561 Monthly customers 227,000 I 4th Street Ramp: Cash customers N/A Monthly customers 85,000 I 5th Street Ramp: Cash customers N/A I Monthly customers 240,000 Rates in Effect per Month: I Locust Ramp: Reserved stalls (Bay) $ 55 I Reserved stalls (Undercover) 50 Roof stalls 38 I Iowa Ramp: Reserved stalls 50 Top of ramp stalls 38 I 4th Street Ramp: Non-assigned stalls 35 I 5th Street Ramp: Non-assigned stalls 40 I Other: Residential Street Meters 37.50/qtr Lot I 25 I Lot 2 25 Lot 10 35 Lot 12 25 I I NI A ~ Not Applicable 24 I I ~~>>~ EideBai 11y:" ~ I I CPA~ & BCSIl'<ESS ADVISOR:':; I I REPORT ON BOND ORDINANCE COMPLIANCE To the Honorable Mayor and Members of the City Council: I I We have audited the financial statements of the Parking Facilities of the City of Dubuque, Iowa, as of June 30, 2005, and for the year then ended, and have issued our report thereon dated September 14, 2005. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. I I 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. I I In the course of our audit, nothing came to our attention that caused us to believe there had been a lack of compliance with the accounting or reporting requirements of the bond ordinance governing the parking revenue refunding bond issue dated March I, 1998. I ~~~Lr' I I Dubuque, Iowa September 14, 2005 I I I I I PEOPLE. PRINCIPLES. POSSIBILITIES. www.eidebailly.com 3999 Pennsylvania Ave., Suite 100 I Dubuque, lowo 52002.2639 I Phone 563.556.1790 I Fax 563.557.7842 I EOE 25 I ~~>>~ EideBailly, ~ I I CPAs & BlJSINESS ADVISORS I I REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS I I To the Honorable Mayor and Members of the City Conncil: I We have audited the financial statements of the Parking Facilities of the City of Dubuque, Iowa, as of and for the year ended June 30, 2005, and have issued our report thereon dated September 14, 2005. 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. I I I Internal Control Over Financial Reporting In planning and performing our audit, we considered the Parking Facilities' internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in arnonnts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. I I Compliance and Other Matters I As part of obtaining reasonable assurance about whether the Parking Facilities' financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported nnder Government Auditing Standards. I I I I I PEOPLE. PRINCIPLES. POSSIBILITIES. www.eidebailly.com 3999 Pennsylvania Ave., Suite 100 I Dubuque, Iowa 52002-2639 I Phone 563.556.1790 I Fox 563.557]842 I EOE 26 I I I I I I I Comments involving statutory and other legal matters about the Parking Facilities' operations for the year ended June 30, 2005, are based exclusively on koowledge obtained from procedures performed during our audit of the financial statements of the Parking Facilities and are reported in Part I of the accompanying Schedule of Findings. Since our audit was based on tests and samples, not all transactions that might have had an impact on the comments were necessarily audited. The comments involving statutory and other legal matters are not intended to constitute legal interpretations of those statutes. This report, a public record by law, is intended solely for the information and use of the officials, employees, and citizens of the City of Dubuque and other parties to whom the City of Dubuque may report. This report is not intended to be and should not be used by anyone other than these specified parties. We would like to ackoowledge the many courtesies and assistance extended to us by personnel of the City of Dubuque during the course of our audit. Should you have any questions concerning any of the above matters, we shall be pleased to discuss them with you at your convenience. I ~~.i~f' I I Dubuque, Iowa September 14,2005 I I I I I I I ., I 27 .' CITY OF DUBUQUE, IOWA PARKING FACILITIES SCHEDULE OF FINDINGS FOR THE FISCAL YEAR ENDED JUNE 30, 2005 I I I I I I Part I: Other Findinl!s Related to Statutory ReDortinl!: 1-A-05 Official Depositories - A resolution naming official depositories has been approved by the City Council. The maximum deposit amounts stated in the resolution were not exceeded during the year ended June 30, 2005. 1-B-05 Certified Budget - For the City of Dubuque as a whole, disbursements of the business-type activities during the year ended June 30, 2005, did not exceed the amounts budgeted. 1-C-05 Ouestionable Expenditures - No expenditures that fail to meet the requirements of public purpose as defined in an Attorney General's opinion dated April 25, 1979, were noted. 1-D-05 Travel Expense No expenditures of Parking Facilities money for travel expenses of spouses of Parking Facilities officials or employees were noted. I I I I 1-E-05 Business Transactions No business transactions between the Parking Facilities and its officials or employees were noted. 1-F-05 Bond Coverage - Surety bond coverage of Parking Facilities officials and employees is in accordance with statutory provisions. The amount of coverage should be reviewed annually to insure that the coverage is adequate for current operations. 1-G-05 Council Minutes - No transactions were found that we believe should have been approved in the Council minutes but were not. 1-H-05 Revenue Bonds - The provisions of the Parking Facilities' Revenue Refunding Bond resolution have been met for the year ended June 30, 2005. I I 1-1-05 Deposits and Investments - No instances of noncompliance with the deposit and investment provisions of Chapters l2B and l2C of the Code ofIowa and the City's investment policy were noted. I I I I I I 28