Agenda - Council Work Session - 06/14/2011

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FINANCIAL CONDITION OF THE GOVERNMENTAL FUNDS AND ACTIVITIES AS A WHOLE FINANCIAL TRENDS AND CONDITIONS OF SELECTED FUNDS The governmental funds reported total fund balances of $38,414,991 at December 31, 2010. This level of fund balance for all governmental funds represents a decrease of $2,594,704 from the prior year fund balance for all governmental funds of $41,009,965. The Park Improvement Capital Project Fund decreased almost $2 million with a transfer of resources for capital expenditures incurred in the current year. The Statement of Net Assets shows an increase in the net assets of the governmental activities of $1,102,234, with ending net assets of $74,522,018. Since this statement is based on accrual accounting rather than modified accounting, the money spent on capital project costs are capitalized as assets, while in the fund statements they are expended. GENERAL FUND The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and culture and recreation. The following graph displays the City's General Fund trends of financial position and changes in the volume of financial activity. Fund balance and cash balance are typically used as indicators of financial health or equity, while annual revenue is often used to measure the size of the operation. $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 — $– General Fund Financial Position Year Ended December 31, -10- IJ 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fund Balance 1 1 Cash Balance Revenue The City's General Fund cash and investments balance (net of interfund borrowing) at December 31, 2010 was $5,971,246, a decrease of $1,043,963 from the previous year. Total fund balance at year -end was $6,059,759, a decrease of $957,194 from the prior year. The City Council has reserved or designated this entire fund balance for specific purposes. The stability of the General Fund's financial position is greatly attributed to the City's "Fund Balance and Excess Revenue Policy" as well as the general budgeting policies. These policies have allowed the City to provide funding for equipment replacement and recurring capital maintenance programs without disrupting the General Fund's financial position. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. The amount of required equity increases as the size of the operation increases. Increase in the size of the operation is natural, caused by such things as inflation, population growth, desired increases in services, and — something which has impacted cities significantly in recent years— mandated increases in services and administrative requirements.