ML041240094
| ML041240094 | |
| Person / Time | |
|---|---|
| Site: | Crystal River  |
| Issue date: | 04/19/2004 |
| From: | Powell S Progress Energy Florida |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| 3F0404-06 | |
| Download: ML041240094 (167) | |
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An honest day's work means putting safety first J
ineworkers gather in the ready room at a GRUJ fleet 1 hangar. A pre-dawn meeting before the bucket trucks roll out. These folks work the seventh most dangerous job in America. Donning hardhats and tool belts. Working 50 feet in the air. Handling 12,000-volt power lines.
They review the rules for moving heavy power equipment.
The meeting is closed with reminders to put safety first.
It's first light; time for another day in the field.
04 GRU 2002-03 ANNUAL REPORT
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An honest day's work is all about trust Fmml hree first-year Water and Wastewater employees care-m IL fully retrieve a fallen co-worker from a 12-foot deep pump-containment pit. The potential danger: toxic chemicals and gases leaking from pipes.
Fortunately, this is a training exercise. The employees take turns playing victim and rescuer. They learn to trust their skills. Those entering the cramped pit wear protective jump-suits connected to a lifeline, hard hats and a gas meter on a strap. The fallen co-worker is hooked to another lifeline and hoisted to the surface through a small manhole using a tripod-and-pulley rescue system. As part of a national award-winning safety program, every plant worker receives confined-space rescue training.
Real-world preparation. For real-world responsibilities.
GRU 2002-03 ANNUAL REPORT 07
An honest day's work can be demanding but rewarding I nside GRU's Deerhaven Generating Station, mechanics dismantle Unit No. 2, a 235-megawaft generating unit.
Its annual scheduled outage is underway.
Tool carts sport giant wrenches and other oversized tools, some a yard long and 50 pounds heavy. Boxes of doughnut-sized valve nuts, rubber seals, and steel bolts. This is not your grandfather's workshop.
An overhead crane hoists a 35-ton turbine rotor for inspec-tion and cleaning. For five straight weeks, two crews of eight mechanics and machine operators log separate 10-hour shifts, six days a week. They painstakingly inspect, dust, brush, scrub, test and reassemble or replace every part. After the makeover, Deerhaven Unit No. 2 is greased and primed for another year of service. This ensures reliability.
Seamless utility service. It's not magic. It's a lot of long hours.
08 GRU 2002-03 ANNUAL REPORT
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'-.An honest day's work -
means listening to our neighbors
'Thile many people are heading home from work, 1
11 GRU employees load their cars and drive through traffic to a local elementary school cafeteria. Armed with flipcharts, PowerPoint slides and trays of sandwiches and cookies. They set up tables, fill out name badges and greet their neighbors. Neighbors who will help decide their com-munity's energy future.
The GRU employees listen as their neighbors offer ideas and voice concerns about how their community-owned utility should grow.
For GRU, community forums like this one are an essential part of building an honest dialogue between customers and company. A way to incorporate customer ideas into policy making. A way to earn public trust.
GRU 2002-03 ANNUAL REPORT 11
From the General Manager hile a tight economy and uncertain energy marketplace made fiscal 2002-03 a challenging year, it also provided a golden opportunity for exceptionally strong utilities to shine. GRU took full advantage, posting meas-urable progress in customer service, product innovation, infrastructure and technology, while delivering healthy financial results. We also heightened cus-tomer and employee involvement in decision-making to improve our opera-tional strategies and plan for future energy demands. By successfully execut-ing these initiatives, GRU is strategically positioned for continued long-term growth and profitability.
Customer Confidence. According to a recent customer satisfaction and loy-alty survey, 78 percent of residential customers indicated they were satisfied with our service. Satisfaction for business customers was even higher.
Customers gave GRU particularly high marks for courtesy, knowledge, prob-lem-solving and willingness to work with cus-tomers. The findings indicated both residential Investor conf and commercial customers value corporate traits fact that the n such as honesty and integrity even higher than r
a pricing, billing and other service attributes.
r Double A ratii Investor Confidence. The nation's two most a testimony t prominent credit rating agencies have assigned the premier Double A rating to every GRU bond since 1987, a testimony to our continued financial strength. Our Double A rating, shared by only 14 public power utilities in the U.S., was reaffirmed in 2003 for the sale of more than
$115 million in new bonds, issued at a lower interest rate to refinance current outstanding bonds. The transaction will save us $10.6 million in borrowing costs over 10 years, helping us keep customers' utility bills low. The rating report by Moody's Investor Service said GRU's "focus on customer retention through competitive pricing and good service delivery has been beneficial and speaks well of management's long-term planning."
idence in GRU is reflected in the ation's two most prominent credit-cies have assigned the premier nig to every GRU bond since 1987, o our continued financial strength.
12 GRU 2002-03 ANNUAL REPORT
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Revenue. Our net revenues remain extremely strong, with debt service cov-erage ratios of 3.34. That's well above the 1.25 ratio required under the bond resolution. Because we are owned by the citizens of Gainesville, we contribute a significant portion of our revenues to fund vital services such as police and fire protection, parks and recreation, and trans-portation. The designated transfer formula last year Because we are owned by the citizens of generated nearly $26 million, or 35 percent of the ElGainesville, we contribute a significant portion City's general fund. A new electric territorial agree-G ment with Clay Electric Cooperative brought 1,100 of our revenues to fund vital services such as new utility customers to GRU. The transfer will elim-police and fire protection, parks and recreation, inate duplication of power lines and other infra-and transportation. The designated transfer for-structure and generate additional revenue.
mula last year generated nearly $26 million, or 35 percent of the City's general fund budget.
Upgrades. We continue to improve and expand our facilities and technology to maintain our competi-tive advantage. Numerous upgrades and expansion of our water, wastewater and reclaimed water facilities ensure that our systems are operating as effi-ciently as possible and will meet future capacity demands.
Power. Based on population forecasts, GRU must increase electric generating capacity by 2010 to meet rising demand. Because of the lengthy lead time required to permit and construct new capacity, we are acting now. We sought public input through a series of community workshops to help us brainstorm and evaluate future energy options and we will soon recommend possible solutions to city commissioners.
Rates. Through ongoing cost-reducing efforts, we were once again able to pass along electric rate savings last year to our residential and business cus-tomers. This marks the tenth consecutive year that our electric rates have declined or remained stable. Natural gas, water and wastewater rates all increased between 2 and 2.25 percent due to increasing costs, yet remain among the lowest in the state. To hedge against future spikes in natural gas 14 GRU 2002-03 ANNUAL REPORT
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An honest day's work makes life easier for everyone e owe our very existence as a municipal utility to the Gainesville corn-munity's historical insistence on getting exceptional value for its dol-lar. Besides maintaining competitive prices, GRU strives to provide the types and levels of service that are of value to our customers.
We continue to create more convenient ways for customers to pay their bills.
Budget Pay is a new service that lets residential customers pay the same amount for utilities each month, leveling seasonal highs and lows in their bills.
The amount is based on the average bill of a customer's residence for the pre-vious 12 months. Additionally, Click-2-Pay is available online at www.gru.com for customers making a one-time payment from their checking or savings accounts. The online payment service became an instant hit, garnering nearly 30,000 payments in its first 10 months of operation. We also launched a new way to pay bills with a credit card through Speedpaysservice, a third-party processor. Payment can be charged online at our Web site, or by credit card or check over the phone using an automated phone system available 24/7.
Speedpay also enhances our bottom line by improving cash flow due to receipt of immediate payment and reducing costs associated with collection.
Our GRUCom telecommunications division, created in 1996, is delivering new services that increase our value to customers and enhance our business suc-cess. We have quickly become one of the largest local Internet providers through our GRU.Net and Gator.Net dial-up access services, and we recently acquired technology that gives us direct control over our Internet operations.
The special network software phone switch connects callers to our own dial-up access telephone lines -
a feature that saves us $30,000 a month in car-rier fees. The new switch quickly paid for itself and now generates significant operational savings and revenue.
Facing eventual competition in a deregulated electric industry, we are build-ing alliances with our commercial customers by helping them boost their prof-itability. Our Business Partners program offers rate reductions of 7,10 and 13 percent when companies agree to purchase electricity from GRU for 10 years.
Today, nearly 800 commercial Business Partners have signed 10-year con-16 GRU 2002-03 ANNUAL REPORT
tracts, including 90 of the area's top 100 companies. Our Business Partners represent 70 percent of our commercial electric revenue. Account represen-tatives for each partner coordinate key value-added services including energy efficiency surveys and advice, green energy purchases, backup power gener-ation, infrared scanning to detect power "hot spots" in our customers' facili-ties and rebates for gas cooling and solar water heating.
An honest day's work safeguards our future I r e always strive to do whatever it takes to meet our customers' daily It, utility needs. We also keep an eye on the future, continually improving and expanding our products and services to maintain our competitive edge in the changing marketplace.
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In 2003, we purchased the remaining 40 acres of a 2,286-acre tract of timberland bordering our Deerhaven Generating Station. The acquired property provides a half-mile buffer between our largest power plant and any future development, protecting our ability to expand to meet increas-ing energy demands. We also are negotiating to acquire 37 acres of state-owned land for a pro-posed Eastside Operations Center in Gainesville to improve operations and deliver better service.
Sharing Efficiency. Energy Supply joined with Water and Electric energy use in our service area has Wastewater Systems to buy a single vacuum truck.
Neither system needs a full time truck, so the dual usage increased by one-third in the past decade. By is both cost-effective and time-efficient.
2010, the community will need additional gener-ation capacity to serve our growing population.
We sponsored a series of "community dialogue" workshops last year so our customer-owners could help us decide how best to meet our electric genera-tion needs. We also have been working through the Florida Municipal Power Agency with neighboring public utilities to investigate the feasibility of build-ing a shared power plant.
GRU 2002-03 ANNUAL REPORT 17
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An honest day's work is sharing in success I e are using a "Balanced Scorecard" to clarify our vision and strategies Wdand balance our customer, operational and financial performance.
This approach emphasizes measurement-based management to align employee goals with organizational goals. We chartered an employee imple-mentation team to develop strategic goals for four key areas -
financial, cus-tomer, employee and business process. We are implementing these strategies across our entire organization, so every employee knows how he or she con-tributes to the big picture.
It may not sound as exciting as going live with Leno or Letterman, but our numbers crunchers and work management staff were nonetheless pleased when we went "live" at our Murphree Water Treatment Plant with our first integrated asset management system. We are using this computer system, called MIMS, or Mincom Information Management System, to more effectively schedule equipment maintenance, track materials and automate work order costing. We will soon go live with MIMS at our wastewater facilities and lift stations. We will upgrade to the newest MIMS software in 2004 for our con-struction management activities, which should help us realize a savings of more than $4 million over the next five years.
Ongoing cost-reduction efforts help maintain long-term financial stability that's reassuring to customers and stakeholders. Last year, our Energy Supply and Water/Wastewater systems split the cost of a $189,000 vacuum truck.
The shared truck is used to vacuum at our Deerhaven Generating Station's coal pile and also is used for Water/Wastewater applications. We previously paid $60,000 yearly to rent similar equipment. The new truck will easily pay for itself in less than four years.
With the right approach, certain costly operational activities can become rev-enue-producing opportunities. Our Vegetation Management program, which prevents tree limbs and unwanted plants from growing into power lines on GRU rights-of-way, has transformed into a profitable business operation by marketing its special expertise to other municipal utilities and electric coop-GRU 2002-03 ANNUAL REPORT 19
eratives throughout the state. The program has grossed more than $1 million over the past four years -
including $600,000 from management of our Deerhaven forest. Good forest management also helps reduce fire risk.
GRU's 12-member diversity team is one of several small employee work teams we use to improve the way we conduct our business. The team last year completed a company-wide "diversity assessment," conducting internal surveys and focus groups and recommending ways we can manage diversity successfully in our workforce. Having a workforce that reflects the diverse nature of our community boosts our competitive advantage by letting us respond effectively to the unique needs of all customers.
An honest day's work preserves neighborhoods s a multi-service utility, we provide one-stop shopping for electric, nat-Aural gas, water, wastewater and telecommunications services. Because GRU is More than Energy,'"we are always creating new opportunities to bet-ter serve our community.
When we built our Ironwood Power Delivery When we built our Ironwood Power Delivery System (PDS) last year to help provide power to System (PDS) last year to help power the the homes and businesses of about 4,000 cus-ihomes and businesses of about 4,000 cus-tomers in northeast Gainesville, we gave the hio electric facility the smallest possible "footprint" tomers in northeast Gainesville, we gave the to preserve neighborhood aesthetics. The PDS electric facility the smallest possible "foot-unit is small enough to fit in many suburban print" to preserve neighborhood aesthetics.
backyards, with attractive landscaping and pre-cast, earth-toned walls effectively screening the installation. The mini-substation is the third of four planned PDS installa-tions -
all being built adjacent to existing transmission lines to minimize community impact and reduce costs.
20 GRU 2002-03 ANNUAL REPORT
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gardens, GRU conservation tips and links to our Web site. We also worked with the U.S. Environmental Protection Agency and the University of Florida to "deconstruct" an abandoned house in southeast Gainesville and reuse the materials to renovate The Reichert House, a nearby facility for at-risk teenage boys. GRU donated the clapboard home for use in the project.
An honest day's work helps you sleep better at night I
t GRU, we work around-the-clock, in the trenches and behind the Ascenes, to ensure reliable, top-quality service so each day -
and rest-ful night -
goes as smoothly as possible for our customers.
Because we generate our own electricity, a widespread power outage like last summer's northern blackout is less likely to affect Gainesville. Nevertheless, given tropical weather and our lush tree canopy, some outages are inevitable; so we are installing a new, computerized Outage Management System that will speed the restoration of power to our customers. The automated system, due to go live in 2004, will instantly display the location of outage problems on our electric distribution network. Other computer-aided features will speed the rerouting of power, operations dispatch and main-tenance scheduling. An interactive voice response pro-gram, which will link with the new system, relays information about a caller's location and the reported problem more quickly than if we used live operators all to provide better service to our customers.
We understand the importance of keeping businesses powered. However, bad weather or a car accident still can cause unavoidable power outages and downtime.
We understand the importance of keeping businesses powered. However, bad weather or a car accident still can cause unavoidable power outages and downtime. That is why we developed AttenGen!TM, our new on-site standby generating service.
That is why we developed AttenGen!, our new on-site standby generating service. GRU designs, installs, manages and maintains a generating unit on site to provide vital standby power to participating businesses, minimizing the effects of severe weather and lengthy service interruptions.
22 GRU :2002-03 ANNUAL REPORT
GRU's water construction employees v the second phase of a multi-year progi a 36-inch water main into the rapidly g portion of our service area.
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/On the "water front," GRU customers can rest
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assured that 28 years of testing every single day continues to confirm that our drinking water is of
- /the highest quality. Since mid-2000, we have increased the number of water production wells at our Murphree Water Treatment Plant wellfield from 11 to 15, which will keep us ahead of the local water demand through 2013. We also have partnered with area water management districts and the U.S. Department of Agriculture to pur-chase the development rights to 7,100 acres located in our wellfield, providing space for addi-tional wells to meet future needs and protecting the water supply from possible contamination York diligently in through commercial development.
ram to extend rowing western We remain vigilant about the security of our facil-ities and the community's utility infrastructure.
We have tightened building security for our cus-tomers and employees in our downtown Administration Building. All GRU facil-ities, including our power and water plants, have benefited from additional security measures to ensure the safety of our customers and employees.
An honest day's work protects our natural resources RU is an essential part of a forward-thinking community, and that J encourages us to make the best use of our natural resources.
We have helped the Gainesville area maintain one of Florida's purest water supplies, and we're working hard to keep it that way. Although no contamina-tion has ever been found in our wellfield, we are planning to add eight more sentinel monitoring wells to our existing formation of 18 testing wells. The 26 wells will form a ring of monitoring protection around our Murphree Water GRU 2002-03 ANNUAL REPORT 23
Treatment Plant, making it the most comprehensive water supply monitoring system in the state. Murphree's 60-acre wellfield is the source of drinking water for more than 135,000 Alachua County residents. The improvements will provide us with an early detection system for pollutants and allow us to ensure groundwater quality long before it could be pumped to area homes.
What better way to reduce the increasing demand for precious groundwater than to offer reclaimed water for irrigation and community beautification. GRU eventually will supply treated wastewater to irrigate a public stormwater park planned on 32 acres south of downtown Gainesville. The city-owned Depot Park site is undergoing mandatory cleanup efforts for severe contamination caused years ago by a private coal gasification plant that operated there. Our engineers are work-Besides cap ing with the Community Redevelopment Agency to a the entire de transform the property into an inviting recreation I
a form one of and greenspace center, with amenities such as a turing and retaining stormwater for
- owntown area, the park will trans-Gainesville's worst contamination elegant recreational centerpiece in ood that welcomes the makeover.
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- -.n-skateboard park, boardwalk, bird sanctuary and M sILUZPLU.III fountain. We will finance the cleanup with a small a
a neighborh surcharge on GRU residential gas utility bills -
and our natural gas rates will remain among the lowest in the state. Besides cap-turing and retaining stormwater for the entire downtown area, the park will transform one of Gainesville's worst contamination sites into an elegant recre-ational centerpiece in a neighborhood that welcomes the makeover.
When is trash beautiful? When it's helping to save our environment, of course.
We are converting landfill-derived gas into "green energy" for purchase by our customers. The initiative, known as GRUgreens" Energy, allows customers to contribute a few dollars more on their monthly utility bills to buy "green elec-tricity" generated from renewable resources. The methane gas produced from garbage degradation at the closed Southwest Landfill generates enough elec-tricity to power about 1,500 homes. The landfill's "biomass" energy is com-bined with solar energy produced locally and purchased wind energy to power our GRUgreen Energy program.
24 GRU 2002-03 ANNUAL REPORT
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2002-03 Statistics Natural Gas Customers (thousands of customers) 32 30 28 20 24 22 20 10 16-14-12 10
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'01
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'03 Natural Gas Sales (millions of therms) 24 22 20 10-16-14-12-10-0 6
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'03 Water Customers (thousands of customers)
Water Sales (millions of gallons) 65
%000 60 505
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so 30 25-15-10HH 5
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'03
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7,000 -
6,000 -
5,000 -
2,000 -
1,000 -
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'00
'01
'02
'03 Wastewater Billings (millions of gallons)
Wastewater Customers (thousands of customers) 55 50 45 40 35 30 25 20 15 10 5,50 -
5,000 -
4,500 -
4,000 -
3,530 -
2,000 -
1,500 -
1,000 -
500 -
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2002-03 Statistics Energy Supply Deerhaven Generating Station Net Capability..................................
422 megawatts (MW)
Kelly Generating Station Net Capability........
177 MW Share Ownership of Crystal River 3..........
.............. Net Capability 12 MW Combined System..................................
Net Capability 611 MW Energy Delivery -
Electric System Service Area.......
127 sq. miles Transmission...........
240.4 circuit miles Distribution...............................................................
Overhead (48%)................
611 circuit miles Underground (52%)..................................
719 circuit miles Total........
1,330 circuit miles Distribution Substations..................................
9 (138 kV/1 2kV)
Energy Delivery -
Natural Gas System Service Area..................................
108 sq. miles Distribution Mains.........
637 miles Delivery Points..................................
5 Water System Walter E. Murphree Water Treatment Plant Treatment Capacity.........
.............. 54 million gallons/day (MGD), peak day Storage Capacity..................................
19.5 million gallons (MG)
Supply Wells..................................
15 Water Service Area............
118 sq. miles Distribution Mains..........
1,003 miles Wastewater System Kanapaha Water Reclamation Facility Treatment Capacity................... 14.9 MGD, Avg. Annual Daily Flow (AADF)
Main Street Wastewater Treatment Plant Treatment Capacity...................................
7.5 MGD, AADF Combined Treatment Capacity...............................
22.40 MGD, AADF Collection Service Area.
115 sq. miles Gravity Mains..................................
553 miles Force Mains..................................
126 miles Lift Stations..................................
156 Telecommunications Miles of Fiber Optic Cable..............
234 miles On-net Locations..................................
248 Maximum Bandwidth...............................
OC-48 (2.5 gigabits/second)
Electric Customers (thousands of customers)
Electric Sales (gigawatt hours) 85 soL 75 70 00 50 50 45 40 35 30 25 20
- 10 10
'99
'00
'0
'02
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Residential O Commerclal/lndustrial 2200 2100 2000 19000 1800 1700 1300 1200-110 H0 1000 9000 700 -
5000-400 -
300-200- _
100 -
'99
'00
'01
'02
'03 Residential 0 Other O Interchange GRU 2002-03 ANNUAL REPORT 28 CO%
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Management's Discussion and Analysis SEPTEMBER 30, 2003 AND 2002 Management's Discussion and Analysis The City of Gainesville, Florida owns and operates a combined utility system (System) doing business as Gainesville Regional Utilities (GRU) which provides five separate utility functions. The utility functions consist of an electric generation, transmission and distribution system (Electric System), water production and distribution system (Water System), a wastewater collection and treatment system (Wastewater System), a natural gas distribution system (Gas System) and a telecommunication system (GRUCom). Each of these systems is accounted for internally as a separate enterprise fund but reported as a combined utility system for external financial reporting purposes.
We offer readers of GRU's financial statements this manage-ment discussion and analysis of GRU's financial statements for the fiscal year ended September 30, 2003. It should be read in conjunction with the financial statements that follow this section.
Financial Analysis of the Combined Utility System The Utilities' System net assets increased from last year by
$ 8.3 million. Table 1 below focuses on the net assets.
Table 1 Combined Utility System Net Assets (In thousands)
September 30 Current and other assets Capital assets, net Total assets Long-term debt outstanding Current and other liabilities Total liabilities 2003
$ 420,434 682,740 1,103,174 435,566 322,399 757,965 2002 (Restated)
$ 428,616 656,058 1,084,674 404,422 343,373 747.795 Required Financial Statements Balance Sheet. This statement includes all of GRU's assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to GRU's creditors (liabilities). It also provides the basis for computing rate of return, evaluating the capital structure of the System and assessing the liquidity and financial flexibility of GRU.
Statement of Revenues, Expenses and Changes in Net Assets. All of the current year's revenues and expenses are accounted for in this statement. This statement measures the success of the combined utility system's operations over the past year.
Statement of Cash Flows. The primary purpose of this statement is to provide information about the combined utility system's cash receipts and cash payments during the reporting period. This statement reports cash receipts, cash payments, and net changes in cash resulting from operating, investing and financing activities.
Notes to Financial Statements. The notes provide additional information that is essential to fully understanding the data provided in the financial statements. The notes to the financial statements can be found on pages 41-54 of this report.
Net assets:
Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 263,207 83,815 (1,813)
S 345,209 252,236 88,657 (4,014)
$ 336,879 Changes in net assets can be further explained using the following condensed statement of revenues, expenses and changes in net assets.
32 GRU 2002-03 ANNUAL REPORT
Management's Discussion and Analysis SEPTEMBER 30, 2003 AND 2002 Table 2 Combined Utilities System Changes in Net Assets (In thousands)
Combined Utilities System Capital Assets (net of accumulated depreciation)
(In thousands)
September 30 Operating revenues Interest income Total revenues Operating expenses Interest expense, net Total expenses Income before contributions and transfers Capital contributions, net Operating transfer to City of Gainesville Change in net assets Net assets - beginning of year, as originally reported Prior period adjustment Net assets, beginning of year, restated Net assets, end of year 2003
$225,624 6,298 231,922 180,972 20,362 201,334 30,588 3,657 (25,915) 8,330 412,314 (75,435) 336,879
$345,209 2002 (Restated)
$213,252 7,152 220,404 163,796 19,676 183,472 September 30 Generation Transmission, distribution and collection Treatment General plant Plant held for future use Plant unclassified Construction work in progress Total net utility plant 2003
$168,365 331,446 48,528 31,152 6,054 25,737 71,458
$682,740 2002
$175,020 326,095 49,128 31,549 6,054 6,154 62,058
$656,058 36,932 Major capital asset events during the current fiscal year included the following:
4,834
- The expansion of the Kanapaha Reclamation Facility's waste-water treatment capacity by 5 million gallons per day (MGD).
(25,695)
Costs added to this year's expansion project were $7.3 million.
16,071
- Electric transmission and distribution net expansion of $3.3 million.
- Fiber optic service expansion of $1.8 million.
The Utility's 2004 capital budget plans for investing approximately $53 million in capital projects. These projects 403,639 will be funded from a combination of cash reserves, excess (82,1) operating revenue, and additional debt.
Long-Term Debt. At the end of the 2003 fiscal year, 320,808 GRU had total long-term debt outstanding of $467.4 million,
$336,879 comprised of revenue bonds and other long-term debt.
The prior period adjustment reflected above results from a change in accounting policy in the accounting and reporting of Rate Stabilization funds. See note 1 on page 41 of this report for further explanation of this accounting change.
Capital Asset and Debt Administration Capital Assets. GRU's investment in capital assets as of September 30, 2003, amounts to $682.7 million (net of accumu-lated depreciation). This investment in capital assets includes land, generation, transmission and distribution systems, build-ings and fixed equipment, and furniture, fixtures and equipment.
The net increase in the investment in capital assets (net of accu-mulated depreciation) for the current fiscal year was 4.1 %.
The following table summarizes the System's capital assets, net of accumulated depreciation and changes for the year ended September 30, 2003.
Outstanding Debt at September 30 (In thousands)
Senior Lien revenue bonds Subordinated revenue bonds Tax-exempt Commercial Paper Taxable Commercial Paper Total 2003
$318,620 77,300 53,700 17,815
$467,435 2002
$293,750 77,300 56,262 18,549
$445,861 On January 30, 2003 the City issued Utilities System Revenue Bonds, Series 2003A and 2003B in the amounts of
$33,000,000 and $7,625,000 respectively. The 2003 A Bonds mature on various dates from October 1, 2015 through October 1, 2024. The 2003 B Bonds mature on various dates from October 1, 2004 through October 1, 2013. The 2003 A Bonds maturing on or after October 1, 2013 are subject to redemption at the option of the City on or after October 1, 2013 at 100%.
The 2003 B Bonds maturing are not subject to redemption prior to maturity.
GRU 2002-03 ANNUAL REPORT 33
Management's Discussion and Analysis SEPTEMBER 30, 2003 AND 2002 On March 20, 2003, the City entered an interest rate swap agreement with an August 28, 2003 effective date with JP Morgan Chase Bank (JP Morgan) for an initial notional amount of $121,525,000 amortizing down to zero on October 1, 2013.
Under the terms of this swap, the City would pay JP Morgan 3.41 % interest on certain payment dates and, in return, JP Morgan would pay the City a floating rate based on a specified index. On August 20, 2003, the City issued Utilities System Revenue Bonds, Series 2003C in the amount of $115,320,000.
The proceeds of these Bonds were used to refund the 1993 Series A and 1993 Series B Bonds outstanding after October 1, 2003 and $ 6,235,000 of the 1996A Bonds maturing October 1, 2004 through October 1, 2008 and to pay an amount to terminate this swap agreement with JP Morgan.
The System maintains an AA rating from Standard & Poor's Corporation, but received a rating upgrade from Moody's Investors Service for its revenue bonds from AA3 to AA while maintaining an A-1 + and P-1 rating for its commercial paper.
Additional information on long-term debt can be found in Note 4 on pages 46-50 of this report.
Financial Highlights. The most significant changes in GRU's financial condition are summarized below:
- Operating revenue increased $12.4 million, or approximately 5.8%. The increase is offset by higher fuel costs in fiscal 2003 of approximately $14.6 million, or about 21.6%, which are passed directly through to our customers.
- Net capital contributions from developers and connection fees in fiscal 2003 were down approximately $1.2 million from fiscal 2002 due to a drop in housing development in the area in the current year.
- Gross utility plant in service increased $22.4 million, or 2.4%,
and net capital assets increased $26.7 million, or 4.0%, as summarized under "Capital Assets," on page 45.
- Long-term debt increased $21.6 million, or 4.8%, because of debt issued for capital projects during the year net of principal payments, as reflected under "Long-Term Debt" on page 33, and the refunding of debt, as shown in footnote 4, on pages 46-50.
- The number of customers for electric, water, wastewater and gas services increased.7%,1.3%,1.6% and 2.2%, respectively in fiscal 2003.
- Gainesville Regional Utilities is in the process of remediation efforts at a former manufactured gas plant site. The costs incurred to date total $1.8 million and GRU estimates that remaining costs of the project will be $9.9 million. GRU has accrued a regulatory asset and liability to account for the cost and cost recovery of the expense, which is being amortized as costs are incurred and customer revenues are received.
Further explanation of this activity is presented in note 13, page 52 of this report.
Currently Known Facts or Conditions that May Have a Significant Effect on GRU's Financial Condition or Results of Operations The primary factors affecting the utility industry include environmental regulations, restructuring of the wholesale and retail energy markets, and the formation of independent bulk power transmission systems.
Utilities, and particularly electric utilities, are subject to increasing federal, state and local statutory and regulatory requirements with respect to the siting and licensing of facilities, safety and security, air and water quality, land use and other environmental factors. The industry is subject to claims asserting health effects from electric and magnetic fields associated with power lines, home appliances and other sources.
The business, affairs and financial condition of GRU could be affected by the efforts now taking place on both the federal and state levels to restructure the electric utility industry. The goal of this restructuring effort is to change from a traditionally monopolistic industry to one in which there is open competition among electric suppliers on both the wholesale and retail levels.
Changes in federal law and regulations dealing with transmission access have already improved competition at the wholesale level, which wholesale competition is expected to increase retail competition. Past legislation seeks (or sought) to complete this restructuring by providing for competition at the retail level. No state legislation is pending or proposed at this time for retail competition in Florida. Any such restructuring of the Florida retail electric utility industry is expected to affect the System.
On October 1, 2003, GRU increased its natural gas base rates by 2.0% and the Cost Recovery Factor (CFR) by 1.1 % per therm. Additionally, GRU increased water and wastewater base rates by 2.5% and 2.25%, respectively. There were no changes in electric rates. Such increases may affect the financial condition and results of operations. To meet increased costs of service, GRU also increased connection fee charges by slightly more than 3.0%
and 8.0%, for the water and wastewater systems, respectively.
GRU currently forecasts the need for new electric supply by around 2010. With this in mind and the potential long lead time to install certain types of generation, GRU has initiated an Integrated Resource Planning process to investigate options to satisfy its customer demand and supply needs. GRU is currently in the evaluation process and is holding community workshops to discuss this issue. It is anticipated that GRU will further solidify its direction in the next year or so.
Requests for Information This financial report is designed to provide a general overview of the Utility System's finances for all those with an interest in the System'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, City of Gainesville Regional Utilities, RO. Box 147117, Station A-105, Gainesville, FL 32614-7117.
34 GRU 2002-03 ANNUAL REPORT
Financial Statements Gainesville Regional Utilities YEARS ENDED SEPTEMBER 30, 2003 AND 2002 Report of Independent Certified Public Accountants The Honorable Mayor and Members of the City Commission City of Gainesville We have audited the accompanying balance sheets of Gainesville Regional Utilities (a department of the City of Gainesville, Florida) as of September 30, 2003 and 2002 and the related statements of revenues, expenses and changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Gainesville Regional Utilities' management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States 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 audits provide a reasonable basis for our opinion.
As discussed in Note 1, the financial statements present only Gainesville Regional Utilities (the Combined Utility Fund of the City of Gainesville, Florida) and are not intended to present fairly the financial position of the City of Gainesville, Florida, and the changes in its financial position and cash flows of its proprietary fund types in conformity with accounting principles generally accepted in the United States.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gainesville Regional Utilities, as of September 30, 2003 and 2002 and changes in its financial position and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
As discussed in Note 1 to the financial statements, in 2003 Gainesville Regional Utilities changed its method of accounting for rate stabilization funds.
In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2003 on our consideration of the Gainesville Regional Utilities' internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations and contracts. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's discussion and analysis, as identified in the table of contents, is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this required supplementary information.
However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.
Financial statements for the years ended September 30, 2000 and 1999 were audited by other auditors. The supplementary information included in the accompanying schedules is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that pertaining to the years ended September 30, 2000 and 1999, on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
lf I
LLP Ernst & Young LpV Orlando, Florida November 7, 2003 GRU 2002-03 ANNUAL REPORT 35
Balance Sheets SEPTEMBER 30, 2003 AND 2002 2003 Assets Current assets:
Cash and cash equivalents Investments Accounts receivable, net of allowance for uncollectible accounts of $704,865 in 2003 and $805,126 in 2002 Prepaid rent -
lease/leaseback Fuels contracts Deferred charges Inventories:
Fuel Materials and supplies Total current assets 2002 (Restated) 5,223,597 514,235 1,860,688 392,886 26,917,521 10,686,909 369,210 2,740,206 25,035,819 10,686,909 82,950 3,514,523 6,987,400 6,947,008 56,901,828 10,782,212 7,474,597 63,314,842 Restricted assets:
Utility deposits -
cash and investments Debt service -
cash and investments Rate stabilization -
cash and investments Construction Fund -
cash and investments Utility plant improvement fund -
cash and investments Investment in The Energy Authority Decommissioning reserve -
cash and investments Total restricted assets 3,761,742 60,004,798 68,228,610 22,121,649 27,747,412 3,215,002 5,113,431 190,192,644 3,728,281 59,897,416 76,852,195 8,803,549 28,634,776 3,101,508 4,634,322 185,652,047 Prepaid rent -
lease/leaseback 151,397,877 162,084,786 Other noncurrent assets 21,942,164 17,564,061 Capital assets:
Utility plant in service Plant unclassified Less: accumulated depreciation and amortization Plant held for future use Construction in progress Net capital assets Total assets 959,374,085 25,737,464 379,884,092 605,227,457 6,053,926 71,458,461 682,739,844
$1,103,174,357 936,948,021 6,153,812 355,155,899 587,945,934 6,053,926 62,058,407 656,058,267
$1,084,674,003 36 GRU 2002-03 ANNUAL REPORT
Balance Sheets SEPTEMBER 30, 2003 AND 2002 2003 Liabilities and fund equity Current liabilities:
Fuel payable Accounts payable and accrued liabilities Operating lease -
lease/leaseback Deferred credits Due to\\(from) other funds Total current liabilities 2,970,088 1,854,362 12,461,916 3,878,407 3,160,611 24,325,384 2002 (Restated) 6,554,687 4,938,009 12,461,916 2,480,066 3,242,918 29,677,596 Payable from restricted assets:
Utility deposits Rate stabilization deferred credit Construction fund:
accounts payable and accrued liabilities Revenue bonds payable -
current portion Accrued interest payable Total payable from restricted assets 3,728,795 71,628,813 3,635,718 75,434,820 2,116,878 12,385,000 7,089,021 96,948,507 1,002,854 11,520,000 8,118,211 99,711,603 Long-term debt:
Utilities system revenue bonds Subordinated utilities system revenue bonds Commercial paper notes Unamortized loss on refinancing Unamortized bond premium\\discount Total long-term debt 309,035,000 74,500,000 71,515,000 (30,372,079) 10,888,559 435,566,480 282,230,000 77,300,000 74,811,000 (26,778,452)
(3,140,827) 404,421,721 Operating lease -
lease/leaseback 176,530,733 188,991,041 Other noncurrent liabilities Total liabilities 24,594,323 757,965,427 Net assets:
Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Total liabilities and net assets 24,992,981 747,794,942 252,236,347 88,656,895 (4,014,181) 336,879,061
$1,084,674,003 263,206,801 83,814,681 (1,812,552) 345,208,930
$1,103,174,357 See accompanying notes.
GRU 2002-03 ANNUAL REPORT 37
Statements of Revenues, Expenses and Changes in Net Assets YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 Operating revenue:
Sales and service charges Other operating revenue Total operating revenue 2002 (Restated)
$198,930,821 14,320,930 213,251,751
$211,651,345 13,972,493 225,623,838 Operating expenses:
Operation and maintenance Administrative and general Depreciation and amortization Total operating expenses Operating income Non-operating income (expense):
Interest income Interest expense, net of AFUDC Total non-operating expense Income before contributions and transfers Capital contributions:
Contributions from developers Reduction of plant costs recovered through contributions Net capital contributions Operating transfer to City of Gainesville General Fund Change in net assets 121,983,071 22,706,274 36,283,237 180,972,582 104,155,618 23,798,182 35,842,269 163,796,069 44,651,256 49,455,682 6,297,965 (20,361,569)
(14,063,604) 7,152,201 (19,676,070)
(12,523,869) 36,931,813 30,587,652 3,893,622 (236,145) 3,657,477 5,868,631 (1,034,708) 4,833,923 (25,915,260)
(25,694,788) 8,329,869 16,070,948 Net assets -
beginning of year, as originally reported Prior period adjustment (See note 1)
Net assets -
beginning of year, as restated Net assets -- end of year 412,313,881 (75,434,820) 336,879,061
$345,208,930 403,639,224 (82,831,111) 320,808,113
$336,879,061 See accompanying notes.
38 GRU 2002-03 ANNUAL REPORT
Statement of Cash Flows YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 Cash flows from operating activities Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees for services Cash payments for operating transactions with other funds Other operating receipts Net cash provided by operating activities
$209,555,527 (122,291,913)
(39,495,623)
(4,661,739) 15,052,285 58,158,537 2002 (Restated)
$202,196,045 (102,454,444)
(36,930,494)
(5,295,612) 12,546,727 70,062,222 Cash flows from noncapital financing activities Transfers to other funds Net cash used in noncapital financing activities Cash flows from capital and related financing activities Principal repayments on long-term debt Interest paid on long-term debt Other receipts Acquisition and construction of fixed assets (including allowance for funds used during construction)
Proceeds from new debt and commercial paper Cash received for connection charges Net cash used in capital and related financing activities Cash flows from investing activities Interest received Purchase of investments Investment in The Energy Authority Distributions from The Energy Authority Proceeds from investment maturities Net cash (used in)/provided by investing activities Net (decrease)Aincrease in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year (25,915,260)
(25,915,260)
(25,694,788)
(25,694,788)
(134,976,000)
(21,390,758) 10,180 (O,352,000)
(21,293,656) 178,634 (54,343,220) 170,579,386 3,311,449 (36,808,963)
(42,324,379) 80,115,806 1,789,383 (51,886,212) 6,511,894 (550,179,848)
(1,181,417) 1,067,922 543,697,899 (83,550)
(4,649,236) 37,517,537
$ 32,868,301 8,816,629 (489,101,705)
(1,131,925) 663,041 517,486,938 36,732,978 29,214,200 8,303,337
$ 37,517,537 GRU 2002-03 ANNUAL REPORT 39
Statement of Cash Flows, continued YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 (Restated)
Reconciliation of operating income to net cash provided by operating activities Operating income
$44,651,256
$49,455,682 Adjustments to reconcile operating income to net cash provided by operating activities:
Depreciation and amortization 36,283,237 35,842,269 Operating lease -
lease/leaseback revenue (1,774,203)
(1,774,203)
Receivables (2,188,895) 3,322,596 Prepaid expenses (286,260) 3,954,165 Inventories 4,322,401 (7,540,418)
Deferred charges (879,881) 3,849,752 Accounts payable and accrued liabilities (5,554,222) 317,277 Due to other funds (82,307) 1,323,302 Utility deposits 93,077 (57,372)
Other liabilities and deferred credits (16,425,666)
(18,630,828)
Net cash provided by operating activities
$58,158,537
$70,062,222 Noncash, investing, capital and financing activities Utility plant contributed by developers in aid of construction was $3,657,477 and $5,562,000 in 2003 and 2002, respectively.
See accompanying notes.
40 GRU 2002-03 ANNUAL REPORT
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002
- 1. Summary of Significant Accounting Policies Organization Gainesville Regional Utilities (GRU or the Utility) is a combined municipal utility system operating electric, natural gas, water, wastewater, and telecommunications (GRUCom) utilities. GRU consists of the combined Utility Funds of the City of Gainesville, Florida (City). GRU is a unit of the City and, accordingly, the financial statements of GRU are included in the annual financial reports of the City.
Basis of Accounting The financial statements are presented on the accrual basis of accounting. Under this basis, revenues are recognized in the period earned and expenses are recognized in the period incurred. GRU applies all applicable Financial Accounting Standards Board (FASB) pronouncements issued on or before November 30,1989, in accounting for and reporting its operations.
In accordance with government accounting standards, GRU has elected not to apply FASB pronouncements issued after that date. In accordance with the Utilities System Revenue Bond Resolution as Supplemented and Amended (Bond Resolution), rates are designed to cover operating and mainte-nance expense, debt service and other revenue requirements, which exclude depreciation expense and other noncash expense items. This method of rate setting results in costs being included in the determination of rates in different periods than when these costs are recognized for financial statement purposes. The effect of these differences are recognized in the determination of net income in the period that they occur, in accordance with GRU's accounting policies. GRU has adopted the uniform system of accounts prescribed by the Federal Energy Regulatory Commission (FERC) and substantially all provisions of the National Association of Regulatory Utility Commissioners (NARUC). Rates are approved annually by the City Commission.
Accounting Changes Reporting Model In connection with a recent reexamination of its accounting policies related to Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation, GRU determined that regulatory basis accounting, as described in Note 2, could be applied to its rate stabilization fund transactions. As a result, in periods when funds are deposited to the rate stabilization fund (restricted cash and investments), pursuant to bond covenants, operating revenues would be reduced by the amount deposited and a related regulatory liability would be established; conversely, the future periods when such rate stabilization's funds are applied, the regulatory liability would be reduced and operating revenues would be increased by the amount applied. Under GRU's previ-ous accounting policy, in previous periods, rate stabilization fund assets were reported as restricted assets on the balance sheet, but the corresponding regulatory liabilities were not recorded and the balance was instead reported as part of restricted net assets.
In the 2003 fiscal year, management has elected to change the accounting policy for its rate stabilization fund by restating the comparative 2002 financial statements and disclosing the accounting change in notes to the financial statements. The treatment as a restatement, instead of as a cumulative effect adjustment, is supported by GASB Codification Section 1600.1 04, footnote 3, which states "changes in accounting principles addressed in APB Opinion No. 20, as amended, should be reported as restatements of beginning net assets."
Management believes that this accounting change will result in more consistency between the accounting for rate stabilization fund transactions and the rate-setting model, and that the change is to a preferable method of accounting for these transactions, as permitted under SFAS No. 71.
The results of the retroactive application of this accounting change are as follows:
- In the 2002 financial statements, $82,831,111 in beginning restricted net assets were reclassified to a regulatory liability, payable from restricted assets; and operating revenues and change in net assets were both increased by $7,396,291 to reflect the reduction in the regulatory liability during the 2002 fiscal year.
- Beginning net assets in the 2003 financial statements were reduced by $75,434,820 to reflect the reclassification of the rate stabilization fund regulatory liability balance as of the beginning of the fiscal year.
During the 2002 fiscal year, GRU adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments (Statement 34); GASB Statement No. 37, Basic Financial Statements -
and Management's Discussion and Analysis -
for State and Local Governments: Omnibus (Statement 37);
and GASB Statement No. 38, Certain Financial Statement Disclosures (Statement 38). Statements 34, 37 and 38 established standards for external financial reporting and disclosure for all state and local government entities, which for GRU includes a balance sheet, a statement of revenues, expenses and changes in net assets and a statement of cash flows. The most significant change related to the implementation of Statement 34 for GRU was the requirement that net assets be classified into three components -
invested in capital assets, net of related debt; restricted; and unrestricted, on a retroactive basis. Previously, GRU's net assets were reported GRU 2002-03 ANNUAL REPORT 41
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 as fund equity, as either retained earnings or contributions in aid of construction. These classifications are defined as follows:
- Invested in capital assets, net of related debt -
This component of net assets consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, or other long-term borrowings that are attributable to the acquisition, construction, or improve-ment of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attribut-able to the unspent proceeds is not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net assets component as the unspent proceeds.
- Restricted -
This component of net assets consists of net assets subject to external constraints on their use imposed by creditors (such as through debt covenants), contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation.
- Unrestricted net assets -
This component of net assets consists of net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt."
The adoption of Statements 34, 37, and 38 had no effect on the financial statements except for the classification of net assets, changes in financial statement presentation and modification of certain financial statement note disclosures.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications Certain amounts for the prior year have been reclassified to conform with current year presentation.
Investments Investments are reported at fair value in the balance sheet and on quoted market prices. All short-term commercial paper with maturities less than one year have been reported at cost which approximates fair value.
Risk Management/Futures & Options Contracts GRU conducts a risk management program with the intent of reducing the impact of fuel price spikes for its customers.
The program utilizes futures and options contracts that are traded on the New York Mercantile Exchange (NYMEX) so that prices may be fixed for given volumes of gas that the utility intends to consume during a given production month. Through the use of an internal oversight group, consultation from reputable risk management sources, and close monitoring of the market on a daily basis, GRU makes every effort to take reasonable steps to lessen customers' exposure to fuel spikes while, at the same time, attempting to minimize costs.
As a result of risk management activity GRU had, on September 30, 2003 and 2002, deposits of $2,300,000 and
$1,600,000, respectively, with brokers for margin accounts.
GRU has $369,210 and $82,950 for outstanding options and estimates approximately $13,300,000 in futures contracts at September 30, 2003 and estimated $ for September 30, 2002. At contract maturity date, gains or losses on hedging transactions are recognized into operation and maintenance expense. On September 30, 2003, $889,500 was held in deferred gains, inclusive of options, from outstanding contracts.
On September 30, 2002 there was $104,500 in deferred gains from outstanding contracts.
Inventories Inventories are stated at cost using the weighted average unit cost method for materials, and the last-in, first-out (LIFO) method for fuel. Obsolete and unusable items are reduced to estimated salvage values. The cost of fuel used for electric generation is charged to expense as consumed.
Capital Assets Property and equipment are recorded at cost. Maintenance and repairs are charged to operating expense as incurred.
The average cost of depreciable plant retired is eliminated from the plant accounts and charged to accumulated depreciation.
Associated cost of removal is charged to depreciation expense.
Plant unclassified includes property and equipment of capital projects placed into service that have not been classified in the related asset category within utility plant in service.
Depreciation and Nuclear Generating Plant Decommissioning Depreciation of utility plant is computed using the straight-line method over estimated service lives ranging from 6 to 50 years. Depreciation was equivalent to 3.24% and 3.34% of average depreciable property for 2003 and 2002, respectively.
Depreciation expense includes a provision for decommissioning costs related to the jointly-owned nuclear power plant (see Note 6).
42 GRU 2002-03 ANNUAL REPORT
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 Amortization of Nuclear Fuel The cost of nuclear fuel, including estimated disposal cost, is amortized to fuel expense based on the quantity of heat produced for the generation of electric energy in relation to the quantity of heat expected to be produced over the life of the nuclear fuel core. These costs are charged to customers through the fuel adjustment clause.
Revenue Recognition Revenue is recorded as earned. GRU accrues for services rendered but unbilled, which amounted to approximately
$12,100,000 and $9,200,000 for 2003 and 2002, respectively.
Fuel adjustment revenue is recognized based on the actual fuel costs. Amounts charged to customers for fuel are based on estimated costs, which are adjusted for any differences between the actual and estimated costs once actual fuel costs are known. If the amount recovered through billings exceeds actual fuel costs, GRU records deferred fuel as a liability. If the amount recovered through billings are less than the actual fuel costs, GRU records deferred fuel as an asset, for amounts to be collected through future rates. As of September 30, 2003 and 2002, deferred fuel charges were $(1,851,000) and
$1,716,000, respectively. The Fuel charges are reported as either part of current deferred charges or current deferred credits on the balance sheet.
Transactions with the City of Gainesville As an enterprise fund of the City of Gainesville, transactions occur between GRU and the City's governmental funds throughout the year in the ordinary course of operations.
Below is a summary of significant transactions:
Administrative Services -
GRU is billed monthly for various administrative and insurance services provided by the City's governmental functions.
Nonmetered and Metered Service Charges -
GRU bills the City's governmental funds on a monthly basis for all nonmetered, metered and other administrative services.
Transfers to the General Fund -
GRU budgets an annual transfer to the General Fund based on a City Commission approved formula. See Note 11 for details.
Funds in Accordance with Bond Resolutions Certain restricted funds of GRU are administered in accordance with bond resolutions. These funds are as follows:
- Debt Service Fund
- Subordinated Indebtedness Fund
- Rate Stabilization Fund
- Construction Fund
- Utility Plant Improvement Fund The Debt Service Fund accounts for funds accumulated to provide payment of principal and interest on or redeem outstanding debt.
The Subordinated Indebtedness Fund, grouped in the Debt Service Fund for financial reporting purposes, accounts for funds accumulated to pay principal and interest on subordinated indebtedness.
The Rate Stabilization Fund accounts for funds accumu-lated to stabilize rates over future periods through the transfer of funds to and from operations as necessary and to provide operating reserves for the Utility.
The Construction Fund accounts for funds accumulated for the cost of acquisition and construction of the system.
The Utility Plant Improvement Fund accounts for funds used to pay for certain capital projects or debt service, the purchase or redemption of bonds, or otherwise provide for the repayment of bonds.
When both restricted and unrestricted resources are available for use, it is GRU's policy to use restricted resources first, then unrestricted resources as they are needed.
Operating, Non-Operating Revenues GRU has defined operating revenue as that revenue which is derived from customer sales or service while non-operating revenues include interest on investments and any gain from the sale of such investments.
Allowance for Funds Used During Construction (AFUDC)
An allowance for interest on borrowed funds used during construction of $112,000 and $0 in 2003 and 2002, respectively, is included in construction in progress and as a reduction of interest expense. These amounts are computed by applying the effective interest rate on the funds borrowed to finance the projects to the monthly balance of projects under construction.
The effective interest rate was approximately 4.23%.
GRU 2002-03 ANNUAL REPORT 43
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 Contributions in Aid of Construction GRU recognizes capital contributions from developers and other third parties as revenues in the period received. Contri-butions to the electric and gas divisions are also reported as capital contribution revenues; however, the related capital asset amounts are also expensed in the same period consistent with the requirements of the FERC Uniform System of Accounts.
Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, bank demand accounts, and overnight repurchase agreements.
Unamortized Loss on Refinancing Losses resulting from the refinancing of bonds are deferred and amortized over the remaining life of the old debt or the life of the new debt, whichever is shorter.
- 2. Rates and Regulation GRU's rates are established in accordance with the Utilities System Bond Resolution and the Utilities System Subordinated Bond Resolution as adopted and amended. Under these docu-ments, rates are set to recover Operation and Maintenance Expenses, Debt Service, Utility Plant Improvement Fund contributions and costs for any other lawful purpose such as the General Fund Transfer.
Each year during the budgeting process, and at any other time necessary, the City Commission approves rate changes and other changes to GRU's charges.
GRU's cost of fuel for the electric and natural gas systems is passed directly through to its customers. Each month, GRU staff estimates the cost of fuel and consumption for both the electric and natural gas systems. These estimates are combined with a true-up for actual costs from previous months into a current-month electric fuel adjustment and natural gas pur-chased gas adjustment. Amounts overbilled or underbilled are passed along to customers and are either accrued or deferred at year-end.
The Florida Public Service Commission does not regulate rate levels in any of GRU's utilities. They do, however, have jurisdiction over rate structure for the electric system.
Currently, GRU prepares its financial statements in accord-ance with Statement of Financial Accounting Standards (SFAS)
No. 71, and records various regulatory assets and liabilities. For a company to report under SFAS No. 71, the company's rates must be designed to recover its costs of providing services, and the company must be able to collect those rates from customers. If it were determined, whether due to competition or regulatory action, that these standards no longer applied, GRU could be required to write off its regulatory assets and lia-bilities. Management believes that GRU currently meets the cri-teria for continued application of SFAS No. 71, but will continue to evaluate significant changes in the regulatory and competitive environment to assess continuing applicability of the criteria.
44 GRU 2002-03 ANNUAL REPORT
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002
- 3. Capital Assets and Changes in Accumulated Depreciation A summary of capital assets, changes in accumulated depreciation and related depreciation provisions expressed as a percentage of average depreciable plant follows:
Transmission, and Distribution Treatment Generation Collection General Unclassified Combined Balance, October 1, 2002 Capital additions Sales, retirements
- Balance, September 30, 2003 Accumulated depreciation, October 1, 2002 Depreciation expense Retirements Accumulated depreciation, September 30, 2003 Average depreciation rate Balance, October 1, 2001 Capital additions Sales, retirements
- Balance, September 30, 2002 Accumulated depreciation, October 1, 2001 Depreciation expense Retirements/adjustments Accumulated depreciation, September 30, 2002 Average depreciation rate
$83,325,774
$333,011,693 462,285,767 2,087,320 3,462,947 18,021,004 40,111 110,843 1,092,359
$85,372,983
$336,363,797 479,214,412
$34,198,595
$157,989,642
.136,190,991 2,686,430 10,119,476 12,578,094 40,111 110,844 999,075
$36,844,914
$167,998,274 147,770,010 3.18%
3.02%
2.67%
Transmission, and Distribution Treatment Generation Collection
$81,371,071
$288,946,495
$422,147,317 2,245,159 56,623,471 45,514,094 290,456 12,558,273 5,375,644
$83,325,774
$333,011,693
$462,285,767
$31,870,077
$160,001,587
$128,547,379 2,618,974 10,501,563 12,894,877 290,456 12,513,508 5,251,265
$34,198,595
$157,989,642
$136,190,991 3.18%
3.38%
2.92%
$58,324,788 5,446,193 5,348,088
$58,422,893
$26,776,671 5,842,312 5,348,089
$27,270,894 10.01%
General
$54,159,664 11,029,223 6,864,099
$58,324,788
$28,717,006 4,918,757 6,859,092
$26,776,671 8.75%
$ 6,153,811
$943,101,833 48,601,116 77,618,580 29,017,463 35,608,864
$25,737,464
$985,111,549 n/a
$355,155,899 n/a 31,226,312 n/a 6,498,119 n/a
$379,884,092 n/a 3.24%
Unclassified Combined
$62,142,573
$908,767,120 58,004,920 173,416,867 113,993,682 139,082,154
$ 6,153,811
$943,101,833 n/a
$349,136,049 n/a 30,934,171 n/a 24,914,321 n/a
$355,155,899 n/a 3.34%
GRU 2002-03 ANNUAL REPORT 45
-5 a
,
r U
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002
- 4. Long-Term Debt Long-term debt outstanding at September 30, 2003 and 2002, consisted of the following:
2003 2002 Utilities System Revenue Bonds:
Series 1983 (1983 Bonds) -
interest payable semi-annually to October 1, 2014 at a rate of 6.0%
1992 Series A (1992 A Bonds) -
interest payable semi-annually to October 1, 2002 6.1 %
1992 Series B (1992 B Bonds) -
interest payable semi-annually to October 1, 2013 at various rates between 6.1% and 7.5%
1993 Series A (1993 A Bonds) -
interest payable semi-annually to October 1, 2006 at various rates between 5.0% and 5.3%
1993 Series B (1993 B Bonds) -
interest payable semi-annually to October 1, 2013 at various rates between 5.0% and 5.5%
1996 Utilities System Revenue Bonds -
1996 Series A (1996 Ser interest payable semi-annually to October 1, 2026 at rates between 4.2% and 5.75%
2002 Utilities System Subordinated Utilities System Revenue Bon 2002A (2002 Series A) interest at variable rates 2002 Utilities System Subordinated Utilities System Revenue Bon 2002B (2002 Series B) interest at variable rates 2003 Series A (2003 A Bonds) -
interest payable semi-annually to October 1, 2024 at rates between 4.625% and 5.25%.
2003 Series B (2003 B Bonds) -
interest payable semi-annually to October 1, 2013 at a 4.4% interest rate (Federally Taxable).
2003 Series C (2003 C Bonds) -
interest payable semi-annually to October 1, 2013 at rates between 4.0% and 5.0%.
Utilities System Commercial Paper Notes, Series C (C Notes) -
interest at variable market rates Utilities System Taxable Commercial Paper Notes, Series D (D Notes interest at variable market rates Current portion of long-term debt Unamortized loss on refinancing Unamortized premium\\discount Total long-term debt The 1983 Bonds mature on October 1, 2014. Those Bonds are subject to redemption at the option of the City as a whole at any time or in part on any interest payment date, at a redemption price of 100% plus accrued interest to the date of redemption.
The 1992 A Bonds matured October 1, 2002.
The 1992 B Bonds mature at various dates from October 1,
$ 4,675,000
$ 4,675,000 1,555,000 24,630,000 24,960,000 4,175,000 17,795,000 2,015,000 110,280,000 126,575,000 134,485,000 37,300,000 37,300,000 40,000,000 40,000,000 33,000,000 7,625,000 115,925,000 53,700,000 56,262,000 17,815,000 467,435,000 (12,385,000)
(30,372,079) 10,888,559
$435,566,480 18,549,000 445,861,000 (11,520,000)
(26,778,452)
(3,140,827)
$404,421,721 2001 to October 1, 2017. Those Bonds maturing on or after October 1, 2003 to October 1, 2007, amounting to $14.3 million were redeemed at the option of the City on October 1, 2002.
The 1993 A and B Bonds mature at various dates through October 1, 2013. Those Bonds maturing on or after October 1, 2004, amounting to $113.9 million, were redeemed at the option of the City on October 1, 2003.
46 GRU 2002-03 ANNUAL REPORT
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 The 1996 A Bonds mature at various dates through October 1, 2026. Those Bonds maturing on or after October 1, 2010 are subject to redemption at the option of the City on or after October 1, 2006 as a whole or in part at any time at a redemption price of 102% in 2006, 101% in 2007, and 100%
thereafter. A portion of the Bonds maturing from October 1, 2004 through October 1, 2008 ($6.2 million) were advance-refunded to the maturity dates.
On July 20, 2002, the City issued Subordinated Utilities System Revenue Bonds, Series 2000A and 2002B in the amounts of $37,300,000 and $40,000,000 respectively. The proceeds from the Series 2002A Bonds were used to refund a portion ($36,645,000) of the 1992B Bonds in order to reduce its total debt service payments over the next 16 years by approximately $4.9 million and to obtain an economic gain of approximately $3.4 million. Of the 2002B Series Bonds,
$20 million was used to pay principal of Series C Tax-exempt Commercial Paper Notes and $20 million was issued to fund the Costs of Acquisition and Construction of the utility system.
The 2002A and 2002B Series Subordinated Bonds were issued as multi-modal variable interest-rate Bonds, initially issued as variable-rate auction notes. As such, interest rates are reset by an auction process each 35 days based on market rates.
Payment of principal and interest of the 2002A and 2002B Series Subordinated Bonds when due are insured by a municipal bond insurance policy issued by Financial Security Assurance. While in the variable auction-rate mode, the Bonds may be redeemed at the option of the City in whole or in part on any interest payment date immediately following the end of an auction period without premium.
On January 30, 2003 the City issued Utilities System Revenue Bonds, Series 2003A and 2003B in the amounts of $33,000,000 and $7,625,000 respectively. The 2003 A Bonds mature on various dates from October 1, 2015 through October 1, 2024. The 2003 B Bonds mature on various dates from October 1, 2004 through October 1, 2013. The 2003 A Bonds maturing on or after October 1, 2013 are subject to redemption at the option of the City on or after October 1, 2013 at 100%. The 2003 B Bonds maturing are not subject to redemption prior to maturity.
On March 20, 2003, the City entered an interest rate swap agreement with an August 28, 2003 effective date with JP Morgan Chase Bank (JP Morgan) for an initial notional amount of $121,525,000 amortizing down to zero on October 1, 2013.
Under the terms of this swap, the City would pay JP Morgan 3.41% interest on certain payment dates and, in return, JP Morgan would pay the City a floating rate based on a specified index. On August 20, 2003, this agreement was terminated and the City issued Utilities System Revenue Bonds, Series 2003C in the amount of $115,925,000. The proceeds of these Bonds were used to refund the 1993 Series A and 1993 Series B Bonds outstanding after October 1, 2003 and a portion of the 1996 Series A Bonds maturing October 1, 2004 through October 1, 2008 and to pay an amount to terminate the swap agreement with JP Morgan referenced in the previous para-graph. This refunding resulted in a reduction in total debt service payments over 10 years of approximately $10.6 million and an economic gain of approximately $8.9 million and allowed for sufficient votes to effectuate certain material amendments to the Utilities System Bond Resolution.
Utilities System Commercial Paper Notes, Series C Notes (tax-exempt) in a principal amount not to exceed $85 million may continue to be issued to refinance maturing Series C Notes or provide for other costs. Liquidity support for the Series C Notes is provided under a long-term credit agreement dated as of March 1, 2000 with Bayerische Landesbank Girozentrale. The obligation of the bank may be substituted by another bank which meets certain credit standards and which is approved by GRU and the Agent. Under the terms of the agreement, GRU may borrow up to $85 million with same day availability ending on the termination date, as defined in the agreement. Series C Notes of $ 3.3 million and $2.7 million were redeemed during 2003 and 2002, respectively.
In June 2000, a Utilities System Commercial Paper Note Program, Series D (taxable) was established in a principal amount not to exceed $25 million. Liquidity support for the Series D Notes is provided under a long-term credit agreement dated June 1, 2000 with SunTrust Bank. The obligation of the bank may be substituted by another bank that meets certain credit standards and is approved by GRU. Under the terms of the agreement, GRU may borrow up to $25 million with same day availability ending on the termination date, as defined in the agreement.
On July 3, 2002 the City of Gainesville d/b/a Gainesville Regional Utilities (GRU) started an interest rate swap with Merrill Lynch Capital Services (the Counterparty) in a notional amount of $37.3 million which amortizes down over time.
Under the terms of the swap agreement, GRU will pay the Counterparty a fixed annual interest rate of 4.10% payable on April 1 and October 1 of each year, beginning October 2, 2002 and will receive a variable rate payment each month beginning August 1, 2002. The variable-rate will be equal to the Bond Market Association (BMA) Municipal Swap Index. The Counterparty has the right, but not the obligation, to terminate the swap if the BMA Municipal Swap Index exceeds 7% for any immediate preceding rolling consecutive 180 calendar day period. As of September 30, 2003, the termination value of the swap, if exercised, would have resulted in a payment to the counter party of approximately $3.7 million.
GRU 2002-03 ANNUAL REPORT 47
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 GRU is required to make monthly deposits into separate accounts for an amount equal to the required share of principal and interest becoming payable for the revenue bonds on the payment dates of April 1 and October 1.
The following table lists the Debt Service requirements (principal and interest) on long-term debt outstanding at September 30, 2003:
Period ending September 30 Principal 2004 2005 2006 2007 2008 2009-2013 2014-2018 2019-2023 2024-2028 2029-2033 2034-2038 Total
$ 12,385,000 15,459,000 14,944,000 15,474,000 20,264,000 129,841,715 100,539,525 60,234,525 42,299,525 53,388,710 2,605,000
$467,435,000 Interest
$ 18,656,124 17,643,599 16,787,725 16,352,509 15,833,307 63,665,162 35,623,832 22,312,895 12,121,041 7,493,183 1,158,073
$227,647,450 Total Debt Service Requirements"'
$ 31,041,124 33,102,599 31,731,725 31,826,509 36,097,307 193,506,877 136,163,357 82,547,420 54,420,566 60,881,893 3,763,073
$695,082,450
"' Interest rates on variable-rate long-term debt were valued to be equal to.85% for the 2002A and 2002B Series Subordinated Bonds,.85% for Series C Tax-exempt Commercial Paper and 1.23% for Series D Taxable Commercial Paper. These are the rates in effect as of September 30, 2003.
48 GRU 2002-03 ANNUAL REPORT
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 The table below shows the changes in net long-term debt balances that occurred during the years ended September 30, 2003 and 2002.
2003 2002 Long-term debt outstanding at beginning of year Changes in long-term debt:
2002A Series Subordinated Bonds issued 2002B Series Subordinated Bonds issued 2003A Series Bonds issued 2003B Series Bonds issued 2003C Series Bonds issued 1 992A Series Bonds refunded 1 993A Series Bonds refunded 1993B Series Bonds refunded 1 996A Series Bonds refunded Fixed rate debt redeemed - Senior Lien and Subordinated TECP redeemed as part of Series 2002B issuance TECP redeemed during the year Taxable CP issued Taxable CP redeemed Change in unamortized loss/bond discount Long-term debt outstanding at end of year
$404,421,721 33,000,000 7,625,000 115,925,000 (9,645,000)
(104,280,000)
(6,235,000)
(12,385,000)
(2,562,000)
(734,000) 10,435,759
$435,566,480
$394,398,221 37,300,000 40,000,000 (36,645,000)
(11,520,000)
(20,000,000)
(2,178,000) 2,000,000 (544,000) 1,610,500
$404,421,721
$ 11,520,000 Current portion of long-term debt
$ 12,385,000 Under the terms of the Bond Resolution relating to the sale of the Utilities System Revenue Bonds, payment of the principal and interest is secured by an irrevocable lien on GRU's net revenue (exclusive of any funds which may be established pursuant to the Bond Resolution for decommissioning and certain other specified purposes), including any investments and income thereof.
The Bond Resolution contains certain restrictions and commitments, including GRU's covenant to establish and maintain rates and other charges to produce revenue sufficient to pay operation and maintenance expenses, amounts required for deposit in the debt service fund, and amounts required for deposit into the utility plant improvement fund.
Derivatives GRU is a party to certain interest rate swap agreements, which are not recorded in the financial statements. Following is a disclosure of key aspects of the agreements.
Objective of the Interest rate swap. On July 3, 2002, the City of Gainesville entered into an interest rate swap with Merrill Lynch Capital Services (see footnote 4) in connection with its variable rate 2002A Subordinated Bonds. The objective was to lower borrowing costs by synthetically fixing an interest rate.
Terms. The swap, with a notional amount of $37.3 million, became effective on July 3, 2002. The swap amount decreases over time, matching the amount of the variable rate debt. The first notional decrease for both is October 1, 2003, with the final maturity of October 1, 2017. Under the terms of the swap agreement, GRU will pay the Counterparty a fixed annual interest rate of 4.10%. GRU will receive from the Counterparty a variable payment based on the Bond Market Association Municipal Swap Index (BMA). GRU will also pay the interest rate resulting from the 35-day remarketing of the auction rate notes.
Fair Value. As of September 30, 2003, the fair value of the swap was $(1.9) million, based on quoted market prices. This negative fair value is a result of changes in interest rates and reflects the fact that at year end, GRU would have to pay this amount to terminate the swap agreement.
GRU 2002-03 ANNUAL REPORT 49
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 Swap payments and associated debt. Assuming interest rates remain the same as September 30, 2003, debt service requirements on the auction rate notes and the interest rate swap would be as follows:
Fiscal Year Ending Sept 30 2004 2005 2006 2007 2008 2009-2013 2014-2017 Total Auction-Rate Notes Principal
$ 2,900,000 3,100,000 3,200,000 3,300,000 Interest
$ 280,925 301,487 298,499 295,537 307,050 1,496,543 1,059,724 S4,039,766 Interest Rate Swaps, Net
$ 1,074,125 1,126,966 1,088,715 1,051,706 1,071,151 4,855,652 3,005,377
$13,273 692 Total
$ 4,255,050 4,528,453 4,587,214 4,647,243 1,378,201 6,352,195 26,065,101
$51,813,458 22,000,000
$34,500,000 Credit Risk. As of September 30, 2003, the fair value of the swap was negative, therefore the City is not subject to credit risk. However, should interest rates change and the fair value of the swap becomes positive, the City would be exposed to credit risk in the amount of the derivative's fair value. The swap counterparty was rated Aa3, A+ and AA-by Moody's, S&P and Fitch respectively as of September 30, 2003. To mitigate the potential for credit risk, if the counterparty's credit quality assigned by any two of Moody's, S&P and Fitch shall be suspended or withdrawn or lower than "Aa3" in the case of Moody's, "MA-" in the case of S&P and "AA-" in the case of Fitch, the City shall have the right to require that the counterpar-ty's obligations under the Agreement be collateralized. Failure to deliver the Collateral Agreement to the City on or before the third business day after receipt of the written request will constitute an Event of Default with respect to the counterparty.
Basis Risk. The swap exposes GRU to the difference between a weekly BMA index and a 35-day rollover based on current market conditions. As a result, savings could not be realized. As of September 30, 2003, BMA was 1.08% for the week of September 24, 2003, while the last 35-day reset was.85%.
Termination Risk. The swap agreement will be terminated at any time if certain events occur that result in one party not performing in accordance with the agreement. The swap can be terminated due to Illegality, a credit event upon merger, or an event of default and illegality. The swap can also be termi-nated if credit ratings fall below established levels.
- 5. Deposits and Investments Deposits are held in a qualified public depository institution insured by the Federal Depository Insurance Corporation and as required by the Bond Resolution in a bank, savings and loan association or trust company of the United States or a national banking association having capital stock, surplus and undivided earnings aggregating at least $10 million.
In accordance with state laws and the Bond Resolution, GRU is authorized to invest in obligations which are uncondi-tionally guaranteed by the United States of America or its agencies or instrumentalities, repurchase agreement obliga-tions unconditionally guaranteed by the United States of America or its agencies, corporate indebtedness, direct and general obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state (provided such obligations are rated by a nationally recognized bond rating agency in either of its two highest rating categories), public housing bonds, and certain certificates of deposit. Investments in corporate indebtedness must be rated in the highest rating category of a nationally rec-ognized rating agency and in one of the two highest rating cat-egories of at least one other nationally recognized rating agency.
Investments are categorized in the following table in accordance with GASB Statement No. 3. All of GRU's investments fall under category 1, which include investments that are insured or registered or held by the Utility or its agent in GRU's name.
50 GRU 2002-03 ANNUAL REPORT
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 Fair (Carrying Amount) Value September 30, 2003 U.S. government securities U.S. government bonds Corporate debt securities Total
$ 66,231,222 23,530,828 68,657,112
$158,419,162
- 7. Restricted Net Assets Certain assets are restricted by bond resolution and other external requirements. Following is a summary of the computation of restricted net assets at September 30, 2003 and 2002, and the restricted purposes of the net asset balances:
Year ended September 30 2003 2002 (Restated)
September 30, 2002 U.S. government securities U.S. government bonds Corporate debt securities Total
$ 88,518,585 24,250,061 31,674,331
$144,442,977 Restricted net assets:
Total restricted assets
$190,192,644 Unspent debt proceeds (21,814,456)
Payable from restricted assets (84,563,507)
Restricted net assets 83,814,681
$185,652,047 (8,803,549)
(88,191,603) 88,656,895 Cash and investments are contained in the following balance sheet accounts as of September 30:
Net assets are restricted as follows:
2003 2002 2003 Restricted assets
$190,192,644 Current assets:
Cash and cash equivalents 1,860,688 Investments 392,886 Total cash and investments 192,446,218 Less cash and cash equivalents (32,868,301)
Less accrued interest receivable and accounts receivable (1.158.755) 2002 (Restated)
$185,652,047 5,223,597 514,235 191,389,879 (37,517,537)
(9,429,365)
$144,442,977 Debt covenants:
Debt service Utility plant improvement Total restricted pursuant to debt covenants Other restrictions:
Investment in The Energy Authority" Nuclear decommissioning reserve Total other restrictions Restricted net assets
$ 47,738,836 27,747,412 75,486,248 3,215,002 5,113,431 8,328,433
$ 83,814,681
$ 52,286,289 28,634,776 80,921,065 3,101,508 4,634,322 7,735,830
$ 88,656,895 Total investments
$158,419,162
- 6. Jointly-Owned Electric Plant GRU-owned resources for supplying electric power and energy requirements include its 1.4079% undivided ownership interest in the Crystal River Unit 3 (CR3) nuclear power plant operated by Florida Power Corporation. GRU's net investment in CR3 at September 30, 2003 and 2002 is approximately
$7,100,000 and $7,400,000, respectively. CR3 operation and maintenance costs, which represent GRUs part of expenses attributable to operation of CR3, are recorded in accordance with the instructions as set forth in the FERC uniform system of accounts. Payments are made to Florida Power Corporation in accordance with the CR3 participation agreement.
GRU, as a part of this participation agreement, is responsible for its share of future decommissioning costs. Decommissioning costs are funded and expensed annually and are recovered through rates charged to customers. The most recent decommis-sioning cost estimates provided by Florida Power Corporation in May 2003, estimated GRU's share of total future decommissioning costs to be $7,100,000. At September 30, 2003, GRU has funded $5,113,000 of this cost.
M"Includes trade guarantee deposits.
- 8. Retirement Plans The City sponsors and administers one defined benefit pension plan and two defined contribution plans (collectively, the Plans) that include GRU and other City employees. The Plans do not make separate measurements of assets and pension benefit obligations for individual units of the City. Such information is presented in the City of Gainesville, Florida, September 30, 2003, Comprehensive Annual Financial Report.
The General Employees Pension Plan (Employees Plan), a contributory defined benefit pension plan, covers all employees of GRU, except certain limited personnel who elect to participate only in a defined contribution plan.
The City accounts for and funds the costs of the Employee Plan as they accrue. Such costs are based on contribution rates determined by the most recent actuarial valuation. The total con-tributions by GRU, including amortization of prior service GRU 2002-03 ANNUAL REPORT 51
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 costs, were $1,800,000 for the years ended September 30, 2003 and 2002.
Certain limited employees are eligible to participate in defined contribution plans managed by outside fiscal agents for the City. Under the first plan, the City contributes a percentage of an employee's annual salary and employees contribute a specified percentage. All employees have the option to partici-pate in the second defined contribution plan. The total defined contribution cost for GRU for the years ended September 30, 2003 and 2002, was $200,000 and $357,000, respectively.
- 9. Postretirement Benefits In addition to providing pension benefits, the City provides certain health care insurance benefits for retired employees of the City and GRU. The City also permits retirees to participate in the life insurance program. Most permanent full and part-time employees who are eligible for normal, early, or disability retirement are eligible for these benefits. Individual benefits are the same for all employees, but the cost to the City may vary.
Contributions by the City to fund these benefits are neither mandated nor guaranteed. The actuarial costs of these plans are determined and funded by GRU. The City recognizes the cost of these benefits on a monthly basis by contributing a percentage of active payroll costs. The cost of providing these benefits for the GRU retirees for the fiscal years ended September 30, 2003 and 2002 was $1,192,000 and $1,167,000, respectively.
- 10. Disaggregation of Receivables and Payables Receivables For the years ended September 30, 2003 and 2002 respectively, net accounts receivable represent 91.1 % and 83.4% from customers for billed and unbilled utility services, and 8.9% and 16.6% from other receivables. There are no receivables expected to take longer than one year to collect.
Payables As of September 30, 2003 and 2002 respectively, payable balances represent 29.4% and 41.6% related to fuels payable, 8.1 % and 7.8% to standard vendor payables, 22.6% and 11.0%
to accrued vacation payable, 31.3% and 20.6% to intergovern-mental payables and 8.6% and 19.0% to other payables.
- 11. Transfers to General Fund GRU makes transfers to the City's general government based on a formula that ties the transfer directly to the financial performance of the system. The transfer to the general fund may be made only to the extent such moneys are not necessary to pay operating and maintenance expenses and to pay debt serv-ice on the outstanding bonds and subordinated debt or to make other necessary transfers under the Bond Resolution.
The formula-based fund transfer to the general fund for the years ended September 30, 2003 and 2002 was $25,915,260 and $25,694,788, respectively.
- 12. Deferred Charges Deferred charges are presented on the balance sheets under current assets and as other noncurrent assets.
The largest deferred charge is for estimated environmental costs of $13,458,000 and $10,100,000 at September 30, 2003 and 2002 respectively. See Note 13 for details on the manufac-tured gas plant remediation portion of this item.
Also included in deferred charges is unamortized bond issuance costs of approximately $6,600,000 and $3,310,000, respectively, at September 30, 2003 and 2002. These costs are being amortized straight-line over the life of the bonds, which approximates the effective interest method.
Other significant deferred charges include acquisition costs of $2,765,000 and $2,705,000 for September 30, 2003 and 2002, respectively, and fuel adjustment true-up of $1,716,000 in 2002. In 2003, the fuel adjustment was $(1,851,000), thus was reported as a deferred credit.
Remaining smaller items make up the balance of the deferred charges of $1,859,000 and $3,247,000, for 2003 and 2002, respectively.
- 13. Environmental Liabilities GRU is subject to numerous federal, state and local envi-ronmental regulations. Under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as 'Superfund," GRU has been named as a potentially respon-sible party at one hazardous waste site. In addition, in January 1990, GRU purchased the natural gas distribution assets of a company and pursuant to the related purchase agreement, assumed responsibility for the investigation and remediation of environmental impacts related to the operation of the former manufactured gas plant. Based upon GRU's analysis of the cost to clean up these sites, GRU has accrued a liability to reflect the costs associated with the cleanup effort. Fiscal year 2003 and 2002 expenditures which reduce the liability balance were $1,804,000 and $ respectively leaving the balance of
$9,896,000 and $7,850,000 as of September 30, 2003 and 2002, respectively. GRU is recovering the costs of this clean-up through customer charges. A regulatory asset was established as a deferred charge in the accompanying balance sheet to represent the balance of customer charges. Fiscal 2003 and 2002 billings were $492,000 and $ respectively which reduced the deferred asset leaving the asset balance
$11,200,000 and $7,850,000 as of September 30, 2003 and 52 GRU 2002-03 ANNUAL REPORT
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002 2002, respectively. Although some uncertainties associated with environmental assessment and remediation activities remain, GRU believes that the current provision for such costs is adequate and additional costs, if any, will not have a material adverse effect on GRU's financial position, results of operations or liquidity.
- 14. Lease/Leaseback On December 10, 1998, GRU entered into a lease/lease-back transaction for all of the Deerhaven Unit 1 and a substantial portion of the Deerhaven Unit 2 generating facilities. Under the terms of the transaction, GRU entered into a 38-year lease and simultaneously a 20-year leaseback. At the end of the lease-back period term, GRU has an option to buy out the remainder of the lease for a fixed purchase option amount.
Under the terms of the transaction, GRU continues to own, operate, maintain and staff the facilities.
The proceeds received by GRU from this transaction were approximately $249 million. From these proceeds, GRU deposited $142 million as a payment undertaking agreement and a second deposit of $72 million in the form of a collateral-ized Guaranteed Investment Contract (GIC), both with an AAA rated insurance company. The deposit instruments will mature in amounts sufficient to meet the annual payment obligations under the leaseback including the end of term fixed purchase option if elected by GRU.
The net benefit of this transaction, after payment of trans-action expenses, was approximately $35 million and resulted in a deferred gain, which is being amortized as income on a straight-line basis over the leaseback period of 20 years.
Amortization of the net benefit was $1,775,000 in both 2003 and 2002, respectively, and was reported as a component of other operating revenue.
- 15. Investment in the Energy Authority In May 2000, GRU became an equity member of The Energy Authority (TEA), a power marketing joint venture. In May 2002, TEA began trading natural gas on behalf of GRU. As of September 30, 2002, this joint venture was comprised of six municipal utilities across the nation, all of which are participating in the electric marketing and five of which participate in the gas program. GRU's ownership interest was 7.1 % in the electric venture and 7.7% in the gas venture, and it accounted for this investment using equity accounting. To become a member, GRU paid an initial capital contribution of $1,000,000 and a membership fee of $867,360. The membership fee was amortized over 24 months and, consequently, eliminated at September 30, 2002. GRU has reflected the capital contribution as an investment in TEA. The investment balance has been adjusted for GRU's subsequent share of TEA's net income or loss. In calculating GRU's share of net income or loss, profit on transactions between GRU and TEA have been eliminated. Such transactions primarily relate to purchases and sales of electricity between GRU and TEA. GRU had electric purchase transactions with TEA of $6,569,705 and $6,710,926 and sales transactions of $3,588,441 and $2,945,944 in fiscal years 2003 and 2002, respectively. TEA's profit on these transactions has been reflected as a reduction to GRUs reported revenue or expense.
As of September 30, 2003, GRU's investment in TEA was
$1,853,506.00. Additionally, in accordance with the member-ship agreement between GRU and its joint venture members, GRU has provided TEA with guarantees of $9,600,000 to secure power marketing transactions. Of this amount, $8,600,000 is represented by a trade guarantee with the balance through a TEA letter-of-credit supported by a cash deposit of $428,571.
GRU has also provided guarantees of $13,800,000 to secure natural gas purchases. Of this amount, $11,000,000 is represented by a trade guarantee with the balance through a TEA letter-of-credit supported by a cash deposit of $899,000.
The following is a summary of the unaudited financial information of TEA for the twelve month periods ended September 30, 2003 and 2002:
2003 2002 Condensed statement of operations:
Total revenue Total cost of sales and expenses Operating income Net revenue Condensed balance sheet:
Current assets Noncurrent assets Total assets Current liabilities:
Current liabilities Noncurrent liabilities Members' capital Total equity and liabilities
$636,993,000
$419,159,000 522,615,000
$114,378,000
$114,729,000
$ 97,209,000 12,779,000
$109,988,000
$ 76,578,000 10,163,000 23,247,000
$109,988,000 358,160,000
$ 60,999,000
$ 61,460,000
$ 98,918,000 12,343,000
$111,261,000
$ 76,786,000 10,704,000 23,771,000
$111,261,000 TEA issues separate audited financial statements on a calendar-year basis.
GRU 2002-03 ANNUAL REPORT 53
Notes to Financial Statements SEPTEMBER 30, 2003 AND 2002
- 16. Risk Management GRU is exposed to various risks of loss related to theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters and insures against these losses. GRU purchases plant and machinery insurance from a commercial carrier. The City is self-insured for workers' compensation, auto liability, and general liability but carries excess workers' compensation coverage. These risks are accounted for under the City of Gainesville's General Insurance Fund. GRU reimburses the City for premiums and claims paid on its behalf, recording the appropriate expense. However, GRU does maintain its own insurance reserve, for the self-insured portion, in the amount of $3,152,000, based on an actuarially computed liability. This reserve is recorded as a fully amortized deferred credit. GRU used $730,000 of its reserve to meet fiscal 2003 claims, leaving $422,000 to be paid from current year revenues. Changes in the claims liability for the last two years are as follows:
Fiscal Year 2001-2002 2002-2003 Beginning Balance
$3,152,000
$3,152,000 Claims
$ 970,000
$1,152,000 Payments
$970,000
$422,000 Ending Balance
$3,152,000
$2,422,000 54 GRU 2002-03 ANNUAL REPORT
"or-I"wArTr-I
Schedules of Combined Net Revenues in Accordance with Bond Resolution YEARS ENDED SEPTEMBER 30, 2003, 2002, 2001, 2000 AND 1999 2003 2002 2001 2000 1999 Revenue Electric fund:
Sales of electricity LeaseAeaseback revenue Other electric revenue Transfers to rate stabilization Interest income Total electric fund revenue
$154,865,704 2,273,293 (401,377) 4,197,325 160,934,945
$147,794,301 2,313,536 (267,583) 4,873,647 154,713,901
$159,398,907 2,731,147 (6,311,744) 5,712,572 161,530,882
$142,078,330 2,433,111 (6,790,929) 5,106,585 142,827,097
$ 135,625,527 249,220,553 2,419,798 (12,199.403) 6,405,429 381,471,904 Gas fund:
Gas sales Other gas revenue (expenses)
Transfers (to) from rate stabilization Interest income Total gas fund revenue 22,926,678 (29,329)
(1,122,811) 408,040 22,182,578 15,913,737 29,208 (683,493) 313,548 15,573,000 21,638,160 (11,333)
(953,843) 462,527 21,135,511 15,275,788 (95,558)
(180,744) 483,108 15,482,594 12,309,930 (5,839) 306,100 456,378 13,066,569 Water fund:
Sales of water Other water revenue Transfers from (to) rate stabilization Interest income Total water fund revenue Wastewater fund:
Wastewater billing Other wastewater revenue Transfers from rate stabilization Interest income Total wastewater fund revenue 12,533,489 1,451,087 2,620,711 569,102 17,174,389 15,957,966 2,055,284 3,252,677 824,618 22,090,545 13,350,022 785,894 3,400,560 696,999 18,233,475 16,038,915 1,218,747 5,089,796 1.019,672 23,367,130 12,879,286 1,763,409 1,083,493 1,265,816 16,992,004 15,696,526 2,413,499 1,893,022 1,732,733 21,735,780 12,356,275 2,084,675 43,359 1,280,250 15,764,559 15,363,519 1,967,796 1,672,756 1,915,226 20,919,297 12,183,647 1,775,024 (435,500) 1,264,766 14,787,937 15,115,652 2,370,807 468,024 1,854,421 19,808,904 GRUCom fund:
Sales to customers Other GRUCom revenue Transfers (to) from rate stabilization Interest income Total GRUCom fund revenue Total revenue 5,367,509 2,641,948 (543,194) 31,100 7,497,363
$229,879,820 5,833,892 1,109,383 (435,905) 21,187 6,528,557
$218,416,063 4,167,542 983,291 (138,900) 183,160 5,195,093
$226,589.270 2,001,610 1,303,706 27,341 3,332,657
$193,326,204 1,226,409 1,058,495 8,410 2,293,314
$431,428,628 56 GRU 2002-03 ANNUAL REPORT
Schedules of Combined Net Revenues in Accordance with Bond Resolution, continued YEARS ENDED SEPTEMBER 30, 2003, 2002, 2001, 2000 AND 1999 2003 2002 2001 2000 1999 Operation, maintenance and administrative Electric fund:
Fuel expense Operation and maintenance Administrative and general Total electric fund expense
$ 69,667,757 25,258,909 11,476,076 106,402,742
$ 60,010,484 23,739,551 12,305,262 96,055,297
$ 67,450,729 23,256,589 10,480,361 101,187,679
$ 53,477,676 22,541,187 9,437,967 85,456,830
$ 44,564,775 19,121,149 11,476,499 75,162,423 Gas fund:
Fuel expense Operation and maintenance Administrative and general Total gas fund expense 12,950,876 924,197 3,035,751 16,910,824 7,926,883 572,690 2,871,282 11,370,855 13,658,209 483,139 2,829,406 16,970,754 7,723,731 729,547 3,176,704 11,629,982 5,800,620 542,303 2,935,549 9,278,472 Water fund:
Operation and maintenance Administrative and general Total water fund expense 4,784,731 3,248,742 8,033,473 4,361,166 3,447,597 7,808,763 5,167,674 3,933,172 9,100,846 4,693,510 2,407,524 7,101,034 5,441,505 2,827,428 8,268,933 4,142,401 2,491,069 6,633,470 5,239,109 3,028,587 8,267,696 3,630,657 2,733,859 6,364,516 4,628,489 3,533,424 8,161,913 Wastewater fund:
Operation and maintenance Administrative and general Total wastewater fund expense 5,778,075 3,658,970 9,437,045 GRUCom fund:
Operation and maintenance Administrative and general Total GRUCom fund expense Total operation, maintenance and administrative 2,618,525 1,286,735 3,905,260
$144,689,344 2,377,170 1,240,869 3,618,039 2,033,441 742,638 2,776,079 1,419,468 453,264 1,872,732 655,707 650,379 1,306,086
$127,953,800
$136,304,479
$113,860,710
$100,273,410 Net revenue in accordance with bond resolution Electric Gas Water Wastewater GRUCom Total net revenue in accordance with bond resolution 54,532,203 5,271,754 9,140,916 12,653,500 3,592,103 58,658,604 4,202,145 10,424,712 14,266,284 2,910,518 60,343,203 4,164,757 9,890,970 13,466,847 2,419,014 57,370,267 3,852,612 9,131,089 12,651,601 1,459,925 306,309,481 3,788,097 8,423,421 11,646,991 987,228
$ 85,190,476
$ 90,462,263
$ 90,284,791
$ 84,465,494
$331,155,218 Aggregate bond debt service Aggregate debt service coverage ratio Total debt service Total debt service coverage ratio
$ 25,502,972
$ 29,312,587
$ 29,765,188
$ 29,458,515
$ 29,899,917 3.34 3.09 3.03 2.87 11.08
$ 33,704,853
$ 34,097,931
$ 37,677,047
$ 34,904,989
$ 33,891,908 2.53 2.65 2.40 2.42 9.77 GRU 2002-03 ANNUAL REPORT 57
Schedules of Combined Net Revenues in Accordance with Bond Resolution - Electric Utility Fund YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 Revenue Sales of electricity:
Residential sales General service and large power Fuel adjustment Street and traffic lighting Utility surcharge Sales for resale Interchange sales Total sales of electricity
$ 47,080,019 36,122,193 52,577,362 3,286,574 2,709,806 6,860,577 6,229,173 154,865,704
$ 45,762,959 38,066,683 38,816,221 3,225,361 3,298,492 6,488,731 12,135,854 147,794,301 Other electric revenue:
Lease/leaseback revenue Service charges Pole rentals Miscellaneous Total other electric revenue 1,069,464 557,072 646,757 2,273,293 1,852,642 233,512 227,382 2,313,536 Transfers (to)/from rate stabilization Interest income Total revenue (401,377) 4,197,325 160,934,945 Operation, maintenance and administrative expense Operation and maintenance:
Fuel expense:
Retail and purchased power Interchange Total fuel expense 65,477,800 4,189,957 69,667,757 (267,583) 4,873,647 154,713,901 53,150,252 6,860,232 60,010,484 16,255,106 679,283 6,805,162 83,750,035 Power production Transmission Distribution Total operation and maintenance 17,204,532 801,727 7,252,650 94,926,666 Administrative and general:
Customer accounts Administrative and general Total administrative and general Total operation, maintenance and administrative expense 3,504,718 7,971,358 11,476,076 106,402,742 3,223,206 9,082,056 12,305,262 96,055,297 Net revenue in accordance with bond resolution Retail Interchange Total net revenue in accordance with bond resolution 52,492,987 2,039,216 S 54,532,203 53,382,982 5,275,622
$ 58,658,604 58 GRU 2002-03 ANNUAL REPORT
Schedules of Combined Net Revenues in Accordance with Bond Resolution - Gas Utility Fund YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 Revenue Sales of gas:
Residential
$12,118,337
$ 8,429,717 Interruptible/commercial 10,594,100 6,818,280 Other sales 214,241 665,740 Total sales of gas 22,926,678 15,913,737 Other gas revenue (expense)
(29,329) 29,208 Transfers to rate stabilization (1,122,811)
(683,493)
Interest income 408,040 313,548 Total revenue 22,182,578 15,573,000 Operation, maintenance and administrative expense Operation and maintenance:
Fuel expense 12,950,876 7,926,883 Operation and maintenance 924,197 572,690 Total operation and maintenance 13,875,073 8,499,573 Administrative and general:
Customer accounts 1,885,194 1,695,536 Administrative and general 1,150,557 1,175,746 Total administrative and general 3,035,751 2,871,282 Total operation, maintenance and administrative expense 16,910,824 11,370,855 Total net revenue in accordance with bond resolution
$ 5,271,754
$ 4,202,145 GRU 2002-03 ANNUAL REPORT 59
Schedules of Net Revenues in Accordance with Bond Resolution -Water Utility Fund YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 Revenue Sales of water:
General customers
$ 9,722,777
$10,408,448 University of Florida 652,307 616,061 Fire protection 1,039,769 1,060,038 Generating stations 39,940 34,669 Utility surcharge 1,078,696 1,230,766 Total sales of water 12,533,489 13,349,982 Other water revenue:
Connection charges 1,451,030 785,894 Miscellaneous 57 40 Total other water revenue 1,451,087 785,934 Transfers from rate stabilization 2,620,711 3,400,560 Interest income 569,102 696,999 Total revenue 17,174,389 18,233,475 Operation, maintenance and administrative expense Operation and maintenance:
Source of supply 8,612 9,745 Pumping 1,100,056 951,658 Water treatment 2,139,972 2,063,739 Transmission and distribution 1,536,091 1,336,024 Total operation and maintenance 4,784,731 4,361,166 Administrative and general:
Customer accounts 1,090,215 1,020,930 Administrative and general 2,158,527 2,426,667 Total administrative and general 3,248,742 3,447,597 Total operation, maintenance and administrative expense 8,033,473 7,808,763 Total net revenue in accordance with bond resolution S 9,140,916
$10,424,712 60 GRU 2002-03 ANNUAL REPORT
Schedules of Net Revenues in Accordance with Bond Resolution -
Wastewater Utility Fund YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 Revenue Wastewater billings:
Billings
$14,622,531
$14,576,585 Utility surcharge 1,335,435 1,462,330 Total wastewater billings 15,957,966 16,038,915 Other wastewater revenue:
Connection charges 1,860,419 1,003,489 Miscellaneous 194,865 215,258 Total other wastewater revenue 2,055,284 1,218,747 Transfers from rate stabilization 3,252,677 5,089,796 Interest income 824,618 1,019,672 Total revenue 22,090,545 23,367,130 Operation, maintenance and administrative expense Operation and maintenance:
Collection 1,416,924 1,357,624 Treatment and pumping 4,361,151 3,810,050 Total operation and maintenance 5,778,075 5,167,674 Administrative and general:
Customer accounts 894,576 823,015 Administrative and general 2,764,394 3,110,157 Total administrative and general 3,658,970 3,933,172 Total operation, maintenance and administrative expense 9,437,045 9,100,846 Total net revenue in accordance with bond resolution
$12,653,500
$14,266,284 GRU 2002-03 ANNUAL REPORT 61
Schedules of Net Revenues in Accordance with Bond Resolution -GRUCom Utility Fund YEARS ENDED SEPTEMBER 30, 2003 AND 2002 2003 2002 Revenue Sales to customers
$5,367,509
$5,833,892 Other GRUCom revenue 2,641,948 1,109,383 Transfers to Rate Stabilization (543,194)
(435,905)
Interest income 31,100 21,187 Total revenue 7,497,363 6,528,557 Operation, maintenance and administrative expense Operation and maintenance 2,618,525 2,377,170 Total operation and maintenance 2,618,525 2,377,170 Administrative and general:
Customer accounts 142,826 131,124 Administrative and general 1,143,909 1,109,745 Total administrative and general 1,286,735 1,240,869 Total operation, maintenance and administrative expense 3,905,260 3,618,039 Total net revenue in accordance with bond resolution
$3,592,103 S2,910,518 62 GRU 2002-03 ANNUAL REPORT
Notes to Schedules of Net Revenues in Accordance with Bond Resolution YEARS ENDED SEPTEMBER 30, 2003 AND 2002 Notes to Schedules of Net Revenues in Accordance with Bond Resolution "Net revenue in accordance with bond resolution" differs from 'Net income," which is determined in accordance with generally accepted accounting principles. Following are the more significant differences:
- Interest income does not include interest earned on construction funds.
- Operation and maintenance expense do not include depreciation, amortization or interest expense.
- Other water and wastewater revenue include fees for connection, installation, and backflow prevention.
- Transfers to the general fund are excluded.
- Revenue from lease/leaseback transaction (see Note 14).
GRU 2002-03 ANNUAL REPORT 63
Combining Balance Sheet SEPTEMBER 30, 2003 Electric Gas Water Wastewater GRUCom Combined Assets Current assets:
Cash and cash equivalents Investments Accounts receivable, net Prepaid rent -
LILO Fuels contracts Deferred charges Inventories:
Fuel Materials and inventories Total current assets 594,465 392,886 21,110,005 10,686,909 138,892 1,884,866 6,987,400 5,057,969 46,853,392 12,694 1,821,296 230,318 674,219 370,652 3,109,179 71,327 1,432,611 73,775 706,890 2,284,603
$ 1,074,472 1,855,423 100,521 (253) 3,030,163 107,730 698,186 6,825 811,750 1,624,491 1,860,688 392,886 26,917,521 10,686,909 369,210 2,740,206 6,987,400 6,947,008 56,901,828 Restricted assets:
Utility deposits -
cash and investments Debt service fund -
cash and investments Rate stabilization -
cash and investment Construction Fund -
cash and investment Utility plant improvement fund -
cash and investments Investment in The Energy Authority Decommission reserve -
cash and investments Total restricted assets 3,761,742 3,761,742 41,139,873 3,741,084 6,111,768 8,210,692 51,584,768 4,204,685 5,086,183 6,772,005 801,381 60,004,798 580,969 68,228,610 9,403,614 6,936,487 18,211,517 3,934,220 (2,923)
(104,660) 5,889,131 22,121,649 62,672 4,695,227 843,776 27,747,412 2,301,175 5,113,431 131,516,120 913,827 3,215,002 5,113,431 19,730,303 11,257,700 19,573,264
_8,115,257 190,192,644 Prepaid rent - LILO 151,397,877 151,397,877 Other noncurrent assets 8,853,412 11,428,659 640,598 925,620 93,875 21,942,164 Capital assets:
Utility plant in service Plant unclassified Less: accumulated depreciation and amortization Plant held of future use Construction in progress Net capital assets 600,132,572 39,254,209 132,444,131 163,950,441 23,592,732 959,374,085 12,278,395 844,214 3,098,691 7,870,847 1,645,317 25,737,464 244,070,356 368,340,611 6,053,926 33,354,721 407,749,258 19,442,527 20,655,896 2,429,993 23,085,889 46,334,341 89,208,481 9,247,053 98,455,534 62,216,108 109,605,180 19,104,032 128,709,212 7,820,760 17,417,289 7,322,662 24,739,951 379,884,092 605,227,457 6,053,926 71,458,461 682,739,844 Total assets
$746,370,059
$57,354,030
$112,638,435
$152,238.259
$34,573,574 $1,103,174,357 64 GRU 2002-03 ANNUAL REPORT
Combining Balance Sheet SEPTEMBER 30, 2003 Electric Gas Water Wastewater GRUCom Combined Liabilities and net assets Current liabilities:
Fuels payable Accounts payable and accrued liabilities Operating lease -
LILO Deferred charges Due (from) to other funds Total current liabilities
$ 2,905,668 64,420 2,970,088 730,944 235,536 403,505 432,963 51,414 1,854,362 12,461,916 12,461,916 2,757,511 1,112,610 4,036 4,250 3,878,407 (6,609,061) 1,840,205 6,222,089 1,712,052 (4,674) 3,160,611 12,246,978 3,252,771 6,629,630 2,149,265 46,740 24,325,384 Payable from restricted assets:
Utility deposits 3,728,795 Rate stabilization deferred credit 54,128,258 Construction fund:
accounts payable and accrued liabilities 736,701 Revenue bonds payable -
5,781,840 116,020 4,641,559 857,277 5,956,509 237,683 3,728,795 1,120,647 71,628,813 169,197 2,116,878 principal 7,584,530 941,295 1,443,511 2,415,664 12,385,000 Accrued interest payable 3,785,434 808,488 940,152 1,286,873 268,074 7,089,021 Total payable from restricted assets 69,963,718 7,647,643 7,882,499 9,896,729 1,557,918 96,948,507 Long-term debt:
Utilities system revenue bonds 189,145,648 21,961,935 40,619,722 47,682,895 9,624,800 309,035,000 Subordinated utilities system revenue bonds 36,270,150 13,680,480 7,226,750 17,322,620 74,500,000 Commercial paper notes 26,079,451 2,863,712 6,972,526 12,229,973 23,369,338 71,515,000 Unamortized loss on refunding (21,576,716)
(1,188,902)
(3,753,777)
(3,852,685)
(30,372,080)
Unamortized bond prem\\disct 7,917,554 223,290 1,287,498 1,409,948 50,270 10,888,560 Total long-term debt 237,836,087 37,540,515 52,352,719 74,792,751 33,044,408 435,566,480 Operating lease -
LILO 176,530,733 176,530,733 Other noncurrent liabilities Total liabilities 13,987,657 8,977,478 646,216 972,783 10,189 24,594,323 510,565,173 57,418,407 67,511,064 87,811,528 34,659,255 757,965,427 Net assets:
Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 175,838,863 (7,903,648) 45,362,549 52,405,868 (2,496,831) 263,206,801 59,858,195 6,087,468 4,821,635 12,196,859 850,524 83,814,681 107,828 1,751,803 (5,056,813)
(175,996) 1,560,626 (1,812,552) 235,804,886 (64,377) 45,127,371 64,426,731 (85,681) 345,208,930 Total liabilities and net assets
$746,370,059
$57,354,030
$112,638,435
$152,238,259
$34,573,574 $1,103,174,357 GRU 2002-03 ANNUAL REPORT 65
Combining Statement of Revenue, Expenses and Changes in Net Assets YEAR ENDED SEPTEMBER 30, 2003 Electric Gas Water Wastewater GRUCom Combined Operating revenue:
Sales and service charges Other operating revenue Total operating revenue Operating expenses:
Operation and maintenance Administrative and general Depreciation and amortization Total operating expenses Operating income
$154,865,704 3,646,120 158,511,824 94,926,665 11,476,076 23,733,884 130,136,625
$22,926,677 (1,152,140) 21,774,537 13,875,072 3,039,498 2,137,660 19,052,230
$12,533,489 4,071,798 16,605,287 4,784,733 3,254,757 3,717,957 11,757,447
$15,957,966 5,307,961 21,265,927 5,778,076 3,649,208 4,919,763 14,347,047
$5,367,509 2,098,754 7,466,263 2,618,525 1,286,735 1,773,973 5,679,233
$211,651,345 13,972,493 225,623,838 121,983,071 22,706,274 36,283,237 180,972,582 28,375,199 2,722,307 4,847,840 6,918,880 1,787,030 44,651,256 Non-operating income (expense):
Interest income Interest expense Loss on sale of investments Total non-operating income (expense) 4,270,719 515,735 (11,535,558)
(1,847,702) 578,364 (2,752,367) 852,648 (3,565,124) 80,499 6,297,965 (660,818)
(20,361,569)
(7,264,839)
(1,331,967)
(2,174,003)
(2,712,476)
- (580,319)
(14,063,604)
Income before contributions and transfers 21,110,360 1,390,340 2,673,837 4,206,404 1,206,711 30,587,652 Capital contributions:
Contributions from developers Reduction of plant cost recovere from contributions Net capital contributions
!d 236,145 1,602,261 2,055,216 3,893,622 (236,145)
(236,145) 1,602,261 2,055,216 3,657,477 Operating transfer to City of Gainesville general fund 16,901,442 1,095,527 294,813 3,310,901 965,197 4,318,825 1,942,795 288,565 25,915,260 Change in net assets Net assets -
beginning of year, as originally reported Prior Period Adjustment (See note #1)
Net assets -
beginning of year, as restated Net assets -end of year 4,208,918 918,146 8,329,869 285,322,850 4,299,839 51,424,444 71,693,122 (426,374) 412,313,881 (53,726,882)
(4,659,029)
(7,262,270)
(9,209,186)
(577,453)
(75,434,820) 231,595,968
$235,804,886 (359,190) 44,162,174 62,483,936
($64.377)
$45,127,371
$64,426,731 (1,003,827) 336,879,061
($85,681)
$345,208,930 66 GRU 2002-03 ANNUAL REPORT
Schedule of Utility Plant Properties -
Combined Utility Fund SEPTEMBER 30, 2003 Balance September 30, 2002 Additions
- Sales, Balance Retirements September 30,
& Transfers 2003 Plant in service Electric utility fund:
Production plant Nuclear fuel Transmission and distribution plant General and common plant Plant unclassified Total electric utility fund
$325,686,883 7,324,809 213,962,366 45,853,601 3,717,527 596,545,186 Gas utility fund:
Distribution plant General plant Plarit acquisition adjustment Plant unclassified Total gas utility fund 32,033,049 1,654,936 4,650,635 596,744 38,935,364 Water utility fund:
Supply, pumping and treatment plant Transmission and distribution plant General plant Plant unclassified Total water utility fund 21,133,794 97,826,798 4,342,711 1,248,121 124,551,424 Wastewater utility fund:
Pumping and treatment plant Collection plant Reclaimed water plant General plant Plant unclassified Total wastewater utility fund
$ 3,462,947 4,301,500 4,710,186 21,035,501 33,510,134 1,098,170 76,353 1,421,993 2,596,516 1,089,017 8,251,010 171,568 11,362,165 20,873,760 998,303 2,060,694 495,026 441,177 11,288,746 15,283,946 1,814,604 46,909 3,492,711 5,354,224
$77,618,580
$27,781,087 3,072,052 9,631,923 13,458,132 4,615,745
$58,558,939 110,843 966,140 4,092,737 12,474,633 17,644,353 73,169 185,765 1,174,523 1,433,457 40,111 23,824 306,832 9,511,595 9,882,362 29,225 672,518 3,995,200 4,696,943 90,236 1,861,513 1,951,749
$35,608,864
$21,578,321 1,431,618 11,367,480 11,288,747 3,492,719
$49,158,885
$329,038,987 7,324,809 217,297,726 46,471,050 12,278,395 612,410,967 33,058,050 1,545,524 4,650,635 844,214 40,098,423 22,182,700 106,053,984 4,207,447 3,098,691 135,542,822 63,189,832 92,240,134 2,914,987 5,605,488 7,870,847 171,821,288 22,999,347 593,385 1,645,317 25,238,049
$985,111,549
$ 6,053,926
$ 33,354,721 2,429,993 9,247,053 19,104,032 7,322,662
$ 71,458,461 62,191,529 90,208,665 2,419,961 5,836,829 577,301 161,234,285 GRUCom utility fund:
Distribution plant General plant Plant unclassified Total GRUCom utility fund Total plant in service Plant held for future use electric 21,184,743 636,712 14,119 21,835,574
$943,101,833
$ 6,053,926 Construction in progress Electric utility fund Gas utility fund Water utility fund Wastewater utility fund GRUCom utility fund Total construction in progress 27,151,955 789,559 10,982,610 16,934,647 6,199,636
$ 62,058,407 GRU 2002-03 ANNUAL REPORT 67
Schedule of Accumulated Depreciation and Amortization -
Combined Utility Fund SEPTEMBER 30, 2003 Balance September 30, 2002
- Sales, Retirements Additions
& Transfers Balance September 30, 2003 Electric utility fund:
Production plant Nuclear fuel Transmission and distribution plant General and common plant Total electric utility fund
$151,500,058 6,489,580 52,405,331 18,276,484 228,671,453
$ 9,780,026 339,450 5,827,731 4,528,139 20,475,346
$ 110,844 872,862 4,092,737 5,076,443
$161,169,240 6,829,030 57,360,200 18,711,886 244,070,356 Gas utility fund:
Distribution plant General plant Plant acquisition adjustment Total gas utility fund Water utility fund:
Supply, pumping and treatment plant Transmission and distribution plant General plant Total water utility fund Wastewater utility fund:
Pumping and treatment plant Collection plant Reclaimed water plant General plant Total wastewater utility fund 13,503,001 879,284 3,842,971 18,225,256 8,947,345 31,519,308 2,897,116 43,363,769 961,121 168,943 346,140 1,476,204 673,323 2,214,876 453,137 3,341,336 2,013,107 1,808,473 54,701 609,533 4,485,814 73,167 185,766 258,933 40,111 23,821 306,832 370,764 29,223 672,519 701,742 14,390,955 862,461 4,189,111 19,442,527 9,580,557 33,710,363 3,043,421 46,334,341 27,264,358 30,140,524 358,494 4,452,732 62,216,108 25,251,251 28,361,274 303,793 4,515,718 58,432,036 GRUCom utility fund:
Distribution plant General plant Total GRUCom utility fund Total 6,255,315 208,070 6,463,385
$355,155,899 1,365,052 82,560 1,447,612
$31,226,312 90,237 90,237
$6,498,119 7,620,367 200,393 7,820,760
$ 379,884,092 68 GRU 2002-03 ANNUAL REPORT
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Comprehensive Annual Financial Report (A Component Unit of the City of New Smyrna Beach, Florida)
September 30, 2003 and 2002
UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA (A COMPONENT UNIT OF THE CITY OF NEW SMYRNA BEACH, FLORIDA)
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COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSIONERS Walter H. Glenn, Jr., Chairman Robert S. Thurlow, Vice Chairman Jack S. Grasty, Secretary-Treasurer Kenneth Taylor, Assistant Secretary-Treasurer William J. Schneider, Commissioner GENERAL MANAGER/CHIEF EXECUTIVE OFFICER Ronald L. Vaden DIRECTOR OF FINANCE Roberto 0. Montalvo, CPA i
TABLE OF CONTENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Reference Pages INTRODUCTORY SECTION Title Page.................................................................................................................
Organization Chart...................................................................................................
Certificate of Achievement......................................................................................
Letter of Transmittal................................................................................................
i iv V
vi-x FINANCIAL SECTION Independent Auditors' Report..................................................................................
1-2 M anagem ent's Discussion and Analysis.................................................................
3-14 Basic Financial Statements:
Balance Sheets...................................................................................................
Statements of Revenue, Expenses, and Changes in Net Assets........................
Statem ents of Cash Flows.................................................................................
N otes to the Financial Statem ents.....................................................................
Statement 1 Statement 2 Statement 3 15-16 17 18-19 20-38 Supplemental Schedules:
Schedule of Revenue, Expenses and Changes in Retained Earnings................
Schedule of Revenue, Receipts, Expenses and Disbursements-Budget and Actual-Electric System (Non-GAAP Budgetary Basis).......................
Schedule of Revenue, Receipts, Expenses and Disbursements-Budget and Actual-Water System (Non-GAAP Budgetary Basis).........................
Schedule of Revenue, Receipts, Expenses and Disbursements-Budget and Actual-Wastewater System (Non-GAAP Budgetary Basis)................
Schedule of Revenue, Receipts, Expenses and Disbursements-Budget and Actual-Telecommunications System (Non-GAAP Budgetary Basis).
Schedule of Operating Expenses-Electric System.............................................
Schedule of Operating Expenses-Water System...............................................
Schedule of Operating Expenses-Wastewater System....
Schedule of Operating Expenses-Telecommunications System.......................
Schedule of Interest Earnings............................................................................
Schedule of Debt Service Requirements to Maturity:
Revenue Certificates Payable.....................................................................
Notes Payable - State Revolving Fund Loan..............................................
Notes Payable - Florida Municipal Power Agency....................................
Schedule 1 39-40 Schedule 2 41 Schedule 3 42 Schedule 4 43 Schedule 5 44 Schedule 6 45 Schedule 7 46 Schedule 8 47 Schedule 9 48 Schedule 10 49 Schedule 11 50 Schedule 12 51 Schedule 13 52 ii
TABLE OF CONTENTS - (CONTINUED)
COMPREHENSIVE ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA
--\\ Reference Pages
- STATISTICAL SECTION Schedule of Expenses by Function-Last Ten Fiscal Years-......................................
Schedule of Revenues by Source Last Ten' Fiscal Years.'......................................
Demographic Statistics...............................................
Property Value, Construction, and Bank Deposits - Last Ten Fiscal Years'.-........
Schedule of Insurance in Force.......................................................
Ten Largest Electric Customers......................................................-
Ten Largest Water Customers.................................................................................
Schedule of Revenue Certificate Coverage.....
Scheuleof Rvene Crtifcat Coerag...........................................................
Historical Peak Demand and Electric System Net Energy Requirements, Water Demand, and Sewage Flows................................
Utility Rate Schedule-Electric Service..............................=
Utility Rate Schedule-Water Service.......................................................................
Utility Rate Schedule-Wastewater and Water Reuse Service..................................
Utility Rate Schedule-Telecommunication Services..............................................
Table 1 53-54 Table II 55-56 Table III 57 A-.Table IV 58 Table VI
'60 Table VII 61 Table VIII 62 Table IX 63 Table X 64 Table XI' 65-66 Table XII 67-68 Table XIII 69 SUPPLEMENTAL AUDIT REPORTS Independent Auditors' Report on Compliance And On Internal Control Over Financial Reporting Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards....................
M anagement Comments..........................................................................................
70-71 72-73 iii
ORGANIZATION CHART
ORGANIZATION CHART UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA iv
CERTIFICATE OF A CHIE VEMENT FOR THE meR ENDED SEPTEMBER 30,2002 THE GOVERNMENT FNANc OFFICERS ASSoCIATION OF THE UNITED STATES AND CANADA (GFOA) A WARDED A CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING TO THE UTILITIES COMMIssIOm Cy OF NEW SMYRNA BEA CH, FLORIDA, FOR ITS COMPONENT UNIT FINANCUL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002.
IN ORDER TO BE A WARDED A CERTIFICATE OF ACHIEVEMENT, A GOVERNMENTAL UNIT MM PUBLISH AN EASILY READABLE AND EFFICIENTLY ORGANIZED COMPREHENSIVE ANNUAL FINANCIAL REPORT, WHOSE CONTENTS CONFORM TO PROGRAM STANDARDS.
SUCH REPORTS MUST SATISFY BOTH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND APPLICABLE LEGAL REQUIREMES.
A CERTIFICATE OF ACHIEVEMENT IS VALID FOR A PERIOD OF ONE YEAR ONLY. MANAGEMENT BELIEVES THAT THIS REPORT CONTINUES TO CONFORM TO CERTIFICATE OFACHIEVEMENT PROGRAM STANDARDS.
CERTIFICATE OF ACHIEVEMENT FOR THE YEAR ENDED SEPTEMBER 30, 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Certificate of Achievement for Excellence in Financial Reporting Presented to Utilities Commission, City of New Smyrna Beach, Florida For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2002 A Certificate of Achievement for Excellence in Financial 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 financial reporting.
President Executive Director v
LETTER OF TRANSMITTAL
UTILITIES COMMISSION CMTY OF NEW SMYRNA BEACH, FLORIDA ELECTRIC, WATER, POLLUTION CONTROL WATER REUSE, INTERNET AND TELEPHONE SERVICE Post Office Box 100 - 200 Canal St.
New Smyrna Beach, Florida 32170-0100 (386) 427-1361 November 10, 2003 To the Chairman and Members of the Utilities Commission City of New Smyrna Beach, Florida The Comprehensive Annual Financial Report of the Utilities Commission, City of New Smyrna Beach, Florida, (the "Utilities Commission") for the fiscal years ended September 30, 2003 and 2002, is hereby submitted. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the Utilities Commission. To the best of our knowledge and belief, the enclosed data are accurate in all material aspects and are reported in a manner designed to present fairly the financial position and results of operations of the Utilities Commission. All disclosures necessary to enable the reader to gain the maximum understanding of the Utilities Commission's financial affairs have been included.
This financial report is presented in four sections: introductory, financial, statistical, and compliance (Auditor General of the State of Florida).
The introductory section. includes this transmittal letter, the Utilities Commission's organization chart, a list of principal officials, the table of contents and a reproduction of the Certificate of Achievement for Excellence in Financial Reporting for 2002. The financial section includes the independent auditors' report on the financial statements, management's discussion and analysis, the basic financial statements, including notes to the financial statements, and the supplemental financial section. The statistical section includes selected financial and demographic information, generally presented on a multi-year basis, and selected ten-year historical financial informration.
The financial statements of the Utilities Commission are audited in accordance with Chapter 10.500, Rules of the Auditor General of the State of Florida. Information related to this audit, findings and recommendations, and auditors' reports on the internal control structure and compliance with applicable laws and regulations, are included in the compliance section of this report.
REPORTING ENTITY AND SERVICES PROVIDED The Utilities Commission provides a full range, of electric, water, wastewater and telecommunications services to its customers both inside and outside the city limits. These activities are fully accounted for in this financial report. The funds and entities related'to the operation of the Utilities Commission, which are included in these financial statements, are a component unit of the City of New Smyrna Beach, Florida, and an integral part of the City's reporting entity. The Comprehensive Annual Financial Report of the Utilities Commission is issued separately to provide a comprehensive financial reporting summary and presentation to the Utilities Commission and its revenue certificate holders. Audited financial statements of the primary government (City of New Smyrna Beach, Florida), are available upon request from the City of New Smyrna Beach, 210 Sams Avenue, New Smyrna Beach, Florida, 32168.
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1 To the Chairman and Members of the'Utilities Commission November 10, 2003 Page 2-ECONOMIC CONDITION AND OUTLOOK The economic condition and outlook of the Utilities Commission have continually improved during the past several years due in large part to the controlled development of residential and commercial properties which in turn has increased the Commission's quality customer base. In addition, substantial increases in the local tourism, light manufacturing, and service related business industries have had a positive effect on the area's employment statistics.
MAJOR INITIATIVESi The Utilities Commission has established a Capital Improvements Plan (Plan) through 2008.
It is the Commission's desire to fund the capital expenditures under this Plan through a combination of service capacity and connection fees, Renewal and Replacement Fund proceeds, and other funding. These proposed capital improvement expenditures are in addition to the annual capital requirements for routine extensions of existing utility facilities to serve new customers.
Significant system improvements contemplated in the Plan consist of the following:
- I New power plant and substation modifications to accommodate a 500 MW power plant (scheduled to be on-line by June 2006);
i New 11 5kV electric transmission line, double circuiting of approximately 13 miles of line; New 30 MVA distribution substation, including site acquisition; Replacing existing wastewater force main crossing under the Intra-coastal Indian River; and i
Planned expansion of the water reuse system's wet weather storage and extension of the water system to provide service to prospective customers.
Reliant Power Plant Project On September 12, 2001, the Utilities Commission approved entering into a Participation Agreement with Reliant New Smyrna Beach, LLC for constructing a new 500 MW natural gas fired electric utility plant.
Under this agreement, the Commission will receive an entitlement to 30 MW of electric capacity at a significant savings in cost to produce this power. The anticipated savings would be passed on to customers by the Commission by lowering customer electric rates by up to 15%. Reliant has obtained the necessary environmental permits for the plant. In order to proceed with the project, Reliant must secure capacity contracts for approximately 50% of the plant's output. With the recent downturn in the industry, the project is currently on hold with the Florida Department of Environmental Protection granting a second extension of 1
time for the environmental permits.
UndergroundingL The Utilities Commission has instituted a program in fiscal year 2002, by which existing subdivisions can convert existing overhead electric facilities to underground. The Commission is also installing a conduit for future fiber optics installation.
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To the Chairman and Members of the Utilities Commission November 10, 2003 Page3 3 Seventy percent of the cost is paid by the proper'ty owner who resides within the City, limits and eighty-five percent of the cost is paid by customers in the unincorporated area, with the Commission offering financing.
There are currently two subdivisions that have been converted, Richmond Drive and Venezia (Quay Assisi).
There are also three additional areas planned for fiscal year 2004: North Atlantic Avenue, South Riverside Drive and portions of the north beach.
Broadband The Utilities Commission is -in the process of deploying Broadband service to the majority' of the customer base. The program uses'two technologies to-solve the "Last Mile.". The first, FTTH (fibe'r-to-the home), is being installed in conjunction with the Venetian Bay Subdivision with a customer base of 2,000 and with-the electric underground program.
Conduit for fiber optics is run along with the electric conduit therefore greatly reducing the cost of the program. Second, wireless with Motorola is operational with initial customer based on the beachside.
Telecommunications The Utilities Commission, through a partnership (agent) with an ALEC, began offering local and long distance telephone service to customers within'Volusia.County in 'fiscal year 2002. The program has been very successful with over ten percent of the current electric customer base using the service and an equal amount -from outside the electric service-area.
The Commission' has obtained ALEC status and'has been offering local and long distance service throughout Florida doing -business under the name of "Sparks Communications."
Utilities Commission forecasts for the electric,-water, wastewater, and water reuse systems indicate that the existing and planned major facilities will be adequate to' accommodate the expected growth' during the five year period of the Plan.
FINANCIAL INFORMATION Management of the Utilities Commission is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Commission are protected from loss, theft'or misuse and-to ensure that adequate accounting data is compiled.totallowifor the-preparation of financial statements in conformity with generally. accepted accounting;priniciples:.The-iinternal control structure'is designed to provide reasonable, but not.absolute,'lassurance that these objectives are met.- *The concept of reasonable assurance recognizes that: (1) 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.
Budgeting Controls Or The Utilities Commission maintains an-integrated system-of budgetary' 'cbitrols. The objective!of these budgetary controls is to ensure compliance with legal provisions embodied in the'approved annual budget.
The operating activities of the electric;- waterj,.wastewater, 'water reuse,-and telecommunications systems are included in the annual budget. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established by function and activity within each individual operating system. The Commission also maintains a separate encumbrance accounting system as one technique of accomplishing budgetary control. This system is used exclusively to maintain budgetary control and is not utilized for purposes of presenting financial statements prepared in accordance with generally accepted accounting principles. '
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To the Chairman and Members of the Utilities Commission November 10, 2003 Page 4 As is demonstrated by the financial statements and schedules in the financial section of this report, the I
Utilities Commission continues to meet its responsibility for sound financial management.
Utility Operations Lb In compliance with Resolution No. 16-75, the electric, water and wastewater systems are accounted for as a single enterprise fund.
As of September 30, 2003, the Utilities Commission served 22,126 electric customers, 20,111 water customers, 16,485 wastewater customers, 417 reclaimed water customers, 4,068 Internet dial-up, DSL, and broadband customers, and 10,870 telephone customers. Service totals for the last five years are summarized below:
i Reclaimed Telecommunications Fiscal Electric Water Wastewater Water Internet Telephone j
Year Accounts Accounts Accounts Accounts Accounts Accounts 1999...............
20,920 17,516 14,600 286 0
0 2000...............
21,134 17,937 14,940 306 0
0 2001...............
21,330 18,569 15,423 346 0
0 2002...............
21,734 19,507 16,066 385 3,215 4,555 2003...............
22,126 20,111 16,485 417 4,068 10,870 The current year's operating revenue and expenses from the combined utilities systems is presented in ii Management's Discussion and Analysis under the headings Financial Highlights and Entity-Wide Analysis on pages 3 to 8. A condensed budgetary comparison to actual results of operations by utility system is also presented in Management's Discussion and Analysis under the heading Budgetary Highlights on pages 9 I
andl O.
Cash management, capital assets, and debt administration are also presented in Management's Discussion l!
and Analysis under headings relevant to these significant financial activities. In order to avoid duplication in analyzing these activities, reporting on significant transactions, events and fiscal policies governing the operations of the Commission here in the transmittal letter, please refer to Management's Discussion and Analysis on pages 10 and 11 of this report for more information regarding these financial matters.
Risk Management I
The Utilities Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters, all of which is satisfactorily insured by general liability insurance. Commercial insurance policies are also obtained for all L
other risks of loss, including workers' compensation and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three years.
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To the Chairman and Members of the Utilities Commission November 10, 2003 Page 5 OTHER INFORMATION_
Independent Audit Resolution Number 28-78 and other local and state statutes require an annual audit of-the books of account;t financial records and transactions of all administrative departments of the Utilities Commissi6n' by an independent certified public accountant selected b'y the Utilities Commission.
The certified public accounting firm of Brent Millikan' &; Company, P.A. wvas 'selectedeby the Commissionlo satisfy this requirement. Their independent auditors' report on the financial stateiments'anid schedules of the Commission has been included in the financial section of this report.
Awards - Certificate ofAchievement The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Utilities Commnission,- City of New Smyrna Beach; Florida,'forits-7-b-component unit financial report for the fisca 'Iea ded 'Sep'tesmb'&30, 2002.
Weare also quite proud of the fact that we have been awarded with this Certificate for the twenty-third consecutive year.
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i In order to be awarded a Certificate of Achievement, the Commissionhmust publishWan easily readable Ande-
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efficiently organized &component unit annual financial'rp6ort,-wh se contents coiform to program standards.
Such reports must satisfy both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe our current report continues to conform to Certificate of Achievement Program requirements, and we are submitting it to GFOA to determine its eligibility for another certificate.
Acknowledgments The preparation of this report on a timely basis could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report.
We would also like to thank the individual members of the Utilities Commission for their interest, support, and leadership in planning and conducting the financial operations of the Utilities Commission in a most responsible and progressive manner.
Respectfully submitted, Ronald L. Vaden Roberto 0. Montalvo, CPA General Manager/CEO Director of Finance x
FINANCIAL SECTION THISSECTI7NISCOMpOSED OF THE FOLLOWING:
lNDEPEDENTAUDrTORSl' REPORT MANAGEMENr'S DISCUSSION AND ANAL YSIS F
cuLU STATEMENTS SUPPLEMENAL FINANCIAL INFORMA TION
INDEPENDENT AUDITORS' REPORT
4'i
.4 BRENT MILLIKAN & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT To the Honorable Chairman and Commissioners Utilities Commission, City of New Smyrna Beach, Florida New Smyrna Beach, Florida We have audited the accompanying basic financial statements of the Utilities Commission, City of New Smyrna Beach, Florida (the "Utilities Commission"), a component unit of City of New Smyrna Beach, Florida, as of and for the fiscal years ended September 30, 2003 and 2002, as listed in the table of contents. These financial statements are the responsibility of the Utilities Commission's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits 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 audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Utilities Commission as of September 30, 2003 and 2002, and the results of its operations and its cash flows for the years 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 10, 2003, on our consideration of the Utilities Commission's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
The management's discussion and analysis on pages 3-14 is not a required part of the basic financial statements but is supplemental information required by the Governmental Accounting Standards Board.
We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this supplementary information. However, we did not audit the information and express no opinion on it.
1 205 MAGNOLIA ST.
- NEW SMYRNA BEACH, FL 32168-7125 * (386) 427-1333
- FAX (386) 427-5823
- www.bmcpa.com MEAIBER: American Institute ofCertied Pubic Accountants and AICPA Private Companies Practice Section
To the Honorable Chairman and Commissioners Utilities Commission, City of New Smyrna Beach, Florida New Smyrna Beach, Florida Page 2 of 2 Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying information identified in the table of contents as supplemental schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements of Utilities Commission, City of New Smyrna Beach, Florida. Such information, except for the statistical data, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The statistical data has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it.
tndtc~~ SV-November 10, 2003 2
MANAGEMENT'S DISCUSSION AND ANAL YSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS This section of Utilities Commission, City of Ne Smyrna Beach, Florida's (the "Utilities Commission")
annual financial report presents our discussion and analysis of the Commission's financial performance during the 'fiscal year that ended September 30,2003. Please read it in conjunction with the transmittal letter at the front of this report and the financial statements, which follow this section.
Financial Highlights The Utilities Commission's demand for electrical energy increased in 2003 at 370.7 million kWh sales compared to 342.8 million kWh sales in'2002. The sales revenue generated from those sales increased by 9.1% to $33.0 million in 2003.
The volume of treated potable water sold in 2003 increased by 4.6% and the volume of wastewater and reclaimed waterjtreafed.in 2003 increased by 1.1% and 24.3%, respectively.
Revenues for the water, wastewater and reclaimed water services revenues increased to $5.1 rhillion and $5.7 million, resp'ectively. The increase in the demand for potable water and increase
' in the amount of -wastewater treatedwas anticipated by management in view of previous years' conservation efforts and the replenishment of Central Florida water resources.
In 2003 the Commission has officially established the Telecommunications System division to account for Internet and Telephone related services to its customers and to customers outside the Commission's immediate customer base.
The number of telecommunications customers has grown through' a combined effort of reduction in the costs to provide Internet dial-up, DSL, and broadband services, which prompted a revision in the service rate schedules for these services, and through the effort of a marketing sales expansion campaign to grow the local and long distance telephone service to customers beyond the immediate vicinity of the City of New Smyrna Beach, Florida. Sales from Internet related services amounted to $676,080 in 2003 and sales from telephone services totaled $1,905,777 in 2003.
- ,Utilities Commission's assets exceeded its liabilities.(net assets) at the end of September 30, 2003 by more than $66.9 million. Of this amount, approximately $18.2 million was unrestricted and available to be used to meet the Commission's ongoing obligations to its customers and creditors.
Of the remaining $48.6 million, approximately $44.0 million was invested in utility plant assets and assets heid for future use, while the remainder was restricted for utility plant expansion
($4,123,835) and debt service ($539,839).
During the year, the Utilities Commission's net assets increased by $7.7 million. In the prior year the change in net assets increased by 3.3% over.the preceding year. Net assets totaled $66.9 million in 2003 compared to approximately $59.2 million at the end of 2002. The comparative increase in net assets in 2003 by contrast'to 2002 is attributed primarily to an increase in capital
'ontributions of $3.5 million. Of this amount $727,027 came from developers deeding property with in-with dthe remainder being received from charges for service ground improvements,wihte capacity feesrelate'd largely to the westward expansion of the City in residential development.
- During' 2003, the Commission's operating revenue increased by approximately $5.7. million to over $46.3 million, which was 12.4% more than last years operating revenue of $40.6 million.
Likewise, the Commission's operating expenses increased by $4.7 million to $39.9 million, which was 11.8% more than last year's $35.1 million.
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Capital contributions received by the Commission increased significantly from almost $1.0 million in 2002 to $4.5 million in 2003, which is 78.5% more than last year. As mentioned above, amounts received for service capacity fees related to residential home development expansion in the City is the primary reason for this large increase.
- The Commission's long-term debt decreased to $79.6 million in 2003, which is down $4.5 l
million over last year's $84.1 m illion. There were no new debt issues in 2003.
I Overview of Financial Statements The Utilities Commission's basic financial statements are comprised of three parts: 1) management's ii discussion and analysis, 2) the basic financial statements, and 3) an optional section that presents detailed summaries and schedules of selected financial data.
Management's Discussion and Analysis (MD&A) serves as an introduction to the basic financial IT statements and supplementary informnation. The MD&A represents management's examination and analysis of the Utilities Commission's financial condition and performance. Summary financial statement data, key financial and operational indicators used in the strategic plan, budget, bond resolutions and other management tools were used for this analysis.
The basic financial statements consist of entity-wide financial statements that provide both the short-and I
long-term financial information about the Utilities Commission's financial activities, all of which are operated like commercial enterprises.
These statements report information about the Utilities F
Commission using full accrual accounting methods and economic resources focus as utilized by similar business activities in the private sector. Information concerning all of the Commission's assets and liabilities, both financial and capital, and short-term and long-term are included. Likewise, all revenues and expenses received during the year, regardless of when cash is received or paid are reported.
L However, rate-regulated accounting principles applicable to private sector utilities are not used by government utilities.
The basic financial statements of the Utilities Commission include a balance sheet; a statement of revenues, expenses, and changes in net assets; a statement of cash flows; and notes to the financial statements, which are described as follows:
I The balance sheet presents the financial position of the Utilities Commission on a full accrual, historical cost basis. This statement provides information about the nature and amount of resources and obligations at year-end.
The statement of revenues, expenses, and changes in net assets presents the results of the business activities over the course of the fiscal year and information as to how the net assets changed during the 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 the related cash flows. This statement also provides certain information about the Utilities Commission's recovery of its costs. Rate setting l
policies use different methods of cost recovery not fully provided for by generally accepted accounting standards. The primary objectives of the rate model are to improve equity among customer classes and to ensure that capital costs are allocated on the basis of long-termn capacity needs, ensuring that growth pays for growth.
The statement of cash flows' presents changes in cash and cash equivalents, resulting from 4
operating, capital and related financing, and investing activities. This statement presents cash receipts and cash disbursement information, without consideration of the earnings event, when an obligation arises, or depreciation of capital assets.
4 4
- The notes to the financial statements provide required disclosures and other information that are essential to a full understanding of material data provided in the statements. The notes present information about the Utilities Commission's significant accounting policies, account balances and activities, material risks, obligations, commitments, contingencies and subsequent events, if any.
The supplementary information presented by the Utilities Commission includes comparisons of budget to actual revenue and expenses, schedules that focus on the individual divisions of the Utilities Commission where more detailed financial data is desirable,' and schedules presenting the Commission's future debt service'requirements and other data required to be' presented in accordance with certain of the Commission's debt covenants.
Entity-Wide Financial Analysis The Utilities Commission's entity-wide financial statements report its net assets and how they have changed over the reporting period.' Net assets'- the difference between assets and liabilities-may serve as a useful indicator of the Commission's finahnial position.
Over time, increases or decreases in the Commission's net assets are a useful indicator of whether its financial health is improving or deteriorating, respectively.
However, one also needs to consider other non-financial factors such as changes in economic conditions, population growth, and new or changed governmental legislation to adequately assess its overall health.
The material portion of the Utilities Commission's net assets (66%) reflects its investment in utility plant assets (e.g., land, buildings, utility plant, and equipment), less that portion of related debt used to acquire those assets that is still outstanding. These utility plant assets are used to provide utility services to our customers; consequently, these assets are not available for future spending. Although the Commission's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources (the sale of utility services), since the capital assets themselves cannot be used to liquidate these liabilities.
Condensed Balance Sheets
($000's)
Dollar Percent FY 2003 FY2002 Change Change Current and other assets....................
$ 15,382
$ 13,423
$ 1,959 14.6%
Restricted assets.................................................
18,429 17,225 1,204 7.0 Capital assets:
'Productive assets in service (net).109,636 110,161 (525)
(05)
Held for future use..................
9,174 9,174 0
Construction in progress 3
.584 3,005 579 19.3 Total assets........................................................
156205 152,988 3,217 2.1 Long-term debt outstanding.79,575 84,075 (4,500)
'(5.4)
Other liabilities..
9,762 9,699 63 0.6 Total liabilities....................(................................
89,337 93.774
(
437j '
(4.7) 5
1 Dollar Percent FY 2003 FY2002 Change Change Net assets:
Invested in plant, net of related debt...........
43,970 39,242 4,728 12.0 Restricted..........
11,493 10,277 1,216 11.8 Unrestricted........................................................
211,405 9695 1,710 17.6 Total net assets............................................... $
6
$ 59,214 S
7.654 12.9%
The Utilities Commission's net assets increased $7.7 million to $66.9 million in 2003, which is up from S59.2 million in 2002. Looking more carefully at the data, the most significant change in net asset position was from amounts invested in utility plant, net of related debt, which increased $4.7 million.
LU This increase reflects the Commission's current policy of investing surplus internal resources, capital contributions and earnings and profits in productive capital assets in lieu of issuing additional debt during the year.
l Condensed Statements of Revenues, Expenses, and Changes in Net Assets
($000's)
Dollar Percent 1
FY 2003 FY2002 Change Change Revenues:
Charges for services:
Electric system.............................................. $ 32,988
$ 29,997
$ 2,991 10.0%
Water system.................................................
5,123 4,983 140 2.8 Wastewater system..................................
5,655 5,632 23 0.4 Telecommunications system.........................
2,582 0
2.582 100.0 Total charges for services.................................
46,348 40,612 5,736 14.1 Interest earnings................................................
358 461 (103)
(22.3)
Other.................................................................
337 433 (96)
(22.2)
Total revenues......................................................
47,043 41.506 5
.537 13.3 Expenses:
Division operating expenses:
Electric system..............................................
29,313 26,777 2,536 9.5 Water system.................................................
3,999 3,822 177 4.6 e Wastewater system.................................
4,603 4,491 112 2.5 Telecommunications system.........................
1.892 0
1,892 100.0 Total division operating expenses.....................
39,807 35,090 4,717 13.4 Interest and debt expense.................................
3,356 3,953 (593)
(15.0)
Asset disposal losses.................................
10 58 (48)
(82.8)
Other.................................
690 56 634 1,232.1 Total expenses.................................
43,863 39.157 4A710 12.0 Income (loss) before contributions......................
3,180 2,349 831 Capital contributions..
I4.474 961 3,513 Increase (decrease) in net assets..........................
4 3310 6
While the balance sheet shows a snapshot of the Commission's financial position at the beginning and ending of the fiscal years, the above statement of revenues, expenses, and changes in net assets provides answers as to the nature and source of these changes. As can be seen above, income before contributions of $3.2 million and capital contributions of $4.5 million were the two sources of the increase in 2003. A comparison of the operating expenses shows that the Commission's operating expenses increased by $4.7 million, or 11.8% in 2003, while system revenues in 2003 also increased by $5.7 million or 12.4% over 2002.
A combination of an increase in fuel and purchased power costs offset by the corresponding increase in the fuel and purchased power cost adjustment clause (fuel adjustment), the net profit earned from telecommunication services, and the increase in capital contributions from service capacity fees makes up the majority of the net increase in net assets in 2003 as compared to 2002. The Commission continues to produce positive net income in 2003 from its utility system operations.
The following is a summary of the operating revenue and expense for each of the Commission's operating divisions:
Operating Revenue and Expense - by Division Year Ended September 30, 2003
$35,000 E i
$30,000
$25,000
$20,000 00
°^e$15'000 i
$10,000
$5,000
$0 -
I 1_1 Electric Water Wastewater Telecommunications The following is a summary of the composition of 2003 utility system revenues by source:
Revenues - By Source Year Ended September 30, 2003 Contributions 9%
Electric/
63%
~Water Interest 0
1%,0
(
<Other 1%%
Telecommunications Wasewater 1%
6%
10%
7 ci07>
During 2003, the overall demand for electricity, water and wastewater treatment services increased. Total electric kWh sales increased from 343 million kWh in 2002 to 371 million kWh in 2003, or 7.5% more than that of the prior year. The number of electric customers increased by 1.8% in 2003 to 22,126 compared to 21,734 in 2002.
The following is a summary of the individual components of the Commission's electrical energy sales for the past two years from residential, commercial demand, commercial non-demand, and street lighting service customers.
Electric kWh Sales Years Ended September 30, 2003 and 2002 250,000,000 200,000,000 150,000,000 4AA nn nnn nUn I UU,UUU,UUU 50,000,000 0
l Residential Demand I Non-Demand IStreet Lights
- 2003 236,255,171 80,669,362 50,358,918 2,960,121 0 2002 212,859,000 80,295,378 46,637,265 2,960,681 kWh Sold by Service Type Similar events were experienced within the Commission's other operating divisions during 2003. The actual number of customers increased in all divisions. The volume of potable water sold during 2003 increased 4.6% to 1,471 MG compared to 1,403 MG in 2002. The wastewater system experienced a 1.1%
increase to 872 MG in the volume of wastewater treated in 2003 compared to 862 MG treated in 2002.
The volume of water reuse sold during 2003 increased 24.3% to 349 MG, up from 264 MG in 2002.
Rising costs to produce electric system revenues resulted in a fuel adjustment being made in June 2003.
Reclaimed water sales and expenses have been incorporated under the Wastewater System in 2003.
Telecommunications System sales and expenses for Internet and Telephone related services are now separately reported due to the significance in growth in providing these services. The actual number of residential and commercial utility customers increased during 2003 in all operating divisions as follows:
2003 2002 Utility ODerating Division Customers Customers Electric system...........................
22,126 21,734 Water system...........................
20,111 19,507 Wastewater system..........................
16,485 16,066 Water reuse system..........................
417 385 Telecommunications - Internet.........
4,068 3,215 Telecommunications - Telephone....
10,870 4,555 8
The net results of operations for all divisions show that the Commission was successful in recovering its costs for these utility divisions.
Budgetary Highlights An annual revenue and expense budget is prepared for the combined electric, water, wastewater and water reuse utility systems and, after Commission approval, is submitted to the City of New Smyrna Beach prior to June 1 of each fiscal year for subsequent City Commission approval. The budget remains in effect therientire year and can only be amended with the approval of the Utilities Commission. No supplemental appropriations were made in 2002.
Schedule of Revenue, Receipts, Expenses and Disbursements -
Budget -vs-Actual
$(OOO's)
Budget Actual Variance Revenue and Receipts:
Electric system..........................
922 33,020 2,098 Water system.......................................
5,146 5,220 74 Wastewater system
.6,059 5,694 (365)
Telecommunications system
.2,152 2,582 430 Capital contributions.
.*839 4A474 3.635 45,118 50.990 5,872 Operating Expenses:
-Purchased power and fuel.13,735 16,569 (2,834)
Other production.7,809 6,431 1,378 Transmission, distribution, sewage collection and treatment......................................
3,752 3,752 0
-Customer accounting.864 996 (132)
Administrative and general.4,046 4,303 (257)
Required payments to City.
2,605 2,706 (101)
Nuclear generation facility decommissioning.
115 145 (30) 32,926 492 (1,976)
Net revenue and receipts.12,192 16,088 3,896 Operating transfers (net).(12192)
(15,856)
(3,664)
Budgeted net cash receipts.0
.232
-- i 2132 Reconciliation of budget to change in riet assets:
Principal portion of sinking fund transfers.......
4,665 Internal funds transfers (net) 8,339 Depreciation and amortization (5,572)
Other................................................................
(10)
Change in net assets......................................
7,654 The Commission's operating budget is prepared on a basis consistent with generally accepted accounting principles (GAAP). Other cash receipts and payments are treated as budgetary items to maintain effective fiscal and budgetary control over the collection arid disposition of all Utilities Commission resources.
However, all capital expenditures are included in a separate five-year Capital Plan. -During 2003, the Commission's actual revenues were more than anticipated amounts by over $5.8 million. This was due primarily to the unanticipated increase in purchased power and fuel costs, the recovery of which was passed on to our electric customers in the form of an energy cost adjustment. Due to the recent trend in the electric industry we have incurred increased fuel and purchased power costs resulting in an adjustment 9
from $8.82 per 1,000 kWh to $12.89 per 1,000 kWh as of June 1, 2003. In addition to the stated increase in utility production expenses and related payments to the City (all of which are directly related to the above described fuel adjustment), the Commission's other operating expenses were relatively on target with the budgeted amounts as a result of close monitoring of operating expenses.
Cash Management 1
Cash temporarily idle during the year was invested through the use of a competitive bid procedure in short-term time deposits and medium short-term investments. Shorter investment periods were utilized by the Utilities Commission due to the rapid changes and uncertainties of interest rates experienced during the fiscal year. The amount of interest earned during the years ended September 30, 2003 and 2002 totaled $461,153 and 1,055,154, respectively. These amounts were further reduced by $ and A
S149,910 during the years ended September 30, 2003 and 2002, respectively, for interest credits used to reduce capitalized interest expense for the respective years.
The Utilities Commission's cash and investments on hand at September 30, 2003 and 2002, totaled $22.1 million and $22.2 million, respectively. The individual components are as follows:
2003 2002 Current assets:
Operating cash and cash equivalents................................
$ 1875.260 1.311235 l Restricted assets:
Debt service funds....................
2,839,743 3,625,980 Renewal and replacement funds.......................................
11,504,914 9,744,916 Customer deposits.............................................................
1,517,204 1,431,890 CR-3 decommissioning fund...........................................
2.567.289 2.422.153 18,429,150 17.224.939 Other assets:
Internally designated stabilization funds..........................
1.768,251 3.668.390 l
Total cash and investments.........................................
$ 22072661 22204,564 Included in the total unrestricted current assets are internally designated funds for renewal and replacement amounting to $1,875,260 and $1,311,235 as of September 30, 2003 and 2002, respectively.
In addition to the amounts legally required to fund the renewal and replacement fund in accordance with long-term debt covenants and for amounts received from developer agreements for service capacity fees, both of which are legally restricted, additional funding above the mandatory legally restricted requirements is internally designated for renewal and replacement projects to internally finance routine utility plant expansion and upgrades.
The Utilities Commission's investment policy is to minimize credit and market risks while maintaining a competitive yield on its portfolio.
Accordingly, deposits were either insured by federal depository insurance or collateralized in accordance with the Florida Security for Public Deposits Act (the "Act").
All collateral on deposits was held either by the Commission, or by the State of Florida in accordance with the applicable provisions of the Act. All of the Commission's investments held at year-end are l
classified in the category of lowest credit risk (backed exclusively by the full faith and credit of the U. S.
government) as defined by the Governmental Accounting Standards Board.
1 The average yield from interest earnings on cash and investments that was earned each month during the fiscal year ended September 30, 2003 is as follows:
10 I
Average Yield October..................................................................................
2.80%
November..............................................................................
2.37%
December...............................................................................
2.05%
January...................................................................................
1.97%
February.1.89%
March........1.84%
M arch...................................................................................
.4 April.1.78%
May.1.74%
June...........................................
1.74%
July.1.64%
August.1.63%
September..............................................................................
1.65%
Capital Assets At the end of 2003, the Utilities Commission's investment in capital assets amounted to $122.3 million, which is stated net of $66.6 million of accumulated depreciation and provision for decommissioning.
This investment in capital assets includes:
Land and land improvements, Electric (fossil fuel and nuclear) generation, transmission and distribution facilities,
- Water supply, production, treatment and distribution facilities,
- Wastewater collection, treatment and reuse distribution facilities, and Machinery and equipment.
During 2003, the total increase in the Commission's investment in capital assets was $5.1 million, compared to $6.4 million invested in 2002.
Major capital asset events during 2003 included the following:
Additional costs related to acquisition of Sugar Mill water and wastewater treatment plant and related costs to place these assets into service of $ 1.3 million, Line transforrners, poles and fixtures amounting to $1.2 million
- Transmission and distribution mains totaling $0.7 million, and Other plant expansion items totaling $1.9 million.
Utility Plant, Net of Accumulated Depreciation September 30, 2003 2002 Land and land rights..............................................................$
3,281,904 3,281,904 Structures and improvements......................................
19,964,958 19,909,131 Production and treatment plant
.44,561,389 44,427,909 Transmission, distribution, and collection and treatment plant.99,533,982 95,962,840 Other general plant and equipment.
8707,613 8,127,752 176,049,846 171,709,536 11
-I September 30, 2003 2002 I1 Accumulated depreciation.
Allowance for decommissioning...................................
Construction in progress........................................................
Plant held for future use........................................................
Nuclear fuel, net of amortization......................................
(64,057,960)
(2.567,289) 109,424,597 3,584,237 9,173,992 211,416 (59,229,142)
(2.422,153) 110,058,241 3,001,496 9,173,992 102.970 I1 I
Utility plant, net.........
$ 122,394.242 L22,,9 Long-Term Debt and Debt Administration The revenue certificate debt coverage ratio is a useful indicator of the Utilities Commission's debt position. The Commission's debt coverage ratio has continued to remain strong over the past three years even in years of debt issuance, as is summarized in the following three-year tabulation:
1 1
2003 2002 Operating revenues........................................
Interest and other incom e..............................
Capacity and other fees.................................
$ 46,347,066 694,980 4,474,157 40,612,225 894,508 960,595 2001 42,715,387 I
1,345,251 1.185,634 1l Revenues per certificate resolution...............
51,516,203 42,467,328 45,246,272 Cost of Operation and Maintenance, net of depreciation and required payments to City of New Smyrna Beach..................
Net revenues per certificate resolution..........
Annual debt service requirement...................
I 32.196,648 19,319,555 6,039,170 27,842.554 14,624,774 5,220,209 30,064,279 15.181,993 5.307,236 1
I Debt service coverage ratio (times)...............
2.80 2.86 I
As of September 30, 2003 the Utilities Commission had outstanding $46,680,000 of revenue certificates payable. All of these obligations are secured by a first lien on and a pledge of the net revenues of the system.
The Utilities Commission's outstanding revenue certificates ratings from Moody's, Standard & Poor's, and Fitch's as follows:
Utilities System Refunding Revenue Certificates, Series 1993................................
Utilities System Refunding Revenue Certificates, Series 1996................................
Utilities System Refunding Revenue Certificates, Series 2002................................
12 Moody's Standard & Poor's Aaa AAA (FGIC Insured)
Fitch's n/r I
I I
.1.
n/r AAA (AMBAC Insured)
AAA n/r AAA (AMBAC Insured)
AAA 1
The debt service requirements on these obligations are detailed in the notes to the financial statements and in Schedule 11 of the supplementary section of the financial statements.
In addition to the revenue certificates payable the Utilities Commission had outstanding notes payable to the'Florida Department of Environmental Protection, State Revolving Fund Loan in the aggregate amount of $15,949,355, which are secured by a lien and pledge on the net revenues of the system, but subordinate to the first lien and pledge securing the' revenue certificates payable.
The Commission also had outstanding notes payable to the Florida Municipal'Power Agency (FMPA) Pooled Loans amounting to
$22,278,000, which are secured by a lien and pledge on the net revenues of the system, but subordinate to the first lien and pledge securing the revenue certificates payable and on a parity with the State Revolving Fund Loan.
The debt service requirements on these obligations are'detailed in the notes to the financial statements.
The future debt service requirements for'the Florida Department of Environmental Protection, State Revolving Fund Loan are in Schedule 12 of the supplementary section of the financial statements. The future debt service requirements for the FMPA Pooled Loans are in Schedule 13 of the supplementary section of the financial statements and are'based on the prevailing interest rate charged as of September 30, 2003. The interest rate on the FMPA Pooled Loans varies and is determined on a monthly basis.
Accordingly, the representation of the future debt service requirements in Schedule 13 may not agree with the actual amounts to be paid and the difference may be material.
At the end of the fiscal year, the Utilities Commission had $79.6 million in long-term debt outstanding, which was down $4.5 million over the prior year's $84.1 million.
At the present time, the Commission has no formal plans to pursue the issuance of any additional long-term debt. However, management continues to review and monitor current bond market conditions for evaluating the feasibility of restructuring any and all outstanding debt obligations if, and when, the opportunity presents itself and only after it is conclusively determined that it makes significant financial "sense" to pursue.
Under its current debt agreements, the Commission has covenanted to maintain several coverage ratios, all of which approximate 1.25 times in the aggregate. In order to issue additional debt obligations, the Commission must demonstrate that it has successfully maintained a coverage ratio of 1.40 times its maximum annual debt service requirements in its immediately preceding fiscal year. Based on this data, the Commission has the ability and the capacity to obtain additional financing, at current market conditions, of approximately $50 million.
Economic Factors and Next Year's Budget and Rates Many factors are considered each year by the'Utilities Commission in its efforts to establish an operating budget, to evaluate its personnel needs, and to develop uniform electric, water, wastewater and other utility fees that are reasonable and, more importantly, capable of cost recovery. Some of the major factors considered in this process are the local economy, civilian labor force, unemployment rates, and inflation rates.
- The most recent estimates'aivailble for' unemployment data in Volusia County, Florida are compiled by the Florida Agency for Workfdrce Innovation on the Florida Research and Economic Database (FRED). This agency estimates'a countywide unemployment rate of 4.9%
at the end of September 2003, which is'slightly higher than the 4.3% rate experienced one year earlier. These estimates compare favorably to the state's 4.9% and 5.3% unemployment rates at September 2003 and 2002, respectively.
Inflationary trends for Volusia County compare favorably with those trends experienced at the state and national levels.
13
Another factor influencing the Commission's 2004 operating budget includes significant anticipated growth in the telecommunications division in the 2003-2004 fiscal year, which will provide more funding to the City of New Smyrna Beach, Florida, subsidize debt reduction funding, and additional funds for A
renewal and replacement funds.
This division includes all financial operations associated with the providing of local and long-distance telephone services along with local dial-up internet services, high-speed broadband asymmetrical digital subscriber line (ADSL) services, and symmetrical digital I
subscriber line (SDSL) services. The 2004 budget includes combined projected revenues of $9.8 million and budget appropriations of $9.8 million for these services.
A summary of the enacted 2004 budget follows:
FY 2004 Operating Budget With Comparison to FY 2003 Actual
$(000's)
FY 2004 FY 2003 Dollar Budget Actual Change Revenue and Receipts:
Electric system................................................
32,058 33,020 (962)
Water system.........................
5,390 5,220 170 Wastewater system...................................
6,220 5,694 526 L Telecommunications system...........................
9,767 2,582 7,185 Capital contributions.......................................
1.204 4.474 (3.270) 54,639 50.990 3.649L Operating Expenses:
Purchased power and fuel...............................
14,593 16,569 1,976 Operation and maintenance.............................
23,501.
15,627 (7,874)
Required payments to City..............................
3,158 2,706 (452) 41,252 34.902 (6.350)
Net revenue and receipts...................................
13,387 16,088 (2,701)
L Debt service...........................................................
(7,924) (7,518)
(406)
Operating transfers (net)...................................
(5.463 338) 2.875 Budgeted net cash receipts.....................................
0 22
(
232)
The Utilities Commission's electric, water, and wastewater rates for the 2003, fiscal year remained the same as the prior year. A 5% increase in the wastewater rates for all classes of customers effective October 1, 2003 in the new fiscal year was deemed necessary for us to recover all of the costs associated with providing these services.
Requests for Information This financial report is designed to provide a general overview of the Utilities Commission, City of New Smyrna Beach, Florida's finances for all those who have expressed an interest in its finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the office of the Director of Finance, Post Office Box 100, New Smyrna Beach, Florida 32170-0100.
14
I BALANCE SHEET September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida I
2003 2002 Assets:
Utility Plant:
Electric utility plant in service...........................................................................
W ater utility plant in service...........................................................................
Wastewater and water reuse utility plant in service.
General utility plant in service..........................................................................
Less: accumulated depreciation and amortization......................................
Construction work in progress.
Plant held for future use.
Nuclear fuel, net of amortization.......................................................................
1:
77,873,246 37,233,022 53,511,799 7,431,779 176,049,846 (66,625,249) 109,424,597 3,584,237 9,173,992 211,416 76,675,018 35,817,251 51,906,418 7,310,849 171,709,536 (61,651,295) 110,058,241 3,004,496 9,173,992 102,970 I
i i
Total utility plant, net................................................................................
122,394,242 122,339,699 Restricted Assets:
Cash and cash equivalents.................................................................................
Investments, at cost............................................................................................
Accrued interest and dividends..........................................................................
Total restricted assets...............................................................................
Current Assets:
Cash and cash equivalents................................................................................
Accounts receivable, net of allowance for doubtful accounts
($106,800 - 2003 and $121,660 - 2002).........................................................
Unbilled accounts receivable............................................................................
Notes receivable...............................................................................................
Inventories........................................................................................................
Prepaid expenses and other assets....................................................................
17,356,681 1,054,900 17,569 18,429,150 1,875,260 3,166,629 4,244,879 437,805 1,701,402 429,797 12,623,245 4,592,800 8,894 17,224,939 1,311,235 2,202,378 3,349,033 70,329 1,680,424 274,584 I
i I
I IL Total current assets...................................................................................
11,855,772 8,887,983 Deferred Charges and Other Assets:
Stabilization funds.............................................................................................
Unamortized phone customer acquisition costs................................................
Unam ortized debt expense................................................................................
1,768,251 1,023,670 733,965 3,668,390 0
866,870 L
Total deferred charges and other assets.....................................................
3,525,886 4,535,260 Total assets..........
5..........................................$
156,205,050 152,987,881 I
I, tI The accompanying notes are an integral part of the financial statements.
I 15 L
Statement I 2002 2003 Net Assets:
Invested in utility plant, net of related debt...........................................................
43,970,077 Restricted for debt service.....................................................................................
539,839 Restricted for renewal and replacement................................................................
10,953,401 Unrestricted..........................................................................................................
11,404,708 39,241,910 539,839 9,736,744 9,695,283 Total net assets..........................................................................................
Liabilities:
Long-Term Debt:
- Revenue certificates payable (net).....................................................................
Notes payable (net)............................................................................................
Total long-term debt.................................................................................
66,868,025 59,213,776 42,941,225 45,754,090 36,634,252 38,321,355 79,575,477 84,075,445 Restricted Fund Liabilities:
Revenue certificates payable..............................................................................
Notes payable....................................................................................................
Accrued interest payable...................................................................................
Accounts payable..............................................................................................
Customers' deposits..........................................................................................
1,825,000 1,593,103 297,778 551,513 1,517,204 2,730,000 1,434,976 365,662 8,172 1,431,890 Total restricted fund liabilities..................................................................
5,784,598 5,970,700 Current Liabilities:
Accounts payable..............................................................................................
Accrued liabilities.............................................................................................
Due to other governments.................................................................................
2,129,943 508,345 830,235 2,001,779 476,242 763,706 Total current liabilities.............................................................................
Other Noncurrent Liabilities:
Deferred compensated absences.....................................................................
Deferred credits - other.....................................................................................
Total other noncurrent liabilities..............................................................
Total liabilities...........................................................................................
3,468,523 3,241,727 351,682 337,565 156,745 148,668 508,427 486,233 89,337,025 93,774,105 Total liabilities and net assets.....................................................
156,205,050 152,987,881 16
I STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN NET ASSETS For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Statement 2 2002 I
I 2003 Operating Revenue:
Sales.....................................................................................................................$
Other revenue.
Total operating revenue.
1 45,758,867 39,966,040 588,199 646,185 46,347,066 40,612,225 1
Operating Expenses:
Purchased power and fuel expenses.....................................................................
Other production expenses....................................................................................
Transmission, distribution, and sewage collection and treatment........................
Custom er accounting...........................................................................................
Adm inistrative and general..................................................................................
Required payments to the City of New Smyrna Beach........................................
Depreciation and decom m issioning.....................................................................
I 16,569,259 6,431,093 3,751,847 996,421 4,302,892 2,706,427 5,049,264 13,652,608 6,038,839 3,782,641 821,128 3,385,868 2,509,729 4,899,416 I
I Total operating expenses..........................................................................
Operating income.....................................................................................
39,807,203 35,090,229 6,539,863 5,521,996 I
Non-operating Revenue (Expense):
Interest earnings...................................................................................................
Other income.......................................................................................................
Interest and debt expense.....................................................................................
Other expenses.....................................................................................................
Loss on disposal of assets....................................................................................
I 358,454 336,526 (3,355,193)
(690,017)
(9,541) 461,153 433,355 (3,952,841)
(56,064)
(58,114) 1 Total nonoperating (expense)....................................................................
Income before contributions......................................................................
Capital contributions................................................................................................
(3,359,771)
(3,172,511)
L 3,180,092 2,349,485 I
4,474,157 960,595 Change in net assets...................................................................................
7,654,249 3,310,080 I
Net assets, beginning of year..................................................................................
59,213,776 55,903,696 Net assets, end of year...........................................................
66,868,025 59,213,776 I
L The accompanying notes are an integral part of the financial statements.
IL 17 L
STATEMENTS OF CASH FLOWNIS For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Statement 3 2002 2003 Cash Flows From Operating Activities:
Cash received from customers..............................................................................$
Cash paid to suppliers...........................................................................................
Cash paid to em ployees........................................................................................
Other receipts (paym ents)....................................................................................
44,541,033 (26,342,390)
(5,721,282)
(2,639,898) 43,192,639 (22,834,384)
- (5,285,654)
(2,532,713)
Net cash provided by operating activities.................................................
9,837,463 12,539,888 Cash Flows From Capital and Related Financing Activities:
Debt reduction outlays........................................................................................
- Contributed capital.............................................................................................
Proceeds from issuance of debt..........................................................................
Proceeds from sale of property and equipment...................................................
Acquisition and construction of capital assets....................................................
Interest paid........................................................................................................
(5,598,976) 3,747,130 0
6,730 (5,544,668)
(2,938,036)
(3,981,064) 960,595 30,216 878 (4,078,202)
(4,655,546)
Net cash (used in) capital and related financing activities.........................
(10,327,820)
(11,723,123)
Cash Flows From Investing Activities:
Proceeds from sale and maturities of investment securities................................
Acquistion of investment securities...................................................................
Interest received..................................................................................................
4,537,900 (1,000,000) 349,779 37,300 (4,500,000) 610,193 Net cash provided by investing activities.
Net increase (decrease) in cash and cash equivalents...............................
Cash and cash equivalents, beginning of year.........................................................
3,887,679 (3,852,507) 3,397,322 (3,035,742) 17,602,870 20,638,612 Cash and cash equivalents, end of year.............................................................
21,000,192 17,602,870 Reconciliation to Balance Sheet:
Restricted cash and cash equivalents...................................................................
Unrestricted cash and cash equivalents................................................................
Stabilization funds...............................................................................................
17,356,681 1,875,260 1,768,251 12,623,245 1,311,235 3,668,390 Total cash and cash equivalents.................................................................$
21,000,192 17,602,870 The accompanying notes are an integral part of the financial statements.
18
I STATEMENTS OF CASH FLOWS - (Continued)
For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Statement 3 2002 I
2003 I
Reconciliation of operating income to net cash provided by operating activities:
Operating income.............................................................
Adjustments to reconcile operating income to net cash provided by operating activities:
Depreciation, decommissioning, and nuclear fuel amortization Provision for losses on receivables.
Decrease (increase) in operating assets:
Accounts and notes receivable.
Unbilled accounts receivable.
Inventories.
Prepaid expenses.
Increase (decrease) in operating liabilities:
Accounts payable.
Due to other governments Customer deposits.......................................................................................
Accrued liabilities........................................................................................
Deferred liabilities.
Other income.
Other expense.
6,539,863 5,177,510 42,301 (1,374,328)
(895,846)
(20,978)
(155,213) 5,521,996 5,021,093 62,297 217,247 1,767,398 (37,685)
(221,776)
I I1 I
671,505 66,529 85,314 32,103 22,194 336,526 (327,070)
(22,984) 162,414 (10,243) 29,910 433,355 I
I (690,017)
(56,064)
Net cash provided by operating activities...........
9,837,463 12,539,888 The accompanying notes are an integral part of the financial statements.
19 I
I I
11I I11 l
L
No TES To THE FINANCIAL STA TEMENTS
NOTES To THE FINANCIAL STATEMENTS SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA NOTE 1-
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Utilities Commission, City of New Smyrna Beach, Florida (the "Utilities Commission) are presented in conformity with accounting principles generally accepted in the United States of America as applicable to governmental units.
The existing hierarchy provides that accounting guidance should first be sought in statements of the Governmental Accounting Standards Board (GASB). If the GASB has not issued a standard applicable to a situation, then pronouncements of the Financial Accounting Standards Board (FASB) are presumed to apply except as described below under Measurement Focus and Basis of Accounting. Additionally, the financial statements are presented substantially inconformity with accounting principles and methods prescribed by the Federal Energy Regulatory Commission (FERC),
except for the method of accounting for contributed capital described in the notes to the financial statements.
The following is a summary of the more significant accounting policies:
Reporting Entity: The Utilities Commission was created in 1967 through the passage of Chapter 67-1754, Laws of Florida, Special Acts of 1967 (House Bill 1669), which amended the Charter of the City of New Smyma Beach, Florida (the "City") to create the Utilities Commission.
The Utilities Commission is governed by a five-member board of Commissioners who are appointed by the City Commission. Utilities Commissioners receive compensation of $100 per month and may serve no more than three consecutive three-year terms. In a referendum held in October, 1984, voters approved amendments to the City Charter which (1) require City Commission approval for extensions'of utility services outside the City limits; (2) give the City Commission the right to review and approve the Utilities Commission's operating budget; and (3) require City Commission approval before issuing or refunding revenue, certificates and entering into contracts which exceed four years.
The funds and entities related to the operation of the Utilities Commission are appropriately included as a component unit of the City of New Smyrna Beach, Florida; and 'an integral part of the City's reporting entity in accordance with the requirements of Statement 14 of the GASB, The Financial Reporting Entity. The basic financial statements of the Utilities Commission are incorporated in the City's Comprehensive Annual Financial Report as an enterprise fund activity. Complefe financial statements of the City of New Smyrna Beach, Florida, the primary government of the Utilities Commission, can be obtained directly from the City's administrative offices, which is as follows:
Administrative Office:
City of New Smyrna Beach, Florida 210 Sams Avenue New Smyrna Beach, Florida 32168 The Utilities Commission maintains a 0.5608% undivided participant -interest with Florida Power Corporation at it's Crystal River Unit 3 nuclear generation facility. Pursuant to this agreement, all fiscal, budgetary and operational control is maintained exclusively by Florida Power Corporation. The agreement and the related ownership interest have remained consistent for the years ended September 30, 2003 and 2002. This agreement does not meet the criteria of a joint venture as specified in Statement 14 of the Governmental Accounting Standards Board.
20
NOTES To THE FINANCIAL STATEMNIENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA 1
In 1983, the Utilities Commission entered into a participation agreement with Florida Municipal Power Agency (FMPA) for an entitlement share of electric capacity and electric energy from FMPA's undivided ownership interest in Florida Power and Light Company's St. Lucie Unit No. 2, a nuclear generating unit.
I The Utilities Commission's role in the agreement is limited to that of a participant contractually obligated to purchase electric capacity and electric energy. The agreement between the Utilities Commission and FMPA does not meet the criteria for inclusion within the reporting entity of the Utilities Commission.
The i
agreement specifically provides that the arrangement is not a joint venture and neither FMPA nor the other utilities which entered into. participation agreements with FMPA for entitlement shares from FMPA's undivided ownership interest in St. Lucie Unit No. 2 are accounting for the agreement as a joint venture.
I Accordingly, the Utilities Commission is not accounting for the agreement as a joint venture.
On March 17, 1998 the Utilities Commission entered into an Interlocal Agreement creating the Florida Electric Power Alliance (FEPA) by and among the City of Homestead, City of Lake Worth, and the Utilities Commission, City of New Smyrna Beach, Florida, for the purpose coordinating certain joint electric power supply projects. On April 28, 1999 FEPA entered into a contract with Florida Power and Light for the purpose of marketing and trading excess capacity and energy. The initial term of the agreement was for the period from May 1, 1999 to October 31, 1999 and will be automatically extended in additional six month increments. The agreement specifically provides that the arrangement is not a joint venture, but rather is an "agency" created under the authority of Chapter 163, Part I, Florida Statutes, as amended. Neither FEPA nor the underlying utilities which entered into the agreement are accounting for the agreement as a joint venture.
Accordingly, the Utilities Commission is not accounting for the agreement as a joint venture.
New Accounting Pronouncements: The Governmental Accounting Standards Board (GASB) has issued Statement of Accounting Standards No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments (SGAS 34). The Utilities Commission elected to implement the provisions of SGAS 34 for the year ended September 30, 2001. Statement 34 established standards for external financial reporting for all state and local governmental entities which includes a statement of net assets, a statement of activities and changes in net assets and a statement of cash flows. It requires the classification of net assets into three components invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined as follows:
Invested in capital assets, net of related debt - This component of net assets consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net assets component as the unspent proceeds.
Restricted - This component of net assets consists of constraints placed on net asset use through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation.
l Unrestricted net assets - The component of net asset consist of net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt."
21 L
NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA The adoption of Statement No. 34 had no effect on the basic financial statements except for the classification of net assets in accordance with the Statement and the reflection of capital contributions as a change in net assets.
Basis of Presentation: The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include all the activities of the Utilities Commission.
By virtue of its municipal ownership, the financial affairs of the Utilities Commission are not subject to the oversight of, or regulation'by, the Florida Public Service Commission. While not required, the accounting records of the Utilities Commission are maintained in accordance with the uniform systems of accounts prescribed by the Federal Energy Regulatory Commission (FERC) and the Florida Public Service Commission (FPSC).
As a result, the accounting provisions permitted understatement of Financial Accounting Standards No. 71, Accounting for'the Effects of Certain Types of Regulation (SFAS 71), have not been adopted by the Utilities Commission.
The Utilities Commission has elected to not apply FASB statements and interpretations issued after November 30, 1989, as permitted by GovernIment Accounting Standards Board (GASB) Statement'No. 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting."
Basis of Accounting:
Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements.
It relates to the timing of the measurements made, regardless of the measurement focus applied. The Utilities Commission's financial statements are prepared on the accrual basis of accounting. By utilizing this method, revenues are recognized when they are earned, and expenses are recognized as they are incurred. Unbilled utility service receivables are recognized to provide a better matching of service revenues arid the costs of providing the service.
Budget and Budgetary Accounting: An annual revenue and expense budget is prepared for the combined electric, water, wastewater and telecommunications utility systems.
In accordance with the Utilities Commission's budget policy, the approved budget is'subriitted to the City of New Smyra Beach prior'to May 1 of each fiscal year for subsequent City Commission approval. The budget was adopted on a basis consistent with generally accepted accounting principles (GAAP) except that certain other cash receipts and payments are treated as budgetary items to maintain effective fiscal and budgetary control over the collection and disposition of all Utilities'Commission resources. Specific budgetary control is exercised over internal operating transfers to restricted funds, payments of principal on long-term debt obligations, and collections of -contributed capital which are recognized in the budget as additions and/or deductions to reconcile budgeted net cash receipts to reported net income (loss) for each system. Budget'appropriations are prepared by the administrative staff and approved as provided by law by the Utilities Commission. Budgetary control is exercised at'the departmental level.
Budget'amendments, if any, can be requested by the General Manager/CEO. However, all budget amendments must be appoved by the Utilities Commission.
Unexpended appropriations for operations lapse at year-end. No supplemental appropriations were required for the current year.
Use of Estim ates and Assumptions: In preparing financial statements that confonn with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and 22
NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA amounts of revenues and expenses reflected during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents:
The Utilities Commission invests all cash balances in interest bearing accounts. Earnings from these investments are appropriately allocated to the investing fund accounts based upon the investment equity and are used, where applicable, to finance general Utilities Commission operations.
For purposes of the statement of cash flows, all highly liquid debt instruments (including restricted and internally designated funds) purchased with original maturity dates of three months or less are considered cash equivalents.
Investments: Investments are recorded at cost or amortized cost, which approximates market. Adjustments are made to cost, for any premium or discount, which is amortized over the maturity of the investment.
Investments in U.S. Treasury and agency obligations with maturities of one year or less when purchased are reported on the balance sheet at their amortized cost. All other investments are reported at fair value.
Receivables: Accounts receivable have been reported net of an allowance for uncollectible accounts, which has been provided based upon management's analysis of historical trends. Utility operating revenues are recognized on the basis of cycle billings rendered monthly. Unbilled accounts receivable are accrued at September 30th, to recognize the sales revenues earned between the last utility meter reading date made through the end of the year.
Inventories: Inventories are priced at cost by the use of the "first-in, first-out" method of accounting. The effect of this method is to flow the costs of the materials and supplies in the order in which they are purchased and to assign a balance sheet inventory valuation more nearly at current replacement value.
Electric line transformers, electric meters, and replacement units for the generating plants are classified as utility plant in accordance with accepted industry practices set forth by the National Association of Regulatory Utilities Commissioners (NARUC).
Unamortized Debt Discount, Issuance Expenses, and Deferred Amount from Refunding: Original issue discounts, debt issuance expenses, and deferred amounts from the advance refunding of outstanding revenue certificates are appropriately deferred and amortized over the remaining terms of the applicable debt issues (or life of the old debt, whichever is shorter, for deferred amounts from the advance refunding) using the bonds outstanding method, which approximates the interest method.
Unamortized debt discounts and deferred amounts from the advance refunding of long-term debt are presented in aggregate in the financial statements as a reduction of the carrying cost of the related long-temn debt. The unamortized debt issuance costs are presented as other assets.
Utility Plant: Utility plant is stated at historical or estimated historical cost. Generally, property, plant and equipment with initial individual costs that equal or exceed $750 and with estimated useful lives of more than one year are recorded as capital assets. Maintenance and repairs of property, and replacements and renewals of items determined to be less than units of property, are charged to maintenance expense. The cost of units of property replaced, renewed or retired, plus removal or disposal costs, less salvage, is charged to accumulated depreciation. Donated utility plant is stated at its estimated fair market value on the date donated. Construction period interest is capitalized, net of interest earned on unexpended construction funds in accordance with the applicable provisions of Financial Accounting Standards No. 62. All capitalized interest is depreciated over the remaining useful lives of the related assets.
3
NOTES To TIlE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Depreciation and Amortization: For financial reporting purposes, substantially all depreciation of utility plant other than nuclear fuel is computed on the straight-line method based on the estimated remaining useful life of the property, adjusted for estimated net salvage, which are as follows:
Years Electric System:
Production plant:
Nuclear production...................................................................................
27 Diesel production..
20-40 Transmission plant.30-55 Distribution plant 28-45 General plant:
Structures and improvements.................................................................
40 Other general plant..................................................................................
5-20 Water System:
Source of supply plant 25-50 Pumping plant 35 W ater treatment plant....................................................................4.................
40-50 Transmission and distribution plant............................................................ 50 General plant:
Structures and improvements....................................................................
35 Other general plant.....................................................................................
10-35 Pollution Control System:
Collection plant..............................................................................................
35-50 Pumping plant:
Structures and improvements..0..................................................................
50 Pumping equipment 25 Treatment and disposal plant 25-40 General plant..................................................................................................
10-50 Common Plant:
Structures and improvements.........................................................................
35 Other general plant.........................................................................................
5-15 Water Reuse System:
Structures and improvements.........................................................................
50 Transmission and distribution plant............................................
5..................
-0 Amortizition of nuclear fuel costs, including disposal'costs associated with obligations to the'U.S.
Department of Energy (DOE), is computed primarily on the u'nit-of-production method and charged to fuel expense. 'Costs related to obligations to the 'DOE' for the decommission-ing' and decontamination of enrichment facilities are also charged to fuel expense.
Nuclear Plant Decommissioning and Dismantlement Provisions:
Provisions for nuclear plant decommissioning costs are based on site-specific' estimates that include the costs for"removal of all radioactive and'other structures at the nuclear plant-site.'. The Utilities Cormniission's pro-rata share of estimated decommissioning costs are amortized on-a'straight-line basis'over the remaining period of the nuclear plant's operating license and are included'in depreciation and amortization expense.
24
NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA I
Compensated Absences: The portion of employee payroll costs paid subsequent to year-end attributable to services performed prior to year-end is recorded and recognized as a current liability. Employees earn annual personal leave time (includes vacation, sick and personal leave time) at the rate of 160 hours0.00185 days <br />0.0444 hours <br />2.645503e-4 weeks <br />6.088e-5 months <br /> to 240 hours0.00278 days <br />0.0667 hours <br />3.968254e-4 weeks <br />9.132e-5 months <br /> per fiscal year, depending of the number of years of service, measured on the anniversary date, which is October 1 for all employees. Employees are required to use 50% of the time accrued each year and may retain the balance for use in succeeding years. The maximum amount of hours that can be accumulated at the end of each year fiscal year is 480 hours0.00556 days <br />0.133 hours <br />7.936508e-4 weeks <br />1.8264e-4 months <br />. Employees with accrued personal leave time over this amount at year-end are paid for all hours in excess of 240 hours0.00278 days <br />0.0667 hours <br />3.968254e-4 weeks <br />9.132e-5 months <br /> or 480 hours0.00556 days <br />0.133 hours <br />7.936508e-4 weeks <br />1.8264e-4 months <br />, depending on employee election.
Payments for any excess hours are made in December of each year based on the employee's regular straight time pay-rate as of preceding September 30f'.
Operating Reserve (for Nuclear Re-Fueling costs): The reserve for nuclear re-fueling and maintenance outage is an operating reserve established to account for the estimated charges to be incurred for the removal and installation of nuclear fuel assemblies. Charges are made to the reserve at the time actual re-fueling takes place.
Rates, Revenues and Fuel Expense:
Revenues are recognized based on monthly cycle billings to customers. The rate schedules are approved by the Utilities Commission. The electric rate schedule contains an energy cost adjustment clause which reflects the cost of fuel as well as the energy and fuel components of purchased power. Generally, the effect of the increase/decrease in the cost of energy is recovered over a twelve month period and is determined as the difference between actual applicable fuel costs and the costs actually billed during the same period. The cost of nuclear fuel is amortized to fuel expense based on the quantity of heat produced for generation of electric energy in relation to the quantity of heat expected to be produced over the life of the nuclear fuel core.
Operating revenues and expenses result from providing utility services, which is the principal ongoing operation of the Utilities Commission. The principal operating revenues are charges to customers for sales and service.
Operating expenses include the cost of sales and services, administrative expenses, and depreciation on utility plant assets. All revenues and expenses no meeting this definition are reported as non operating revenues and expenses.
NOTE 2 - CASH DEPOSITS AND INVESTMENTS I
Pursuant to the applicable provisions of Chapter 280, Florida Statutes, The Florida Security for Public Deposits Act ("the Act"), the State of Florida, Department of Insurance, Bureau of Collateral Securities, and the Department of Treasury have established specific requirements relative to the security and collateralization for public deposits. Accordingly, banks qualifying as a public depository in the State of Florida must adopt the necessary procedures outlined in these statutes and meet all of the requirements of this chapter to be designated by the State Treasurer as eligible to receive deposits from municipal depositors.
Collateral having a market value equal to 50% of the average daily balance for each month of all public deposits in excess of any applicable depository insurance is required to be pledged or deposited with the State Treasurer to secure such deposits. Additional collateral, up to a maximum of 125% may be required if deemed necessary under the conditions set forth in the Act. Securities eligible to be pledged as collateral are generally limited to obligations of the United States government and any state thereof and are held in the name of the State Treasurer's office. Compliance with the provisions of Chapter 280, Florida Statutes, is monitored by the Department of Insurance.
25 I
NOTES To TIlE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 A
UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Deposits: At September 30, 2003, the carrying amount of the Utilities Commission's deposits, including money market funds held with financial institutions, was $1,890,151 and the September 30, 2003, bank balances totaled $2,581,044 of which $100,000 was covered by federal depository insurance, $1,229,752 was secured in accordance with the statutory provisions of the Act, and $1,239,588 was held in unsecured, uncollateralized money market mutual funds.
Included in the carrying amount of Utilities Commission deposits is $11,704 in petty cash and change funds.
Carrying Bank Amount Balance Insured (FDIC).........................................
638,859
$ 1,329,752 Uninsured:
Uncollateralized........................................
1,239,588 1,239,588 Cash funds..........................................................................
11704 11.704 Total deposits....................................................................
$ 1890151
$2581044 Investments:
The Utilities Commission's investment policies are governed by state statutes and local resolution. Allowable investment instruments include: bonds, notes, certificates of indebtedness, treasury bills, or other securities which are guaranteed by the full faith and credit of the United States of America, interest bearing savings accounts, interest bearing certificates of deposit and interest bearing time deposits.
At September 30, 2003, the Utilities Commission's investments included United States Treasury State and Local Government (SLGS) Bonds, mortgage-backed securities, and overnight investments in money market funds, which were secured by U. S. Treasury obligations.
The investments are categorized to give an indication of the level of risk assumed by the Utilities Commission at year-end.
Category 1 includes investments that are insured, registered, or for which the securities are held by the Utilities Commission or its agent in the Utilities Commission's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the banks' trust departments or agents in the Utilities Commission's name.
Category 3 includes uninsured and unregistered investments for which the securities are held by the banks, or by their trust departments or agents but not in the Utilities Commission's name.
At September 30, 2003, the Utilities Commission's cash and investments are categorized as follows:
Category Carrying Fair Type of Investment 1
2 3
Value Value U.S. Treasury State and Local Government Series (SLGS) Bonds...............................
54,900 54,900 54,900 Federal Home Loan Bank Unsecured Bonds 1,000,000 1,000,000 1,005,630 Repurchase agreements.............
0 0
19.121,452 19.121.452 19,107.097 Totals....................................................................$
54900
.000000 19121452 2352 2016762 26
I NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA I
I NOTE 3 - RESTRICTED AND INTERNALLY DESIGNATED ASSETS Certain cash and investments are externally restricted by revenue certificate resolutions, nuclear generation facility decommissioning trusts and customer agreements.
The Utilities Commission's restricted assets consist of the following accounts:
September 30, 2003 2002 I
-I Debt service and related funds:
Principal and interest funds.............................................................
Debt service reserve funds..............................................................
Nuclear generation facility decommissioning funds...........................
Renewal and replacem ent funds..........................................................
Custom er deposits...............................................................................
Total restricted assets......................................................................
Total restricted assets consist of:
Cash and cash equivalents..............................................................
Investm ents, at cost.........................................................................
Accrued interest receivable.............................................................
Total restricted funds...........................................................................
I 2,299,904 539,839 2,839.743 2.567,289 11.504.914 1,517,204
$ 18,429,150
$ 17,356,681 1,054,900 17,569
$,18429,150 3,086,141 539,839 3.625,980 2,422.153 9.744,916 1,431,890 17,224,939 12,623,245 4,592,800 8,894 17,224.939 I
I I
I I
I Internally designated assets include certain cash and investments that have been internally designated by the Utilities Commission's governing board and earn the same interest rate as its operating investment portfolio.
These funds are comprised of the following:
I Internally designated funds:
Rate Stabilization Fund:
Cash and cash equivalents..........................................................
Accrued interest receivable.........................................................
I 1,765,307 2.944 3,664,387 4,003 I
Total internally designated funds.
,768,251 3
I I
I 27 I
NOTES To TiIE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA NOTE 4 - UTILITY PLANT A summary of utility plant at September 30, 2003 and 2002 is as follows:
Wastewater September 30, Electric Water and Water reuse Common 2003 Land and land rights.................................................
$ 1,672,728 483,946 381,642 743,588 3,281,904 Structures and improvements.2,590,500 5,136,725 9,797,085 2,440,648 19,964,958 Production and treatment plant..................... ;........
24,214,968 6,455,478 13,890,943 0
44,561,389 Transmission, distribution, and collection and treatment plant.47,686,752 24,129,034 27,718,196 0
99,533,982 Other general plant and equipment.
1708.298 1,027839 1.723903 4273
.24707613 77,873,246 37,233,022 53,511,799 7,431,779 176,049,846 Accumulated depreciation....................................
(35,871,989) (12,282,785)
(11,905,550)
(3,997,636) (64,057,960)
Allowance for decommissioning..........................
(2,567.289) 0 0
0 (2.567.289) 39,433,968 24,950,237 41,606,249 3,434,143 109,424,597 Construction in progress......................................
2,091,201 937,590 320,422 235,024 3,584,237 Plant held for future use...................................
9,173,992 0
0 0
9,173,992 Nuclear fuel, net ofamortization..............................
211L416 0
0 0
211.416 Utility plant, net 5 50, 9
10,577 25 8
2 4
1
,96,6 36 12234,242 Wastewater September 30,
-'Electric Water and Water reuse Common 2002 Land and land rights.
Structures and improvements..................... ;
Production and treatment plant..................... ;
Transmission, distribution, and collection and treatment plant..............................
Other general plant and equipment...........................
Accumulated depreciation...
Accumulate dpeito.
Allowance for decommissioning.............................
Construction in progress......................................
Plant held for future use...........................................
Nuclear fuel, net of amortization..............................
1$ 1,6?2,728 2,590,500 24,118,422 46,675,183 1.618.185 76,675,018 (33,385,198)
(2.422.153) 40,867,667 1,478,211 9,173,992 102.970 483,946 5,112,725 6,422,368 22,892,232 905.980 35,817,251 (11,457,515)
.0 24,359,736 1,079,547 0
0 381,642 9,797,085 13,887,119 26,395,425 1.445.147 51,906,418.
(10,568,067)
. 0 41,338,351 340,046 0
0 743,588 2,408,821
. 0 3,281,904 19,909,131 44,427,909 0 95,962,840 4.158,440 8.127752
.7,310,849 171,709,536 (3,818,362) (59,229,142) 0 (2.422.153) 3,492,487 110,058,241 106,692 3,004,496
.0 9,173,992 0
102.970 Utility plant, net.........
S 5439283
......... 25...8....,3..59, 1
22,339, Depreciation expense totaled $4,904,128 and $4,737,946 for 2003 and 2002, respectively. There were no capitalized interest costs associated with expansion and improvements made to utility plant for the fiscal years ended September 30, 2003 and 2002.
I NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA 1
A summary of utility plant activity for the year ended September 30, 2003 is as follows:
Beginning End of Year Acquisitions Disposals of Year l1 I
I Land and land rights..............................
Structures and improvements................
Production and treatment plant..............
Transmission, distribution, and collection and treatment plant...........
Other general plant and equipment.
Accumulated depreciation.....................
Allowance for decommissioning...........
Construction in progress........................
Plant held for future use........................
Nuclear fuel, net of amortization...........
3,281,904 19,909,131 44,427,909 95,962,840 8,127,752 171,709,536 (59,229,142)
(2,422,153) 110,058,241 3,004,496 9,173,992 102,970 0
55,827 133,480 0
0 0
3,610,065 632.300 4,431,672 (4,904,128)
(145.136)
(617,592) 5,509,394 0
236.692 (38,923)
(52.439)
(91,362) 75,310 0
(16,052)
(4,929,653) 0 (128,246) 3,281,904 19,964,958 44,561,389 99,533,982 8,707,613 176,049,846 (64,057,960)
(2.567,289) 109,424,597 3,584,237 9,173,992 211,416 I
I 1
I Utility plant, net....................................
$ 122339699 1494 (5,073,951) 122394242 I
NOTE 5 - DECOMNINMISSIONING AND DISmANTLEMIENT PROVISIONS Provisions for nuclear decommissioning costs associated with the Utilities Commission's 0.5608% undivided participant interest with Florida Power Corporation at it's Crystal River Unit 3 (CR3) nuclear generation facility are approved the Florida Public Service Commission. Florida Power's most recent site-specific estimates of decommissioning costs for the CR3 nuclear plant were developed in 2000, using 2000 cost factors, and are based on prompt dismantlement decommissioning, which reflects the cost of removal of all radioactive and other structures at the site, with such removal occurring shortly after operating license expiration. The Utilities Commission's share of these estimated costs, in 2000 dollars was $2.89 million and is subject to change based on a variety of factors including, but not limited to, cost escalation, changes in technology applicable to nuclear decommissioning and changes in federal, state or local regulations.
Decommissioning cost provisions, which are included in depreciation and amortization expense, were
$145,136 and $161,470 for the years ended September 30, 2003 and 2002, respectively.
Accumulated decommissioning costs, which are included in accumulated depreciation, were $2,567,289 and
$2,422,153 at September 30, 2003 and 2002, respectively. These costs include amounts retained internally in decommissioning trusts. Trust earnings increase the trust balance with a corresponding increase in the accumulated decommissioning balance. These balances are adjusted for net unrealized gains and losses related to changes in the fair value of trust assets.
Management believes that the plant decommissioning costs being recovered through the Utilities Commission's present electric utility rate structure are currently sufficient to provide for the costs of decommissioning.
29 I
I I
I I
I 1
I I
NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 -
UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA NOTE 6 - NET ASSETS Net assets represent the difference between assets and liabilities.
The -following is a summary of the individual components of the Utilities Commission's net assets at September 30 t:
September 30, 2003 2002 Invested in utility plant, net of related debt:
Net utility plant..................................................................................
Add:
Funds restricted for debt service............................
Funds restricted for future decommissioning costs..............
Funds restricted for repayment of customer deposits..........
Less:
Revenue certificates payable (net).......................................
Notes payable (net)...............................................................
Accrued interest payable on long-term debt.........................
Customer deposits............
Restricted for debt service:
Funds restricted for debt service reserve purposes.............................
$ 122,394,242 2,299,904
- 2,567,289 1,517,204 (44,766,225)
(38,227,355)
(297,778)
(1,517.204) 43,970.077 122,339,699 3,086,141 2,422,153 1,431,890 (48,484,090)
(39,756,331)
(365,662)
(1,431,890) 39,241.910 539,839 539.839 Restricted for renewal and replacement:
Funds legally restricted for renewal and replacement........................
Less:
Accounts payable from restricted funds...............................
Total net assets invested and restricted................................
Unrestricted net assets.:..:...................................................................
11,504,914 (551,513) 10.953,401 55,463,317 11.404.708 9,744,916 (8.172) 9.736.744 49,518,493 9,695.283 Total net assets.....................................................................
$ 66,868,025 59,213,776 Included in unrestricted net assets are internally designated funds for renewal and replacement amounting to
$1,875,260 and $1,311,235 as of September 30, 2003 and 2002, respectively.
In addition to the amounts legally required to fund the renewal and replacement fund in accordance with long-term debt covenants and for amounts received from developer agreements for service capacity fees, both of which are legally restricted, additional funding above the mandatory legally restricted requirements is internally designated for renewal and replacement projects to internally finance routine utility plant expansion and upgrades.
30
I NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA l
NOTE 7 - LONG-TER-m DEBT A summary of long-term debt outstanding at September 30th, is as followvs:
September 30, 2003 2002
'I 1
Utilities System Revenue Certificates, Series 1992-4.10% to 5.60%
due serially to 2004, with $515,000 (5.35%), $1,020,000 (5.80%)
$1,230,000 (6.00%) and $10,160,000 (6.00%) term bonds due in 2002, 2007, 2010, and 2013, respectively; called forredemption on October 1, 2002.............................................................................
Utilities System Refunding Revenue Certificates, Series 1993-4.75%
due serially to 201 1; called for redemption on October 1, 2002, with
$1,245,000 (5.00%) and $1,285,000 (5.00%) term bonds due in 2018 and 2019, respectively.......................................................................
Utilities System Refunding Revenue Certificates, Series 1996-4.10%
to 5.30% due serially to 2011, to be called for redemption on October 1, 2004..................................................................................
Utilities System Refunding Revenue Certificates, Series 2002 --2.75%
to 5.00% due serially to 2017.............................................................
I I
0 270,000 I
I.
2,530,000 6,155,000 37,695,000 3,240,000 7,905,000 39,035,000 I
I Total utilities revenue certificates outstanding..............................
Less: current maturities:
Series 1992 Certificates......................................................................
Series 1993 Certificates......................................................................
Series 1996 Certificates......................................................................
Series 2002 Certificates......................................................................
46,380,000 0
0 (1,825,000)
(18 0)
(1,825,000) 50,450,000 (270,000)
(710,000)
(1,750,000)
(27 0)
(2.730.000) 1 1
Long-term certificate debt.............................................................
Plus: unam ortized debt prem ium...........................................................
44,555,000 47,720,000 L
868,729 1,040,103 1
Less: deferred amount on advance refunding........................................
unam ortized debt discount...........................................................
N et long-termn certificate debt........................................................
(2,398,465)
(84.039) 42.94 1,225 (2,910,486)
(95.527) 45.754.090 L
Notes Payable:
State Revolving Loan Fund-construction loans consisting of
$8,521,618, bearing interest at 3.22% per annum, $1,778,378, bearing interest at 3.18% per annum, and $7,135,931 bearing interest at 3.11% per annum; payable in equal semi-annual payments of $639,359, and maturing in August, 2019..................
L L
15,949,355 16,704,331 L
31
NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA September 30, 2003 2002
$12,200,000 payable to Florida Municipal Power Agency, as agent for Initial Pooled Loan Project, at a variable interest rate; interest payable monthly with annual principal payments over 20 year term; repayment commencing on April 1, 2001 and maturing in April 2020......................................................................................
$3,000,000 payable to Florida Municipal Power Agency, as agent for Initial Pooled Loan Project, at a variable interest rate; interest payable monthly with annual principal payments over 20 year term; repayment commencing on October 1, 2001 and maturing in October 2020.............
$9,050,000 payable to Florida Municipal Power Agency, as agent for Initial Pooled Loan Project, at a variable interest rate; interest payable monthly with annual principal payments over 20 year term; repayment commencing on December 1, 2001 and maturing in December 2020..........................................................
11,030,000 11,435,000 2,733,000 8,515.000 2,827,000 8,790,000 Total notes payable.......................................................................
Less: current maturities:
State Revolving Fund Loan................................................................
FM PA Pooled loans...........................................................................
Long-term portion of note payable..............................................
Total long-term debt, net...............................................................
38,227,355 (779,103)
(814.000)
(1.593,103) 36,634,252
$ 79,575,477 39.756,331 (754,976)
(680,000)
(1.434,976) 38.321,355 84,075,445 A summary of borrowings and debt service activity for the year ended September 30, 2003 is as follows:
I
.- Beginning
-of Year Maturities /
Borrowings Redemptions End of Year Utilities revenue certificates...................
$ 50,450,000 0
Notes payable....................................................
39,756,331 0
(4,070,000) 46,380,000 (1,528,976) 38,227,355 Total outstanding debt..............
$ 90,206,331 0
(5,598,976) 6 84,607,355 The authorization for the above described revenue certificates outstanding (collectively referred to as the "Certificates") provides that the Utilities Commission will not issue additional obligations except for the construction and acquisition of additions, extensions and improvements to the system or for refunding purposes and except upon the parity conditions provided in the authorizing resolution. The Certificates are I
32
NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA
~1 payable from and secured by a first lien upon and pledge of the net revenues derived from the operation of the system. The Certificates do not constitute general indebtedness of the Utilities Commission or the City of New Smyrna Beach, Florida (City), and the City is not obligated to levy any taxes for the payment thereof.
Under the terms of its long-term debt agreements, the Utilities Commission has agreed to maintain certain restricted funds and to comply with the covenants contained in such agreements, which require specific 1
actions to be taken by the Utilities Commission. Certain of these agreements contain the following provision relating to the right of the obligation holder:
"Any holder of certificates or any coupons appertaining thereto issued under the provision hereof or any trustee acting for the holders of such certificates may by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights, l
including the right to the appointment of a receiver, existing under the laws of the State of Florida, or granted and contained herein, and may enforce and compel the performance of all duties herein required or by any applicable statutes to be performed by the Commission or by l
any officer thereof. Nothing herein, however, shall be construed to grant to any holder of the certificates any lien on any real property of the Commission or the City."
The notes payable to the State of Florida, Department of Environmental Protection, State Revolving Fund i
Loan are secured by pledged revenues of the Utilities Commission; however, the lien on the pledged revenues is subordinate to the right of payment and security to the Revenue Certificates Payable - Series 1992, 1993, and 1996. The notes payable to the Florida Municipal Power Agency are secured by a pledge and lien upon the Utilities Commission's utility system revenues and are subordinate to the right of payment and security to the Revenue Certificates and are on a parity with the State Revolving Fund Loan.
I On August 7, 2002, the Commission issued $39,035,000 in Utilities System Refunding Revenue Certificates, Series 2002, with an average interest rate of 3.78% to advance refund: (1) all of the outstanding Series 1992 Certificates maturing on October 1, 2003 through October 1, 2017, which will be called for redemption on I
October 1, 2002 in the principal amount of $12,995,000 with an average interest rate of 5.86%, (2) a portion of the outstanding Series 1993 Certificates maturing on October 1, 2003 through October 2017 and which will be called for redemption on October 1, 2002 in the principal amount of $15,605,000 with an average l
interest rate of 5.07%, and (3) a portion of the outstanding 1996 Series Certificates maturing on April 1, 2005 through October 1, 2011 and which will be called for redemption on October 1, 2004 in the principal amount of $9,665,000 with an average interest rate of 5.07. The net proceeds of $39.6 million (after payment of
$487,630 in underwriting fees, insurance, and other issuance costs) plus $685,256 in excess 1992, 1993, and 1996 sinking fund monies were used to purchase $40,284,821 in U.S. government securities at the date of closing. The U.S. government securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1992, 1993, and 1996 certificates through October 1, I
2002, when the 1992 and 1993 Series certificates will be called for complete redemption and through October 1, 2004, when the 1996 Series certificates will be called for complete redemption. As a result, the 1992 and a portion of the 1993 and 1996 Series certificates are considered to be defeased and the liability for I
those certificates has been removed at August 7, 2002.
Although the advance refunding resulted in the recognition of a deferred loss on advance refunding in the amount of $2,780,798 (which will be amortized over the life of the refunding certificates) for the year ended September 30, 2002, the Commission in effect reduced its aggregate debt service payments by almost $3.0 33
NOTES To THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA million over the next 15 years and obtained an economic gain (difference between the present values of the old and new debt service payments, adjusted for old and new sinking funds on hand) of $2.5 million.
Aggregate annual long-term debt service requirements in each of the next five years (and five-year increments thereafter) are as follows:
Revenue Fiscal Year Fndina Certificates Note Payable Notes Payable SRF Loan FMPA Totals September 30, 2004......................
September 30, 2005......................
September 30, 2006......................
September 30, 2007......................
September 30, 2008......................
Thereafter......................................
$ 5,075,036
$ 4,337,284
$ 5,039,652
$ 5,037,778
$ 5,036,462
$ 38,238,980 1,278,718 1,278,718 1,278,718 1,278,718 1,278,718 14,065,903 1,167,510 1,187,667 1,223,069 1,247,661 1,281,458 19,886,839 7,521,264 6,803,669 7,541,439 7,564,157 7,596,638 72,191,722 L
NOTE 8 - PRIOR YEARS' DEFEASANCE OF DEBT In prior years, the Utilities Commission defeased certain of its outstanding utilities revenue certificates (and certain general obligation bonds of the City of New Smyrna Beach, Florida), originally issued for the System and payable from revenues derived from the operation of the utilities systems by placing the proceeds of new certificates in irrevocable trusts to provide for all future debt service payments on the defeased certificates/bonds. Accordingly, the trust account assets and the liabilities for the defeased bonds are not included in the accompanying financial statements. They include the following at September 30,2003:
1978 Refunding:
Series 1965--4.2% to 4.25% due through 2004..........................
Series 1975--3.75% to 6.2% due through 2004..........................
Series 1975A--5.0% to 6.6% due through 2005.........................
2002 Refunding:
Series 1996-4.8% to 5.3% due through 2011...........................
185,000 200,000 940,000 9,665,000 NOTE 9 - REQUIRED PAYMENT To CITY The legislation that created the Utilities Commission requires it to pay to the general fund of the City of New Smyrna Beach a sum equal to six percent (6%) of the gross revenues from utilities under Utilities Commission control. This payment is subordinate to the debt service requirement of all utilities revenue certificates and is recorded as a quasi-external transaction for financial reporting purposes. Amounts paid to the City for the years ended September 30, 2003 and 2002 totaled $2,706,427 and $2,509,729, respectively.
The balances due to the City at September 30, 2003 and 2002, totaled $260,257 and $249,1605, respectively.
34
NOTES To TIlE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA 1
NOTE 10 - EMPLOYEE PENSION PLANS A. Defined Benefit Pension Plan Plan Description. The Utilities Commission contributes to the Florida (public employee) Retirement System of the State of Florida (the "FRS"), a cost-sharing, multiple-employer defined benefit pension plan created in December, 1970, that acts as a common investment and administrative agent for municipalities and other qualifying political subdivisions in the State of Florida.
The pension plan, which is administered by the State of Florida, Department of Administration, Division of Retirement, provides retirement and disability benefits and death benefits to plan members and beneficiaries. All retirement legislation must comply with Article X, Section 14 of the State Constitution and with Part VII, Chapter 112, Florida Statutes. Both of these provisions require that any increase in retirement benefits must be funded concurrently on an actuarially sound basis. The FRS issues a publicly available financial report that includes financial statements and required supplementary information for the plan. That report may be obtained by writing to Florida Retirement System, Department of Administration, Division of Retirement, Cedars Executive Center, Building C, 2639 North Monroe Street, Tallahassee, FL 32399-1560.
Funding Policy. The funding methods and determination of benefits payable are provided in the various acts of the Florida Legislature, which created the fund, including subsequent amendments thereto. In previous years, these acts provided, in general, that funds were to be accumulated from employee contributions, employer contributions, State appropriations and income from investments of accumulated funds. The act also provides that, should the accumulated funds in the fund at any time be insufficient to meet and pay the benefits due, the employer shall supplement the funds by an appropriation from current funds, or from any revenues which may lawfully be used for said purposes, in an amount sufficient to make up the deficiency.
The Utilities Commission made the required contributions to the plan for the fiscal years ended September 30, 2003, 2002, and 2001, as follows: $283,041, $299,683, and $364,604, respectively. The employer contribution rates for FRS members (which are examined and amended each year on July 1) were as follows:
Plan year beginning June 30, 2003......................................................
7.39%
Plan year beginning June 30, 2002......................................................
5.76%
Plan year beginning June 30, 2001......................................................
7.30%
Plan year beginning June 30, 2000......................................................
9.15%
Plan year beginning June 30, 1999......................................................
10.15%
Plan year beginning June 30, 1998......................................................
16.45%
There were no employee contributions made during these years.
B. Defined Contribution Plan The Utilities Commission contributes to the Utilities Commission of New Smyrna Beach Retirement Plan, a defined contribution plan administered by the Principal Mutual Life Insurance Company, P. 0.
Box 9396, Des Moines, IA 50306-9396.
35I
NOTES To TIHE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30,2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Under Resolution No. 54-95, the Utilities Commission established this plan for all regular full time and regular part time employees hired on or after January 1, 1996, by revoking its participation in the Florida Retirement System pursuant to Chapter 95-338, La-Ws of Florida with respect to such employees. All qualifying employees at least 18 years of age participate in the plan on the date of employment. Normal retirement and disability benefits are available after 5 years of service and attaining age 62. Early retirement and disability benefits are available after 5 years of service and attaining age 55. Employer contributions to the plan are 8% of the gross employee wages. Employees may make supplemental contributions to the extent permitted by law. Employer contributions to the plan were $90,069, $73,429, and -$42,230, for the years ended September 30, 2003, 2002, and 2001, respectively. There were no employee contributions made during these years.
NOTE 1 1 - DEFERRED EMPLOYEE BENEFITS A. IRC Section 401(k) Plan The Utilities Commission offers its Chief Executive Officer participation in a Prototype 401(k) Plan, created in accordance with Sections 401(a) and 401(k) of the Internal Revenue Code. The assets of the prototype deferred compensation plan are administered by the International City Managers Association Retirement Corporation. Upon separation from service for reasons of death, disability or attainment of age 55 (normal retirement age) the participant may elect to commence receiving benefits which equal accumulated employer's and employee's contributions plus earnings thereon. All benefits vest with the employee at the date of contribution.
For the years ended September 30, 2003, 2002 and 2001 the Utilities Commission's covered payroll was $130,194, $133,663 and $127,296 respectively.
For the years ended September 30, 2003, 2002 and 2001, employer contributions were $16,169, $17,549 and
$16,715, respectively. For the years ended September 30, 2003, 2002 and 2001, employee contributions to the plan were $25,689, $24,372 and $19,640, respectively.
B. IRC Section 457 Plan The Utilities Commission also provides its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The assets of this plan are administered by the International City Managers Association Retirement Corporation. The plan has been amended to include provisions changed by the Economic Growth and Tax Relief Reconciliation Act of 2001.
Annual contributions, determined by the participant, may not exceed the lesser of $12,000 or 100% of gross annual compensation for plan years beginning in 2003.
Deferred compensation withheld from a participating'employee's pay is not taxable as current income until withdrawn from the plan. Such compensation is not available to the employees until employment termination, retirement, or death.- All assets and income of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries.
36
I NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA I
I NOTE 12 - DEPART MENTAL INFORMATION The information below discloses certain financial activity for the Utilities Commission's individual utility systems as follows:
Electric Water Wastewater Telecomnnunications System System System System Total Operating revenue......................
S 32.987.652 5.123.020 5,654.537 2.581,857 46,347,066 I
I I
Depreciation/decommissioning........
Operating income.............................
Required payments to City...............
Income (loss) before contributions Capital contributions........................
Change in net assets.........................
Utility plant acquisitions..................
Utility plant retirements...................
Revenue certificates payable............
Notes payable...................................
Net assets..........................................
Total assets.......................................
2,773,920 3,674,466 1,920,119 2,171,102 960,529 3,131,631 1,325,575 65,667 22,950,503 19,545,000 25,827,603 74,653,269 885,034 1,123,581 319,812 495,753 1,668,156 2,163,909 1,460,851 13,634 13,275,494 1,202,520 20,940,879 33,068,153 1,390,310 1,052,089 320,858 (12,565) 1,845,472 1,832,907 1,645,251 12,061 10,154,003 17,479,835 19,573,741 47,336,853 0
689,727 145,638 525,802 0
525,802 0
0 0
4 0
3 525,802 6
1,146,775 I1 5,049,264 6,539,863 2,706,427 3,180,092 4,474,157 7,654,249 4,431,677 91,362 46,380,000 38,227,355 66,868,025 6,205,050 I
1I I
NOTE 13 - LEGAL MATTERS The Utilities Commission is engaged in routine litigation incidental to the conduct of its utilities affairs. In the opinion of its legal counsel, no legal proceedings are pending or threatened against the Utilities Commission which are not covered by applicable insurance which would inhibit its ability to perform its operations or materially affect its financial condition.
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NOTE 14 - COMMITMENTS I
The Utilities Commission, acting through the Florida Municipal Power Agency (FMPA), is a participant in a portion of Florida Power and Light Company's (FPL) St. Lucie Unit No. 2, a nuclear generating unit. FMPA originally acquired an 8.806% undivided ownership interest of St. Lucie No. 2 together with rights to receive electric capacity and electric energy under a reliability exchange agreement. The Utilities Commission's participation provides for a 9.884% entitlement share of FMPA's ownership interest.
I I
A reliability exchange agreement provides for FMPA's exchanging 50% of its share of the output from St.
Lucie No. 2 for a like amount from FPL's exclusively owned St. Lucie No. I to mitigate the potential for economic loss resulting from the extended or permanent outage or early retirement of St. Lucie No. 2. The Utilities Commission, as a participant, has also entered into a power sales contract which requires payment on a "take-and pay" basis for its entitlement share of the project capability for the St. Lucie Project for each month during any portion of which electric capacity and electric energy are available to the Utilities Commission from the St. Lucie Project, including electric capacity and electric energy under the reliability exchange agreement with FPL. In the event payment is not required for any month under the this power sales contract, the Utilities Commission is required to make payment for such month under its project support I
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37 I.
NOTES To TIlE FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2003 AND 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA, contract on a "take-or-pay" basis. The payment under the project support contract would be the amount the Utilities Commission would have been required to pay under its power sales contract for such month if any electric capacity and electric energy from the St. Lucie Project had been made available to them. As a result of these agreements, the Utilities Commission is obligated to provide payments of approximately $3.8 million annually.
The Utilities Commission has entered into an interlocal agreement with Reliant Energy of New Smyrna Beach, LLC for the purpose of assisting Reliant Energy in the development and construction of a 500 MW combined-cycle electric generating facility.
As a part of the agreement, the Utilities Commission will provide certain infrastructure and utility-related services to Reliant Energy for the facility and receive the right to purchase up to 30 MW of generating capacity from the facility or from other sources. Reliant has obtained the necessary environmental permits for the plant; however, in order to proceed with the project Reliant must secure capacity contracts for approximately 50% of the plant's output.
With the recent downturn in the industry, the project is currently on hold with the Florida Department of Environmental Protection granting an additional extension of time for the environmental permits.
Construction of the generating facility is expected to commence upon attaining the permits and securing the capacity contracts.
No additional investment is anticipated on the Utilities Commission's part at this time.
The Utilities Commission is involved in a tri-party agreement by and between the Utilities Commission, the City of New Smyrna Beach, Florida (the "City"), 01 Communications (formerly Volaris Communications) and MPI.net to provide dial-up analog and DSL internet access services to customers of the Utilities Commission. Pursuant to the agreements, the Utilities Commission is obligated to pay to the City 6% of the internet service gross revenue and is required to pay to 01 Communications for technical support, training, and for use of provided equipment, including all hardware, lines, maintenance, licenses, etc.
During the fiscal years ended September 30, 2003 and 2002, the Commission paid $262,584 and $412,596, respectively, to 01 Communications and MPI.net (and its predecessor companies) for the ability to provide these services.
The balance due 01 Communications and MPI.net as of September 30, 2003 and 2002 amounted to $18,857 and $33,456, respectively. The 6% paid to the City is included in the required payment amount reported in Note 9 above.
The Utilities Commission also entered into a tri-party marketing agreement with Epicus, Inc. ("Epicus") and the City of New Smyrna Beach, Florida (the "City"), whereby the Utilities Commission markets certain intrastate and interstate telecommunications services for Epicus. As with the preceding agreement, the Utilities Commission must pay the City 6% of the gross commissions and revenues received from Epicus.
During the fiscal year ended September 30, 2003, the Commission paid $1,014,433 to Epicus for the ability to provide these services.
As of September 30, 2003, the Utilities Commission had additional unrecognized construction contract commitments of approximately $11.9 million for utility plant expansion and upgrading.
The Utilities Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters, all of which is satisfactorily insured by general liability insurance. Commercial insurance policies are also obtained for all other risks of loss, including workers' compensation and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three years.
38
SUPPLEMENTAL INFORMA TION THIS SECTIONIS COMPOSED OF TBlE FOLLOWING:
SUPPLEMENTAL DETAIL FINANCIAL INFORMA TION OF THE:
ELECTRIC SYSTEM, WA TER SYSTEM, WASTE WA TER SYSTEM, AND TELECOMMUNICA TIONS S YSTEM STATISTICAL SECTION THESE SCHEDULES PROVIDE A MORE DETAILED VIEW OF THE "BASIC FINANCIAL STA TEMENTS" PRESENTED IN THE PRECEDING SUBSECTION.
RESOLUTION NUMBERS 16-75 AND 28-78, AS AMENDED, ESTABLISHED THE ELECTRIC, WATER, POLLUTION CONTROL, AND WA TER REUSE SYSTEMS AS A SINGLE ENTERPRISE FUND. THESE SCHEDULES ARE PRESENTED TO PROVIDE DETAILED INFORMATIONON THE INDIVIDUAL UTILITYSYSTEMS AND TO PRESENT THE BUDGETARY COMPARISOVS THA TARE NOT NECESSARY FOR A FAIR PRESENTATION IN CONFORMITY WITH GENERALLY A CCEPTED ACCOUNTING PRINCIPLES.
I SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BY UTILITY SYSTEM For the Fiscal Year Ended September 30, 2003 With Comparative Actual Amounts for the Fiscal Year Ended September 30, 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Electric I1 I1 I
Water Operating Revenue:
Sales.......................................................................................
32,743,047 Other revenues.......................................................................
244,605 4,927,877 195,143 I
Total operating revenue......................................
32,987,652 5,123,020 Operating Expenses:
Purchased power and fuel expenses.......................................
Other production expenses.
Transmission, distribution, and sewage collection and treatment.
Customer accounting.............................................................
Administrative and general.
Required payments to City of New Smyrna Beach................
Depreciation and decommissioning...................................
Total operating expenses......................................
I I
16,569,259 4,035,211 1,486,640 387,282 2,140,755 1,920,119 2,773,920 29,313,186 0
1,118,865 451,335 171,455 1,052,938 319,812 885,034 3,999,439 i
I I
Operating incom e.......................................................
3,674,466 1,123,581 Non-operating Revenue (Expenses):
Interest earnings.....................................................................
Other incom e.........................................................................
Interest and debt expense.......................................................
Other expenses.......................................................................
Gain (loss) on disposal of assets......................................
I 259,576 280,382 (1,526,175)
(507,324)
(9,823) 65,141 40,361 (725,091)
(8,389) 150 I
Total nonoperating revenue (expenses)......................
Income (loss) before contributions............................
(1,503,364)
(627,828)
I 2,171,102 495,753 1,668,156 1
Capital contributions................................................................
960,529 Change in net assets.
3,131,631 2,163,909 I
Net assets, beginning of year...................................................
22,695,972 18,776,970 Net assets, end of year 25,827,603 20,940,879 39 I
I I
I
Schedulel1
!t Totals Wastewater Telecommunications 2003 2002 5,543,949 110,588 5,654,537 0
0 1,813,872 155,287 922,121 320,858 1,390,310 4,602,448 1,052,089 2,543,99 37,8(
2,581,85 1,277,01 282,39 187,0?
145,62 1,892,12 689,72 94 45,758,867 5
588,199 5 7 46,347,066 0
16,569,259
.7 6,431,093 0
3,751,847 97 996,421 78 4,302,892 38 2,706,427 0
5,049,264 3_
39,807,203 27 6,539,863 39,966,040 646,185 40,612,225 13,652,608 6,038,839 3,782,641 821,128 3,385,868 2,509,729 4,899,416 35,090,229 5,521,996 33,737 15,141 (1,103,927)
(9,737) 132 (1,064,654)
(12,565) 1,845,472 1,832,907 17,740,834 19,573,741 64 (164,56 (163,92 525,8(
525,8C 525,8(
0 358,454 42 336,526 0
(3,355,193)
- 67)
(690,017) 0 (9,541)
- 25)
(3,359,771)
Q2 3,180,092 0
4,474,157
)2 7,654,249 0
59,213,776 32 66,868,025 461,153 433,355 (3,952,841)
(56,064)
(58,114)
(3,172,511) 2,349,485 960,595 3,310,080 55,903,696 59,213,776 40
-I SCHEDULE OF REVENUE, RECEIPTS, EXPENSES AND DISBURSEMIENTS -
BUDGET AND ACTUAL - ELECTRIC SYSTEM (NON-GAAP BUDGETARY BASIS)
For the Fiscal Year Ended September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 2 Variance Favorable (Unfavorable)
I I
Final Budget Actual Revenue and Receipts:
Direct Sales:
I Electric sales......................................................................
Other revenues...................................................................
Non-operating revenue (expenses):
Interest earnings.................................................................
M eter Deposit interest expense......................................
Other revenues (expenses).................................................
Capital contributions.............................................................
Operating Expenses:
Purchased power and fuel expenses.....................................
Power production................................................................
Transmission and distribution..............................................
Customer accounting...........................................................
Administrative and general..................................................
Required payments to the City of New Smyrna Beach.
Decommissioning expense.
30,314,312 307,270 150,000 0
150,000 0
30,921,582 13,735,458 5,279,651 1,376,526 407,539 1,997,654 1,831,055 115,493 24,743,376 32,743,047 244,605 259,576 (19,842)
(207,100) 960,529 33,980,815 16,569,259 4,035,211 1,486,640 387,282 2,140,755 1,920,119 145,136 26,684,402 2,428,735 (62,665) 109,576 (19,842)
(357,100) 960,529 3,059,233 (2,833,801) 1,244,440 (110,114) 20,257 (143,101)
(89,064)
(29,643)
(1,941,026)
I I
I I
I I
Net revenue and receipts...........................................
6,178,206 7,296,413 1,118,207 Operating Transfers In (Out):
Sinking Fund - 1992 Certificates..........................................
Sinking Fund - 1993 Certificates..........................................
Sinking Fund - 1996 Certificates..........................................
Sinking Fund - 2002 Certificates..........................................
Debt Reduction Fund - required contribution......................
Sinking Fund - FMPA Pooled Loans....................................
Renewal and Replacement Funds..........................................
Telecommunications for rebate program...............................
Residential electric rebate program.......................................
Rate Stabilization Fund.........................................................
I (492,916)
(886,316)
(1,222,436) 0 0
(1,659,493)
(1,881,891) 60,000 (60,000)
(35,154)
(6,178,206) 0 (67,412)
(990,681)
(1,418,785)
(108,351)
(1,020,382)
(1,881,888) 60,000 (60,000)
(1,658,718)
(7,146,217) 492,916 818,904 231,755 (1,418,785)
(108,351) 639,111 3
0 0
(1,623,564)
(968,011)
I I
Budgeted net cash receipts........................................
0 Reconciliation of Net Cash Receipts to Net Income (GAAP):
Principal portion of required Sinking Fund transfers............
Net transfers to Renewal and Replacement Fund.................
Net transfers to Rate Stabilization Fund................................
Net transfers to Debt Reduction Fund...................................
Gain (loss) on disposal of property and equipment..............
Depreciation.........................................................................
Amortization of debt expense and loss on refunding.............
Change in net assets...................................................
150,196 150,196 2,205,542 1,881,888 1,658,718 108,351 (9,823)
(2,628,784)
(234,457) 3,131,631 I
I, I
41 I
SCHEDULE OF REVENUE, RECEIPTS, EXPENSES AND DISBURSEMENTS -
BUDGET AND ACTUAL - WATER SYSTEM (NON-GAAP BUDGETARY BASIS)
For the Fiscal Year Ended September 30,1/22003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 3 Final Budget Variance Favorable (Unfavorable)
Actual Revenue and Receipts:
Direct Sales:
Water sales.
Other revenues.
Non-operating revenue:
Interest earnings.
Meter Deposit interest expense......................................
Other revenues (expenses).
Capital contributions.
Operating Expenses:
Water production.
Transmission and distribution.
Customer accounting.
Administrative and general.
Required payments to the City of New Smyrna Beach.
4,819,600 201,500 100,000 0
25,000 467,781 5,613,881 994,828 468,606 207,864 1,043,876
-.298,266 3,013,440 4,927,877 195,143 65,141 (3,721) 35,693 1,668,156 6,888,289 1,118,865 451,335 171,455 1,052,938
319,812 3,114,405 108,277 (6,357)
(34,859)
(3,721) 10,693 1,200,375 1,274,408 (124,037) 17,271 36,409 (9,062)
(21,546)
(100,965)
N et revenue and receipts...........................................
2,600,441 3,773,884 1,173,443 Operating Transfers In (Out):
Sinking Fund - 1992 Certificates..........................................
Sinking Fund - 1993 Certificates..........................................
Sinking Fund - 1996 Certificates..........................................
Sinking Fund - 2002 Certificates..........................................
Debt Reduction Fund - required contribution......................
Sinking Fund - FMPA Pooled Loans....................................
Renewal and Replacement Funds - required contribution....
Renewal and Replacement Funds - restricted contribution Rate Stabilization Fund..........................................................
(166,696)
(573,136)
(836,538) 0 0
(97,335)
(440,157)
(467,781)
(18,798)
(2,600,441) 0 (43,592)
(677,944)
(790,249)
(60,351)
(61,314)
(440,160)
(1,668,156)
(87,150)
(3,828,916) 166,696 529,544 158,594 (790,249)
(60,351) 36,021 (3)
(1,200,375)
(68,352)
(1,228,475)
Budgeted net cash receipts..................
0 Reconciliation of Net Cash Receipts to Net Income (GAAP):
Principal portion of required Sinking Fund transfers............
Net transfers to Renewal and Replacement Fund................
Net transfers to Rate Stabilization Fund..............................
Net transfers to Debt Reduction Fund...................................
Gain (loss) on disposal of property and equipment..............
Depreciation.......
Amortization of debt expense and loss on refunding.
Change in net assets...........................................
(55,032)
(55,032) 985,345 2,108,316 87,150 60,351 150 (885,034)
(137,337) 2,163,909 42
I SCHEDULE OF REVENUE, RECEIPTS, EXPENSES AND DISBURSEMENTS -
BUDGET AND ACTUAL - WASTE WATER SYSTEM (NON-GAAP BUDGETARY BASIS)
For the Fiscal Year Ended September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 4
.1 I
Final Budget Variance Favorable (Unfavorable)
Actual Revenue and Receipts:
Direct Sales:
Pollution control charges..............................................
5,925,533 Other revenues 48,000 Non-operating revenue:
Interest earnings 65,000 Meter Deposit interest expense.
0 Other revenues (expenses).............................................
20,000 Capital contributions 371,239 6,429,772 Operating Expenses:
Collection and treatment system...........................................
1,906,167 Customer accounting.............................................
183,294 Administrative and general.............................................
878,867 Required payments to the City of New Smyrna Beach 355,532 3,323,860 5,543,949 110,588 33,737 (1,240) 6,644 1,845,472 7,539,150 1,813,872 155,287 922,121 320,858 3,212,138 (381,584) 62,588 (31,263)
(1,240)
(13,356) 1,474,233 1,109,378 92,295 28,007 (43,254) 34,674 111,722 I
I I
I I
N et revenue and receipts...........................................
3,105,912 4,327,012 1,221,100 Operating Transfers In (Out):
Sinking Fund - 1992 Certificates..........................................
Sinking Fund - 1993 Certificates..........................................
Sinking Fund - 1996 Certificates..........................................
Sinking Fund - 2002 Certificates..........................................
Debt Reduction Fund - required contribution......................
Sinking Fund - FMPA Pooled Loans....................................
Sinking Fund - State Revolving Fund Loan.........................
Renewal and Replacement Fund - required contribution......
Renewal and Replacement Fund - restricted contribution Rate Stabilization Fund.........................................................
I (395,428)
(203,741)
(520,547) 0 0
(123,880)
(1,278,718)
(212,359)
(371,239) 0 (3,105,912) 0 (15,496)
(421,860)
(653,150)
(49,881)
(78,036)
(1,278,718)
(212,364)
(1,845,472) 224,760 (4,330,217) 395,428 188,245 98,687 (653,150)
(49,881) 45,844 0
(5)
(1,474,233) 224,760 (1,224,305)
I I
.1 Budgeted net cash receipts........................................
0 Reconciliation of Net Cash Receipts to Net Income (GAAP):
Principal portion of required Sinking Fund transfers.
Net transfers to Renewal and Replacement Fund.
Net transfers from Rate Stabilization Fund.
Net transfers to Debt Reduction Fund.
Gain (loss) on disposal of property and equipment.
Depreciation.
Amortization of debt expense.
Change in net assets..............
(3,205)
(3,205)
I 1,474,579 2,057,836 (224,760) 49,881 132 (1,390,310)
(131,246) 1,832,907 I
I I
I 43 I
SCHEDULE OF REVENUE, RECEIPTS, EXPENSES AND DISBURSEMENTS -
Sc BUDGET AND ACTUAL - TELECOIMIMUNICATIONS SYSTEM (NON-GAAP BUDGETARY BASIS)
For the Fiscal Year Ended September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida chedule 5 Final Budget Variance Favorable (Unfavorable)
Actual Revenue and Receipts:
Direct Sales:
Internet sales...............
746,400 Telephone sales.................................................................
Non-operating revenue:
Interest earnings.................................................................
Other Revenues (expenses)...............................................
Operating Expenses:
Production expenses..............
Customer accounting...........................................................
Administrative and general...................................................
Required payments to the City of New Smyrna Beach.
1,259,100 0
146,876 2,152,376 1,534,668 65,734 124,558 120,330 1,845,290 2,543,994 37,863 0
642 2,582,499 1,277,017 282,397 187,078 145,638 1,892,130 1,797,594 (1,221,237) 0 (146,234) 430,123 257,651 (62,520)
(25,308) 169,823 Net revenue and receipts...........................................
307,086 690,369 599,946 Operating Transfers In (Out):
Renewal and Replacement Fund - required contribution.......
Rate stabilization fund...........................................................
Electric system rebate program.......................................
(247,086) 0 (60,000)
(307,086)
(247,092)
(244,031)
(60,000)
(551,123)
(6)
(244,031) 0 (244,037)
Budgeted net cash receipts..................
0 Reconciliation of Net Cash Receipts to Net Income (GAAP):
Principal portion of required Sinking Fund transfers............
Net transfers to Renewal and Replacement Fund.................
Net transfers to Rate stabilization fund.................................
Net transfers to Electric system for rebate program...............
Depreciation.........................................................................
Amortization.........................................................................
139,246 355,909 0
247,092 244,031 60,000 0
(164,567)
Change in net assets...................................................
525,802 44
SCHEDULE OF OPERATING EXPENSES-ELECTRIC SYSTEM For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 6 2002 2003 I1 Operating Expenses:
Purchased power and fuel:
Nuclear fuel............................................................ S 774,956 Diesel fuel............................................................
106,143 Purchased power............................................................
15,688,160 16,569,259 Power production:
Nuclear power generation................................................................................
3,276,912 Diesel power generation..................................................................................
268,245 System control and load dispatching............................................................
490,054 4,035,211 Transmission and Distribution............................................................
1,486,640 Customer Accounting............................................................
387,282 Administrative and General............................................................
2,140,755 Required payments to the City of New Smyrna Beach...................
1,920,119 Depreciation and decommissioning............................................................
2,773,920 569,520 67,407 13,015,681 13,652,608 4,129,520 293,811 484,426 4,907,757 1,423,256 445,467 1,714,629 1,891,212 2,741,739 I
I 1
I Total operating expenses...................
29,313,186 26,776,668 45 I
1 I
I I
I I
SCHEDULE OF OPERATING EXPENSES-WATER SYSTEM For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 7 2002 2003 Operating Expenses:
Water production:
Source of supply..............................................................................................
W ater treatment...............................................................................................
Transmission and Distribution.
Customer Accounting.
Administrative and General.
Required payments to the City of New Smyrna Beach........................................
Depreciation........................................................................................................
395,034 723,831 1,118,865 451,335 171,455 1,052,938 319,812 885,034 346,352 784,530 1,130,882 495,611 197,827 864,307 301,359 832,380 Total operating expenses............
3,999,439 3,822,366 46
SCHEDULE OF OPERATING EXPENSES-WVASTE WATER SYSTEM For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 8 2002 2003 I
Operating Expenses:
Collection and treatment system:
Collection expenses.........................................................................................
252,067 Pumping expenses............................................................................................
375,227 Treatment and disposal....................................................................................
1,186,578 1,813,872 Customer Accounting..........................................................................................
155,287 Administrative and General............................................................
922,121 Required payments to the City of New Smyrna Beach...................
320,858 Depreciation.........................................................................................................
1,390,310 252,762 314,169 1,296,843 1,863,774 177,834 806,932 317,158 1,325,297 I
i I
Total operating expenses..................
4,602,448 4,490,995 47 I
I I
I I
I I
I I
I I
SCHEDULE OF OPERATING EXPENSES-TELECOMMIUNICATIONS SYSTEM For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 9 2002 2003 Operating Expenses:
Other production expenses:
-Payments to Internet service provider................................................................S Payments to telephone service provider.............................................................
Customer accounting...........................................................................................
Administrative and General.
Required payments to the City of New Smyrna Beach.
262,584 0
1,014,433 0
282,397 0
187,078 0
145,638 0
Total operating expenses.
1,892,130 0
48
I SCHEDULE OF INTEREST EARNINGS For the Fiscal Years Ended September 30, 2003 and 2002 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule 10 2002 I1 1
2003 Interest Earnings By Source:
From Investments:
Sinking flinds...................................................................................................
Renewal and replacem ent funds.......................................................................
Custom ers' deposits.........................................................................................
CR3 nuclear decom m issioning funds...............................................................
Other................................................................................................................
1 35,744 205,915 39,501 29,643 47,651 49,130 273,622 25,616 45,977 66,808 1
i Total interest earnings..............................................................................
358,454 461,153 Interest Earnings By System:
Electric system.....................................................................................................
W ater system......................................................................................................
W astewater system...............................................................................................
259,576 65,141 33,737 I
300,247 109,336 51,570 Total interest earnings...............................................................................$
358,454 461,153 49 I
I I
-I I.
I
[7
[.7
-F
[
[77
[- 77
-7 [am [- 77
--[
17-
[
F7-F7
[-7
[rv -u-F SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY Schedule 11 Revenue Certificates Payable For the Fiscal Year Ended September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Utilities System Refunding Revenue Certificates Series 1993 Utilities System Refunding Revenue Certificates Series 1996 Utilities System Refunding Revenue Certificates Series 2002 Total Debt Service Requirements to Maturity tAU Certificates -
Payment Principal Coupon Total Principal Coupon Total Principal Coupon Total Principal Total Date Amount Rate Interest Requirements Amount Rate Interest Requirements Amount Rate Interest Requirements Amount Interest Requirements 10/01/2003 4.800%
63,250 63,250 900,000 4.600%
150,238 1,050,238 2.750%
900.000 213,488 1,113,488 04/01/2004 63,250 63,250 925,000 4.700%
129,537 1,054,537 2.750%
742,668 742,668 925,000 935,455 1,860,455 10/01/2004 5.000%
63,250 63,250 970,000 4.700%
107,800 1,077,800 t,335,000 3.000%
743,668 2,078,668 2,305,000 914,718 3,219,718 04/01/2005 63,250 63,250 245,000 4.800%
85,005 330,005 3.000%
724,311 724,311 245,000 872.566 1,117,566 10/01/2005 5.000%
63,250 63,250 255,000 4.800%
79,125 334,125 2,840,000 3.000%
724,311 3,564,311 3,095,000 866,686 3,961,686 04/01/2006 63,250 63,250 260,000 4.900%
73,005 333,005 3.000%
681,711 681,711 260.000 817,966 1,077,966 10/01/2006 5.100%
63,250 63,250 270,000 4,900%
66,635 336,635 2,920,000 3.000%
681,712 3,601,712 3,190,000 811,597 4,001,597 04/01/2007.
63,250 63,250 275,000 5.000%
60,020 335,020 3.000%
637,911 637,911 275,000 761,181 1,036,181 I0/0112007 5.200%
63,250 63,250 280,000 5.000%
53,145 333,145 3,010,000 3.000%
637,911 3,647,911 3,290,000 754,306 4,044,306 04/01/2008 63,250 63,250 290.000 5.100%
46,145 336,145 3.200%
592,761t 592,761 290.000 702,156 992,156 10/01/2008 5.250%
63,250 63,250 295,000 5.100%
38,750 333,750 3,095,000 3.200%
592,762 3,687,762 3,390,000 694,762 4,084,762 04/01/2009 63,250 63,250 305,000 5.200%
31,228 336,228 3.400%
543,241 543,241 305,000 637,719 942,719 10/01/2009 5.250%
63,250 63,250 310,000 5.200%
23,297 333,297 3,195,000 3.400%
543,241 3,738,241 3,505.000 629,788 4.134,788 04/01/2010 63,250 63,250 320,000 5.300°%
15,238 335,238 3.600.
488,926 488,926 320,000 567,414 887,414 10/01/2010 5.250%
63,250 63,250 125,000 5.300%
6,757 131,757 3,510,000 3.600%
488,927 3,998,927 3,635,000 558,934 4,193,934 04/01/201
-1 63,250 63,250 130,000 5.300%
3,445 133,445 5.000%
425,746 425,746 130,000 492,441 622,441 10/01/2011 5.250%
63,250 63,250 3,970,000 5.000%
425,746 4,395,746 3,970,000 488,996 4,458,996 04/02/2012 63,250 63,250 5.000%
326,496 326,496 389,746 389,746 10/01/2012 5.000%
63,250.
63,250 4,300,000 5.000%
325,496 4,625,496 4,300,000 388,746 4,688,746 04/01/2013 63,250 63,250 5.000%
218,996 218.996 282,246 282,246 10/01/2013
- 5.000%
63,250 63,250 4,515,000 5.000%
218,996 i
4,733,996 4,515,000 282,246 4,797,246 04/01/2014 63,250 63,250 4.100%
106,121 106,121 169,371 169,371 10/01/2014 5.000%
63,250 63,250 1,305,000 4.100%
106,121 1,411,121 1,305,000 169,371 1,474,371 04/01/2015 63,250 63,250 4.250%
79,369 79,369 142.619 142,619 10/01/2015 5.000%
63,250 63,250 1
1,355,000 4.250%
79,369 1,434,369 1,355,000 142,619 1,497,619 04/01/2016 63,250 63,250 4.250%
50,575 50,575 113,825 113,825 10/01/2016 5.000%
63,250 63,250
- 1,155,000 4.250%
50,575 1,205,575 1,155,000 113,825 1,268,825 04/01/2017 63,250 63,250 4.375%
26,031 26,031 89,281 89,281 10/01/2017 5.000%
63,250 63,250 1,190,000 4.375%
26,031 1,216,031 1,190,000 89,281 1,279,281 04/01/2018 63,250 63,250 63,250 63,250 10/01/2018 1,245,000 5.000%
63,250 1,308,250 1,245,000 63,250 1,308,250 04/01/2019 32,125 32,125 32,125 32.125 tO0I//2019 1,285,000 5.000%
32,125 1,317,125 1
2,285,000 32,125 1,317.125
$_14,555,000 S6 155,0~ 0
$969,370 7,124,370
$37,695,000 SI 1,289,729
$48 984,729 46,3805000
$14,284,099
$60,664,099 50
SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY Schedule 12 Florida Department of Environnoental Protection State Revolving Fund Loan For the Fiscal Year Ended September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Wastewater Treatment Plan Project CS 120 4260060 Wastewater Treatment Plan Project CS 120 4260060 Wastewater Treatment Plan Project CS 120 4260060 Total Debt Service Requirements State Revolving Fund Loan State Revolving Fund Loan StLate Revolving Fund Loan to Maturity
________Original Lo~an Amendment I AsnendmenL 2
-- Combined --
Payment Principal Interest Total Principal Interest Total Principal Interest Total Principal Total Date Amount Rate Interest Requirements Amount Rate Interest Requirements Amount Rate Interest Requirements Amount Interest Requirensents 02/15/2004 188,198 3.220%
125,551 313,749 39.393 3.180%
25,867 65,260 158,897 3.110%
101,453 260,350 386,488 252,871 639.359 08115/2004 191,228 3.220%
122,521 313,749 40,019 3,180%
25,241 65,260 161,368 3.11O0%
98,982 260,350 392,615 246,744 639,359 02/15/2005 194,307 3.220%
119,442 313,749 40,656 3.180%
24,604 65,260 163,877 3.110%
96,473 260,350 398,840 240,519 639,359 08/15/2005 197,436 3.220%
116,314 313,750 41,302 3.180%
23,958 65,260 166,425 3.110%
93,925 260,350 405.163 234,197 639,360 02/15/2006 200,614 3.220%
113.135 313,749 41,959 3.180%
23,301 65,260 169,013 3.110%
91,337 260,350 411,586 227.773 639,359 08/15/2006 203,844 3.220%
1 09,905 313,749 42,626 3.180%
22,634 65,260 171,641 3.110%
88,709 260.350 418,111 221,248 639,359 02/15/2007 207,126 3.220%
106,623 313,749 43,304 3.180%
21,956 65,260 174,310 3.110%
86,040 260,350 424,740 214,619 639,359 08/15/2007 210,461 3.220%
103,288 313,749 43,992 3.180%
21,268 65.260 177,021 3.110%
83,329 260,350 431,474 207,855 639,359 02/15/2008 213,849 3.220%
99,900 313,749 44,692 3.180%
20,568 65,260 179,774 3.110%
80,576 260,350 438,315 201,044 639,359 08/15/2008 217,292 3.220%
96,457 313,749 45,402 3.180%
19,858 65,260 182,569 311 0%
77,781 260,350 445,263 194,096 639,359 02/15/2009 220,791 3.220%
92,959 313,750 46,124 3.180%
19,136 65,260 185,408 3.110%
74,942 260.350 452.323 187,037 639,360 08/15/2009 224,345 3.220%
89,404 313,749 46,857 3.180%
18,403 65,260 188,291 3.110%
72,059 260,350 459,493 179,866 639,359 02/15/2010 227,957 3.220%
85,792 313,749 47,602 3.180%
17,658 65,260 191,219 3.110%
69,131 260,350 466,778 172,581 639,359 08/15/2010 231,627 3.220%
82,122 313,749 48,359 3.180%
16,901 65,260 194,192 3.1 10%
66,158 260,350 474,178 165,181 639,359 02/15/2011 235,357 3.220%
78.392 313,749 49,128 3.180%
16,132 65,260 197.212 3.110%
63,138 260,350 481,697 157,662 639,359 08115/2011 239,146 3.220%
74,603 313,749 49,909 3.180%
15,351 65,260 200,279 3.110%
60,071 260,350 489.334 150,025 639,359 02/15/2012 242,996 3.220%
70,753 313,749 50,703 3.180%
14,557 65,260 203,393 3.110%
56,957 260,350 497,092 142,267 639,359 08/15/2012 246,908 3.220%
66,841 313,749 51,509 3.180%
13,751 65,260 206,556 3.110%
53,794 260,350 504,973 134,386 639,359 02/15/2013 250,884 3.220%
62,866 313,750 52,328 3.180%
12,932 65,260 209,768 3.110%
50,582 260,350 512,980 126.380 639,360 08/15/2013 254,923 3.220%
58,826 313,749 53,160 3.180%
12,100 65,260 213,030 3.110%
47,320 260,350 521,113 118,246 639,359 02/15/2014 259,027 3.220%
54,722 313,749 54,005 3.180%
11.255 65,260 216,342 3.110%
44,008 260,350 529,374 109,985 639,359 08/15/2014 263,197 3.220%
50,552 313,749 54,864 3.180%
10,396 65,260 219,706 3.110%
40,644 260,350 537,767 101,592 639,359 02/15/2015 267,435 3.220%
46,314 313,749 55,736 3.180%
9,524 65,260 223,123 3.110%
37,227 260,350 546,294 93,065 639,359 08/15/2015 271,741 3.220%
42.009 313,750 56,623 3.180%
8,637 65,260 226,592 3.110%
33,758 260,350 554,956 84,404 639,360 02/15/2016 276,116 3.220%
37,634 313,750 57,523 3.180%
7,737 65,260 230.116 3.110%
30,234 260,350 563,755 75,605 639,360 08/15/2016 280,561 3.220%
33,188 313,749 58,438 3.180%
6,822 65,260 233,694 3.110%
26,656 260,350 572,693 66.666 639,359 02/15/2017 285,078 3.220%
28,671 313,749 59,367 3.180%
5,893 65,260 237,328 3.110%
23,022 260,350 581,773 57,586 639,359 08/15/2017 289,668 3.220%
24,081 313,749 60,311 3.180%
4,949 65,260 241,019 3.110%
19,331 260,350 590,998 48,361 639,359 02/15/2018 294,331 3.220%
19,418 313.749 61,270 3.180%
3,990 65,260 244,767 3.110%
15,583 260,350 600,368 38,991 639,359 08/15/2018 299,070 3.220%
14,679 313,749 62,244 3.180%
3,016 65,260 248,573 3.110%
11,777 260,350 609,887 29,472 639,359 02/15/2019 303,885 3.220%
9,864 313,749 63,233 3.180%
2,027 65,260 252,438 3.110%
7,912 260,350 619,556 19.803 639,359 08/1512019 308,778 3.220%
4,971 313,749 64,239 3.180%
1,021 65,260 256,363 3.110%
3,987 260,350 629,380 9,979 639,359
$~7J98,176
$2R,241,797
$10,039,973
$1,626,877
$461,443
$2,088,320
$6,524,304
$1,806,896
$8,331,200 S15,949,357
$4,510,136
$20,459,493 5 1 K-K
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SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY Schedule 13 Note Payable - Florida Muncipal Power Agency For the Fiscal Year Ended September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Initial Pooled Loan Project Initial Pooled Loan Project Initial Pooled Loan Project Total Debt Service Requirements Acquisition of Electric Generation Plant Acquisition of Sugar Mill Water/Sewer Plant Acquisition of Land for Plant Expansion to Maturity Original Loan - S 12,200,000, Principal due 04/01 Original Loan
- S3,000,000, Principal due t0/01 Original Loan - $9,050,000. Principal due 12/01 Combined --
Payment Principal Interest Total Principal Interest Total Principal Interest Total Principal Total Period Amount Rate Interest Requirements Amount Rate Interest Requirements Amount Rate Interest Requirements Amount Interest Requirements 09/30/2004 425,000 1.70%
176,545 601,545 1,70%
290,000 1,70%
135,504 425,504 715,000 312,049 1,027,049 09/30/2005 440,000 1.70%
168,853 608,853 99,000 1.70%
44,778 143,778 305,000 1.70%
130,036 435,036 844,000 343,667 1,187,667 09/30/2006 465,000 1.70%
160,778 625,778 10S,000 1.70%
42,993 147,993 325,000 1.70%
124,298 449,298 895,000 328,069 1,223,069 09/30/2007 485,000 1.70%
152,320 637,320 111,000 1.70%
41,106 152,106 340,000 1.70%
118,235 458,235 936,000 311,661 1,247,661 09/30/2008 510,000 1.70%
143,438 653,438 117,000 1.70%
39,117 156,117 360,000 1.70%
111,903 471,903 987,000 294,458 1,281,458 09/30/2009 535,000 1.70%
134,088 669,088 124,000 1.70%
37,009 161,009 375,000 1.70%
105,173 480,173 1,034,000 276,270 1,310,270 09/30/2010 565,000 1.70%
124,270 689,270 131,000 1.70%
34,782 165,782 400,000 1.70%
98,090 498,090 1,096,000 257,142 1,353,142 09/30/2011 590,000 1.70%
113,985 703,985 138,000 1.70%
32,436 170,436 420,000 1,70%
90,667 510,667 1,148,000 237,088 1,385,088 09/30/2012 620,000 1.70%
103,148 723,148 146,000 1.70%
29,954 175,954 440,000 1.70%
82,833 522,833 1,206,000 215,935 1,421,935 09/30/2013 655,000 1.70%
91,715 746,715 155,000 1.70%
27,319 182,319 465,000 1.70%
74,573 539,573 1,275,000 193,607 1,468,607 09/30/2014 690,000 1.70%
79,645 769,645 164,000 1.70%
24,531 188,531 490,000 1.70%
65,889 555,889 1,344,000 170,065 1,514,065 09/30/2015 730,000 1.70%
79,645 809,645 173,000 1.70%
24,531 197,531 515,000 1.70%
65,889 580,889 1,418,000 170,065 1,588,065 09/30/2016 770,000 1.70%
66,895 836,895 183,000 1.70%
21,590 204,590 545,000 1.70%
56,709 601,709 1,498,000 145,194 1,643,194 09/302017 815,000
.70%'/.
53,423 868,423 194,000 1.70%
18,479 212,479 575,000 1.70%
47,019 622,019 1,584,000 118,921 1,702,921 09/30/2018 860,000 1.70%
39,185 899,185 205,000 1.70%
15,181 220,181 600,000 1.70%
36,890 636,890 1,665,000 91,256 1,756,256 09/30/2019 910,000 1.70%
24,140 934,140 216,000 1.70%
11,696 227,696 635,000 1.70%
26,194 661,194 1,761,000 62,030 1,823,030 r
09/30/2020 965,000 1.70%
8,203 973,203 229,000 1.70%
8,024 237,024 670,000 1.70%
14,903 684,903 1,864,000 31,130 1,895,130 09/30/2021 243,000 1.70%
4,131 247,131 765,000 1.70%
13,005 778,005 1,008,000 17,136 1,025,136 ASl22030.000 Sl,720,276 S
,27 50.276
$2 733 000
$457,657
$3,190,657 HJSI 5,009.
S,397,810 S9 912 810 S22 278,000 3 575 743 j
8 3
a74
__1
.$2 85 7.
52
STA TISTICAL SECTION STATISTICAL TABLES DIFFER FROM FINANCIAL STATEMENTS BECAUSE THEY USUALLY COVER MORE THAN ONE FISCAL YEAR AND MAY PRESENT NON-ACCOUNTING DATA.
THESE TABLES REFLECT SOCIAL AND ECONOMIC DATA AND FINANCIAL TRENDS OF THE UTILITIES COMMIsSION, CTY OF NEW SMYRNA BEACH, FLORIDA.
I SCHEDULE OF EXPENSES BY FUNCTION LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA I
1 Transmission, Distribution and Collection Operating Required Payments to City of New Smyma Beach I
Fiscal Year Total Expenses Production Expenses Customer Accounting Administrative and General i
I 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 32,069,031 33,667,749 33,106,991 32,319,028 32,709,554 31,791,948 43,684,948 41,181,296 39,157,248 43,861,954 15,514,926 15,736,225 16,004,020 16,469,270 16,652,829 16,005,319 22,970,923 22,270,711 19,691,447 23,000,352 2,937,195 3,433,468 3,053,810 2,624,394 2,657,672 2,731,438 3,140,325 3,348,147 3,782,641 3,751,847 811,963 808,391 819,986 726,214 660,678 721,860 818,320 745,380 821,128 996,421 4,015,134 4,300,729 3,778,385 3,312,462 3,406,001 3,169,521 3,227,988 3,519,275 3,385,868 4,302,892 1,922,423 1,945,294 2,076,104 1,949,594 2,018,552 2,016,471 2,214,486 2,625,008 2,509,729 2,706,427 1
I I
I I
I I
I I
I-53
Table I Expenses Non-operating Expenses Depreciation and Decommissioning Total Operating Expense Interest and Debt Expense Other Non-operating Expense Loss on disposal of assets Total Non-operating Expenses 3,210,370 3,540,923 3,583,478 3,632,710 3,692,111 3,694,652 3,875,830 4,581,217 4,899,416 5,049,264 28,412,011 29,765,030 29,315,783 28,714,644 29,087,843 28,339,261 36,247,872 37,089,738 35,090,229 39,807,203 3,458,792 3,791,166 3,731,690 3,462,756 3,422,072 3,353,913 3,877,542 3,976,825 3,952,841 3,355,193
, 117,691 78,565 20,647 39,840 40,092 11,328 61,620 15,466 56,064
- 690,017 80,537 32,988 38,871 101,788 159,547 87,446 3,497,914 99,267 58,114 9,541 3,657,020 3,902,719 3,791,208 3,604,384 3,621,711 3,452,687 7,437,076 4,091,558 4,067,019 4,054,751 54
1 SCHEDULE OF REVENUES BY SOURCE LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Operating Revenues Fiscal Total Electric Water Wastewater Telecommunications Year Revenues System System System System 1994 S
33,264,310 24,352,192 3,923,279 3,172,812 1995 S
41,208,889 25,612,207 3,972,005 3,551,240 1
1996 S
36,439,421 25,872,665 4,145,975 3,744,450 1997 S
35,820,675 24,901,225 4,187,748 3,758,499 1998 36,105,091 24,699,025 4,365,734 3,849,022 1999 36,717,793 24,066,446 4,552,710 3,933,025 2000 43,664,295 31,967,742 4,576,099 4,876,066 2001 45,246,272 33,114,680 4,736,997 4,863,710 2002 S
42,467,328 29,997,004 4,983,226 5,631,995 2003 S
51,516,203 32,987,652 5,123,020 5,654,537 2,581,857 55 1
Table 11 -
Non-operating Revenues Total Total Operating Interest Other Capital Non-operating Revenue Earnings Income Contributions Revenue 31,448,283 33,135,452 33,763,090 32,847,472 32,913,781 32,552,181 41,419,907 42,715,387 40,612,225 46,347,066 495,971 762,206 824,645 898,260 1,082,325 1,006,728 1,114,573 905,244 461,153 358,454 277,769 355,693 252,121 199,327 353,946 286,029 356,616 440,007 433,355 336,526 1,042,287 6,955,538 1,599,565 1,875,616 1,755,039 2,872,855 773,199 1,185,634 960,595 4,474,157 1,816,027 8,073,437 2,676,331 2,973,203 3,191,310 4,165,612 2,244,388 2,530,885 1,855,103 5,169,137 56
I DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table III School Percent Attendance (4)
I I
New Smyrna Beach's Estimated Population (1)
County Per Capita Income (2)
I County Unemployment Rate (3)
Fiscal Year School Enrollment (4)
I I
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 17,989 17,853 18,239 18,327 18,503 18,603 18,977 20,048 20,169 20,595 SI 8,482 S19,425
$20,431
$21,328
$21,933
$22,675 N/A N/A N/A NIA 6.4%
4.9%
4.5%
3.9%
3.3%
2.9%
4.0%
3.3%
4.3%
4.9%
5,053 5,348 4,978 5,008 6,767 6,810 6,478 5,059 4,900 4,829 96.0%
96.0%
96.0%
95.9%
95.4%
95.2%
95.0%
95.0%
95.0%
95%
I I
I i
(5)
(5)
(5)
(5)
I (1) Obtained from University of Florida, Bureau of Economics and Business Research.
(2) Obtained from Volusia County Business Development Corporation.
(3) Obtained from State of Florida, Department of Labor and Employment Security.
(4) Obtained from Volusia County School Board - includes grades K-12.
(5) Obtained from City of New Smyrna Beach Development Services Division.
57 I
I I
I I
I I,
I
PROPERTY VALUE, CONSTRUCTION AND BANK DEPOSITS (4)
Table IV LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA FDIC Dollar Insured Property Number Value Institutional Assessed of of Deposits Value Fiscal Permits Construction (2)
(3)
Year (1)
(S000's)
($000's)
($000's) 1994 2,266
$18,103 S532,340 (5)
$1,149,931 1995 2,177
$33,581
$539,119 (6)
$1,199,523 1996 2,561
$23,785
$548,762 (6)
$1,231,515 1997 2,301
$28,975
$543,313 (6)
$1,275,232 1998 3,779
$39,327
$562,509 (6)
$1,336,740 1999 5,777
$41,166 S576,008 (6)
$1,380,855 2000
- -:2,257
$41,296
$590,205
. (6)
$1,541,902 2001 3,742
$72,439
$653,201 (6)
$1,685,072 2002 2,810
$59,610
$590,955 (6)
$1,852,528 2003
$4,777
$87,616
$752,958 (6)
$2,090,052 (1) Obtained from City of New Smyrna Beach Building Department.
(2) Obtained from inquiry of officials of banks and savings and loan associations.
(3)
Obtained from Volusia County Finance Department.
(4) The above data is related exclusively to area within the municipal limits of the City of New Smyrna Beach.
(5) Deposit information after 1993 does not include deposits from bank and savings and loan branches which are located outside the municipal boundaries of the City of New Smyrna Beach. Prior to 1994, branch deposits were based on regional banking/savings and loan center totals which included branches located outside of' the City. Prior year data cannot be easily segregated due to the large number of banking changes/mergers that have occured during the last ten years.
(6)
Deposit information obtained from Florida Bankers Association and FDIC June Market Share Report.
58
i SCHEDULE OF INSURANCE IN FORCE September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table V I
I Coverage and Insuring Company Policy Number Policy Period Details of Coverage Liability Limits Comprehensive General Liabiity:
Coregis PKFL 106449520302 10/01/2003 Combined bodily injury 10/01/2004 and property damage
$5,000,000 with $ deductible (statutory limits)
I Business Auto:
Coregis PKFL 106449520302 10/01/2003 Liability 10/01/2004 Comprehensive
$1,000,000 bodily injury and property combined Actual cash value less
$250 deductible Actual cash value less
$500 deductible Statutory I
Collision I
No fault Business Property:
Coregis PK FL 106449520302 10101/2003 10/01/2004 Buildings and contents Valuable papers/records Contractors equipment Computer equipment
$18,850122 with $10,000 deductible (agreed value)
$100,000 with $250 deductible
$952,793 with $1,000 deductible
$155,000 with $ 1,000 deductible I
I Crime:
Coregis PKFL 106449520302 10101/2003 10/01/2004 10/01/2003 10/01/2004 Forgery or Alteration Theft, Destruction (inside)
Theft, Destruction (outside)
Employee Dishonesty Breakdown due to accident
$100,000 aggregate, $1,000 deductible
$70,000 with $1,000 deductible
$70,000 with S1,000 deductible
$100,000 with $1,000 deductible I
I Boiler and Machinery:
Travelers Property Casualty Flood Insurance:
Omaha Property Casualty Nuclear Energy Damage:
American Nuclear Insurance and Nuclear Electric Insurance, Ltd.
Insurance Ltd.
(These amounts represent the total insurance coverage for Florida Power Corporation's Crystal River nuclear plant, of which the Commission owns a 0.05608%
undivided ownership interest)
M51-BM21-993x9275-TIL-03 30097212202003 P00-081 XOO-015 NF195 NS347 N35 NW579
$50,000,000 with $1 0,000 deductible 09/02/2003 Building 09/02/2004 Contents Deductible s500,000
$500,000
$5,000 I
I 04/01/2003 04/01/2004 04/01/2003 04/01/2004 04/01/2003 04/01/2004 04/01/2003 04/01/2004 04/01/2003 04/01/2004 04/01/2003 04/01/2004 Primary property Excess property (Excess of $500 million)
Primary liability Suppliers and transporters liability Secondary financial protection Master Workers Torts
$500 million
$1.100 billion I
$200 million
$200 million
$9.514 billion with $200 million I
deductible
$200 million aggregate I
Public Official/Employee Liabiity:
Coregis Insurance Organizations Workers' Compensation:
Preferred Governmental Insurance Trust Pollution Liability:
Florida Petroleum Liability Insurance Mid-Continent Group Coregis PKFL 106449520302 (24,102) 04T000010729 10/01/2003 Liability 10/01/2004 10/01/2003 Statutory coverage 10101/2004 Employer's liability
$1,000,000 Retentions-$ 10,000 per loss Statutory
$100,000
$1,000,000 / $2,000,000 aggregate
$10,000 deductible
$1,000,000 aggregate
$25,000 deductible 1
I 07/10/2003 07/10/2004 Liability - fuel spillage PK FL 106449520302 10/01/2003 Liability 10/01/2004 I
59 I
TEN LARGEST ELECTRIC CUSTOMERS September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table VI Kilowatt Hour Sales Percent (kWh) of (000's)
Total Revenues Billed Percent of Amount Total 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Bert Fish Medical Center.................................................
Utilities Commission (wastewater plant)........................
Reddy Ice.........................................................................
Publix Food Store (#2019100).........................................
Winn Dixie (#2304)...........................
Publix Food Store (#2033500).......................... _
Caraustar Industrial & Consumer Prd.......................... ;
W al-Mart Stores...............................................................
Board of Public Instruction (NSB Middle School)..........
KM art #7447...................................................................
Totals.......................................................................
7,787 4,357 3,233 3,180 3,035 2,839 2,614 2,407 2,361 2,290 34,103 2.10%
1.18%
0.87%
0.86%
0.82%
0.77%
0.71%
0.65%
0.64%
0.62%
9.22%
$594,416 333,013 252,581 250,040 229,423 215,955 171,686 181,009 200,761 174,959
$2,603,843 1.87%
1.05%
0.79%
- 0.79%
0.72%
0.68%
0.54%
0.57%
0.63%
0.55%
8.19%
60
TEN LARGEST NVATER CUSTOMERS September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table VI1 I
1 Consumption Percent Gallons of (000's)
Total Revenues Billed Percent of Amount Total I1 4.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Reddy Ice........................................................................
Board of Public Instruction..............................................
Bert Fish M edical Center.................................................
Sea Woods Homeowners Association..............................
Errol by the Sea Condominium Association....................
Rinker M aterials.............................................................
Federal H ousing Authority...............................................
Islander Beach Lodge.......................................................
Pelican Association........................................................
Oceanview Nursing Home..............................................
Totals.......................................................................
21,353 15,659 14,633 13,953 12,991 11,696 10,852 9,096 8,932 7,935 127,100 1.45%
1.06%
0.99%
0.95%
0.88%
0.79%
0.74%
0.62%
0.61%
0.54%
8.63%
$57,022 42,953 27,184 38,477 27,165 28,598 32,594 13,807 15,093 14,218 S297,111 1.10%
0.83%
0.52%
0.74%
0.52%
0.55%
0.63%
0.27%
0.29%
0.27%
5.72%
i I
I I
61 1
/
SCHEDULE OF REVENUE CERTIFICATE COVERAGE LAST TEN FISCAL YEARS September 30,
.; -I UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table VIII L
L Gross Revenue Per Certificate Resolution:
Operating revenues..................................................
Interest and other income (excluding construction fund interest earnings).....................
Capital contributions................................................
Assessment collections............................................
Gross revenue per certificate resolution.............
Expenses Per Certificate Resolution:
Operating expenses..................................................
Less: Depreciation expense.....................................
Required payments to the City.......................
Expenses per certificate resolution....................
Income available for debt service......................
Annual Debt Service Requirements:
Principal..................................................................
Interest (less accrued interest) (I)............................
Annual debt service requirements.....................
Coverage ratio (Times)......................................
Gross Revenue Per Certificate Resolution:
Operating revenues..................................................
Interest and other income (excluding construction fund interest earnings).....................
Capital contributions................................................
Assessment collections............................................
Gross revenue per certificate resolution............
Expenses Per Certificate Resolution:
Operating expenses..................................................
Less: Depreciation expense.....................................
Required payments to the City.......................
Expenses per certificate resolution....................
Income available for debt service......................
Annual Debt Service Requirements:
Principal....................................................................
Interest (less accrued interest) (I)............................
Annual debt service requirements.....................
Coverage ratio (Times)......................................
2003 46,347,066 694,980 4,474,157 0
51,516,203 39,807,203 (4,904,128)
(2,706,427) 32,196,648 19,319,555 4,070,000 1,969,170 6,039,170 3.20 1998 32,913,781 1,436,271 1,755,040 40,878 36,145,970 29,087,843 (3,490,562)
(2,018,552) 23,578,729 12,567,241 2,255,000 3,054,404 5,309,404 2.37 2002 40,612,225 894,508 960,595 0
42,467,328 35,090,229 (4,737,946)
(2,509,729) 27,842,554 14,624,774 2,705,000 2,515,209 5,220,209 2.80 1997 32,847,472 1,097,587 1,785,424 559 35,731,042 28,714,644 (3,450,710)
(1,949,594) 23,314,340 12,416,702 1,945,000 3,138,448 5,083,448
-2.44 2001 42,715,387 1,345,251 1,185,634 0
45,246,272 37,049,738 (4,360,451)
(2,625,008) 30,064,279 15,181,993 2,560,000 2,747,236 5,307,236 2.86 1996 33,763,090 1,076,766 1,383,945 1,331 36,225,132 29,315,783 (3,386,306)
(2,076,104) 23,853,373 12,371,759 1,855,000 3,687,574 5,542,574 2.23 2000 41,419,907 1,471,189 773,198 0
43,664,294 36,247,872 (3,656,949)
(2,214,486) 30,376,437 13,287,857 2,460,000 2,857,214 5,317,214 2.50 1995 33,135,452 1,117,899 798,090 3,106 35,054,547 29,765,030 (3,337,966)
(1,945,294) 24,481,770 10,572,777 1,680,000 3,841,252 5,521,252 1.91 1999 32,552,181 1,292,757 1,774,292 3,408 35,622,638 28,339,261 (3,502,707)
(2,016,471) 22,820,083 12,802,555 2,350,000 2,948,209 5,298,209 2.42 1994 31,448,283 773,740 727,054 (301) 32,948,776 28,412,011 (3,179,382)
(1,922,423) 23,310,206 9,638,570
- 1,595,000 3,923,144 5,518,144
-.. 75 L
L (1)
Interest expense forthe fiscal yearended September 30, 2002 is stated net of $152,218 i
in interest expense which was funded from the proceeds of the issuance of revenue certificates.
62
HISTORICAL PEAK DEMAND AND ELECTRIC SYSTEM NET ENERGY REQUIREMENTS, WATER DEMAND, AND SEWAGE FLOWS LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table IX ELECTRICSYSTEM WATER SYSTEM WASTEWATER SYSTEM Net Annual Annual Maximum Average Minimum
[otal Maximum Average
--Minimum To-tal Energy Annual Peak Increase Daily Daily Daily Annual Daily Daily Daily Annual Fiscal Requirements Increase Demand (Decrease)
Flow Flow Flow Production Flow Flow Flow Production Year (kWh)
(kW)
(MGD)
(MGD)
(MGD)
(MGY)
(MGD)
(MGD)
(MGD)
(MGY) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 301,883,000 318,962,000 331,282,000 325,239,000 352,623,000 335,599,000 360,760,000 361,159,000 367,175,437 386,385,433 3.2 5.7 3.9 (1.8) 8.4 0.8 0.8 0.1 1.7 5.2 69,900 88,300 89,200 82,500 80,200 85,700 87,300 91,100 87,900 100,200 (3.1) 26.3 1.0 (7.5)
(2.8) 6.9 1.9 4.4 (3.5) 14.0 5.83 6.14 6.18 5.85 6.62 6.13 7.06 5.96 6.62 7.20 3.84 4.19 4.30 4.28 4.54 4.57 4.82 4.54 4.73 4.83 2.12 2.62 2.85 2.73 2.88 2.56 2.77 2.11 2.16 3.40 1,400 1,457 1,572 1,562 1,659 1,667 1,763 1,658 1,726 1,763 3.16 3.59 4.43 4.50 4.23 7.55 5.72 9.29 9.77 6.45 2.68 2.88 2.77 2.46 2.49 2.97 3.30 3.81 3.92 3.83 1.72 1.65 2.07 1.88 1.94 1.25 2.25 1.97 2.40 2.30 979 1,053 1,016 898 909 1,096 1,203 1,304 1,429 1,357 (1)
The above information is provided pursuant to the requirements of Section 2(B) of the Commnission's Continuing Disclosure Certificate issued on August 7, 2002.
63 K-h K
F
[
F F
V- -
L L.-
1-V
UTILITY RATE SCHEDULE -
ELECTRIC SERVICE September 30, 2003 i,
UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Electric System Rate Schedule:
Table X Residential Service - Monthly Rate Customer Charge:
Single Phase Service Three Phase Service
$S5.65
$7.85 Energy Charge:
All kWh per month at:
(plus fuel and purchased power cost adjustment)
$0.07173 per kWh General Service - Non-Demand - Monthly Rate Customer Charge:
Single Phase Service Three Phase Service
$6.05
$8.85 Energy Charge:
All kWh per month at:
(plus fuel and purchased power cost adjustment)
$0.07333 per kWh General Service - Demand - Monthly Rate Customer Charge:
Demand Charge:
Energy Charge:
All kW of billing demand All kWh per month at:
(plus fuel and purchased power cost adjustment)
$33.50
$5.50 per kW
$0.05546 per kWh General Service - Demand Time of Use - Monthly Rate Customer Charge:
Demand Charge:
per kW of excess demand
$33.50
$22.00 per kW
$0.05546 per kWh Energy Charge-Customer Charge:
Demand Charge:
Energy Charge:
All kWh per month at:
(plus fuel and purchased power cost adjustment)
All kW of billing demand All kWh per month at:
(plus fuel and purchased power cost adjustment)
$235.00
$5.50 per kW
$0.05546 per kWh Green Pricing Rate
-Green Pricing Level I Green Pricing Level 2 Fuel and Purchased Power Cost Adjustment Clause:
The Fuel and Purchased Power Cost Adjustment Clause (FPPCAC) is an integral component of the monthly charges, and is designed to allow for accurate billing of fluctuating applicable fuel and purchased power costs.
In order to minimize changes in customer billings, the FPPCAC is developed on a twelve month projected basis, with provision to "true-up" any over or under recovery of any applicable fuel and purchased power cost in each subsequent twelve month period. A provision is provided in the clause for the FPPCAC to be modified if significant circumstances arise during the twelve month billing cycle. The adjustment for the twelve month period ending Sepiember 30, 2003 was $8.82 per 1,000 kWh through May 31, 2003.
Beginning June 1, 2003 the adjustment was increased to $12.89 per kWh, which remains in effect as of October 1, 2003.
(1)
The above information is provided pursuant to the requirements of Section 2(B) of the Commission's Continuing Disclosure Certificate which was issued on August 7, 2002 in conjunction with the sale of $39,035,000 Utilities Refunding Revenue Certificates, Series 2002.
$5.00 S10.00 64
I UTILITY RATE SCHEDULE -
WATER SERVICE September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMIYRNA BEACH, FLORIDA Table XI I
I Meter Size (Inches)
Base Facility Charge Reuse Subsidy Charge Billing Charge Monthly Total Monthly Billing I
Residential Service:
Single Family 518" 1 1/2" 2"
3" 4"
6" 8"
S 8.85 S
22.15 44.25 70.80 141.60 221.25 442.50 708.00 0.90 S
2.25 4.50 7.20 14.40 22.50 45.00 72.00 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 S 11.65 + Gallonage Charge S 26.30 + Gallonage Charge S 50.65 + Gallonage Charge S 79.90 + Gallonage Charge S 157.90 + Gallonage Charge S 245.65 + Gallonage Charge S 489.40 + Gallonage Charge S 781.90 + Gallonage Charge I
I Gallonage Charge/I,000 Gallons Block I Block 2 Block 3 Block 4
$1.00
$1.10 S2.20
$2.70 Monthly Rate Blocks (Gallons)
I I
Block I Block 2 Block 3 Block 4 All meter sizes 0-2000 2,001-6,000 6,001 - 14,000 14,001 and over Billing Charge Monthly I
Billing Account Base Facility Charge Reuse Subsidy Charge Total Monthly Billing I
Multi-Family Each Unit Master Meter S
8.85 S
0.00 0.90 0.00 0.00 S 9.75 1.90 S 1.90 + Gallonage Charge @
$1.05 per KG - all usage I
Sugar Mill Residential, General and Multi-Family Master Meter Services Meter Size (Inches)
Base Facility Charge Total Monthly Billing I
5/8" x 3/4" 314" 1 1/2" 2"
3" 4"
6" 8"
10" s
9.77 14.55 24.43 48.88 78.20 156.39 244.37 488.74 782.00 1,124.11
$ 9.77 + Gallonage Charge S 14.55 + Gallonage Charge S 24.43 + Gallonage Charge
$ 48.88 + Gallonage Charge S 78.20 + Gallonage Charge S 156.39 + Gallonage Charge S 244.37 + Gallonage Charge S 488.74 + Gallonage Charge S 782.00 + Gallonage Charge S 1,124.11 + Gallonage Charge I
I I
Gallonage Charge/1,000 Gallons I
All meter sizes S4.43 I
I 65 I
UTILITY RATE SCHEDULE -
WATER SERVICE - (Continued)
September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table XI Irrigation Service:
Gallonage Charge/1,000 Gallons Meter Size Block I Block 2 Block 3 1"- 8" Sl.00 S1.l0 -.
$2.20 Monthly Rate Blocks (Gallons)
Meter Size Block I Block 2 Block 3 1"
1 1/2" 2"
3" 4"
6" 8"
0 0
0 0
0 0
0
- 15,000
- 30,000
- 50,000
- 100,000
- - 200,000
- 300,000
- 600,000 15,001 - 40,000 30,001 - 75,000 50,001 - 100,000 100,001 - 200,000 200,001 - 400,000 300,001 - 600,000 600,001 - 1,000,000 40,001 and over 75,001 and over 100,001 and over 200,001 and over 400,001 and over 600,001 and over 1,000,001 and over Meter Size (Inches)
Base Facility Charge Reuse Subsidy Charge Billing Charge Monthly Total Monthly Billing Nonresidential service:
5/8" 11.
1 1/2" 2"
3" 4"
6" 8"
S 8.85 22.15 44.25 70.80 141.60 221.25 442.50 708.00 0.90 S
--- 2.25 4.50
. 7.20 14.40
-22.50 45.00 72.00 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90
$ 11.65 + Gallonage Charge
$ 26.30 + Gallonage Charge S 50.65 + Gallonage Charge S 79.90 + Gallonage Charge S 157.90+ Gallonage Charge
$ 245.65 + Gallonage Charge
$ 489.40 + Gallonage Charge
$ 781.90 + Gallonage Charge Gallonage Charge/I,000 Gallons Meter Size Block I Block 2 Block 3 5/8" - 8"
$1.05
$1.25
$1.70 Monthly Rate Blocks (Gallons)
Meter Size Block I Block 2 Block 3 5/8" 1I.
1 1/2" 2"
3" 4,
6"
-. 8" 0 - 7,000 0 - 15,000 0 - 30,000 0 - 50,000 0 -'100,000 0 - 200,000 0 - 300,000 0 - 600,000 7,001 - 14,000 15,001 - 40,000 30,001 - 75,000 50,001 - 100,000 100,001 - 200,000 200,001 - 400,000 300,001 - 600,000 600,001 - 1,000,000 14,001 and over 40,001 and over 75,001 andover 100,001 and over 200,001 and over 400,001 and over 600,001 and over 1,000,001 and over (1) The above information is provided pursuant to the requirements of Section 2(B) of the Comminssion's Continuing Disclosure Certificate which was issued on August 7, 2002 in conjunction with the sale of $39,035,000 Utilities Refunding Revenue Certificates, Series 2002.
66
I UTILITY RATE SCHEDULE -
WASTEWATER AND WATER REUSE SERVICE September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Wastewater Rate Schedule Residential, (Single-Family) and Non-Residential:
Table XII I
-I Meter Size (Inches)
Base Facility Charge Reuse Subsidy Charge Billing Charge Monthly Total Monthly Billing 518" I..
I 1/2" 2"
3" 4"
6" 8"
S 14.07 35.20 70.35 112.56 225.12 351.75 703.50 1,125.60 S
1.05 S
2.65 5.25 8.40 16.80 26.25 52.50 84.00 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 S
16.62 + Gallonage Charge 39.35 + Gallonage Charge 77.10 + Gallonage Charge S 122.46 + Gallonage Charge S 243.42 + Gallonage Charge
$ 379.50 + Gallonage Charge
$ 757.50 + Gallonage Charge
$ 1,211.10 + Gallonage Charge I
I I
Gallonage Charge/I,000 Gallons Block 1 Block 2 All meter sizes I
I I
$2.30
$2.75 Monthly Rate Blocks (Gallons)
Block 1 Block 2 All meter sizes 0-2,000 2,001 and over I
Multi-Family:
Each Unit Master Meter 14.07 0.00 1.05 0.00 0.00 1.50 0.00 S 15.12 1.55 1.50 + Gallonage Charge I
Sugar Mill Area:
Residential Service Meter Base Size Facility (Inches)
Charge Total Monthly Billing I
518" x 3/4" 3/4" 12" 1 1/2' 2"
3" 4"
6" 8"
10" 19.63 19.63 19.63 19.63 19.63 19.63 19.63 19.63 19.63 19.63 S
S S
S S
19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge 19.63 + Gallonage Charge I
I I
I Gallonage Chargell,000 Gallons All meter sizes 0 - 6,000
$5.73 All excess gallons no charge I
67 I
UTILITY RATE SCHEDULE -
VASTEWATER AND WATER REUSE SERVICE - (Continued)
September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Table XII Sugar Mill Area:
General and Multi-Family Master Meter Service Size (Inches)
Facility Charge Monthly Billing 5/8" x 3/4" S
314" I"
1 1/2" 2"
3" 4"
6" 8"
10" 19.63 29.45 49.07 98.16 157.04 314.08 490.77 981.51 1,570.42 2,257.47 19.63 + Gallonage Charge 29.45 + Gallonage Charge 49.07 + Gallonage Charge 98.16 + Gallonage Charge
$ 157.04 + Gallonage Charge
$ 314.08 + Gallonage Charge
$ 490.77 + Gallonage Charge
$ 981.51 + Gallonage Charge S 1,570.42 + Gallonage Charge S 2,257.47 + Gallonage Charge Gallonage Charge/1,000 Gallons All meter sizes
$6.86 Sugar Mill Area:
Residential Wastewater Only Service Charge per Meter Size Billing Period All
$36.54 Reclaimed Water Rate Schedule:
Meter Size (Inches)
Minimum Monthly Charge Flow Charge per KG Primary Tier Rate:
Service:
5/8" X 3/4" 1"
1 1/2" 10.00 25.00 50.00 N/A N/A N/A Metered:
2" 3"
4" 6"
0.00 0.00 0.00 0.00 0.15 0.15 0.15 0.15 Secondary Tier Rate:
$16.29/acre/month for metered users whose anticipated capacity exceeds 100,000 gallons per day and which must provide a minimum of three (3) days of wet weather storage for the minimum flow rate of 1,900 gallons/acre/day on an annual average.
(1) The above information is provided pursuant to the requirements of Section 2(B) of the Commission's
- Continuing Disclosure Certificate which was issued on August 7, 2002 in conjunction with the sale of $39,035,000 Utilities Rcfunding Revenue Certificates, Series 2002.
68
1 UTILITY RATE SCHEDULE -
TELECOMIMIUNCIATIONS SERVICE September 30, 2003 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA NEW SMYRNA BEACH, FLORIDA Local Exchange Telephone Service:
Table XIII I
I I
Residential Service Plans - Monthly Rate Home Plan City Plan America Plan World Plan S24.95 to $34.95 S32.95 to $34.95
$49.95 to $59.95 558.95 to $69.95 i
I Business Service Plans - Monthly Rate Silver Package Gold Package Platinum Package
$27.95 to $34.95
$29.95 to $36.95
$39.95 to $46.95 I
Measured Rate Charges:
Residential Intrastate Long Distance Business Intrastate Long Distance Residential State-to-State Long Distance Business State-to-State Long Distance Extended Area Usage Charge (Gold Package only)
$.069 per minute
$.069 per minute S.059 per minute
$.045 per minute
$.06 per minute I
I Internet Service:
Economy Internet Dial-up Standard Unlimited Internet Dial-up Deluxe Unlimited Internet Dial-up DSL Internet Service:
ADSL 128/384 ADSL 384/768 IDSL 128/128/
SDSL 192/192 SDSL 384/384 SDSL 768/768 SDSL 1.1/1.1 Reach T-1 192/192 Reach T-1 384/384 Reach T-I 768/768 Reach T-l 1.1/1.1 Broadband Wireless Internet:
128 kbps/128 kbps 384 kbps/128 kbps 512 kbps/128 kbps 768 kbps/128 kbps
- 1.
I Mbps/128 kbps Monthly Rate Monthly Rate Monthly Rate
$6.95
$9.95
$12.95 I
I Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate
$49.95
$69.95
$149.00
$149.00
$184.00
$279.00
$359.00
$409.00
$539.00
$669.00
$789.00 I
I I
I Monthly Rate Monthly Rate Monthly Rate Monthly Rate Monthly Rate
$22.95
$29.95
$39.95
$49.95
$69.95 I
1 (1)
The above information is provided pursuant to the requirements of Section 2(B) of the Commission's Continuing Disclosure Certificate which was issued on August 7, 2002 in conjunction with the sale of $39,035,000 Utilities Refunding Revenue Certificates, Series 2002.
69 1
I
SUPPLEMENTAL A UDIT REPORTS
i~~
~
~
4 --
BRENT MILLIKAN & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Chairman and Commissioners Utilities Commission, City of New Smyrna Beach, Florida New Smyrna Beach, Florida We have audited the financial statements of Utilities Commission, City of New Smyrna Beach, Florida, a component unit of City of New Smyrna Beach, Florida, as of and for the year ended September 30, 2003, and have issued our report thereon dated November 10, 2003. 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.
Compliance As part of obtaining reasonable assurance about whether Utilities Commission, City of New Smyrna Beach, Florida's financial statements are free of material misstatement, we performed 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 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 that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting In planning and performing our audit, we considered Utilities Commission, City of New Smyrna Beach, Florida's 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 assurance 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 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 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 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.
70 205 MAGNOLIA ST.. NEW SMYRNA BEACH, FL 32168-7125. (386) 427-1333. FAX (386) 427-5823
- www.bmcpa.Com MEMBER: American Institute of CfiedPublicAccountants andAICPA Prite Companies PracticeSection
To the Honorable Chairman and Commissioners Utilities Commission, City of New Smyrna Beach, Florida New Smyrna Beach, Florida Page 2 of 2 This report is intended solely for the information and use of the Utilities Commission, management, City of New Smyrna Beach, the Auditor General of the State of Florida, and applicable federal/state awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
November 10, 2003 71
BRENT MILLIKAN & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT LETTER To the Honorable Chairman and Commissioners Utilities Commission, City of New Smyrna Beach, Florida New Smyrna Beach, Florida We have audited the financial statements of Utilities Commission, City of New Smyrna Beach, Florida, (the "Commission") as of and for the fiscal year ended September 30, 2003, and have issued our report thereon dated November 10, 2003.
We conducted our audit in accordance with United States generally accepted auditing standards; 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. We have also issued our Independent Auditor's Report on Compliance and Internal Control over Financial Reporting. Disclosures in this report, which is dated November 10, 2003, should be considered in conjunction with this management letter.
Additionally, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General.
Those rules (Section 10.554(l)(g)l.a.) require that we address in the management letter, if not already addressed in the auditor's report on compliance and internal control, whether or not inaccuracies, shortages, defalcations, fraud, and/or violations of laws, rules, regulations, and contractual provisions reported in the preceding annual financial audit report have been corrected.
No inaccuracies, irregularities, shortages, defalcations, and/or violations of laws, rules, regulations, and contractual provisions were disclosed in the preceding annual report.
The Rules of the Auditor General (Section 10.554(1)(g)1.b.) require that we address in the management letter, if not already addressed in the auditor's report on compliance and internal control, whether or not recommendations made in the preceding annual financial audit report have been followed. The recommendations made in the preceding annual financial audit report have been corrected.
As required by the Rules of the Auditor General (Section 10.554(1)(g)2.), the scope of our audit included a review of the provisions of Section 218.415., Florida Statutes, regarding the investment of public funds.
In connection with our audit, we determined that Utilities Commission, City of New Smyrna Beach, Florida, complied with Section 218.415, Florida Statutes.
The Rules of Auditor General (Section 10.554(l)(g)4.) require disclosure in the management letter of the following matters if not already addressed in the auditor's report on compliance and internal control: (1) violations of laws, rules, regulations, and contractual provisions that have occurred, or are likely to have occurred; (2) improper or illegal expenditures; (3) improper or inadequate accounting procedures (e.g.,
the omission of required disclosures from the financial statements); (4) failures to properly record 72 205 MAGNOLIA ST.
- NEW SMYRNA BEACH, FL 32168-7125 * (386) 427-1333
- FAX (386) 427-5823
- www.bmepa.com MEMBER: American Institute of CerdfiedPubk Accountants and AICPA Private Companks Practe Section
To the Honorable Chairman and Commissioners Utilities Commission, City of New Smyrna Beach, Florida New Smyrna Beach, Florida Page 2 of 3 financial transactions; and (5) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of, the auditor. Our audit disclosed no matters required to be disclosed.
The Rules of the Auditor General (Section 10.554(1)(g)5.) also require that the name or official title and legal authority for the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. The Utilities Commission, City of New Smyrna Beach, Florida, was created in 1967 through the passage of Chapter 67-1754, Laws of Florida, Special Acts of 1967 (House Bill 1669),
which amended the Charter of the City of New Smyrna Beach, Florida, to create the Utilities Commission as a component unit of the City of New Smyrna Beach, Florida.
As required by the Rules of the Auditor General (Section 10.554(l)(g)6.a.), the scope of our audit included a review of the provisions of Section 218.503(1), Florida Statutes, regarding financial emergencies. In connection with our audit, we determined that Utilities Commission, City of New Smyrna Beach, Florida, is not in a state of financial emergency as a consequence of the conditions described in Section 218.503(1), Florida Statutes.
As required by the Rules of the Auditor General (Section 10.554(1)(g)6.b.), we are required to determine that the annual financial report for Utilities Commission, City of New Smyrna Beach, Florida, required to be filed with the Florida Department of Banking and Finance pursuant to Section 218.32 (l)(b), Florida Statutes is in agreement with the annual financial audit report for the fiscal year ended September 30, 2003. This report has not yet been completed by the Commission's oversight unit (City of New Smyrna Beach, Florida, Unit ID#251) at the time of submitting this report. Upon completion of the annual financial report, we will compare the reported data with that data contained in their audited financial statements to confirm that both are in agreement. Should it be determined by us that the data reported in the annual financial report is not in agreement with the Commission's audited financial statements, we will promptly report our findings to you in an amended or supplemental management letter.
As required by the Rules of the Auditor General (Sections 10.554(g)(6)c. and 10.556), we applied financial condition assessment procedures at September 30, 2003. It is management's responsibility to monitor the entity's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same.
This management letter is intended solely for the information of Utilities Commission, City of New Smyrna Beach, Florida and its management, and the State of Florida Office of the Auditor General and is not intended to be and should not be used by anyone other than these specified parties.
November 10, 2003 73