ML061380671

Audited Financial Statements, September 30, 2005 and 2004

ML061380671
Person / Time
Site:	Crystal River
Issue date:	09/30/2005
From:	Hearn J, Ksionek K, Willis M Orlando Utilities Commission
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
3F0506-06
Download: ML061380671 (178)

Text

Audited financial statements Orlando Utilities Commission IOuCh September 30, 2005 and 2004 I TheReabletOne 7

k~fLkkLIAW.1 A A A COMBINED FINANCIAL HIGHLIGHTS September 30  % Increase (Dollars in thousands) 2005 2004 (Decrease)

Total operating revenues $ 754,260 $ 673,107 12.1%

Total operating expenses 645,034 574,772 12.2%

Interest, gain and other income 16,049 25,436 (36.9%)

Interest expense 68,551 71,004 (3.5%)

Income before contributions 56,724 52,767 7.5%

Dividend payment 34,034 31,660 7.5%

Utility plant, net 1,765,676 1,746,342 1.1%

Total assets 2,547,134 2,545,196 0.1%

Long-term debt, net 1,351,781 1,387,423 (2.6%)

Net assets 762,500 725,203 5.1%

Bond ratings (1) AA, Aal, AA AA, Aal, AA Debt service coverage:

Current debt sevice 2.26 2.24 1.3%

ELECTRIC FINANCIAL HIGHLIGHTS Operating revenues $ 700,002 $ 622,708 12.4%

Fuel and purchased power 373,880 318,558 17.4%

Operating expenses excluding fuel and storm recovery 228,255 199,101 14.6%

Storm recovery expenses - 5,856 (100.0%)

WATER FINANCIAL HIGHLIGHTS Operating revenues $ 54,258 $ 50,399 7.7%

Operating expenses excluding storm recovery 42,899 38,110 12.6%

Storm recovery expenses - 147 (100.0%)

ELECTRIC STATISTICAL HIGHLIGHTS Total sales (MWH) 8,703,050 8,538,879 1.9%

Total retail sales (MWH) 5,350,346 5,162,022 3.6%

Sales for resales (MWH) 3,352,704 3,376,857 (0.7%)

Total active services (2) 192,194 183,492 4.7%

Average annual residential use (KWH) 13,058 12,767 2.3%

Average residential revenue per KWH 9.79¢i 8.99¢e 8.9%

Heating degree days 501 554 (9.6%)

Cooling degree days 3,468 3,416 1.5%

Gross peak demand (MW) 1,141 1,100 3.7%

WATER STATISTICAL HIGHLIGHTS Total sales (in thousands of gallons) 28,980,351 27,830,809 4.1%

Total active services 130,719 126,712 3.2%

Average annual residential usage (gallons) 140,660 141,199 (0.4%)

Average residential revenue per 1000 gallons $ 1.87 $ 1.81 3.6%

Rainfall (inches) 64.20 52.60 22.1%

Peak pumping (million gallons per day) 109 118 (8.1%)

1. Bond Rating Agencies: Fitch Investors Service, Inc., Moody's Investors Service, and Standard & Poor's, respectively.

2. Excludes inactive and streetlight services.

For more detailed statistical information, see OUC's Ten-Year Financial & Statistical Information Report.

AI E=1 M101 ORLANDO UTILITIES COMMISSION SEPTEMBER 30, 2005 AND 2004 Commission Members & Officers Tommy Boroughs, Esq.

President Lonnie C Bell First Vice President Katie Porta Second Vice President Tico Perez, Esq.

Immediate Past President Buddy H. Dyer Mayor - Commissioner Kenneth P Ksionek Secretary John E. Hearn Sharon L. Knudsen Elizabeth M. Mason Assistant Secretaries Management Table of Contents Kenneth P. Ksionek General Manager and Management's Discussion 3 Chief Executive Officer and Analysis Alvin C. Frazier Vice President Corporate Services Statements of Net Assets 10 Frederick F. Haddad, Jr.

Statements of Revenues, 12 Vice President Power Resources Expenses and Changes in Roseann E. Harrington Net Assets Vice President Marketing, Communications & Community Relations Statements of Cash Flows 13 John E. Hearn Notes to Financial Statements 14 Vice President Financial Services and Chief Financial Officer Independent Auditors' Report 32 Byron A. Knibbs Vice President Electric Distribution Gregory T. Rodeghier Vice President Information Technology and Co-Chief Information Officer Douglas M. Spencer Vice President OUCustomer Connection Thomas B. Tart, Esq.

Vice President Legal Services and General Counsel Thomas E. Washburn Vice President Transmission and Chief Information Officer 2 0 0 5 A U D I T E D F I N A N C I A L S TAT E M E N T S IAl

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1 2005 AUDITED FINANCIAL STATEMENTS

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h iaca hol Thsdsuso era ncojnto ihth iaca tteet n oe t This discussion should be read in conjunction with the Financial Statements and Notes to the Financial Statements.

Management's Report The management of Orlando Utilities Commission (OUC) has prepared - and is responsible for - the integrity and objectivity of the financial statements and related information included in this report. The financial statements have been prepared in accordance with generally accepted accounting principles and follow the standards outlined by the Governmental Accounting Standards Board.

To ensure the integrity of our financial statements, OUC maintains a system of internal accounting controls. These internal accounting controls are supported by written policies and procedures and an organizational structure that appropriately assigns responsibilities to mitigate risks. These controls have been put in place to ensure OUC's assets are properly safeguarded and the books and records reflect only those transactions that have been duly authorized. OUC's controls are evaluated on an ongoing basis by both management and OUC's internal auditors.

In addition, Deloitte & Touche LLP, OUC's independent public accountants, considers certain elements of the internal control system to determine their auditing procedures for the purpose of expressing an opinion on the financial statements.

Based on the statements above, it is management's assertion that the financial statements do not omit disclosures necessary for a fair presentation of the information nor do they improperly include untrue statements of a material fact or statements of a misleading nature.

Kennkh R Ksianek General Manager &

X=J I hnEearn

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Vice President &

Mindy F.Wil is Director Chief Executive Officer Chief Financial Officer Accounting Services 2005 AU DITE D FINAN CIAL STATEM ENTS I I A3

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to OUC's financial statements. It defines the basic financial statements and summarizes OUC's general financial condition and results of operations.

Basic Financial Statements The basic financial statements are prepared to provide the reader with a comprehensive overview of OUC's financial position, results of operations and cash flows.

The Statements of Net Assets present information on all of OUC's assets and liabilities with the difference between these two amounts being reported as net assets. OUC's assets are separated based on their nature. Utility plant includes assets that are both in service and currently under construction. Restricted and internally designated assets include cash and cash equivalents either legally or internally restricted by Commission action.

The Statements of Revenues, Expenses and Changes in Net Assets present both current and prior year revenues and expenses. Operating results are reported separately from non-operating and contributions in aid of construction.

Non-operating income and expenses are primarily the result of current and prior year financing and investing activities.

Contributions in aid of construction are comprised of amounts received from residential and commercial customers for system enhancements.

The Statements of Cash Flows are presented using the direct method. This method outlines the sources and uses of cash as it relates to operating income. Also included in the cash flow statements are classifications for non-capital related financing, capital related financing, and investing activities.

Financial Highlights Summary of Financial Position Years Ended September 30 (Dollars inthousands) 2005 2004 2003 Assets Utility plant, net $ 1,765,676 $ 1,746,342 $ 1,704,987 Restricted and internally designated assets 461,639 473,917 545,166 Current assets 257,371 231,844 211,379 Other assets 62,448 93,093 26,539 Total assets $ 2,547,134 $ 2,545,196 $ 2,488,071 Liabilities and net assets Long-term debt, net $ 1,351,781 $ 1,387,423 $ 1,261,883 Current liabilities 205,499 190,259 247,644 Other liabilities and deferred credits 227,354 242,311 288,403 Net assets 762,500 725,203 690,141 Total liabilities and net assets $ 2,547,134 $ 2,545,196 $ 2,488,071 Summary of Revenues, Expenses and Changes in Net Assets Operating revenues $ 754,260 $ 673,107 $ 559,713 Operating expenses 645,034 574,772 443,007 Operating income 109,226 98,335 116,706 Net non-operating expense (52,502) (45,568) (61,689)

Income before contributions 56,724 52,767 55,017 Contributions in aid of construction 14,607 13,955 10,348 Annual dividend (34,034) (31,660) (32,991)

Increase in net assets 37,297 35,062 32,374 Net assets - beginning of year 725,203 690,141 657,767 Net assets - end of year $ 762,500 $ 725,203 $ 690,141 2005 2 AUDITED FINANCIAL STATEMENTS

Assets Utility plant, net:

2005 compared to 2004: In2005, utility plant increased $19.3 million net of accumulated depreciation. Current year plant additions were $112.7 million of which 23% or close to $26 million was incurred for transmission improvements to the St. Cloud and Lake Nona substations. An additional $39.5 million was spent for Distribution related projects and

$12.7 million of new utility plant assets were capitalized for Chilled Water in conjunction with the completion of the north loop of the downtown district. Also during 2005, $4 million was incurred for the implementation of a Customer Information System.

2004 compared to 2003: In 2004, utility plant increased $41 million net of accumulated depreciation. New plant additions including construction work in progress amounted to $112 million and included the completion of the additional shared facilities at the Stanton Energy Center. These facilities were constructed to support the operations at the Stanton A (SECA) generation plant and are owned by OUC and the participants of Stanton Units 1 & 2, at their proportionate ownership interests. Costs incurred to construct these facilities spanned from 2003 to 2004 and totaled

$32 million. Distribution/transmission and water projects also contributed to the amount of assets capitalized with additions of $48 million and $13 million, respectively, including the expansion of two substations and the completion of the Sky Lake water treatment plant. Chilled water operations incurred construction costs of $10 million to construct the north loop of the downtown district. Inaddition, chilled water net plant assets increased by $18 million as a result of OUC's acquisition of Trigen-Cinergy Solutions' (TCS) rights in the chilled water operations in April 2004. TCS' rights were netted against utility plant in 2003 to properly reflect their share of future revenue streams.

Utility plant, net at September 30 2,000 - (Dollars inmillions) 1,600 -

1,200-800 400 0

2003 2004 2005 l Electric U Water U Chilled Water 0 Common Capital asset settlement:

In July 2005 OUC negotiated a settlement with the Florida Department of Transportation (FDOT) as a result of an eminent domain action to secure a portion of the land under which OUC's Administration building's parking garage resides for the expansion of the 1-4/SR 408 interchange. The negotiated settlement with the FDOT includes a cash settlement in the amount of $15 million and the exchange of land parcels. The cash proceeds from this transaction have been designated by OUC's governing board for transition and future capital asset costs related to the taking of the land at the Administration building site. These proceeds, net of $1.6 million of costs incurred to date, have been included in the renewal and replacement fund at September 30, 2005.

In respect to the capital assets associated with this transaction, OUC early adopted Governmental Accounting Standard No. 42 Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries. In accordance with this guidance OUC recognized an impairment expense to write-down the Administration building to the lower of cost or market in the amount of $6.7 million. In addition to the impairment expense, OUC relocated its Customer Service operations to ensure customer access during the upcoming construction period. Total costs for the relocation as well as temporary parking facilities for those remaining at the Administration building site during construction are estimated at $6 million of which $1.6 million was spent in 2005. Accrued transition costs that have not yet been incurred as of September 30, 2005, $4.4 million, are included in the Statement of Net Assets under the heading of Accounts payable and accrued expenses. The remaining proceeds from the settlement, $2.3 million, were deferred and included on the Statement of Net Assets as regulatory liabilities at September 30, 2005.

2005 AU D I T E D F I N A N C I A L S TAT E M E N T S A5

Assets (continued)

Restricted and Internally designated assets:

2005 compared to 2004: Restricted and internally designated assets decreased $12.3 million in 2005. This overall change is the result of several key factors including the use of $11.1 million in fuel stabilization funds to mitigate rising fuel prices and $32.5 million used for capital projects including the transmission and chilled water projects. These uses were offset by the replenishment of $11 million of renewal and replacement funds for grant funds received under the Federal Emergency Management program, the receipt of $13.4 million of net funds from the FDOT for the capital asset settlement, increases in deposits and advances including a $3 million increase of funds received from the Stanton A generation facility participants to cover their portion of current estimated fuel costs and increased reserve funds as a result of annual requirements in the amount of $5.9 million.

2004 compared to 2003: Restricted and internally designated assets decreased $71 million in 2004. This decrease is due to a combination of several different items including the use of $52 million of construction funds for capital assets, the use of $17 million of fuel stabilization funds to mitigate higher fuel costs, the planned usage of $21 million of liability reduction and base rate stabilization funds to offset changes in the wholesale energy markets and the use of $10 million of renewal and replacement funds for hurricane restoration. These usages were offset by the recovery of $12 million of liability reduction funds from the defeasance of debt in 2002, the increase of $6 million of designated principal debt service requirements as a result of the issuance of the pension bonds in November 2003, the increase of $9 million for designated system development costs and other deposits and advances.

Current assets:

2005 compared to 2004: Current assets increased in 2005 as a result of the higher fuel cost component of retail and wholesale customer receivables as well as the impact of this change on accrued unbilled receivables.

2004 compared to 2003: Current assets increased in 2004 as a result of the culmination of small fluctuations including a slight increase in operating cash, customer and participant receivables offset by lower fuel for generation inventory.

Other assets:

2005 compared to 2004: Other assets decreased $30.6 million as compared to prior year primarily due to the recovery of $25 million of storm restoration costs under the Federal Emergency Management program from hurricanes Charley, Frances and Jeanne in 2004. The remaining change isthe result of the amortization of the long-term advance pension funding of $3 million and the systematic amortization of other deferred regulatory assets.

2004 compared to 2003: In 2004, other assets increased $66 million. This increase was due to the advance funding of the actuarial pension liability, the deferral of net storm restoration costs anticipated to be recovered from the Federal Emergency Management Agency and the State of Florida Department of Community Affairs and the initial lump sum payment of $5 million for current contracted customers as part of OUC's acquisition of TCS's 51% share of the chilled water operations. The advance funded pension amount was provided by the issuance of $55 million in bonds in November 2003, and is being systematically amortized over a fifteen-year period. In 2004, $2.5 million was recognized in the Statements of Revenues, Expenses and Changes in Net Assets under the Unit/department expenses heading and

$3 million was reclassified to current assets for charges to be recognized in 2005. The long-term advance pension fund amount and the deferred storm restoration costs are $49 million and $25 million, respectively, at September 30, 2004.

Liabilities Long-term debt, net:

2005 compared to 2004: In 2005 long-term debt, net decreased as a result of the annual required principal payment and systematic amortization of unamortized discounts and deferred amounts. OUC continues to maintain its credit ratings as follows:

Fitch Investors Service AA Moody's Investors Service Aal Standard & Poor's AA 2005 AUDITE D FINAN CIAL STATE MENTS A6

Liabilities (continued)

Long-term debt, net (continued):

2004 compared to 2003: Long-term debt, net of unamortized discounts and deferred amounts on refunding, increased in 2004 as compared to 2003 due to the refunding of $100 million of outstanding bond anticipation notes scheduled to mature in September 2004 and the issuance of taxable variable rate debt in the amount of $55 million to fund a portion of the accrued pension actuarial liability. In August 2004, OUC issued $217 million of fixed rate debt to refund outstanding bonds totaling $131 million and outstanding bond anticipation notes of $100 million.

The issuance of the taxable pension bonds in November 2003 activated the provisions of the General Bond Resolution, which places all debt on a parity basis and modifies several previous resolution covenants. OUC's credit ratings were affirmed subsequent to the activation of this resolution.

Current liabilities:

2005 compared to 2004: Current liabilities increased in 2005 as compared to 2004 as a result of rising fuel prices and the accrual of eminent domain transition costs offset by the exclusion of storm restoration accruals in 2004.

2004 compared to 2003: The decrease in current liabilities is primarily due to the refunding of $100 million of bond anticipation notes that were scheduled to mature in September 2004. These notes were refunded in August 2004.

This decrease was offset by a $36 million increase in accounts payable and accrued expenses including payables related to OUC's storm restoration efforts and higher fuel and purchased power payables.

Other liabilities, deferred charges and commitments:

2005 compared to 2004: Other liabilities decreased in 2005 as a result of the usage of $11.1 million of fuel stabilization funds to mitigate higher fuel costs and the planned usage of $10.1 million in liability reduction and deferred gain on sale funds to mitigate the demand payments and annual depreciation costs of the new Stanton A generation facility.

In 2005 OUC's governing board approved the execution of the joint development of the Clean Coal Technology project at the Stanton Energy Center. The estimated total project cost is $792 million of which $305 million will be contributed by OUC. A grant in the amount of $235 million has been provided from the Department of Energy and the remaining amount is to be provided by Southern Company.

2004 compared to 2003: The change in other liabilities and deferred charges as compared to 2003 is due to the use of $50 million of regulatory deferrals including $17 million of fuel stabilization funds and the planned usage of asset transition and base rate stabilization funds of $21 million.

Changes in Net Assets Operating revenues:

2005 compared to 2004: In 2005, operating revenues increased $81 million or 12% as compared to 2004 primarily due to the increased recovery of rising fuel and purchased power costs for retail and resale revenue. Rising fuel and purchased power costs accounted for close to $65.7 million of the total change in revenues in 2005. In addition to this change, OUC recognized an increase in revenues as a result of warmer weather in the months of July and August, contributing to the overall annual 3%increase in electric consumption in 2005 as compared to 2004. Other changes to operating revenues included an increase in water revenues in 2005 as a result of a rate change and the continued enhancement of conservation rates.

Services fees which include revenues from the Chilled Water and Streetlight operating segment, also increased as a result of customer growth.

2004 compared to 2003: Total operating revenues increased $113 million or 20% as compared to 2003. The most significant portion of this increase was due to the recovery of rising fuel and purchased power costs for retail and resale electric fuel revenue. Retail and resale fuel revenue increased $75 million or 40% as compared to 2003 with 72% of this increase attributable to resale sales. Resale energy revenue was $10 million higher in 2004 as compared to 2003 due to the use of regulatory funds to mitigate higher fixed rate demand payments for purchased generation capacity.

Retail energy revenue is consistent with 2003 due to milder weather throughout the year. Milder weather was offset by an overall 4%growth in the electric services customer base. Water revenue in 2004 increased $4 million or 9%as compared to 2003 as a result of a 19% decrease in rainfall and a 3%growth in customer base.

2005 AU D IT ED FIN AN C IAL STATE M ENT S I I A7

Changes in Net Assets (continued)

Service fees increased $14 million or 67% in 2004 as compared to 2003. The sources of revenue under this heading have expanded over the past several years and now include shared facility revenue earned from the SECA generation facility in the amount of $5 million. In addition, the acquisition of TCS' operating rights in Chilled Water increased revenue as compared to 2003 by $4 million. Other increases include the implementation of late fees and continued expansion of streetlight revenue.

The following charts compare revenue by customer source:

September 30, 2005 September 30, 2004 r Waterr Operating expenses:

2005 compared to 2004: Fuel and purchased power costs increased $55 million or 17% as compared to 2004 due to rising fuel costs and a production increase of 4% in 2005 as compared to 2004, primarily stemming from increased usage of the Stanton A combined cycle generation facility.

Unit/department expenses increased $11.5 million in 2005 or 8% as compared to 2004. A portion of this increase is due to the exclusion of deferred internal labor costs as a result of Hurricanes Charley, Frances and Jeanne in 2004, higher utility costs as a result of rising fuel costs, increased water operational costs to ensure compliance with the new guidelines of the Consumptive Use Permit secured in May 2004 and overall inflationary cost increases.

Depreciation and amortization increased $5.8 million or 7% in 2005 as a result of new capital additions in both 2005 and 2004.

2004 compared to 2003: Costs related to fuel for generation and purchased power increased $97 million, or 44%. This increase is due to an increase in fuel prices and the number of megawatts generated. The average cost per megawatt generated in 2004 as compared to 2003 increased 38% as a result of volatile fuel prices and higher transportation costs. In respect to quantity, OUC generated 18% more megawatts in 2004 as compared to 2003. In 2004 the SECA purchased power agreement became effective increasing OUC's flexibility and the amount of megawatts acquired through purchased power agreements. In comparison to 2003 megawatts acquired through purchased power agreements increased 24%.

Unit/department expenses were $17 million or 15% higher in 2004 largely due to the increase in fringe benefit costs. Costs for pension and medical increased approximately $10 million in 2004. In addition, SECA operating costs were $6 million in 2004 as compared to $0 in 2003.

Depreciation and amortization increased $9 million or 13% as compared to 2003 as a result of the increase in OUC's utility plant base including the commencement of depreciation for the SECA generation plant and supporting shared facilities in the amount of $5 million. Also included under the heading of depreciation and amortization are amounts recorded for asset replacements prior to their maturity in the amount of $1.9 million.

l 20 0 5 AU DI T ED F INA NC IA L STATE MEN TS A8 Cot ~L

Changes in Net Assets (continued)

Net non-operating expense:

2005 compared to 2004: Total net non-operating expense increased $6.9 million as compared to 2004 as a result of a lower amount of deferred gain on sale funds recognized in 2005 offset by higher interest expense. In 2004 OUC amortized gain on sale funds of $14 million compared to $4million in 2005 net of the capital asset settlement gain and the eminent domain costs. This decrease was offset by higher interest expense in the amount of $2.5 million.

2004 compared to 2003: Total net non-operating expense decreased $16 million or 26% in 2004 as compared to 2003 largely due to the governing board's action to recognize $14 million of deferred gain on sale of assets. The remaining change of $1.6 million isdue to excess proceeds received from the restructuring of the escrow deposit trust fund for defeased bonds.

Contributions in aid of construction:

Contributions in 2005 were consistent with those received in 2004. In2004 however, contributions in aid of construction increased $3.6 million or 35% as compared to 2003 as aresult of OUC securing a higher amount of donated water utility plant assets from developers. Donated water utility assets increased $2million in 2004.

2005 AU DITED FINA NCIAL STATEM ENTS A9

A AI Assets Years Ended September 30 (Dollars in thousands) 2005 2004 Utility plant Electric $ 2,005,081 $ 1,935,795 Water 414,709 404,309 Chilled water 61,740 48,912 Common 128,395 125,247 Allowances for depreciation and amortization (957,195) (869,583) 1,652,730 1,644,680 Land and other non-depreciable assets 29,667 31,670 Construction work in progress 83,279 69,992 Total utility plant, net 1,765,676 1,746,342 Restricted and internally designated assets Restricted assets Decommissioning funds 34,698 31,948 Debt service reserve funds 46,023 46,122 80,721 78,070 Internally designated assets Liability reduction fund 151,096 190,491 Debt service sinking funds 66,814 63,142 Stabilization funds 50,669 60,887 Renewal and replacement fund 64,433 38,978 Deposits and advances 42,402 36,859 Self-insurance fund 5,504 5,490 380,918 395,847 Total restricted and internally designated assets 461,639 473,917 Current assets Cash and investments 73,535 83,077 Customer accounts receivable, less allowance for doubtful accounts (2005 - $954, 2004 - $1,499) 87,697 65,619 Accrued utility revenue 28,181 24,242 Fuel for generation 8,642 6,512 Materials and supplies inventory 31,300 29,231 Accrued interest receivable 2,218 2,322 Miscellaneous receivables and prepaid expenses 25,798 20,841 Total current assets 257,371 231,844 Other assets Long-term advance pension asset 46,216 49,167 Regulatory assets 6,937 8,838 Other deferred costs 6,035 31,536 Deferred debt costs 3,260 3,552 Total other assets 62,448 93,093 Total assets $ 2,547,134 $ 2,545,196 See notes to the financial statements.

1 2005 AU D IT E D FI NA N C IA L STATE M E N TS

Liabilities Years Ended September 30 (Dollars in thousands) 2005 2004 Current liabilities Payable from restricted assets Accrued interest payable on notes and bonds $ 28,744 $ 27,744 Current portion of long-term debt 38,560 35,575 Customer meter deposits 26,099 24,846 Total payable from restricted and designated assets 93,403 88,165 Payable from current assets Accounts payable and accrued expenses 97,779 90,055 Billings on behalf of state and local governments 12,398 10,661 Accrued governmental payments 3,600 1,890 Accrued swap (receivables)/payables (1,681) (512)

Total payable from current assets 112,096 102,094 Total current liabilities 205,499 190,259 Other liabilities and deferred credits Regulatory liabilities 155,976 173,716 Deferred revenue 22,839 23,224 Asset retirement obligation and other liabilities 48,539 45,371 Total other liabilities and deferred credits 227,354 242,311 Long-term debt Bond and note principal 1,395,890 1,434,450 Unamortized discount and deferred amount on refunding (44,109) (47,027)

Total long-term debt, net 1,351,781 1,387,423 Total liabilities $ 1,784,634 $ 1,819,993 Net Assets Invested in capital assets, net of related debt $ 518,926 $ 460,349 Unrestricted 243,574 264,854 Total net assets $ 762,500 $ 725,203 See notes to the financial statements.

2005 AU D I T E D FI N A N CIA L S TATE M E N TS I I All

A-I A x A A AI Years Ended September 30 (Dollars inthousands) 2005 2004 Operating revenues Retail electric revenue, net $ 428,043 $ 387,434 Resale electric revenue, net 232,218 200,193 Water revenues, net 54,251 50,261 Other revenues 39,748 35,219 Total operating revenues 754,260 673,107 Operating expenses Fuel for generation and purchased power 373,880 318,558 Unit/department expenses 147,805 136,333 Storm recovery expenses - 6,003 Depreciation and amortization 85,570 79,768 Payments to other governments and taxes 37,779 34,110 Total operating expenses 645,034 574,772 Operating income 109,226 98,335 Non-operating income and expenses Interest income 9,238 9,201 Other income, net 2,840 2,229 Amortization of deferred gain on sale of assets 3,971 14,006 Interest expense (68,551) (71,004)

Total net non-operating expense (52,502) (45,568)

Income before contributions 56,724 52,767 Contributions in aid of construction 14,607 13,955 Annual dividend (34,034) (31,660)

Increase in net assets 37,297 35,062 Net assets - beginning of year 725,203 690,141 Net assets - end of year $ 762,500 $ 725,203 See notes to the financial statements.

l 2005 AUDITED FINANCIAL STATEMENTS A12

A A Years Ended September 30 (Dollars in thousands) 2005 2004 Cash flows from operating activities Cash received from customers $ 710,245 $ 631,648 Cash paid for fuel and purchased power (364,435) (313,039)

Cash paid for unit/department expenses (131,271) (123,540)

Cash received/(paid) for storm recovery expenses 16,482 (22,485)

Cash paid to other governments and taxes (37,404) (33,862)

Net cash provided by operating activities 193,617 138,722 Cash flows from non-capital related financing activities Dividend payment (32,700) (35,495)

Net cash used in non-capital related financing activities (32,700) (35,495)

Cash flows from capital related financing activities Debt interest payments (66,742) (66,084)

Principal payments on long-term debt (35,575) (261,980)

Debt issuances - 288,735 Debt issuance expenses (640) (543)

Advance pension payments - (54,600)

Capital asset settlement funds provided/(used) 13,338 Construction and acquisition of utility plant net of contributions (105,294) (100,723)

Net cash used in capital related financing activities (194,913) (195,195)

Cash flows from investing activities Proceeds from sales and maturities of investment securities 232,197 544,702 Proceeds from gain on sale of investments - 12,950 Purchases of investment securities (203,529) (548,278)

Investments and other income 14,590 18,027 Net cash provided by investing activities 43,258 27,401 Net increase/(decrease) in cash and cash equivalents 9,262 (64,567)

Cash and cash equivalents - beginning of year 125,367 189,934 Cash and cash equivalents - end of year $ 134,629 $ 125,367 Reconciliation of operating income to net cash provided by operating activities Operating income $ 109,226 $ 98,335 Adjustments to reconcile operating income to net cash provided by operating activities Depreciation and amortization of plant charged to operations 85,570 79,768 Depreciation and amortization charged to fuel for generation and purchased power 1,833 2,258 Depreciation of vehicles and equipment charged to unit/department expenses 1,604 1,573 Changes in assets and liabilities Increase in receivables and accrued revenue (27,407) (6,062)

(increase)/decrease in fuel and materials and supplies inventories (11,244) 1,169 Increase in accounts payable 25,954 17,342 Increase/(decrease) in deposits payable and deferred costs 24,755 (20,910)

Decrease in stabilization and deferred revenue (16,674) (34,751)

Net cash provided by operating activities $ 193,617 $ 138,722 Reconciliation of cash and cash equivalents Restricted and internally designated investments $ 64,552 $ 91,219 Cash and investments 25,855 25,695 Construction and related funds 11,945 7,030 Debt service and related funds 32.277 1,423 Cash and cash equivalents at the end of the year $ 134,629 $ 125,367 See notes to the financial statements.

20 05 A U D ITE D FI N A N CIA L S TATE M E N TS I IAl3

• A Aa Note A - The Organization Orlando Utilities Commission (OUC) was created in 1923 by a Special Act of the Florida Legislature as a statutory commission of the State of Florida. The Act confers upon OUC the rights and powers to set rates and charges for electric and water services. OUC isresponsible for the acquisition, generation, transmission and distribution of electric and water services to its customers within Orange and Osceola Counties.

OUC's governing board consists of five members including the Mayor of the City of Orlando. Members serve without compensation and with the exception of the Mayor, who isan ex-officio member of OUC, may serve no more than two full consecutive four-year terms.

Note B - Summary of Significant Accounting Policies Reporting entity: OUC meets the criteria of an "other stand-alone government" as defined in Governmental Accounting Standards Board Statement No. 14, The Financial Reporting Entity and No. 39, Determining Whether Certain Organizations are Component Units.

Within OUC's stand-alone government reporting structure are undivided interests in several utility plants, which are operated through participation agreements and are described in Note D.Title to the property isheld in accordance with the terms defined in each agreement, and as such, each party isobligated for its contractual share of operations. There are no separate entities or organizations associated with these agreements.

Measurement Focus, Basis of Accounting, and Financial Statement Presentation: OUC reports operating revenues and expenses separately from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering utility service in the forms of electric, water and chilled water. The principal operating revenues are charges to retail and wholesale customers and are recorded net of the provision for uncollectible accounts. Operating expenses include fuel and purchased power, unit/department, taxes, and depreciation on capital assets. All revenues and expenses incurred outside of these definitions are reported as non-operating revenues and expenses.

Basis of presentation: The financial statements of OUC are presented in conformity with generally accepted accounting principles for enterprise funds as prescribed by the Governmental Accounting Standards Board (GASB) and in accordance with the accounting principles prescribed by the Financial Accounting Standards Board (FASB),

where not in conflict with GASB. The accounting records are maintained in accordance with the accounting principles and methods prescribed by the Federal Energy Regulatory Commission (FERC) with the exception of contributions in aid of construction which are recorded in accordance with the standards prescribed by GASB.

OUC isa regulated enterprise and, as such, applies the accounting principles permitted by Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation (SFAS 71). Under SFAS 71, certain expenses and revenues are deferred and recognized in accordance with rate actions of OUC's governing board.

OUC has elected not to apply FASB statements and interpretations issued after November 30, 1989, as permitted by Governmental Accounting Standards Board Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and other Governmental Entities.

Recent accounting pronouncements: In2005, OUC implemented the following Governmental Accounting Standards:

• Statement of Governmental Accounting Standard (SGAS) No. 40, Deposit and Investment Risk Disclosures.

The implementation of this statement enhances the disclosures for cash, cash equivalents and investments and is included in Note E.

1 200 5 AU D ITE D F I N A N C IA L STATE M E N TS

=I Note B - Summary of Significant Accounting Policies (continued)

Statement of Governmental Accounting Standard (SGAS) No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries. This standard was early implemented in conjunction with the eminent domain action taken by the Florida Department of Transportation (FDOT). The action resulted in the taking of OUC's Administration building parking garage for the expressway enhancement project and isdisclosed in Note F - Regulatory Deferrals. A portion of this settlement, in accordance with OUC's governing board's action, was recorded as a regulatory liability.

Additional pronouncements issued by GASB currently being evaluated by OUC for future implementation are as follows:

• Statement of Governmental Accounting Standards (SGAS) No. 43 and 45, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans and Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, respectively.

• Statement of Governmental Accounting Standards (SGAS) No. 44, Economic Condition Reporting: The Statistical Section - an amendment to NCGA Statement 1.

Setting of rates: According to the existing laws of the State of Florida, the five board members of OUC act as the regulatory authority for the establishment of electric and water rates. These rates are set in accordance with the "rate structures" established by the Florida Public Service Commission (FPSC). The FPSC has the jurisdiction to regulate the electric "rate structures" of municipal utilities in Florida. A rate structure is defined as the rate relationship between customer class and among customers within rate classes and is distinguishable from the total amount of revenue requirements a utility may receive from rates.

Periodically OUC performs a rate adequacy study to determine the electric base and fuel revenue requirements.

Based on this study, current cost-of-service studies and regulations of the FPSC regarding electric rate structures, OUC's staff develops the electric rate schedules. Prior to the implementation of any rate change, OUC notifies customers individually, holds a public workshop, presents the rates to the governing board for approval and files the proposed tariffs with the FPSC. Water base rate requirements are studied and prepared in a similar manner excluding filing notification with the FPSC.

As a result of rising fuel prices, effective June 1, 2004 and March 1, 2005, OUC's governing board approved average electric fuel rate increases of 20.9% and 17.6%, respectively. The impact of these changes increased electric retail revenue 8%as compared to 2004. In addition, in November 2005 in response to continued rising fuel prices, OUC's governing board approved an average electric fuel rate increase of 41.3%. This change is effective January 2006. In respect to water rates, a 10% rate increase became effective on October 1, 2004.

Budgets: Revenue and expense budgets are prepared on an annual basis in accordance with OUC's budget policy and bond resolutions and submitted to the OUC board for approval prior to the beginning of the fiscal year. Legal adoption of budgets is not required. Actual revenues and expenses are compared to the budget by operating unit as well as by line item. Variance analyses are prepared and submitted to OUC's governing board each month as required by OUC's budget policy and bond resolutions.

Utility plant: Utility plant is stated at historical cost with the exception of the fair value assets recorded in accordance with FERC Order 631, Accounting, Financial Reporting, and Rate Filing Requirements for Asset Retirement Obligations.

Historic utility plant costs include the costs of contract work, labor, materials and allocated indirect charges for equipment, supervision and engineering. The fair value assets for the nuclear generation facilities, in accordance with FPSC requirements, are subject to re-measuring every five years. The cost of electric or water utility plant assets retired, together with removal costs less salvage, are charged to accumulated depreciation with the exception of mass units of property which are accounted for under the vintage method of depreciation. In addition, when utility plant constituting an operating unit or system is sold or disposed of, the gain or loss on the sale or disposal is recorded as a gain (loss) on disposition of property unless regulatory action is taken by the governing board.

All assets are depreciated systematically using the straight-line method over the estimated useful life or license period of the asset. Total depreciation as a percentage of total depreciable assets was 3.1% and 3.2% for 2005 and 2004, respectively.

2005 AU D IT ED F IN AN CIA L STATE MENTS A

A15

Note B - Summary of Significant Accounting Policies (continued)

Cash, cash equivalents and investments: Cash equivalents include all authorized instruments purchased with an original maturity date of three months or less including all investments in the Surplus Funds Investment Pool Trust Fund and money market funds. These instruments and the money market funds are reported at amortized cost and the Florida Local Government Surplus Funds Trust Fund (SBA), an external 2a-7 investment pool, is presented at the share price.

Investments are reported at fair market value with the exception of the funds held in the Debt Service Reserve funds. The Debt Service Reserve funds, in accordance with OUC's ratemaking model and their intention to retain these investments until the related debt instruments have reached maturity or the series has been refunded, are recorded at amortized cost. As a result of refunding activity in 2003 and 2004, the difference between amortized cost and fair value at September 30, 2005 and 2004 is immaterial. Realized and unrealized gains and losses for all investments except those executed in conjunction with a bond refunding are included in interest income on the Statements of Revenues, Expenses and Changes in Net Assets. Realized gains recognized as a result of bond refunding are included in unamortized discount and deferred amount on refunding. Premiums and discounts on bonds and other investments are amortized using the effective interest method.

Derivative instruments: Fuel related derivative transactions are executed in accordance with OUC's internally established Energy Risk Management Oversight Committee (Committee) whose primary objective is to minimize exposure to energy price volatility for cash flow and control purposes. The Committee has a defined organizational structure and responsibilities, which include approving all brokerage relationships, counter-party credit worthiness, and overall program compliance. In addition, the Energy Risk Management Program was established with specific volume and financial limits, which are 20%/ of the annual fuel budget and $30 million of the gross current market value of the derivatives. The recording of fuel derivatives, when appropriate, is included on the Statements of Net Assets as either an asset or liability measured at fair market value. Related gains and/or losses are deferred and recognized in the specific period in which the derivative is settled and included as a part of Fuel for generation and purchased power costs in the Statements of Revenues, Expenses and Changes in Net Assets.

Financial related derivative transactions and interest rate swap agreements are executed to modify interest rates on outstanding debt. Periodically, as defined by the underlying agreement, the net differential between the fixed and variable rates is exchanged with the counter party and included as part of interest expense. No fair market value amounts related to these agreements are recorded on the Statements of Net Assets. Fair value amounts of these financial instruments are included in Note H.

Accounts receivables: OUC bills customers monthly on a cyclical basis. OUC recognizes an estimate of uncollectible accounts for its receivables based upon its historical experience with collections, and current energy market conditions.

Bad debt for estimated uncollectible accounts is recorded as a reduction of operating revenues in the Statements of Revenues, Expenses and Changes in Net Assets.

Miscellaneous receivables include billings to power plant participants for their proportionate share of fuel, operating and capital costs. At September 30, 2005 and 2004 receivables from these participants are $7.9 million and

$8.3 million, respectively.

The customer net accounts receivable balance of $87.7 million and $65.6 million at September 30, 2005 and 2004, respectively, includes billings on behalf of the State and other local governments, net of administrative expenses of $12.4 million and $10.7 million, respectively. All receivables classified as current assets are anticipated to be collected within an operating cycle.

Accrued utility revenue: Revenues consumed but not billed at the end of the fiscal year for electric, water and chilled water are accrued.

Fuel for generation, materials and supplies inventory: Fuel oil, coal, materials and supplies inventories are stated at their average cost. Nuclear fuel is included in utility plant and amortized to fuel expense as it is used.

Prepaid expenses: Prepaid expenses represent costs that are anticipated to be recognized in the Statements of Revenues, Expenses and Changes in Net Assets in the near future including deferred long-term service agreement costs and current year advance pension funding amounts. Prepaid expenses at September 30, 2005 and 2004 are

$7.1 million and $3.5 million, respectively.

1 2005 AUDITED FINANCIAL STATEMENTS

Note B - Summary of Significant Accounting Policies (continued)

Long-term advance pension asset: The long-term advance pension funding at September 30, 2005 and 2004 is

$46.2 and $49.2 million, respectively, and is being amortized based on annual actuarial valuations consistent with the maturity period of the related pension obligation bonds included in Note H.

Deferred debt: Deferred debt costs represent costs related to bond issuances, which are amortized using the bonds outstanding method and recorded net of accumulated amortization.

Unamortized discount and deferred amount on refunding: Unamortized discount on outstanding bonds is amortized using the bonds outstanding method and is recorded net of accumulated amortization. Deferred amounts on refunding represent deferred losses from bond refundings. These amounts are amortized over the shorter of the lives of the refunded debt or refunding debt using the straight-line method and are recorded net of accumulated amortization.

Accounts payable and accrued expenses: Included in this amount are vendor payables, accrued fuel costs including purchased power agreements, advance payments from power plant participants, and accrued wages including earned benefit time. The following table summarizes the significant payable balances included under this heading:

September 30 (Dollars in thousands) 2005 2004 Fuel and purchased power payables $ 56,543 $ 33,292 Vendor payables 18,630 38,418 Accrued earned benefit time 8,008 8,157 Advance payments from power plant participants 4,266 3,826 Other accounts payable and accrued expenses 10,332 6,362 Total $ 97.779 $ 90,055 Deferred revenue: Deferred revenue represents advanced funds received for future services that are amortized over a period consistent with the service agreement. In October 1999 in conjunction with the sale of the Indian River Plant OUC received prepaid transmission access fees that are being amortized over the life of the agreement.

Deferred revenue related to this agreement at September 30, 2005 and 2004 is $16.1 million and $16.9 million, respectively.

Asset retirement obligation and other liabilities: Included in this amount are the asset retirement obligations (ARO) related to the legal requirement of decommissioning OUC's interest in the St. Lucie Unit 2 and Crystal River Unit 3 nuclear generation facilities and advances from customers for construction. The asset retirement obligation was determined based on the most recent approved FPSC report provided to OUC by the owner-operators of these plants. The amount estimated for decommissioning of these facilities, in 2000 dollars, was $26.7 million and

$8.6 million for St. Lucie Unit 2 and Crystal River Unit 3, respectively. Adjusted to 2003 dollars, based on FPSC approved earnings rates, these amounts are $31.4 million and $9.6 million, respectively and the accretion period is consistent with each plant's license period. Amounts recorded at September 30, 2005 and 2004 were $33.2 million and $32.1 million and $11.4 million and $10.8 million, for St. Lucie Unit 2 and Crystal River Unit 3, respectively.

License expirations for St. Lucie and Crystal River are 2043 and 2016, respectively.

Contributions in aid of construction: Funds received from developers and customers for assets owned and maintained by OUC as well as funds received for system development fees are recorded as contributions in aid of construction in the period in which they have been received on the Statements of Revenues, Expenses and Changes in Net Assets.

Reclassifications: Certain amounts in 2004 have been reclassified to conform to the 2005 presentation.

2005 AU D ITE D FI N AN CIA L STATE M ENTS I A17

Note C - Utility Plant Utility plant: Utility plant costs include the costs of contract work, labor, materials and allocated indirect charges for equipment, supervision and engineering as well as the fair value assets related to the retirement obligations of the nuclear generation facilities. The majority of OUC's assets are self constructed and as such are accumulated through the construction work in progress system and capitalized to fixed assets as a transfer upon completion of the project. Accordingly, a substantial amount of the utility plant additions are reflected as transfers. Assets either acquired or capitalized from construction work in progress are depreciated over the following useful lives:

Electric 5 -50 Years Water 3 - 50 Years Common and Chilled Water 3 -50 Years Activity for the years ended September 30, 2005 and September 30, 2004 including the impairment impact on the Administration building as a result of the eminent domain action (see Note F)are as follows:

September Retirements/ September (Dollars in thousands) 2004 Additions Transfers reclassifications 2005 Utility plant Electric $ 1,935,795 $ 9,717 $ 65,951 $ (6,382) $ 2,005,081 Water 404,309 3,227 8,050 (877) 414,709 Chilled Water 48,912 - 12,705 123 61,740 Shared/customer service 125.247 1.640 92 1,416 128,395 Total utility plant 2.514.263 14.584 86.798 (5,720) 2,609,925 Accumulated depreciation Electric (710,829) (64,079) 32 2,245 (772,631)

Water (91,786) (12,849) 3 2,243 (102,389)

Chilled Water (6,804) (2,497) - 261 (9,040)

Shared/customer service (60,164) (12,057) (35) (879) (73,135)

Total accumulated depreciation (869,583) (91,482) - 3,870 (957,195)

Total depreciable utility plant, net 1,644,680 (76,898) 86,798 (1,850) 1,652,730 Land and other non-depreciable assets 31,670 - (2,003) - 29,667 Construction work in progress 69,992 98,082 (84,795) - 83,279 Utility plant, net $ 1,746,342 $ 21,184 $ - $ (1,850) $ 1,765,676 September Retirements/ September (Dollars in thousands) 2003 Additions Transfers redassifications 2004 Utility plant Electric $ 1,872,848 $ 4,501 $ 62,992 $ (4,546) $ 1,935,795 Water 373,659 5,646 29,398 (4,394) 404,309 Chilled Water 48,249 - 663 - 48,912 Shared/customer service 100,540 20,735 3,677 295 125,247 Total utility plant 2,395,296 30,882 96,730 (8,645) 2,514,263 Accumulated depreciation Electric (653,954) (60,786) (3) 3,914 (710,829)

Water (84,151) (10,443) (20) 2,828 (91,786)

Chilled Water (5,021) (1,783) - - (6,804)

Shared/customer service (52.519) (7.475) 23 (193) (60,164)

Total accumulated depreciation (795.645) (80.487) - 6.549 (869.583)

Total depreciable utility plant, net 1,599,651 (49,605) 96,730 (2,096) 1,644,680 Land and other non-depreciable assets 29,267 400 2,003 - 31,670 Construction work in progress 76.069 93,353 (98,733) (697) 69,992 Utility plant, net $ 1,704,987 $ 44,148 $ - $ (2,793) $1,746,342 1 2005 AUDITED FINANCIAL STATEMENTS

I Note D - Jointly Owned Operations OUC operated: OUC maintains fiscal, budgetary and operating control at four (4) power generation facilities for which there are undivided participant ownership interests. These undivided ownership interests are with the Florida Municipal Power Agency (FMPA) and Kissimmee Utility Authority (KUA). Each agreement is limited to the generation facilities and excludes the external facilities.

OUC also maintains operational control of a wastewater treatment facility at the Stanton Units 1 & 2 site through an agreement with Orange County.

Non-OUC operated: OUC maintains an undivided participant interest with Florida Power & Light at their St.

Lucie Unit 2 nuclear generation facility, Progress Energy at their Crystal River Unit 3 nuclear generation facility and the City of Lakeland at their McIntosh Unit 3 coal-fired generation facility. In each of these agreements, fiscal, budgetary and operational controls are not maintained by OUC.

OUC also maintains an undivided participant interest with Southern Company at their Stanton Unit A combined cycle generation facility (SECA). In this agreement, for the initial 10 years of operation, OUC retains responsibility as fuel agent for the generation facility. Funds secured in this role as fuel agent are restricted on the Statements of Net Assets and disclosed in Note E.

OUC and non-OUC operated agreements and the related undivided interests have remained consistent for the years ending September 30, 2005 and 2004 and are as follows:

OUC undivided Net OUC Total facility net ownership megawatt Facility name Agreement year megawatt capacity interest capacity Crystal River Unit 3 (CR3) 1975 835 1.60% 13 McIntosh Unit 3 (MAC3) 1978 340 40.00% 136 St. Lucie Unit 2 (SL2) 1980 853 6.09% 52 Stanton Unit 1 (SEC1) 1984 440 68.55% 302 Indian River Combustion Turbines (A&B) 1988 96 48.80% 47 Indian River Combustion Turbines (C&D) 1990 236 79.00% 186 Stanton Unit 2 (SEC2) 1991 440 71.59% 315 Stanton Unit A (SECA) 2001 633 28.00% 177 Plant balances and construction work in progress for SEC1, SEC2, MAC3 and the Indian River Plant CT's include the cost of common and/or external facilities. At the other plants, participants pay user charges to the operating entity for the cost of common and/or external facilities. User charges paid for SECA are remitted back to OUC at their proportionate ownership interest of Shared Facilities. Allowance for depreciation and amortization of utility plant is determined by each participant based on their depreciation methods and rates relating to their share of the plant.

The following is a summary of OUC's recorded net share of each jointly owned power generation facility:

September 30 (Dollars inthousands) 2005 2004 Stanton Unit 1 $ 177,429 $ 185,067 Stanton Unit 2 295,984 303,779 Stanton Unit A 61,169 64,746 McIntosh Unit 3 56,154 59,604 St. Lucie Unit 2 48,520 46,455 Indian River Combustion Turbines 28,242 34,473 Crystal River Unit 3 6,745 6,863 Total $ 674.243 $ 700.987 2005 AU D ITE N A CACIA L STATE M E NTS I IAl19

Note E - Cash, Cash Equivalents and Investments OUC maintains a portion of its cash, cash equivalents and investments in interest-bearing qualified public depository accounts with institutions insured by the Federal Deposit Insurance Corporation or collateralized by a pool of U.S.

Governmental securities, per the Florida Security of Public Deposits Act, Chapter 280 of the Florida Statutes as well as other types authorized by the investment policy. At September 30, 2005 and 2004 the total amount of deposits and investments were $533.9 million and $555.9 million, respectively.

In2005 OUC adopted GASB Statement No. 40, Deposit and Investment Risk Disclosures enhancing the disclosures for cash, cash equivalents and investments to include additional information on the risks associated with these assets.

The following describes the key risks associated with these assets and the manner in which OUC mitigates these risks:

• Interest Rate Risk: The risk associated with interest rate changes is addressed in OUC's investment policy by requiring a minimum of 10% of the operating portfolio be held in highly marketable securities with maturities not exceeding 30 days. This requirement enables OUC to mitigate fair value changes within the portfolio and reduce its exposure to this risk. In addition, the investment policy limits maturities based on investment type and credit strength and invokes the "prudent person" rule requiring the portfolio manager to consider market conditions that might adversely affect the portfolio value to ensure overall interest risk is mitigated.

• Credit and Concentration Risk: OUC's investment policy was designed to mitigate both credit and concentration risk by providing specific guidance as to the weighting and integrity of the deposit and investment instruments other than those investments in U.S. Treasury and U.S. Government Agency obligations. The following table summarizes OUC's investment policy including maximum portfolio weighting:

Maximum Portfolio Investment Type Credit Guidelines Weighting Repurchase and Secured transactions executed under a master repurchase agreement 50% and 20%,

reverse repurchase with collateral limited to direct governmental and agency obligations respectively agreements with terms of less than 10 years and held and maintained by a third respectively party trust at a market value of 102% of the cash value.

M Limited to funds which meet a stable net asset value of $1 per share 20%

Money market funds and are not rated less than "Aaa", "AAA" or equivalent by at least one nationally recognized rating agency.

Commercial paper Minimum rating of "A-i", 'P-l" and "Fl" by at least 2 nationally 20%

recognized rating agencies.

notesgrade corporate Minimum rating of 'A+', 'Al' by at least 2 nationally recognized 10%

_ __srating agencies.

Interest-bearing Investments held by or purchased from institutions certified with the qualified public Florida Security of Public Deposits Act, Chapter 280 of the Florida 20%

depository accounts Statutes.

fdeposit Investments held by or purchased from institutions certified with the Certificates of dFlorida Security of Public Deposits Act, Chapter 280 of the Florida Statutes.

bonds Minimum 'A" rating by a nationally recognized rating agency 10%

Inventory based with an unsecured, uninsured and unguaranteed Bankers acceptances obligation rating of at least "P-i" and "A" and 'A-i" and "A" by 10%

Moody's and S&P, respectively. Bank must be ranked in the top 100 banks in terms of total assets by the American Bank's yearly report.

Local Govemment Surplus Funds Qualified under the laws of the State of Florida. 25%

Investment Pool 1

I 2005 2005 AUDITED AUDITED FINANCIAL FINANCIAL STATEMENTS STATEMENTS

Note E - Cash, Cash Equivalents and Investments (continued)

The following schedule discloses OUC's deposits and investments by type including their weighted average maturity and the reporting of these funds on the Statements of Net Assets at September 30, 2005 and 2004, respectively.

September 30 (Dollars inthousands) 2005 2004 Cash $ 4,212 $ 4,316 Investments U.S. Agencies 330,495 396,528 U.S. Treasuries 18,437 18,776 Municipal 28,896 20,840 Money Market 59,499 15,053 Local Government Surplus Funds 5,809 25,415 Corporate notes and commercial paper 86,577 74,961 Total investments 529,713 551,573 Total cash, cash equivalents and investments $ 533,925 $ 555,889 Restricted and internally designated assets Restricted assets Nuclear generation facility decommissioning funds $ 34,698 $ 31,948 Debt service reserve funds 46,023 46,122 Total restricted assets 80,721 78,070 Internally designated assets Liability reduction fund 151,096 190,491 Debt service sinking funds 66,814 63,142 Stabilization funds 50,669 60,887 Renewal and replacement fund 64,433 38,978 Deposits and advances 42,402 36,859 Self-insurance fund 5,504 5,490 Total internally designated assets 380,918 395,847 Total restricted and internally designated assets 461,639 473,917 Other funds Cash and investments 73,535 83,077 Less: accrued interest receivable from restricted and internally designated assets (1,249) (1,105)

Total cash, cash equivalents and investments $ 533,925 $ 555,889 The following schedule discloses the weighted average maturity in years for each of the investment classifications at September 30, 2005 and 2004.

September 30 Weighted average maturity 2005 2004 U.S. Agencies 2.90 3.05 U.S. Treasuries 2.96 3.61 Municipal 0.58 1.01 Money Market 0.00 0.00 Local Government Surplus Funds 0.08 0.08 Corporate Bonds 0.34 0.09 Total portfolio weighted average maturity 2.01 2.38 2005 AUDITED F INA NC IA L STATE MEN TS I A21

Note F - Regulatory Deferrals Regulatory assets: Based on regulatory action taken by the governing board, OUC has recorded the following regulatory assets that will be included in the ratemaking process and recovered in future periods:

In 2004, OUC approved a regulatory action to defer utility plant costs associated with the replacement of new water treatment plant assets. These deferred charges were fully amortized in 2005 and included under the heading of Depreciation and amortization in the Statements of Revenues, Expenses and Changes in Net Assets.

The balance at September 30, 2005 and 2004 is $0 and $1.5 million, respectively.

Also included under this heading are deferred interest costs on the Series 1993 and 1993B bonds. These interest costs were incurred as a result of differing short-term and long-term rates at the time of bond issuance. The balance of deferred charges at September 30, 2005 and 2004 is $6.9 million and $7.3 million, respectively.

Deferred charges are currently amortized to interest expense over the remaining period of the original bond series.

Regulatory liabilities: Based on regulatory actions taken by the governing board, OUC has recorded the following regulatory liabilities that will be included in the ratemaking process and recognized as revenues in future periods:

• Deferred gain on sale of assets: On October 5, 1999, OUC sold its steam units at the Indian River Plant (IRP) and elected to defer the gain on sale ($144 million). In accordance with this action, a portion of the amount

($45 million) was designated to offset generating facility demand payments. In 2004, OUC's governing board approved the systematic recognition of the remaining gain amount ($99 million), net of any residual funds used to offset generating facility demand payments, to be recognized over a period consistent with the life of the Stanton A generation plant. As a result of this action, OUC has recognized gains of $4 million annually during the years ended September 30, 2005 and 2004. As a result of the recognition of these gains, the deferred gain on sale amount at September 30, 2005 and 2004 is $93 million and $97 million, respectively.

• Deferred gain on settlement: As a result of an eminent domain action in July 2005, the Florida Department of Transportation (FDOT) took possession of OUC's Administration building parking garage. In exchange for taking possession of OUC's garage and the underlying land, the FDOT provided OUC with a cash settlement of $15 million. In addition to the cash settlement OUC secured an adjacent parcel of land in exchange for the parcel taken. In accordance with Governmental Accounting Standards Board Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries the assets associated with this transaction were determined to be impaired and as such were written-down to the lower of cost or fair market value for an impairment expense of $6.7 million. In addition to the impairment expense, OUC also accrued transition costs in the amount of $6 million for the relocation of its customer service facilities to ensure accessibility during the road construction period. The transition period isestimated to be approximately 3 years. The impairment and transition expenses ($12.7 million) were offset by the recognized gain on settlement for a net zero impact in the Statements of Revenues, Expenses and Changes in Net Assets. The remaining proceed from the settlement, $2.3 million, were deferred and included on the Statements of Net Assets at September 30, 2005.

• Deferred wholesale trading profits: This account represents a portion of profits generated from resale sales.

• Electric and water rate stabilization: OUC's governing board established these accounts for costs (revenues) that are to be recovered by (used to reduce) rates in periods other than when incurred (realized).

• Fuel stabilization: This account was established in accordance with guidelines from the Public Utilities Regulatory Policies Act of 1978 and represents the difference between the fuel costs charged to customers and the fuel costs incurred.

• Customer retention stabilization: This account was established to assist in retaining existing customers and attracting new customers.

• Health insurance reserve: OUC's governing board established this account to mitigate unexpected increases in medical costs to employees.

1 2005 AUDITED FI NAN CIAL STATE M ENTS

Note F - Regulatory Deferrals (continued)

In conjunction with the recording of these regulatory liabilities, OUC's governing board has internally designated certain cash and investments to fund these deferrals (see Note E). Each of these funds earns the same interest rate as OUC's operating investment portfolio.

September 30 (Dollars in thousands) 2005 2004 Regulatory assets $ 6,937 $ 8,838 Deferred wholesale trading profits $ 25,459 $ 31,335 Rate stabilization 33,597 32,348 Fuel stabilization 589 11,713 Health insurance reserve 503 490 Customer retention stabilization 484 827 Deferred revenue regulatory liabilities 60,632 76,713 Deferred gain on sale of assets 93,044 97,003 Deferred gain on settlement 2,300 -

Deferred gain regulatory liabilities 95,344 97,003 Total regulatory liabilities $ 155,976 $ 173,716 Note G - Insurance Programs and Claims OUC is exposed to various risks of loss related to torts, theft of and destruction to assets, errors and omissions and natural disasters. In addition, OUC is exposed to risks of loss due to injuries and illness of its employees.

These risks are managed through OUC's self-insurance program and third-party insurance coverage. Under the self-insurance program, OUC is liable for all claims up to certain maximum amounts per occurrence. Claims in excess of $250,000 for workmen's compensation and healthcare coverage and $1,000,000 for general and automobile liability are covered by insurance at September 30, 2005 and 2004.

Liabilities associated with the workmen's compensation and healthcare programs are determined based on actuarial studies. These amounts also include amounts for claims that have been incurred but not reported. Liabilities associated with general and automobile coverage are determined based on historic information and in 2004 also include estimates for unasserted claims as a result of hurricanes Charley, Frances and Jeanne. The liability associated with this program is included in the Statements of Net Assets under the heading of Accounts payable and accrued expenses. Self-insurance program liability at September 30, 2005 and 2004 is as follows:

General and Workmen's automobile Health and (Dollars inthousands) comp liability medical Balance at September 30, 2003 $ 440 $ 40 $ -

Payments (396) (61) (8,915)

Incurred claims 476 282 11,024 Balance at September 30, 2004 520 261 2,109 Payments (354) (247) (9,468)

Incurred claims 514 10 9,384 Balance at September 30, 2005 $ 680 $ 24 $ 2,025 It is the opinion of general counsel that OUC, as a statutory commission, may enjoy sovereign immunity in the same manner as a municipality, as allowed by Florida Court of Appeals rulings. Under said rulings, Florida Statutes limit of liability for claims or judgments by one person for general liability or auto liability is $100,000 or a total of $200,000 for the same incident or occurrence; greater liability can result only through an act of the Florida Legislature.

Furthermore, any defense of sovereign immunity shall not be deemed to have been waived or the limits of liability increased as a result of obtaining or providing insurance in excess of statutory limitations.

2005 AU D ITE D F INA N CIAL STATE MEN TS A2

Note G - Insurance Programs and Claims (continued)

Liability for accidents at the nuclear power plants for which OUC has a minority interest are governed by the Price Anderson Act which limits the public liability of nuclear reactor owners to the amount of insurance available from private sources and an industry retrospective payment plan. Both majority owners (Florida Power & Light and Progress Energy Corporation) maintain the maximum amount of private liability insurance ($300 million per site) and participate in a secondary financial protection system. In addition, both majority owners participate in nuclear

-mutual companies that provide limited insurance coverage for property damage, decontamination and premature decommissioning risks. Irrespective of the insurance coverage, should a catastrophic loss occur at either of the plants, the amounts of insurance available may not be adequate to cover property damage and other expenses incurred. The owners of a nuclear power plant could be assessed to pay a maximum payout of $503 million per unit per incident at any nuclear utility reactor in the United States, payable at a rate not to exceed $75 million per incident per year. Uninsured losses, to the extent not recovered through rates, would be borne by each of the owners at their proportionate ownership share and may have an adverse effect on their financial position. See Note D for OUC's ownership interest in St. Lucie Unit 2 and Crystal River Unit 3.

OUC's transmission and distribution system are not covered by property insurance, since such coverage is generally not available.

Note H - Long-Term Debt On October 9, 2001 OUC adopted the General Bond Resolution. On November 12, 2003 the provisions of this resolution became effective and as such all debt obligations became equal in priority. The following schedule summarizes the long-term debt activity for fiscal years ended September 30, 2005 and September 30, 2004.

Balance Balance Final outstanding Additicins Decreases outstanding principal Interest October durincg during September Current (Dollars in thousands) Payment rates (%) -

2004 year year 2005 portion 1992 Bonds 2010 5.30 - 6.00% $ 234,535 $ - $ 28,130 ) $ 206,405 $ 29,730 1994A Bonds 2020 4.25 - 5.00% 775 - 775 1996A Bonds 2023 4.10% 60,000 60,000 1996B Bonds 2011 5.10% 39,995 39,995 2001 Bonds 2023 3.00 - 5.25% 255,525 - 1,960 253,565 5,620 2001A Bonds 2020 4.00 - 5.25% 36,780 - 140 36,640 145 2002A Bonds 2017 Variable Rate* 120,000 120,000 2002B Bonds 2022 Variable Rate* 100,000 100,000 2002C Bonds 2027 5.00 - 5.25% 70,955 70,955 2003 Bonds 2025 5.00% 54,775 54,775 2003A Bonds 2022 2.50 - 5.00% 118,760 2,000 116,760 130 2003B Bonds 2022 3.00 - 5.00% 105,700 105,700 2003T Bonds 2018 1.24 - 5.29% 55,325 2,570 52,755 2,935 2004 Bonds 2009 3.00 - 5.25% 216,900 216,900 Total debt 1,470,025 35,575 1434,450 38,560 Less current portion (35,575) (38,560) (35,575) (38,560)

Total long-term debt $ 1,434,450 $ (38,560) )$ t 4W 1.395.890 $ 38.560

• Variable rates ranged from 1.39% to 3.0% for the year ended September 30, 2005.

1 2005 AUDITED FINANCIAL STATEMENTS

Note H - Long-Term Debt (continued)

Balance Balance Final outstanding Additions Decreases outstanding principal Interest October during during September Current (Dollars in thousands) oavment rates (%) 2003 year year 2004 oortion 1992 Bonds 2010 5.30 - 6.00% $ 261,170 $ - $ 26,635 $ 234,535 $ 28,130 1994A Bonds 2020 4.25 - 5.00% 132,825 - 132,050 775 775 1996A Bonds 2023 4.10% 60,000 60,000 1996B Bonds 2011 5.10% 39,995 39,995 1999A Bond Anticipation Notes 2004 Variable Rate* 100,000 100,()00 2001 Bonds 2023 3.00 - 5.25% 257,260 735 255,525 1,960 2001A Bonds 2020 4.00 - 5.25% 36,915 135 36,780 140 2002A Bonds 2017 Variable Rate* 120,000 - 120,000 2002B Bonds 2022 Variable Rate* 100,000 - 100,000 2002C Bonds 2027 5.00 - 5.25% 70,955 - 70,955 2003 Bonds 2025 5.00% 54,775 - 54,775 2003A Bonds 2022 2.50 - 5.00% 118,760 - 118,760 2,000 2003B Bonds 2022 3.00 - 5.00% 105,700 - 105,700 2003T Bonds 2018 1.24 - 5.29% 55,325 - 55,325 2,570 onn^A n 4UU4 Dunus

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£ IYUU n~n Total debt 1,458,355 272,225 260,555 1,470,025 35,575 Less current portion (129,250) (35,575) (129,250) (35,575)

Total long-term debt $ 1,329,105 $ 236,650 $ 131,305 $ 1,434,450 $ 35,575

• Variable rates ranged from 0.82% to 1.70% for the year ended September 30, 2004.

Following is a schedule of annual principal and interest maturities on bonds and notes outstanding at September 30, 2005:

Years Ending (Dollars inthousands) Principal Interest Total 2006 $ 38,560 $ 62,190 $ 100,750 2007 41,420 59,968 101,388 2008 43,585 57,577 101,162 2009 46,045 52,125 98,170 2010 265,420 44,736 310,156 2011-2015 298,745 183,966 482,711 2016-2020 310,125 118,963 429,088 2021-2025 358,290 30,577 388,867 2026-2028 32,260 723 32,983 Total $ 1,434,450 $ 610,825 $ 2,045,275 General bond resolution: On October 9, 2001 the General Bond Resolution was adopted. Bonds issued after this date fall under the provisions of this resolution. On November 12, 2003, the 51% consent threshold was met to enact the provisions of this resolution including ranking all debt obligations without preference, priority, or distinction. The following are some key provisions of the resolution:

. Rate covenant: The net revenue requirement for annual debt service has been set at 100% or available funds plus net revenues at 125% of annual debt service.

• Additional bonds test: This test is limited to OUC's certification that it meets the rate covenant.

• Flow of funds: There are no funding requirements; however, consistent with prior resolutions, OUC can determine whether to fund a debt service reserve account on an issue-by-issue basis or internally designate funds.

• System definition: OUC's system definition has been modified to utility system. This definition is a more expansive definition to accommodate organizational changes and the expansion into new services.

• Sale of assets: System assets may be sold if the sale will not interfere with OUC's ability to meet rate covenants. Consistent with prior lien resolutions, proceeds must first be used to pay debt service.

2005 AU D IT ED F IN AN CIA L STATE MEN TS I A25

Note H - Long-Term Debt (continued)

Refunded and defeased bonds: Proceeds secured from refunding transactions are invested in United States obligations in irrevocable escrow deposit trust funds. Each escrow deposit trust is structured to mature at such time as to provide sufficient funds for the payment of maturing principal and interest on the Refunded Bonds. All interest earned or accrued on the United States obligations has been pledged and will be used for the payment of the principal and interest on each respective bond series. As a result of a favorable rate environment, OUC has refunded $131.3 million of long-term debt for the fiscal year ended September 30, 2004 as summarized below (dollars in thousands):

Par Par Savings %of Month amount amount PV Accounting refunded Debt issued issued issued refunded savings loss bonds 2004 Aug - 04 $ 216,900 $ 131,305 $ 14,742* $ 4,934 3.08%

• The Series 2004 Bonds have a maturity date of July 1,2009; however, the present value calculation has been computed through July 2025 as the Series 2004 Bonds have been designated by OUC as 'Designated Maturity Obligations" for the purposes of the General Bond Resolution. It isthe intent of OUC to refund all or a portion of the Series 2004 Bonds on their maturity date of July 1,2009.

No debt was refunded for the fiscal year ended September 30, 2005.

In July 2002, OUC used proceeds from the Liability Reduction Fund (LRF) to defease $112.2 million of the Water and Electric Subordinated Revenue Bonds Series 1989D (Defeased Bonds). LRF proceeds were invested in United States obligations in an irrevocable escrow deposit trust fund and were to mature at such time and in such amounts as to provide sufficient funds for the payment of maturing principal and interest on the defeased bonds. The loss associated with the defeasance ($15.5 million) was deferred in accordance with regulatory action taken by OUC's governing board.

Since the defeasance date, several escrow transactions have occurred with the final transaction occurring in June 2004.

At the final transaction date, $1.6 million in excess of the remaining regulatory costs was earned and recognized as interest income in the Statements of Revenues, Expenses and Changes in Net Assets. At September 30, 2005 and 2004 the escrow transactions had mitigated the deferred loss and as such the outstanding balance for both of these periods was $0.

All refunded and defeased bonds are treated as extinguished debt for financial reporting purposes and have been

,removed from the Statements of Net Assets. Defeased bonds outstanding decreased as a result of the maturity of the Series 1975B and 1978 in the amounts of $9.7 million and $94.6 million respectively. The balance outstanding at September 30, 2005 and 2004 for defeased bonds is $184.5 million and $322.2 million, respectively.

Interest rate swaps: Interest rate swaps, a derivative financial instrument, are used by OUC to manage interest rate exposure on both fixed and variable rate debt and are not executed for trading purposes. Under these swap agreements, only the net difference in interest calculated at fixed and variable rates is actually exchanged with the counterparty. The notional amounts are the basis on which interest is calculated; however, the notional amounts are not exchanged.

Although a termination of the swap agreement may result in OUC making or receiving a termination payment, OUC limits its execution of these agreements to major financial institutions with a minimum credit rating of "Aa3" or "AA-" by any two nationally recognized credit rating agencies or have a subsidiary rated "AAA' by least two nationally recognized credit rating agencies per the derivatives policy. Therefore, OUC does not anticipate nonperformance by a counterparty.

OUC's swap agreements outstanding at September 30, 2005 and 2004 with fair value amounts corresponding to the market value are summarized below:

September 30 (Dollars in thousands) 2005 2004 Notional amount* $ 545,000 $ 545,000 Term October 2008-2022 October 2008-2022 Rate OUC:

Received 2.76% 2.33%

Paid (weighted average rate) 2.72% 2.18%

Fair value liability, net $ 4,185 $ 3,930

• The notional amounts at September 30, 2005 and 2004, represent nine counterparty agreements of which two have call options that expire in2009.

2005 AUD ITE D FI NA N CIAL STATE M ENTS A26

Note I - Commitments and Contingent Liabilities Energy sales commitments: OUC engages in long-term resale energy contracts with several key customers for both unit specific sales, sales generated from a specific power plant, and systems sales (sales generated from any OUC available resource). The following table provides a summary of OUC's power sales contracts with other companies.

Unit Sales System Sales Total No. of Amount of No. of Amount of No. of Amount of YV-

• var mandra1-cunuracss W

savers RAlv Evans contracts sales MW contracts sales MW 2006 1 27 29 2 56 1

2007 1 6 0 0 1 6 2008 0 0 0 0 0 0 Purchased power commitments: Purchased power commitments were executed in conjunction with the sale of the Indian River Plant steam units (see Note F) and the commencement of the SECA generation facility. The purchased power commitments outstanding at September 30, 2005 for these agreements are as follows:

Year Number of contracts Amount of megawatts 2006-2008 2 357 2009 2 357 2010 2 357 2011 2 357 2012 2 357 2013 342 2014 342 Fuel and fuel transportation commitments Coal: OUC and the other participants in SEC1 and SEC2 have entered into coal supply and rail contracts. The coal supply contracts expire in 2006, 2007, 2008 and 2009, with renewal and/or market price reopeners of five years on some of the contracts. The rail transportation contracts for coal expire on December 31, 2017. The coal supply contracts require minimum annual purchases as follows:

Amount Year (Dollars in thousands) 2006 $ 72,350 2007 52,722 2008 40,000 2009 40,000 Natural gas: OUC and the other participants have entered into natural gas supply and transportation contracts.

The supply contracts for SECA expire in 2006 and 2007. These contracts have an indexed-based pricing structure such that the cost of natural gas floats with market prices. Natural gas supply costs, based on current estimated market prices, are $11.80 per MMBTU for 2006 and $9.22 per MMBTU for 2007. The transportation contract expires in 2014 with 10-year renewal options. OUC has also entered into a contract that expires in 2016 for discounted winter firm gas transportation capacity. In addition, OUC, as fuel agent for SECA, has entered into a contract effective 2004 with a minimum term of 10 years for natural gas transportation capacity at SECA.

The contracts require minimum annual capacity charges.

2005 AU D IT ED F IN AN CIA L STATE MEN TS I I A27

Note I - Commitments and Contingent Liabilities (continued)

The following schedule summarizes natural gas transportation capacity and supply commitments at September 30, 2005:

Year (Dollars inthousands) Supply Capacity Total 2006 $ 131,189 $ 18,453 $ 149,642 2007 14,931 18,113 33,044 2008 18,229 18,229 2009 18,229 18,229 2010 18,229 18,229 2011 18,229 18,229 Other fuel sources: OUC and the other participants have entered into a contract for the supply of 1,000,000 MMBTU's per year of methane gas for SECI and SEC2. The contract expires on December 31, 2007.

Derivative fuel instruments: OUC's fuel-related derivative transactions, where applicable, are recorded on the Statements of Net Assets as either an asset or liability measured at fair market value. Related gains and/or losses on these transactions are deferred and recognized in the specific period in which the instrument was settled and are included as part of the fuel and purchased power costs in the Statements of Revenues, Expenses and Changes in Net Assets. No amount is recorded for the fuel swaps other than the net monthly fuel settlement amount resulting from these agreements.

At September 30, 2005 and 2004, OUC did not have any fuel-related derivative instruments (swaps, futures, and options). Because of high futures rates, OUC settled its existing hedge instruments as of September 30, 2005 and delayed the purchase of new instruments. No significant costs were recorded in the Statements of Revenues, Expenses and Changes in Net Assets in 2005 and 2004 for fuel-related derivatives as a result of the volatility in the energy markets.

Power generation plant commitment: In 2005 OUC's governing board approved the execution of the joint development of the Clean Coal Technology project at the Stanton Energy Center. The estimated total project cost is

$792 million of which OUC has committed $305 million towards the project completion. The Department of Energy and Southern Company have committed $235 million and $252 million, respectively.

Note J - Major Agreements City of Orlando: OUC pays a revenue-based payment and an income-based dividend payment to the City of Orlando. The revenue-based payment is classified as an operating expense and is calculated at 6%of gross retail electric and water billings and 4%of chilled water billings to customers within the City limits. The income-based dividend payment is calculated based on 60% of net income before contributions and is recorded as a reduction of net assets on the Statements of Revenues, Expenses and Changes in Net Assets. Dividends for fiscal years 2005 and 2004 totaled $34 million and $31.6 million, respectively, including accrued dividends at September 30, 2005 and 2004 of $ 1.3 million and $0, respectively. In 2005 OUC's governing board approved a change for 2006 only, to increase the dividend calculation from 60% to 85% of income before contributions.

Orange County: OUC pays a revenue-based payment to Orange County calculated at 1%of gross retail electric billings to customers within the County but outside the city limits of the City of Orlando. This payment is recorded under the heading of Payments to other governments and taxes on the Statements of Revenues, Expenses and Changes in Net Assets.

City of St. Cloud: In April 1997, OUC entered into an interlocal agreement with the City of St. Cloud (STC) to assume responsibility for providing retail electric energy services to all STC customers and to assume control and operation of STC's electric transmission and distribution system and certain generation facilities. In return, OUC isobligated to pay STC 9.5% of gross retail electric billings to STC customers (a minimum of $2.4 million annually, unless certain events occur) and to pay STC's electric system net debt service. The term of the agreement commenced May 1, 1997 and, as amended in April 2003, continues until September 30, 2032. OUC's billed revenue included under the heading of Resale electric revenue, net includes $44.3 million and $37.2 million from the interlocal agreement for the years ended September 30, 2005 and 2004, respectively. Revenue based payments and net debt service payments for the years ended September 30, 2005 and 2004 are $5.2 million and $5.1 million, respectively.

2005 AU D ITE D F I N A N C I AL STATE M E NTS A28

Note J - Major Agreements (continued)

Trigen-Cinergy Solutions: On June 23, 1998, OUC entered into an agreement with Trigen-Cinergy Solutions (TCS) to construct and provide air conditioning cooling systems (chilled water) for buildings in the Orlando metropolitan area.

In March 2004 OUC's governing board authorized the dissolution of this agreement and as such, acquired TCS' 51%

operational interest in the chilled water operations for $24.4 million. The acquisition price included the repayment of TCS' capital contributions ($18.1 million), repayment of their proportionate share of net operating earnings

($1.3 million) and an initial lump sum payment for current contracted customers of $5 million. Additional payments are contingent on OUC securing additional contracts in certain chilled water operating loops. At September 30, 2005 no additional payments are due to TCS.

Note K - Pension Plans and Other Post-Employment Benefits Defined benefit plan Plan description: OUC maintains a single-employer, defined benefit pension plan for all employees who regularly work 20 or more hours per week and were hired prior to January 1, 1998. Under provisions of the pension plan, employees who participate receive a pension benefit equal to 2.5% of the highest three consecutive years average base earnings times years of employment. A maximum of 30 years service is credited. Benefits are vested after five years of service.

OUC is the administrator of the plan and as such has the authority to make changes thereto. Periodically, the plan issues stand-alone financial statements with the most recent report issued for the year ending September 30, 2003. In accordance with Governmental Accounting Standards, the plan receives actuarial reports annually with the most recent actuarial report prepared for the period ending September 30, 2005.

Actuarial reports received each February disclose plan assets and actuarial liabilities as of the beginning of the current fiscal year for required contribution levels in the subsequent fiscal year. As such the actuarial valuation report dated October 1, 2003 includes the required contribution levels for the fiscal year ending September 30, 2005. This methodology enables OUC to better match its rate-making requirements.

Funding policy: The pension plan agreement requires OUC to contribute, at a minimum, amounts actuarially determined. The current rate of contribution required by OUC is 12.52% of annual covered payroll. Required participant contribution obligations are 4%of earnings until the later of age 62 or completion of 30 years of service, with no required contributions thereafter. The benefit reduction for early retirement is 1% per year.

Annual pension cost and net pension asset: OUC recognizes annual pension costs in accordance with GASB Statement No. 27, Accounting for Pensions by State and Local Government Employers. GASB Statement No. 27 also requires recognition of a net pension asset or obligation for the cumulative differences between the annual pension cost and employer contributions to the plan. Included in the calculation of the annual pension costs is the interest earned on the net pension asset and the amortization of the prepaid pension asset included under the heading of "Adjustment to ARC." Pension cost and the net pension asset have been calculated using information obtained from actuarial documentation and are as follows:

September 30 (Dollars inthousands) 2005 2004 Current year actuarial required contribution (ARC) $ 3,984 $ 4,173 Interest earnings on net pension asset (4,549) (4,797)

Adiustment to ARC 7,590 8,011 Annual pension cost 7,025 7,387 Contributions applicable to pension period 4,133 59,032 Change in net pension asset (2,892) 51,645 Beginning net pension asset 53,451 1,806 Ending net pension asset $ 50,559 $ 53,451 2005 AU D IT ED FIN AN CIA L STATE MENTS l A29

Note K - Pension Plans and Other Post-Employment Benefits (continued)

Actuarial amounts are calculated using the aggregate cost method, which as noted in the guidance, does not identify or separately amortize unfunded actuarial assets/obligations. The actuarial value of assets/obligations is determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period.

In accordance with GASB Statement No. 27 and approval by OUC's governing board, the calculation below uses the following rates based on actuarial information received in 2003 and 2002 for required contribution levels in 2005 and 2004, respectively.

October 1 2003 2002 Investment rate of return 8.50% 8.50%

Projected salary increases 5.75% 5.75%

Inflation component 4.00% 4.00%

Effective for October 1, 2004 valuation analysis, OUC's governing board approved a revision of the salary increase assumption from 5.75% to 5.50%.

Contributions applicable to the year ended September 2004 include net proceeds receivable of $55.3 million from the taxable pension bonds issued in November 2003. These bonds, Series 2003T, funded in advance the outstanding actuarial liability of $54.6 million at September 2003. This advance funding is recorded under the heading of Deferred debt costs on the Statement of Net Assets and is being amortized as a component of the annual pension cost. The annual amortization amount of the advance funding was $2.9 million and $2.5 million for the years ended September 30, 2005 and 2004, respectively.

The following table summarizes three-year trend information for the pension plan including the annual pension cost and the net pension asset. In addition, the schedule includes the percentage of current year funds contributed and the percentage of funds contributed inclusive of the pension bond annual amortization.

Current year contributions Percentage of APC Years ended Annual pension (including amortization of contributed (including (Dollars inthousands) cost (APC) advance funding) advance funding) 2005 $ 7,025 $ 7,030 100%

2004 7,387 7,387 100%

2003 4,252 4,585 108%

Defined contribution plan All employees who regularly work 20 or more hours per week and were hired on or after January 1, 1998, are required to participate in a defined contribution retirement plan established under section 401(a) of the Internal Revenue Code and administered by OUC. In addition, employees hired prior to January 1, 1998, were offered the option to convert their defined benefit pension account to this plan. The plan was created by resolution of OUC.

Under the plan, each eligible employee, upon commencement of employment, is required to contribute 4%of their salary, with OUC making a matching contribution of 4%. In addition, OUC will match up to 2%for additional voluntary contributions. Employees are fully vested after one year of employment. Total contributions for the years ended September 30, 2005 and September 30, 2004 were $2.6 million ($1.2 million employer and

$1.4 million employee) and $2.3 million ($1.1 million employer and $1.2 million employee), respectively.

2005 AU D IT E D F I N A N C IA L STATE 1 E N TS A30

Note K - Pension Plans and Other Post-Employment Benefits (continued)

Other post-employment benefits OUC has a policy to provide health care benefits and life insurance coverage to all employees who retire under the defined benefit plan on or after attaining age 55 with at least 10 years of service or at any age after completing 25 years of service. Currently, 516 retirees meet the eligibility requirements. Retirees may also elect to provide health care insurance for their qualifying dependents by paying 50% of the calcurated premium. Medical benefits will be available, but not subsidized, for employees who retire under the defined contribution pension plan. OUC is a secondary provider for those retirees and/or their dependents who are eligible for Medicare benefits.

OUC provides these health care benefits in conjunction with its self-insurance health care program (see Note G).

This program is administered through an insurance company and also includes additional purchased insurance coverage for claims over $250 thousand per covered member per year. The insurance company administers the plan and processes the claims according to benefit specifications, with OUC reimbursing the insurance company for its payouts. Expenses are recorded by OUC when paid to the insurance company and all related liabilities for incurred medical costs are included under the heading of Accounts payable and accrued expenses on the Statements of Net Assets. Total post-employment health care costs recognized by OUC for the years ended September 30, 2005 and 2004, were $5 million and $3.9 million, respectively. Post-employment life insurance costs during the same periods were $48 thousand and $45 thousand, respectively.

Note L- Regulation and Competition The electric utility industry has been and will be, in the future, affected by a number of factors that could have an impact on OUC's operations. Although a handful of states have enacted legislation or issued orders designed to deregulate the production and sale of electricity, no legislative action has been executed in the State of Florida.

In 2000, the Governor of Florida signed an executive order creating the Energy 2020 Study Commission whose purpose was to design an energy strategy and plan for the state. To facilitate an effective plan, the Commission elected to split the study between wholesale and retail competition. In respect to the wholesale market, the Commission recommended opening the "statutory barriers to entry" to allow the construction of merchant plants within the state borders. As for retail competition, it was the Commission's recommendation that changes to this market be deferred until such time as an effective competitive wholesale market has been developed. To date no legislative actions have been taken on these recommendations.

The FERC, in its Order No. 2000 issued December 15, 1999, stated that it expects all utilities which own transmission facilities to join regional transmission organizations (RTO) that meet commission standards. While the formation of the RTO is voluntary under Order No. 2000, the FERC clearly expressed its intention to use its Federal Power Act authorities to 'remedy undue discrimination or the exercise of market power, including the remedy of requiring RTO participation where supported by the record." After over five years of meetings, workshops, studies, and filings at FERC and the FPSC, RTO formation in Florida is almost at a standstill. The FPSC has asked the Applicants (Florida Power & Light, Progress Energy Florida, and Tampa Electric Company) to file an 'RTO-lite" proposal, which would include some of the features of a FERC-approved RTO, but at a much lower cost to the customers in Florida. This filing was due in September 2005.

Note M - Subsequent Events In November 2005, OUC refunded the Series 1996B Water and Electric Revenue Bonds in the amount of

$40 million. Present value savings of $2 million or 5%of the refunded bonds resulted from this transaction. An economic loss of $928 thousand will be included in the unamortized discount and deferred amount on refunding on the September 30, 2006 Statements of Net Assets.

In November 2005, OUC secured a forward starting fixed-payer swap with a notional amount of $100 million and a fixed payer rate of 4.442%. The swap was competitively bid and will become effective April 6, 2009 and terminate October 1, 2027. The swap was executed in anticipation of the Series 2004 Utility System Revenue Bonds refunding in July 2009.

20 0 5 A U D I T ED F I NA N C I A L S TAT E d E N T S l

3 3 A

• D elo itte. Deloltta & Touche LLP Certified Public Accountants Suite 1800 200 South Orange Avenue Orlando, Florida 32801-3413 USA Tel: +1 407 246 8200 Fax: +1407422 0936 ww.deloltte.corm INDEPENDENT AUDITORS' REPORT To the Commissioners of Orlando Utilities Commission:

We have audited the accompanying statements of net assets of Orlando Utilities Commission as of September 30, 2005 and 2004, and the related statements of revenues, expenses and changes in net assets and of cash flows for the years then ended. These financial statements are the responsibility of Orlando 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 GovernmentAuditing 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Orlando Utilities Commission's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Orlando Utilities Commission as of September 30, 2005 and 2004, 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.

Managcmcnt's discussion and analysis listed 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. This supplemental information is the responsibility of Orlando Utilities Commission's management. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it.

2005 AUDITED FINANCIAL STATEMENTS A32

In accordance with Government Auditing Standards, we have also issued our report dated November 28, 2005 on our consideration of Orlando Utilities Commission's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with GovernmentAuditing Standardsand should be considered in assessing the results of our audit.

November 28, 2005

ouc.@

The Reliable One' 500 South Orange Avenue, Orlando, FL 32801 Phone: 407.423.9100 Fax: 407.236.9616 Web site: www.ouc.com

I lFiscal Year Ending September 30,2005

Comprehensive Annual Financial Report of the City of Bushnell, Florida for the Fiscal Year Ended September 30, 2005 PREPARED BY THE OFFICE OF THE CITY CLERK

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2005 CITY OF BUSHNELL, FLORIDA TABLE OF CONTENTS INTRODUCTORY SECTION Certificate of Achievement for Excellence in Financial Reporting ............................................... i Organization Chart ............................................ ii...

Letter of Transmittal ............................................... ii-vii City Council Elected and Appointed Officials ............................................... viii Il. FINANCIAL SECTION Independent Auditors' Report................................................ 1-2 Management's Discussion and Analysis ................................................ 3-9 Basic Financial Statements Statement of Net Assets ................................................. 10 Statement of Activities ................................................ 11-12 Balance Sheet - All Governmental Funds ................................................ 13 Reconciliation ofthe Balance Sheet of Governmental Funds to the Statement of Net Assets ................................................ 14 Statement of Revenues, Expenditures, and Changes in Fund Balances -All Governmental Funds ................................................ 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................................................ 16 Statement of Net Assets - Proprietary Funds ................................................ 17-18 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds ................................................ 19 Statement of Cash Flows -Proprietary Funds ................................................ 20-21 Statement of Fiduciary Net Assets ................................................ 22 Statement of Changes in Fiduciary Net Assets -Pension Trust Funds ................................................ 23 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Major Fund - General Fund ................................................ 24-27 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Major Fund - Cemetery ................................................ 28 Notes to Financial Statements ................................................ 29-50 Required Supplementary Information Schedule of Contributions - Employer and Other General Employees' Retirement Fund and Police Officers' Retirement Fund ................................................ 51

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER30, 2005 CiTY OF BUSHNELL, FLORIDA TABLE OF CONTENTS (Conduded)

III STATISTICAL SECTION General Governmental Expenditures by Function ....................................... 52 General Governmental Revenues by Source ....................................... 53 General Governmental Tax Revenues by Source ....................................... 54 Property Tax Levies and Collections ....................................... 55 Assessed and Estimated Actual Value of Property ....................................... 56 Property Tax Rates -Direct and Overlapping Governments ............. .......................... 57 Computation of Overlapping Bond Debt....................................... 58 Principal Taxpayers ....................................... 59 Ratio of Annual Debt Service Expenditures for General Debt to Total General Expenditures ....................................... 60 Schedule of Electric Utility Revenue Debt Service ....................................... 61 Schedule of Water Revenue Debt Service ....................................... 62 Schedule of Sanitation Revenue Debt Service ....................................... 63 Schedule of Wastewater Revenue Debt Service ....................................... 64 Demographic Statistics ....................................... 65 Property Values and New Construction ....................................... 66 Miscellaneous Statistics ....................................... 67 Schedule of Insurance Coverage ....................................... 68-69 Computation of Legal Debt Margin ....................................... 70 IV. COMPLIANCE SECTION Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit ofFinancial Statements Perfoimed in Accordance with GovernmentAuditing Standards................................. 71

IITIONCTMFarm01 Certificate of Achievement for Excellence in Financial Reporting Presented to City of Bushnell, Florida For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2004 A Certificate ofAchievement 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.

S President Executive Director i

r r" E r7- --, r . r r r tr r Ur r r r UF-- r- r-Cty Of SUOMI O kelzal qhsvi ii

r, CITY OF BUSHNELL

'I 219 N. Market Street Bushnell, Florida 33513 P.O. Box 115 - (352) 793-2591 i~ Fax (352) 793-2711 March 7, 2006 TO THE CITIZENS OF THE CITY OF BUSHNELL:

The comprehensive annual financial report of the City of Bushnell for the fiscal year ended September 30, 2005, is hereby submitted. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the City. To provide a reasonable basis for making these representations, management of the City of Bushnell has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Bushnell's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Bushnell's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material aspects. All disclosures necessary to enable the reader to gain an understanding of the government's financial activities have been included. Additional, the Managements Discussion and Analysis section that follows will provide highlights and review the financial performance during the reporting period.

FINANCIAL STATEMENT PRESENTATION The comprehensive annual financial report is presented in three sections, Introductory, Financial, and Statistical. The Introductory Section includes this transmittal letter, the City's organizational chart and a list of principle officials. The FKnancialSection includes the Management's Discussion and Analysis, the basic financial statements, and the auditors report. The StatisticalSection includes selected financial & demographic information.

BACKGROUND INFORMATION The City is a political subdivision of the State of Florida located in Sumter County. The city was established under the legal authority of the Laws of Florida, chapter 57-105. The City operates under a council-manager form of government. The legislative branch of the City is composed of a four-member elected City Council, and an elected mayor.

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REPORTING ENTITY AND ITS SERVICES This report includes all funds of the City. The City of Bushnell provides a full range of general governmental services and activities. These services include police and code enforcement; administrative and financial services; planning, zoning and development review; maintenance of highways, streets & drainage; library, recreation and special events. In addition to general government activities, the governing body also operates an Electric, Water, Wastewater and Sanitation utility operation.

LOCAL ECONOMY The City of Bushnell is the County Seat of Sumter County. It also contains, within its boundaries, Bushnell Elementary and South Sumter High School. The County Courthouse, as well as the schools, brings a diverse group of consumers into the Bushnell area. While Bushnell's municipal limits are 2.5 square miles our consumer service area is much greater.

The City of Bushnell is one of the smallest Electric utility providers in the State of Florida. The City also provides Water; Sanitation and Wastewater services to consumers within the municipal limits are well as select areas outside our municipal boundaries. The Wastewater Utility has encouraged newfound commercial growth, which has created employment opportunities within the area.

Major industries located within the government's boundaries or in close proximity include manufacturers of air conditioning vents and metal components; go cart-racing motors; prosthetics for humans and horses; and cabinetry.

Due to its central location, within the state, Bushnell has access to all major cities via Interstate 75, Highway 301, and the Florida Turnpike. Thus, making it easy to commute to Tampa, Orlando, Ocala and Gainesville.

CURRENT YEAR PROJECTS During the fiscal year '05, the City of Bushnell completed an assortment of projects to help improve on the services provided to our citizens. The following will highlight some of these major initiatives taken by the City during the fiscal year '05:

New Website Development During fiscal year '05 a new website was developed for the City of Bushnell, with assistance from KUA, Kissimmee Utility Authority. The new website is maintained by City of Bushnell administrative staff. The site contains an array of information about the city's history, departments and activities. The user has the ability to download forms, look up information, receive assistance computing utility bills, or answering questions regarding land development or code issues, review minutes and agendas, focus on a particular department.

These items and much more is available through the new website.

Along with the above options available to the user, the website also has a video library about the City of Bushnell, with access to four videos, A Welcome address, Municipal services, Recreation & things to do, & Historical facts.

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Main Street / Downtown Landscaping Proiect This landscaping project, developed to enhance the aesthetics of Main Street and the Downtown area, was completed in fiscal 05'. This project consisted of over 300 trees and 6,000 schrubs & bushes, complete with irrigation and the construction of two welcome signs at both the North and South ends of HWY 301.

The total landscape project cost was approximately $335,000.00. Originally, Highway Beautification grant funding in the amount of $300,000.00 were ear marked for this project, however due to hurricane activities during the funding year, these monies weren't available and were replaced with DOT District 5 operative dollars in the amount of $50,000.00 and local agency program funds in the amount of $250,000.00 Landscaped areas consist of approximately 3 of a mile on the Eastern side of Main Street and a 4 block area in the Downtown area around Bushnell Plaza.

MAJOR INITIATIVES/FUTURE PROJECT The City government is considering a number of major initiatives for the City. This section will briefly highlight such future major initiative(s):

Horseman'sPark Waste Water TreatmentFacilitu The City of Bushnell Horseman's Park Waste Water Treatment Facility is currently under renovations that will result in an increase of permitted capacity for the facility. Once complete, the capacity is expected to be 73,000 gpd.

Two new digesters and chlorine contact chambers will be installed, compressed air systems will be rebuilt, the evaporation and percolation ponds, used for disposal of effluent, will be retrofitted and the entire facility will be fenced.

The city has acquired an agreement from the City of Webster to fund $25,000.00 of the estimated $80,000.00 project. It is anticipated that the project will be complete and the plant will resume commercial operation in April 2006 Water & Sewer Expansion to Sumterville During fiscal year 05', the City of Bushnell received funding commitment from RUS for water and sewer expansion to the Sumterville area. It is anticipated that construction of the Water Treatment Facility consisting of two wells, a 30,000 gallon pnumatic tank and chemical treatment facilities.

The associated distribution system will provide fire flows and potable water along 1-l/2 miles of Hwy 301 serving approximately 20 businesses. The sewer collection system will serve the same customers, with one master lift station that will pump to an interconnection point with the City's force main feeding into the David Hanson Treatment Facility. The committed funding from USDA consists of a grant in the amount of $ 424,000.00 and a loan in the amount of $ 1,030,000.00 with an interest rate of 4.25%

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DEPARTMENTAL FOCUS Management of the City of Bushnell has selected to focus on the Administrative Department to report accomplishments and undertakings in the recent past. The City of Bushnell Administrative Department consists of a staff of eight and provides services to the city in areas of general administration, finance, payroll and accounting, utility customer services; including new customer orientation, billing and collections, service order requests, etc., the administrative staff also maintains the city's website, assists with municipal planning and zoning issues, provides network support, electronic mapping, maintains cemetery records & lot sales, rents the community center, etc. Payment for all service the city offers can be paid via cash, check or credit card The staff in the Administrative department is cross-trained with each person capable of doing a broad variety of job duties. Customers requesting information or services are directed to the appropriate person for assistance. In order to maintain the high level of quality customer service the staff prides themselves on, the city does not utilize an automated or voice response system. A staff member greets at a counter or over the phone all customers.

The city has been maintaining and expanding a geospatial data base that includes a variety of information dealing with streets, lots and blocks, zoning, water, sewer and electric systems. During the upcoming fiscal year, the city hopes to add topographical information that would designate areas of potential flooding as well as expand the geographic information system capabilities.

OTHER INFORMATION Independent Audit:

State statutes require an annual audit by independent certified public accountants. The accounting firm of Purvis, Gray, and Company was selected by the City of Bushnell's to complete this year's audit. The auditor's report on the basic financial statements and combining and individual fund statements and schedules are included in the financial section of the report.

Awards:

Safetu Award: The City has received numerous electric safety awards. The first safety award was presented to the City by the Florida Municipal Electric Agency to the Utility Department for recognition of a perfect safety record without reports of accidents. The City has received this award for 17 consecutive years.

Tree Cit USA: The Tree City USA award was first presented to the City in 1994. The City has continued to receive this award to the present. This award requires an annual Arbor Day Celebration, the planting of trees, and the implementation of a tree preservation policy as well as an annual application documenting levels of expenditure for maintenance of the program.

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OutstandingRural Communit : The State of Florida issued its first annual Outstanding Rural Community Award of the Year to the City of Bushnell. This award highlights one rural community with population under 8,000 for a project that significantly impacts the community's quality of life. In 1992, the City of Bushnell submitted the Kenny Dixon Sports Complex as the project for this award.

Certificate of Excellence in FinancialReporting: The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Bushnell for its comprehensive annual financial report for the fiscal year ended September 30, 2003. This was to second consecutive year that the government has achieved this prestigious award In order to be awarded a Certificate of Achievement; a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

Acknowledgments:

The preparation of the comprehensive annual financial report on a timely basis was made possible by the dedicated service of the entire staff of the Administrative Department.

Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. We should also like to thank the Mayor and the Council Members for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner.

Sincerely, Joy Coleman, City Clerk/Finance Director Vince Ruano Vince Ruano, City Manager vii

it of[ OBushnell

£LECTeD OFFICIAS Mayor Joseph P. Strickland Jr.

Vice Mayor Warren Maddox Councilman Billy K. Williams Councilman Dale Swain Councilman Dale Barnes City Clerk N. Joy Coleman MPPOITED OFFICILS City Manager Vince Ruano Police Chief Joyce Wells Utilities Director Bruce Hickle Public Works Director Ronnie Pitts V.i

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Purvis Gray &

Comnpany INDEPENDENT AUDITORS' REPORT Honorable Mayor and Council Members City of Bushnell Bushnell, Florida We have audited the accompanying financial statements of governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Bushnell, Florida (the City) as of and for the year ended September 30, 2005, which collectively comprise the City's basic financial statements. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2005, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the general fund and major special revenue fund for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued a report dated March 7, 2006, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standardsand should be considered in conjunction with this report in considering the results of our audit Certified Public Accountants P.O. Box 23999

• 222 N.E. 1st Street

• Gainesville, Florida 32602 * (352) 378-2461

• FAX (352) 378-2505 Laurel Ridge Professional Center

• 2347 S.E. 17th Street

• Ocala, Florida 34471 * (352) 732-3872

• FAX (352) 732-0542 443 East College Avenue

• Tallahassee, Florida 32301 * (850) 224-7144

• FAX (850) 224-1762 2201 Cantu Court, Suite #100

• Sarasota, Florida 34232 * (941) 379-2800

• FAX (941) 379-2899 MEMBERS OF AMERICAN AND FLORIDA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATECOMPANIES AND S.E.C. PRACTICE SECTIONS 1-

Honorable Mayor and Council Members City of Bushnell Bushnell, Florida INDEPENDENT AUDITORS' REPORT (Concluded)

The management's discussion and analysis and pension schedules listed in the table of contents, are not a required part of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, consisting principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was made for the purpose of forming opinions on the financial statements that collectively form the City's basic financial statements. The introductory section and statistical tables listed in the table of contents are presented for additional analysis and are not a required part of the basic financial statements.

The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

March 7, 2005 Ocala, Florida 2

Management's Discussion and Analysis As management of the City of Bushnell, we offer readers of Bushnell's financial statement this narrative overview and analysis of September 30, 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iii-vii of this report. AU amounts, unless otherwise indicated, are expressed in thousands of dollars.

Financial HiLyhlights The assets of the City of Bushnell exceeded its liabilities at the close of the most recent fiscal year by

$10,671,000. Of this amount, $1,469,564 may be used to meet the government's ongoing obligations to citizens and creditors.

As of the close of the current fiscal year, the City of Bushnell's governmental funds reported combined Leending fund balances of $1,013,805, an increase of $200,669 in comparison with the prior year.

Approximately 51% of this total amount $510,647 is available for spending at the government's discretion.

At the end of the current fiscal year, unreserved fund balance for the general fund was

$510,647, or approximately 18.5% of total general fund expenditures.

L Overview of the Financial Statements This management discussion and analysis is intended to serve as an introduction to the City ofBushnell L basic financial statements. The City of Bushnell's basic financial statement comprises three components:

1) governmental-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains required supplementary information in addition to the basic financial statement themselves.

1) Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Bushnell's finances, in a manner similar to a private-sector business.

The statement of new assets presents information on all of the City of Bushnell's assets and liabilities, L with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Bushnell is improving or deteriorating.

The statement of activities presents information in how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are

-, reported in this statement for some items that will only result in cash flows in future fiscal period (e.g.,

uncollected taxes and earned but unused vacation leave).

The government-wide financial statements can be found on pages 10-12.

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2.) Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Bushnell, like other state and local LJ governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Bushnell can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmentalfunds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the L government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term L financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar bU information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

L The City of Bushnell maintains two individual governmental funds. Information is presented separately Laandin the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, changes in fund balances for the general fund and special revenue funds.

The City of Bushnell adopts an annual appropriated budget for its general and special revenue fund. The budgetary comparison statements have been provided for the general fund and special revenue funds to demonstrate compliance with this budget.

The basic governmental fund financial statements can be found on pages 13-16.

i Proprietaryfunds.Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Bushnell uses enterprise funds to account for its electric distribution operation, water services, wastewater services, and sanitation services.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the electric, water, wastewater and sanitation services, of which all are considered to be major funds of the City of Bushnell.

G The basic proprietary fund financial statements can be found on pages 17-21.

L Fiduciaryfunds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City of Bushnell's programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The fiduciary fund financial statements can be found of pages 22-23 of this report.

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3.) Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 29-50 of this report.

4.) Other Information In additional to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Bushnell's progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on page 51 of this report.

Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position.

In the case of the City of Bushnell, assets exceeded liabilities by $10,671,000 at the close of the most recent fiscal year.

By far the largest portion of the City of Bushnell's net assets, 81% reflects its investment in capital assets (e.g., land, buildings, utility plant in service, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The City of Bushnell uses these capital assets to provide services to citizens consequently; these assets are not available for future spending. Although the City of Bushnell's investment in its 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, since the capital assets themselves cannot be used to liquidate these liabilities.

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CITY OF BUSHNELL'S NET ASSETS Business-Type Governmental Activities Total 2005 2004 2005 2004 2005 2004 Current and other Assets $1,149,020 $1,084,373 $2,253,424 $2,040,361 $3,402,444 $3,124,734 jW Capital Assets 3,430,908 2,848,334 8,920,012 8,877,356 12,350,920 11,725,690 Total Assets 4,579,928 3,932,707 _ _

11,173,436 10,917,717 15,753,364 14,850,424 Long-term liabilities outstanding 717,132 785,182 2,932,988 3,090,975 3,650,120 3,876,157

Other Liabilities 290,400 136,022 _ _

1,141,444 1,049,305 1,431,844 1,185,327 Total Liabilities 1,007,532 921,204 4,074,432 4,140,280 5,081,964 5,061,484 Net assets:

i l Invested in capital assets, net of related debt 2,644,471 2,146,813 5,978,373 5,836,327 8,622,844 7,983,140 Restricted 503,158 485,693 72,534 29,016 575,692 514,709 Unrestricted 424,767 378,997 1,044,797 912,094 1,469,564 1,291,091 Total net assets 3,572,396 3,011,503 7,095,704 6,777,437 10,668,100 9,788,940 CITY OF BUSHNELL'S CHANGES IN NET ASSETS Business-Type Governmental Activities Total 2005 2004 2005 2004 2005 2004

- Revenues:

Program revenues:

Charges for Services 111,149 130,105 4,382,353 3,697,327 4,493,502 3,827,432 Operating grants and contributions 118,365 126,089 - 64,737 118,365 190,826 Capital grants and contributions 459,705 54,395 271,215 109,084 730,920 163,479 General revenues:

Property Taxes 398,811 283,977 - - 398,811 283,977 Other Taxes 718,065 642,433 - - 718,065 642,433 Other Revenues 472,483 393,137 29,351 12,152 501,834 405,289 L Total revenues 2,278,578 1,630,136 4,682,919 3,883,300 6,961,497 5,513,436 Expenses:

General government 439,323 389,674 439,323 389,674 Public safety 758,509 696,291 758,509 696,291 Physical Environment 31,240 12,066 31,240 12,066 ijTransportation 428,638 371,970 428,638 371,970 Culture and Recreation 386,474 358,638 386,474 358,638 Interest on Long-term debt 37,213 36,512 37,213 36,512 Electric Utility 2,448,113 2,269,014 2,448,113 2,269,014 1 Water Utility 456,630 435,197 456,630 435,197 Sanitation 435,321 393,609 435,321 393,609 Wastewater Utility -

657.876 701,540 _ _

657,876 701,540 i Total expenses 2.081.397

_, , .

1.865.151

, _

3.997.940

_, ., .

3.799.360

_, . ,_

6.079.337

_, . .

5,664,511 Increase (Decrease) in net assets before transfers 197,181 (235,015) 684,979 83,940 882,160 (151,075)

Transfers -

363,712 414,000 - (363,712) (414,000)

Increase (Decrease) in net assets 560,893 178,985 321,267 (330,060) 882,160 (151,075)

Net assets Beginning 3,011,503 2,832,518 6,777,437 7,107,497 . _

9,788,940 9,940,015 LI Net assets Ending 3.572.396 3,011,503 7,098,704 6,777,437 10,671,100 9,788,940 6

An additional portion of the City of Bushnell's net assets, 5% represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets

$1,469,564 may be used to meet the government's ongoing obligations to citizens and creditors.

At the end of the current fiscal year, the City of Bushnell is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities.

The government's net assets increased by $907,467 during the current fiscal year.

The increase in net assets could be partially attributed to the increase in the wastewater customer base, which reflected in an increase of revenues. Another contributing factor would be the decrease in governmental activities expenditures as compared to the prior year. With both of these variables the end result was an increase in net assets.

Governmental Activities. Both the general fund and the special revenue - cemetery fund are considered major governmental funds. Governmental activities increased the City of Bushnell's net assets by

$560,893 thereby accounting for 5% of the total in the net assets of the City of Bushnell.

• Property taxes increased by $114,834, which is 51% during the year in the general fund. Most of this increase is attributed to the growth and development with the municipal limits as well as the approved increase in the millage rate.

• The special revenue - cemetery fund has reserve fund balance $503,158.

For the most part, increases in expenses closely paralleled inflation and growth in the demand for services.

Business-type Activities. The city considered all four of the business-type activities - electric, water, wastewater and sanitation major funds. Business-type activities decreased the City of Bushnell's net assets by $321,267 of the total in the government's net assets. A key element of this decrease was the Wastewater utility. With this being a newer utility, projected revenues were not met for the fiscal year.

The City expects this utility to grow in the upcoming year due to a growth in the commercial areas and enhancements to the facility to accommodate more connections. Other factors for the net assets are as follows:

• Charges for services for business-type activities increased by 18%. This can be attributed to the increase in sales due to the municipal limit increase and commercial growth.

• Revenues also increased as a result of a modest increase in sales. The increase in sales and rates account for the $685,026 increase in charge for services for Electric, Water, Wastewater and Sanitation services.

• With the continued growth within the Wastewater customer base the anticipated increase in charges for services should be reflective within the next fiscal year.

• Growth within the City's municipal limits also contributed to additional customers within the' service area for the City of Bushnell. These annexations generated an increase in the customer base, therefore increasing charges for services revenue.

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Financial Analysis of the Government's Funds As noted earlier, the City of Bushnell uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmenudfunds. The focus of the City of Bushnell's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Bushnell's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the City of Bushnell's governmental funds reported combined ending fund balances of $1,013,805 an increase of $65,454. in comparison with the prior year.

Approximately 51% of this total amount constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to pay and perpetual care for the cemetery.

l I The general fund is the chief operating fund of the City of Bushnell. At the end of the current fiscal year, unreserved fund balance of the general fund and the total fund balance reached $510,643. As a measure of the general fund's liquidity, it may be useful to compare the total fund balance to total fund expenditures.

Total fund balance represents 19 % of total general fund expenditures.

The fund balance of the City of Bushnell's general fund increased by $47,989 during the current fiscal year. Key factors in this growth are as follows:

• The City Council took a proactive choice to increase ad valorem taxes in an effort to diminish the ongoing decline in fund balance. The current millage levy is 4.50.

L The departments such as administration, police, street, parks and recreation have reduced expenditures in an attempt to assist with the increase in fund balance for the general fund.

LD} Proprietaryfunds. The City of Bushnell's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Unrestricted net assets of the Electric, Water, Wastewater and Sanitation fund at the end of the year amount to $1,041,797. Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Bushnell's business-type activities.

Govenmental Funds Budeetarv Information Differences between the original budget and the final amended budget were relatively minor and can be briefly summarized as follows:

• Increase in Grant revenue, due to additional funding being received.

• Increase in several departments for additional expense related to Grant Funding.

• Slight increase in Operating Expenses of most departments due to a rise in the cost of diesel and gasoline.

During the year, revenues exceeded budgetary estimates greater than expenditures exceeded budgetary estimates, thus eliminating the need to draw upon existing fund balance and actually increasing General Fund Balance. The budgetary variances can also be explained by the bulleted comments above.

Capital Asset and Debt Administration Capitalassets. The City of Bushnell's investment in capital assets for its governmental and business type activities as of September 30, 2005, amounts to $12,350,921 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system, improvements, machinery and equipment.

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Capital asset events during the current fiscal year included the following:

• Small amounts of utility plant additions made to each of the utilities within the year.

• Minor improvements, building and equipment purchases made within the governmental fund.

Additional information on capital assets can be located on page 40, within the notes to the financial statement.

Long-term debt. The City of Bushnell's total debt increased by $210,608. During the current fiscal year.

The key factor in this increase was the capital lease of two police cruisers and the note payable for the purchase of land. Additional information on long term debt can be located within the notes of the financial statements.

Economic Factors and Next Year's Budgets and Rates Economic Factors. Bushnell is the County Seat of Sumter County, reported Economic and Business research as " The fastest growing County in the State of Florida in annual population change from 1998 to 2002". Situated just 50 miles north of Tampa and 50 miles west of Orlando, Bushnell is strategically located between Interstate 75 and the Florida Turnpike. Our location provides easy transportation access to both of these metropolitan areas.

Easily accessible from many areas and being the County Seat in rural Sumter County makes Bushnell's market area much larger than it's corporate limits. Independent market studies suggest that the population i within the market area affected by the City of Bushnell could exceed 70,000 people. In addition to this L4 6 significant number, traffic studies conducted by the Sumter County Road & Bridge Department indicate average daily traffic counts of 50,000 cars on West Belt Avenue. These statistics are mentioned only to illustrate the much larger market and social forces affecting this small community on a daily basis. Within the utility service area, which comprises mostly the incorporated City limits and some small areas in the unincorporated Sumter County, the City of Bushnell services a total of 1136-metered customers, 330 of L which are commercial customers. Bushnell exhibits steady growth in its commercial sector. Continued community growth and development is expected along Main St. north, and SR 48 west corridor to the I -

75 interchange. The SR 48 and I - 75 interchange still has a number of commercial undeveloped parcels of varying size; currently, the City serves potable water, wastewater and sanitation services to this area.

Based on current trends and projections, it's anticipated that the interchange area will have the most impact on the commercial sector of the City of Bushnell. As such, it will present the City with significant challenges in order to preserve adopted level of service of its infrastructure while allowing quality develops in the area.

L Nextfiscalyear Budget andRate= The utility rates to be utilized in the forecast of revenues for the next fiscal year budget would be Electric Utility a 3% increase, Water Utility a 4% increase, and a 10% increase L>; ~in Wastewater Utility and a 5% increase in Sanitation Utility over existing rates. All departments will continue to minimize capital expenditures in an attempt to regain reserves.

t 1 Reauests for Information This financial report is designed to provide a general overview of the City of Bushnell's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the City Clerk/Finance Director, P. O. Box 115, Bushnell, FL 33513.

9

BASIC FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA STATEMENT OF NET ASSETS SEPTEMBER 30,2005 Business-Governmental Type Activities Activities Total Assets Cash and Cash Equivalents $ 1,022,115 $ 978,666 $ 2,000,781 Investments 0 185,687 185,687 Receivables, Net 55,364 638,042 693,406 Due from Other Governments 71,541 200,824 272,365 Inventory 0 247,062 247,062 Capital Assets Not Being Depreciated:

Land 818,574 556,665 1,375,239 Construction in Progress 0 92,311 92,311 Capital Assets - Depreciated:

Utility Plant in Service and Buildings 1,561,528 9,355,174 10,916,702 Improvements Other Than Buildings 1,008,260 0 1,008,260 Machinery, Equipment and Furniture 1,761,462 2,407,058 4,168,520 Less Accumulated Depreciation (1,718,916) (3,491,196) (5,210,112)

Unamortized Bond Issue Costs 0 3,143 3,143 Total Assets 4,579,928 11,173,436 15,753,364 Liabilities t Accounts and Retainage Payable 100,557 332,653 433,210 L Customer Deposits 7,450 165,542 172,992 Due to Other Governments 0 7,524 7,524 Accrued Liabilities 27,208 26,271 53,479 Unearned Revenue:

Developer's Agreement 0 320,155 320,155 Decommissioning Liability 0 185,687 185,687

, : Accrued Interest Payable 0 10,919 10,919 Noncurrent Liabilities:

Due Within One Year 155,185 92,993 248,178 Due in More Than One Year 717,132 2,932,988 3,650,120 L Total Liabilities 1,007,532 4,074,732 5,082,264 Net Assets L,. Invested in Capital Assets, Net of Related Debt 2,644,471 5,978,373 8,622,844 Restricted for:

Perpetual Care (Expendable) 503,158 0 503,158 Debt Service 0 75,534 75,534 Unrestricted 424,767 1,044,797 1,469,564 Total Net Assets $ 3,572,396 $ 7,098,704 $ 10,671,100 See accompanying notes.

10

L CITY OF BUSHNELL, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30,2005 Program Revenues L

Charges Operating Capital Functions/Programs Expenses for Services Grants and Contributions Grants and Contributions L

Governmental Activities General Govermnent Public Safety

$ 439,323 758,509

$ 24,972 24,778

$

22,815 0 $ 166,100 0

L Physical Environment Transportation Culture and Recreation 31,240 428,638 386,474 1,692 59,707 0 95,550 0

0 293,605 0

0 L

Interest on Long-term debt 37,213 0 0 0 Total Governmental Activities 2,081,397 111,149 118,365 459,705 U

Business-type Activities Electric Utility 2,448,113 2,822,165 0 Water Utility 456,630 568,844 0 Sanitation 435,321 461,477 0 0 Wastewater Utility Total Business-type Activities $

657,876 3,997,940 $

529,867 4,382,353 $

0 0 $

271,215 271,215 L1 General Revenues, Special Items and Transfers Taxes:

U Property Taxes Franchise Taxes Public Service Taxes L

Other Taxes State-shared Revenues (Unrestricted)

Investment Income Miscellaneous i

Transfers Total General Revenues, Special Items and Transfers Change in Net Assets L

Net Assets, Beginning of Year Net Assets, End of Year L L

L1 See accompanying notes.

L 11 L

Net (Expense) Revenue and Change in Net Assets Primary Government L Governmental Business-Type Activities Activities Total w $ (248,251) $ 0 $ (248,251)

(710,916) 0 (710,916)

(29,548) 0 (29,548)

(39,483) 0 (39,483)

(326,767) 0 (326,767)

(37,213) 0 (37,213) i, (1,392,178) 0 (1,392,178)

L 0 374,052 112,214 374,052 112,214 0 26,156 26,156 LU 143,206 655,628 143,206 655,628 398,811 0 398,811 L; 235,293 0 235,293 242,377 0 242,377 240,395 0 240,395 6l 353,384 0 353,384 18,062 29,351 47,413 101,037 0 101,037 j 1 363,712 (363,712) 0 No 1,953,071 (334,361) 1,618,710 560,893 321,267 882,160 3,011,503 6,777,437 9,788,940 j $ 3,572,396 $ 7,098,704 $ 10,671,100 See accompanying notes.

12

L CITY OF BUSHNELL, FLORIDA BALANCE SHEET ALL GOVERNMENTAL FUNDS L

SEPTEMBER 30,2005 Li Major Funds General Cemetary Total Governmental L

Fund Fund Funds Assets Cash and Cash Equivalents Other Receivables

$ 513,968 55,364

$ 508,147 0

$ 1,022,115 55,364 L

Due from Other Govermnents Total Assets 71,541 640,873 508,147 0 71,541 1,149,020 L Liabilities and Fund Balances Liabilities L

Accounts Payable 100,393 164 100,557 Other Accrued Liabilities Deposits 27,208 2,625 0

4,825 27,208 7,450 L

Total Liabilities 130,226 4,989 135,215 t -1 Fund Balances Li Reserved for:

Perpetual Care 0 503,158 503,158 Unreserved Reported in:

General Fund 510,647 0 510,647 Total Fund Balances 510,647 503,158 1,013,805 I

Total Liabilities and Fund Balances $ 640,873 $ 508,147 $ 1,149,020 L L

L

,

See accompanying notes. L 13

,

CITY OF BUSHNELL, FLORIDA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS AS OF SEPTEMBER 30,2005 Total Fund Balances of Governmental Funds $ 1,013,805 Amounts Reported for Governmental Activities in the Statement of Assets are Different Because:

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $5,149,824 and the accumulated depreciation is $1,718,916. 3,430,908 Long-term liabilities are not due and payable in the current period and accordingly are not reported as fund liabilities.

Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due.

All liabilities, both current and long-term, are reported in the statement of net assets. Long-term liabilities at year-end consist of:

Notes Payable and Certificates of Obligation (714,087)

Capital Lease Obligations (72,350)

Compensated Absences (85,880)

Total Net Assets of Governmental Activities $ 3,572,396 See accompanying notes.

14

L CITY OF BUSHNELL, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES L

ALL GOVERNMENTAL FUNDS SEPTEMBER 30,2005 L General Major Funds Cemetary Total Governmental L

Revenues Taxes $

Fund 1,116,876 $

Fund 0 $

Funds 1,116,876 C

Licenses and Permits Intergovernmental Revenues Grant Revenue 10,722 419,748 578,070 0

0 0

10,722 419,748 578,070 LI Charges for Service 27,260 0 27,260 Fines and Forfeitures 24,778 0 24,778 Miscellaneous Revenues 50,007 51,117 101,124 Total Revenues 2,227,461 51,117 2,278,578 f "';

Expenditures Current:

General Government 402,645 20,042 422,687 Public Safety 690,804 0 690,804 Physical Environment 30,466 0 30,466 Transportation 401,029 0 401,029 Culture and Recreation Capital Outlay 321,182 744,761 0

13,610 321,182 758,371 U

Debt Service:

Principal Interest 125,692 37,213 0

0 125,692 37,213 U

Total Expenditures (2,753,792) (33,652) (2,787,444)

(Deficiency) Excess of Revenues L (Under) Over Expenditures (526,331) 17,465 (508,866)

Other Financing Sources (Uses)

Transfers in 363,712 0 363,712 L

Capital Lease Proceeds from Note Payable Total Other Financing Sources 44,608 166,000 574,320 0

0 0

44,608 166,000 574,320 U

Net Change in Fund Balances 47,989 17,465 65,454 L Fund Balance, Beginning of Year 462,658 485,693 948,351 Fund Balance, End of Year $ 510,647 $ 503,158 $ 1,013,805 L

F 1

See accompanying notes.

15

CiTY OF BUSHNELL, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30,2005 Net Change in Fund Balances - Total Governmental Funds $ 65,454 Amounts Reported for Governmental Activities in the Statement of Activities are Different Because:

Governmental funds report capital purchases as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives and reported as depreciation expense. This reconciling item is the amount by which depreciation expense of $175,797 was less than capital purchases of $758,371. 582,574 The issuance of bonds and similar long-term debt provides current financial resources to governmental funds and thus contribute to the change in fund balance. In the statement of net assets, however, issuing debt increases long-term liabilities and does not affect the statement of activities. Similarly, repayment of principal is an expenditure in the governmental funds, but reduces the liability in the statement of net assets. Also governmental funds report the effect of issuance costs, premium, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. The amounts of the items that make up these differences in treatment of long-term debt and related items are:

Debt Issued or Incurred:

Capital Lease and Note Payable (210,608)

Principal Repayments:

Notes Payable and Certificates of Obligation 113,000 Capital Leases 12,692 Some expenses reported in the statement of activities such as compensated absences do not require the use of current financial resources and are not reported as expenditures in governmental funds:

Net Increase in Compensated Absences (2,219)

Change in Net Assets of Governmental Activities $ 560,893 See accompanying notes.

16

i CITY OF BUSHNELL, FLORIDA STATEMENT OF NET ASSETS H1 PROPRIETARY FUNDS SEPTEMBER 30,2005 U

Electric Utility Water Utility Business-Type Activities Sanitation Wastewater Utility L

Assets Fund Fund Fund Fund Total L

Current Assets Cash and Cash Equivalents $ 257,822 $ 242,148 $ 240,709 $ $ 740,679 Restnicted Cash and Investments:

Customer Deposits 165,453 0 0 0 165,453 Revenue Bonds 0 0 0 72,534 72,534 Receivables:

Customers (Net of Allowance for Uncollectible Accounts)

Power Cost Adjustment 386,200

- 49,842 60,237 0

52,225 0

89,538 0

588,200 49,842 I

Due from Other Governments Interfund Receivable Inventories, at Cost 358,871 182,875 0

11,805 54,710 0 0 0

0 200,824 0

9,477 200,824 370,676 247,062 LI Total Current Assets 1,401,063 368,900 292,934 372,373 2,435,270 Noncurrent Assets Restricted Assets Investments - CR-3 Nuclear Decommissioning 185,687 0 0 0 185,687 Li Capital Asset Land Utility Plant in Service and Buildings 2,300 1,962,591 43,340 2,060,963 0

0 511,025 5,331,620 556,665 9,355,174 IIi Machinery and Equipment 1,006,047 837,484 407,665 155,862 2,407,058 (Accumulated Depreciation and Amortization) (1,677,694) (1,143,357) (297,374) (372,771) (3,491,196)

Total Capital Assets -

Cost Less Depreciation 1,293,244 1,798,430 110,291 5,625,736 8,827,701 Construction In Progress Other Assets 0 0 0 92,311 92,311 U

Bond Issue Costs, Net Advances to Other Funds Total Other Assets 850,100 850,100 0 3,143 3,143 0

0 0

0 0

0 0

3,143 850,100 853,243 L

Total Noncurrent Assets Total Assets 2,329,031 3,730,094 1,801,573

$ 2,170,473 $

110,291 403,225 5,718,047

$ 6,090,420 9,958,942

$12,394,212 L

L See accompanying notes.

L 17 D

CITY OF BUSHNELL, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER30, 2005 (Concluded)

Business-Type Activities Electric Water Wastewater Utility Utility Sanitation Utility Fund Fund Fund Fund Total Liabilities and Net Assets Current Liabilities L Accounts Payable $ 198,950 $ 17,647 $ 67,058 $ 48,998 $ 332,653 Accrued Expenses 9,334 6,223 6,706 4,008 26,271 Compensated Absences 6,483 4,643 5,032 1,340 17,498 Due to Other Governments 7,524 0 0 0 7,524 Interfind Payable 0 0 370,676 370,676 Unearned Revenue:

Developer's Agreement 0 0 0 320,155 320,155 Total Current Liabilities 222,291 28,513 78,796 745,177 1,074,777 Current Liabilities (Payable from Restricted Assets)

Current Portion of Revenue Bonds and Notes Payable 25,495 20,000 0 30,000 75,495 Interest Payable 127 0 0 10,792 10,919 Customer Deposits 165,542 0 0 0 165,542 Total Current Liabilities

(Payable from Restricted Assets) 191,164 20,000 0 40,792 251,956 Noncurrent Liabilities Revenue Bond 0 0 0 2,742,000 2,742,000 Compensated Absences 25,935 18,574 20,126 5,353 69,988 Notes Payable 0 121,000 0 0 121,000 Deferred Credit -

CR-3 Decommissioning 185,687 0 0 0 185,687 Advances from Other Funds 0 220,100 0 630,000 850,100 Total Noncurrent Liabilities 211,622 359,674 20,126 3,377,353 _3,968,775 Total Liabilities 625,077 408,187 98,922 4,163,322 _ 5,295,508 Net Assets i Invested in Capital Assets, Net of Related Debt 1,267,749 1,654,286 110,291 2,946,047 5,978,373 Restricted for Debt Services 0 0 0 75,534 75,534 if Unrestricted 1,837,268 108,000 194,012 (1,094,483) 1,044,797 Total Net Assets $ 3,105,017 $ 1,762,286 $ 304,303 $ 1,927,098 $ 7,098,704 See accompanying notes.

18

L CITY OF BUSHNELL, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS L

FOR THE YEAR ENDED SEPTEMBER 30,2005 Electric Water Business-Type Activities Wastewater L Utility Utility Sanitation Utility Operating Revenues Charges for Services Fund

$ 2,822,165 $

Fund 568,844 $

Fund 461,477 $

Fund 529,867 Total

$ 4,382,353 L

Operating Expenses Demand and Energy Charge 1,805,208 0 0 0 1,805,208 D

CR-3 Operations and Maintenance 68,543 0 0 0 68,543 Landfill Charges Salaries and Benefits 268,613 0

220,265 0 189,539 157,706 0

167,326 189,539 813,910 L

Other Costs of Sales and Services 183,541 152,962 68,776 197,075 602,354 Depreciation and Amortization 120,453 79,050 19,300 163,975 382,778 Lo (Total Operating Expenses)

Operating Income (2,446,358) 375,807 (452,277) 116,567 (435,321) 26,156 (528,376) 1,491 (3,862,332) 520,021 L

Nonoperating Revenues (Expenses)

Interest Income 18,149 4,111 4,476 2,615 29,351 Interest Expense (1,755) (4,353) 0 (129,500) (135,608)

Total Nonoperating Revenues (Expenses) 16,394_ (242) 4,476 (126,885) (106,257)

Income (Expense) Before Contributions L

and Transfers 392,201 116,325 30,632 (125,394) 413,764 Capital Contributions - Grants o 0 0 271,215 271,215 L

Transfers (Out) (300,000) (34,795) (28,917) 0 (363,712)

Total Capital Contributions and Transfers (300,000) (34,795) (28,917) 271,215 (92,497) L Change in Net Assets Net Assets, Beginning of Year 92,201 3,012,816 81,530 1,680,756 1,715 302,588 145,821 1,781,277 321,267 6,777,437 L

Net Assets, End of Year $ 3,105,017 $ 1,762,286 $ 304,303 $ 1,927,098 $ 7,098,704 U L

U See accompanying notes.

19 L

CITY OF BUSHNELL, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2005 Business-Type Activities Electric Wate r Wastewater Utility UtilitkY Sanitation Utility Fund FundI Fund Fund Total

- Cash Flows from Operating Activities Cash Received from Customers, Including Cash Deposits $ 2,705,470 $ 555,439 $ 456,993 $ 473,365 $ 4,191,267 Cash Paid to Suppliers (271,420) (216,314) (153,364) (167,326) (808,424)

Cash Paid to Employees for Services (2,051,314) (195,167) (210,822) (192,420) (2,649,723) t Net Cash Provided by (Used in)

Operating Activities 382,736 143,958 92,807 113,619 733,120 r1 Cash Flows from Noncapital Financing Activities Interfind Receivable and Payable (213,948) 0 0 213,948 0 Grant Funds 39,418 0 0 0 39,418 Transfers Out (300,000) (34,795) (28,917) 0_ (363,712)

Net Cash Provided by (Used in)

Noncapital and Related Financing Activities (474,530) (34,795) (28,917) 213,948 (324,294)

Cash Flows from Capital L and Related Financing Activities Acquisition and Construction of Capital Assets (89,321) (44,056) (62,976) (249,491) (445,844)

Capital Contributions - Grants 0 67,000 0 109,535 176,535 Principal Paid on Capital Debt (25,518) (20,000) 0 (28,000) (73,518)

Interest Paid (1,755) (4,353) 0 (129,500) (135,608)

¢ 5Net Cash Provided by (Used In) Capital and Related Financing Activities (116,594) (1,409) (62,976) (297,456) (478,435)

Cash Flows from Investing Activities Interest Income 18,149 4,111 4,476 2,615 29,351 Net Increase (Decrease) In Cash L[ and Cash Equivalents (190,239) 111,865 5,390 32,726 (40,258)

Cash, Beginning of Year 613,514 130,283 235,319 39,808 1,018,924 Cash, End of Year $ 423,275 $ 242,148 $ 240,709 $ 72,534 $ 978,666 See accompanying notes.

20

U CITY OF BUSHNELL, FLORIDA STATEMENT OF CASH FLOWS Li PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2005 (Concluded)

L Electric Water Business-Type Activities Wastewater L

Utility Utility Sanitation Utility Fund Fund Fund Fund Total 11 Shown in the Financial Statements As Cash and Cash Equivalents $ 257,822 $ 242,148 S 240,709 $ 0 $ 740,679 Restricted Cash Total 165,453

$ 423,275 S 242,148 0

$ 240,709 0

$

72,534 72,534 237,987

$ 978,666 L Reconciliation of Operatine Income to Net Cash Provided by (Used in) Activities Operating Income (Loss) S 375,807 $ 116,567 $ 26,156 $ 1,491 S 520,021 L

Adjustments to Reconcile Operating Income (Loss) to Net L-Cash Provided by (Used in)

Operating Activities:

Depreciation and Amortization 120,453 79,050 19,300 163,975 382,778 Loss on Disposal of Assets 20,410 0 0 0 20,410 Changes in Assets Decrease (Increase) and Liabilities Increase (Decrease):

Accounts Receivable, Net (150,732) (13,405) (4,484) (56,502) (225,123)

Inventory (13,278) 2,945 0 (2,294) (12,627)

Accounts Payable (1,154) (45,436) 47,493 5,565 6,468 I Accrued Expenses Customer Deposits (2,807) 34,037 4,237 0

4,342 0

1,384 0

7,156 34,037 U~

Total Adjustments 6,929 27,391 66,651 112,128 213,099 Net Cash Provided by (Used in)

Operating Activities $ 382,736 $ 143,958 _$ 92,807 $ 113,619 S 733,120 U

Noncash Investing, Capital and Financing Activities Capital - None U

L See accompanying notes.

21 U

CiTY OF BUSHNELL, FLORIDA STATEMENT OF FIDUCLARY NET ASSETS PENSION TRUST FUNDS SEPTEMBER 30,2005 Pension Trust Funds Assets I I Cash and Cash Equivalents $ 89,615 Investments 633,511 Contributions Receivable 37,256 LI Total Assets 760,382 Total Liabilities 0 I t Net Assets Held in Trust for Pension Benefits $ 760,382 See accompanying notes.

22

U CiTY OF BUSHNELL, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS PENSION TRUST FUNDS L

FOR THE YEAR ENDED SEPTEMBER 30,2005 L

Pension Trust L

Additions Contributions:

Funds L

Employer $ 136,441 State 25,305 U Employee Total Contributions Investment Earnings 2,518 164,264 65,337 LI Less: Investment Management Fees (11,759)

Net Investment Income 53,578 Total Additions 217,842 Deductions General and Administrative 1,937 (Total Deductions) (1,937)

Net Increase 215,905 L

Net Assets Held in Trust for Pension Benefits:

I Beginning of Year 544,477 End of Year $ 760,382 L

L U

L L

See accompanying notes.

U 23 U

CITY OF BUSHNELL, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL MAJOR FUND - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,2005 Original Final Variance With Budget Budget Actual Final Budget Revenues Taxes Ad Valorem $ 401,341 $ 401,341 $ 398,811 $ (2,530)

Local Government Infrastructure Surtax 147,708 147,708 213,362 65,654 Local Option Gas Tax 24,995 24,995 27,033 2,038 Franchise Tax:

Electric 98,088 98,088 104,225 6,137 Utility Tax:

Communication 96,898 96,898 113,253 16,355 Gas 15,889 15,889 9,223 (6,666)

Electric 107,790 107,790 119,901 12,111 City Utility Tax 112,996 112,996 131,068 18,072 Total Taxes 1,005,705 1,005,705 1,116,876 111,171 Licenses and Permits City Building Permits 4,000 4,000 2,925 (1,075)

City Occupational License 6,000 6,000 7,797 1,797 Total Licenses and Permits 10,000 10,000 10,722 722 Intergovernmental Revenue State Revenue Sharing 80,055 80,055 75,687 (4,368)

Alcohol Beverage License Distribution 1,000 1,000 1,064 64 Mobile Home Licenses 7,214 7,214 6,547 (667)

County Occupational License 1,500 1,500 2,173 673 Sumter County Gas Tax 135,914 135,914 146,595 10,681 County Reimbursement - Fire Truck 36,420 36,420 33,898 (2,522)

County Library Funding 25,000 25,000 32,467 7,467 Half-cent Sales Tax 89,566 89,566 121,317 31,751 Total Intergovernmental Revenue 376,669 376,669 419,748 43,079 Grant Revenue FEMA/DCA Hurricane Reimbursement Grant 0 132,140 95,550 (36,590)

FRDAP Grant 400,000 400,000 0 (400,000)

Land and Water Conservation Grant 0 0 166,100 166,100 LAP Grant 250,000 250,000 243,605 (6,395)

JPA Grant 50,000 50,000 50,000 0 Law Enforcement Grant 1,500 1,500 22,815 21,315 Total Grant Revenue 701,500 833,640 578,070 (255,570)

See accompanying notes.

24

D CITY OF BUSHNELL, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL L

MAJOR FUND - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,2005 A

(Continued) In Original Final Variance With Budget Budget Actual Final Budget r Revenues (Conchuded)

L Charges for Services Mowing Fees Fall Festival Summer Youth Program

$ 200 13,235 14,238

$ 200 13,235 14,238

$ 20 10,373 16,867

$ (180)

(2,862) 2,629 U

Total Charges for Services 27,673 27,673 27,260 (413)

Fines and Forfeitures L

Fines and Forfeitures 39,257 39,257 23,418 (15,839)

Police Education 1,577 1,577 1,360 (217)

Total Fines and Forfeitures 40,834 40,834 24,778 (16,056)

Miscellaneous Revenue U

Interest Earned 2,426 2,426 5,944 3,518 Rent - Community Building 5,520 5,520 5,300 (220)

Rent - Tower Space 6,000 6,000 9,138 3,138 Miscellaneous 20,696 20,696 29,625 8,929 Total Miscellaneous Revenue 34,642 34,642 50,007 15,365 Total Revenues 2,197,023 2,329,163 2,227,461 (101,702)

L Expenditures General Government L

Legislative:

Personal Services 18,000 18,000 19,033 (1,033)

Operating Expenses Grants and Aid 8,439 5,000 8,439 5,000 10,738 2,530 (2,299) 2,470 U

Total Legislative 31,439 31,439 32,301 (862)

Finance and Administrative:

Personal Services 247,535 247,535 256,454 (8,919)

U1 Operating Expenses Capital Outlay Total Finance and Administrative 66,158 10,000 323,693 82,158 10,000 339,693 90,910 3,771 351,135 (8,752) 6,229 (11,442)

L Legal Counsel:

Operating Expenses 24,844 24,844 22,980 1,864 U

Total General Government 379,976 395,976 406,416 (10,440)

U See accompanying notes.

U 25 U

CITY OF BUSHNELL, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL MAJOR FUND - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,2005 (Continued)

Original Final Variance With Budget Budget Actual Final Budget Expenditures (Continued)

Public Safety Law Enforcement:

Personal Services $ 493,336 $ 493,336 $ 528,531 $ (35,195)

Operating Expenses 129,196 129,196 108,150 21,046 Capital Outlay 4,800 4,800 86,064 (81,264)

Total Law Enforcement 627,332 627,332 722,745 (95,413)

Code Compliance Department:

Personal Services 48,086 48,086 47,920 166 Operating Expenses 7,460 7,460 6,203 1,257 Total Code Compliance Department 55,546 55,546 54,123 1,423 i Total Public Safety 682,878 682,878 776,868 (93,990)

Physical Environment Cemetery.

Operating Expenses 400 400 15,400 (15,000)

Industrial Development Department:

Grants and Aids 12,000 12,000 15,000 (3,000)

Animal Control:

T Operating Expenses 100 100 66 34 Total Physical Environment 12,500 12,500 30,466 (17,966)

Transportation Roads and Streets:

L Personal Services Operating Expenses Capital Outlay 166,337 115,474 324,500 166,337 227,328 324,500 159,320 241,709 310,769 7,017 (14,381) 13,731 Total Transportation 606,311 718,165 711,798 6,367 I , Culture and Recreation Libraries:

Personal Services 87,288 87,288 84,174 3,114 Operating Expenses 36,459 40,745 41,804 (1,059)

Capital Outlay 3,700 3,700 1,695 2,005 Total Libraries 127,447 131,733 127,673 4,060 See accompanying notes 26

L CITY OF BUSHNELL, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE L BUDGET AND ACTUAL MAJOR FUND - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,2005 L

(Concluded)

Original Final Variance With L

Budget Budget Actual Final Budget Expenditures (Concluded)

Culture and Recreation (Concluded)

L Parks and Recreation:

Personal Services Operating Expenses

$ 88,202 76,259

$ 88,202 76,259

$ 66,650 .$

84,472 21,552 (8,213)

L Capital Outlay 415,000 415,000 342,462 72,538 Total Parks and Recreation Special Events:

579,461 579,461 493,584 85,877 U

Operating Expenses 26,901 26,901 24,406 2,495 Summer Youth Program: Li Personal Services 5,150 5,150 5,181 (31)

Operating Expenses Total Summer Youth Program Total Culture and Recreation 14,700 19,850 753,659 14,700 19,850 757,945 14,495 19,676 665,339 205 174 92,606 Li Debt Service Principal Retirement 123,074 123,074 125,692 (2,618)

Interest and Fiscal Charges 37,698 37,698 37,213 485 Total Debt Service 160,772 160,772 162,905 (2,133) J (Total Expenditures) (2,596,096) (2,728,236) (2,753,792) (25,556)

(Deficiency) of Revenue (Under) Ij' Expenditures (399,073) (399,073) (526,331) (127,258)

Other Financing Sources (Uses)

Transfers In: I Electric 300,000 300,000 300,000 0 Water 34,795 34,795 34,795 0 Sanitation Wastewater 28,917 35,361 28,917 35,361 28,917 0

0 (35,361) L Capital Lease 0 0 44,608 44,608 Proceeds from Note Payable Total Other Financing Sources 0

399,073 0

399,073 166,000 574,320 166,000 175,247 L Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 0 0 47,989 47,989 L Fund Balance, Beginning of Year Fund Balance, End of Year $

462,658 462,658 $

462,658 462,658 $

462,658 510,647 $

0 47,989 L U

See accompanying notes.

27 L

CITY OF BUSHNELL, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL MAJOR FUND - CEMETERY FOR THE YEAR ENDED SEPTEMBER 30,2005 Original Final Variance With Budget Budget Actual Final Budget Revenues Contributions $ 8,500 $ 8,500 $ 22,250 $ 13,750 Sale of Cemetery Lots 6,000 6,000 14,250 8,250 Interest 20,000 20,000 12,118 (7,882)

Memorials and Gifts 500 500 2,499 1,999 Total Revenues 35,000 35,000 51,117 16,117 (Expenditures) (38,200) . _

(38,200) (33,652) 4,548 Excess of Revenues Over Expenditures (3,200) (3,200) 17,465 20,665 Fund Balance, Beginning of Year 3,200 3,200 485,693 482,493 Fund Balance, End of Year S 0 $ 0 $ 503,158 $ 503,158 See accompanying notes.

28

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA Note 1- Description of Funds and Summary of Significant Accounting Policies L The financial statements of the City of Bushnell, Florida (the City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Significant City accounting policies are described below.

Reporting Entity The City is a political subdivision of the State of Florida located in Sumter County. The City was established under the legal authority of the Laws of Florida, Chapter 57-105. The City operates under a council-manager form of government. The legislative branch of the City is composed of a four-member elected City Council, and an elected mayor. The Mayor and City Council are governed by the City Charter by state and local laws and regulations. The Mayor U

and City Council are responsible for the establishment and adoption of policy. The execution of such policy is the responsibility of the City Manager. The City provides services to its residents in many areas, including public safety (police), highways and streets, utilities, sanitation, culture L

and recreation, public improvements, and general administrative services.

In evaluating the City as a reporting entity, management has addressed all potential component units (traditionally separate reporting entities) for which the City may or may not be financially accountable and, as such, be included within the City's financial statements. The City (the primary government) is financially accountable if it appoints a voting majority of the organization's governing board and (1) it is able to impose its will on the organization, or (2) there is a potential for the organization to provide specific financial benefit to or impose specific financial burden on the City. Additionally, the primary government is required to consider other U

organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Management has determined that there is no component units that U the City is required to report on.

Government-wide and Fund Financial Statements L The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government.

For the most part, the effect of interfind activity has been removed from these statements. L Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct U

expenses are those that are clearly identifiable with a specific function or segment Indirect expenses are allocated automatically and certain indirect costs are included in program expenses reported for individual function and activities. Program revenues include:

1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and 2) grants and U

contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues..

U 29 U

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Contnued)

Note 1 - Description of Funds and Summary of Significant Accounting Policies (Continued)

Government-wide and Fund Financial Statements (Conduded)

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. The fiduciary funds are excluded from the government-wide financial statements. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements.

Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule, the effect of interfund activity has been eliminated from the government-wide activities.

Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, franchise fees, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government.

The City operates the following major governmental fund:

n Governmental Funds Governmental funds are used to account for all or most of a government's general activities.

The City operates the following major governmental funds:

• The General Fund is the government's primary operating fimd. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

• Evergreen Cemetery Fund - accounts for the proceeds and expenditures generated to maintain the City's cemetery.

30

L NOTES TO FINANCIAL STATEMENTS CiTY OF BUSHNELIR , FLORIDA (Continued)

Note 1 - Description of Funds and Summary of Significant Accounting Policies (Continued) U Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Concluded) U Fund Financial Statements (Concluded)

• Proprietary Funds Proprietary funds are used to account for the Citys ongoing activities which are similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration.

The City reports the following major proprietary funds: L

• The Electric Utility Fund - accounts for the fiscal activity of providing electric services to residential and commercial customers.

• The Water Utility Fund - accounts for the fiscal activity of providing water services to residential and commercial customers. L

• The Wastewater Fund - accounts for the fiscal activity of providing wastewater services to residential and commercial customers. L

• The Sanitation Fund - accounts for the operations and maintenance of the City's refuse collection system L

• Fiduciary Funds

• Pension Trust Funds - accounts for the activities of the City's General Employees' and Police Officers' Retirement funds, which accumulate resources for pension benefit 1 payments for qualified retiring employees. They are excluded from the government-wide financial statements because they are fiduciary in nature and do not represent resources available to the government for operations. L Summary of Significant Accounting Policies L The City conforms to all significant accounting policies to generally accepted accounting principles applicable to governmental units. The following is a summary of the more significant principles and practices used in the preparation ofthese financial statements. L Proprietary Funds Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the govermnent-wide and proprietary fund financial statements L

to the extent that those standards do not conflict with or contradict guidance of GASB. Based on the accounting and reporting standards set forth in GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use L

PropnetaryFundAccounting, the City has opted out to apply only the accounting and reporting pronouncements issued by the Financial Accounting Standards Board (FASB) on or for L November 30, 1989, for business-type activities and enterprise funds.

31 L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Condnued)

Note 1- Description of Funds and Summary of Significant Accounting Policies (Continued)

Summary of Significant Accounting Policies (Conduded)

Proprietary Funds (Conduded)

Proprietary funds distinguish operating revenues and expenses from nonoperating items.

Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the City's policy to generally use restricted resources first, and then unrestricted resources, as they are needed for their intended purposes, however, this decision is frequently made on a case-by-case basis based upon facts and circumstances. Revenues of the enterprise funds are recognized on the basis of services rendered. Billing cycles of the enterprise funds that overlap September 30, are prorated based upon meter reading dates.

Budgets and Budgetary Accounting The City's procedures in preparing and adopting the annual budget, which is adopted on a basis consistent with generally accepted accounting principles, are as follows:

a The City Manager is responsible for preparing a proposed operating budget for all governmental funds and proprietary funds for the upcoming year prior to September 30 that includes estimated revenues, proposed expenditures, and other financing sources and uses.

• Public hearings are held to obtain taxpayer comments and suggestions. The budget is enacted through passage of a resolution.

• The City Manager is authorized to transfer budgeted amounts within any fund, but may not revise total fund expenditures without the approval of the City Council. The budget data presented is in agreement with the originally adopted budget as amended by the City Council.

a Formal budgetary integration is employed as a management control device during the year for substantially all funds. Budgets are adopted on a basis consistent with generally accepted accounting principles, except that the provision for depreciation expense is not included in the budget of the proprietary funds. Total budgetary appropriations within a governmental fund type may not be exceeded legally. Appropriations lapse at the end of the year. Budget data, when presented in the basic financial statements is prepared on the same basis of accounting as that prescribed for the fund. An annual operating budget was prepared for all funds.

32

L NOTES TO INANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Condnued)

Note 1- Description of Funds and Summary of Significant Accounting Policies (Continued) L Budgets and Budgetary Accounting (Concluded)

Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds.

U During the year, the City made supplemental budget appropriations which increased or decreased the budgets as necessary.

Cash and Cash Equivalents Cash includes cash on hand, demand deposits with banks, deposits in cash management pools U

and certificates of deposits, as well as short-term investments with a maturity date within three months of the date acquired. The City's pooled cash account is considered to be cash equivalent since each fund can effectively deposit or withdraw funds at any time without prior notice or L

penalty.

The City utilizes pooled cash and investment accounts in which each fund participates on a dollar equivalent basis (except the pension trust funds). Interest is distributed monthly based on average balances. The nature of the pooled accounts permits temporary negative cash balances i upon overdrawing of cash available in individual funds, which is presented as interfund receivables and payables. The deposits and investments of the pension trust funds are held separately from those of other City funds.

Transfers Transfers are recognized in the accounting period in which the interfund receivable and payable arise. Transfers are made from the utility funds to finance operations of the general fund.

Capital Grants Accounts receivable from other governments include amounts due from grantors. Program and capital grants for capital assets are recorded as receivables and revenues at the time reimbursable costs are incurred. Revenues received in advance of costs being incurred are deferred. Capital grants for capital asset additions to the proprietary funds are recorded as U nonoperating revenues.

' !

Investments U Investments including pension funds and funds invested in the CR m decommissioning fund are stated at fair value-uoted market price or the best available estimate thereof U Receivables Utility operating revenues are generally recognized on the basis of cycle billings rendered monthly. The amount of services delivered after the last billing date and up to September 30 is L estimated and accrued at year end.

Inventories and Prepaid Items Inventories held by the utility funds are priced by the weighted-average costs method at the lower of cost or market. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. L 33L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Continued)

Note 1 - Description of Funds and Summary of Significant Accountingg Policies (Continued)

Cost Reimbursements Certain personal services and operating expenses/expenditures recorded in various funds and departments are a results of services performed and expenses/expenditures incurred for the benefit of other funds and departments. In order to better reflect various funds and departments' actual costs, a cost reimbursement is recorded as a reduction in expenditures or expenses. The funds and departments that benefit from the services and expenses/expenditures record a cost reimbursement as an increase in expenditures or expenses.

Capital Assets Capital assets, which include land, utility plant-in-service buildings and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Utility plant-in-service and equipment with initial, individual costs that equal or exceed $300 and estimated useful lives of over one year are recorded as capital assets.

Capital assets are recorded at historical cost if purchased or constructed.

Capital asset purchases are recorded as capital outlay expenditures in the fund level governmental funds in the year of acquisition.

Capital Assets are depreciated using the straight-line method over the following estimated useful lives:

Buildings 32-50 Years Improvements Other Than Buildings 10-50 Years Machinery, Equipment and Furniture 3-15 Years Investment in Crystal River No. 3 Nuclear Plant 28 Years Bond Discounts and Issuance Costs Bond discounts and insurance costs for proprietary fund types are deferred and amortized over the term of the bonds using the straight-line amortization method which produces a result not significantly different from the interest method. Bond discounts are presented as a reduction of the face amount of bonds payable, whereas issuance costs are recorded as deferred charges.

Compensated Absences In the governmental fund financial statements there are no amounts of compensated absences associated with employee vacations and sick leave recorded. In the government-wide financial statements, all governmental fund compensated absences are recorded and split between the current and noncurrent portions.

In proprietary funds, the amount of compensated absences associated with employee vacations that are recorded as expenses represent the amounts paid during the year and accrued at year end. The entire liability for compensated absences of these funds is reflected in the respective financial statements split between the current and noncurrent portions and also recorded in the entity-wide statements.

34

L NOTES TO FINANCLIL STATEMENTS CITY OF BUSHNELL, FLORIDA L (Confinued)

Note 1 - Description of Funds and Summary of Significant Accounting Policies (Continued) L Compensated Absences (Conduded)

The policy for payment of sick leave is upon voluntary termination of the employee, 50% of the accumulated hours would be paid (75% for long-term employees with twenty or more years of L 1 full-time service) not to exceed 1,040 hours4.62963e-4 days <br />0.0111 hours <br />6.613757e-5 weeks <br />1.522e-5 months <br />. The City accrues and records 100% of unpaid vacation pay and 50% or 75%, as applicable, of unpaid sick pay at the employee's current pay L rate.

Encumbrances Encumbrances accounting, under which purchase orders, contracts, and other commitments are L

recorded as expenditures in order to reserve that portion of the applicable appropriation, is not employed by the City for budgetary purposes. L Unearned Revenues Unearned revenues include amounts collected before the revenue recognition criteria are met and receivables which, under the modified accrual basis of accounting, are measurable but not L

yet available.

Governmental Fund Types Reservations of fund balance are used to indicate the portion not currently available for expenditure or segregated for a specific future use. L Water Line Extension Charges Water line extension charges are made to customers to cover the full cost of the addition. Costs of the extension are reported as property and equipment and depreciation over the estimated LT useful life of the assets.

Property Taxes Under Florida law, the assessment of all properties and the collection of all county, municipal L

and school board property taxes are consolidated in the offices of the County Property Appraiser and the County Tax Collector. The laws of the state regulating tax assessment are also designed to assure a consistent property valuation method statewide. Florida Statutes U

permit municipalities to levy property taxes at a rate of up to 10 mills. The millage rate assessed by the City for the fiscal year ended September 30, 2005, was 4.50%. L The tax levy of the City is established by the City Council prior to October 1 of each year and the Sumter County Property Appraiser incorporates the City millages into the total tax levy, L which includes the County and the County School Board tax requirements.

All property is assessed according to its fair market value on January 1 of each year. Each assessment roll is submitted to the Executive Director of the Florida Department of Revenue for review to determine ifthe rolls meet all of the appropriate requirements of Florida Statutes. L L

35 L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Con inued)

Note 1 - Description of Funds and Summary of Significant Accounting Policies (Conduded)

Property Taxes (Condcuded)

Taxes are assessed on November 1 of each year or as soon thereafter as the assessment roll is certified and delivered to the County Tax Collector. Unpaid taxes become delinquent on April 1 following the year in which they are assessed. Discounts are allowed for early payment at the rate of 4% in the month of November, 3% in the month of December, 2% in the month of January, and 1%in the month of February. The taxes paid in March are without discount.

On or prior to June 1 following the tax year, certificates are sold for all delinquent taxes on real property. After sale, tax certificates bear interest at 18% per year or any lower rate bid by the buyer. Application for a tax deed on any unredeemed tax certificates may be made by the certificate holder after a period of two years. Unsold certificates are held by the County.

Delinquent taxes on personal property bear interest of 18% per year until the tax is satisfied either by seizure and sale of the property or by the five-year statute of limitations.

The City does not accrue its portion of the County held tax sales certificates or personal property tax wan-ants because such amounts are not measurable and available as of the balance sheet date.

Note 2 - Denosits and Investments Cash and Cash Equivalents At September 30, 2005, the carrying amount of the City's cash deposit accounts was $1,464,183 in the governmental and business-type funds and $89,615 in the pension funds. All cash deposits were held in qualified public depositories and were covered by federal depository insurance or by the Florida Security for Public Deposits Act (the Act); Chapter 280 of the Florida Statutes. The Act established a multiple-financial institution collateral pool with the ability to assess member institutions to satisfy the claims of governmental entities if any member financial institution f&ils. This ability to assess provides protection which is similar to depository insurance.

Cash Equivalents consist of amounts placed with the State Board of Administration for participation in the Local Government Surplus Funds Trust Fund investment pool created by Section 218.405, Florida Statutes. This investment pool operates under investment guidelines established by Section 215.47, Florida Statutes. The City's investment in the Local Government Surplus Funds Trust Fund, a Securities and Exchange Commission Rule 2a7-like external investment pool, in the amount of $536,599. This external investment pool is unrated and as of September 30, 2005, had an average of 49 days to maturity.

Investments Florida Statutes authorize the investments of funds in certificates of deposits or savings accounts of financial institutions approved by the State Treasurer, obligations of the United States Government, instruments guaranteed by the United States Government, and money market funds registered with the Securities Exchange Commission. Investments may also include repurchase agreements collateralized by U.S. Treasury Securities and Market-to-Market, 36

NOTES TO FINANCIAL STATEMENTS I CITY OF BUSHNELL, FLORIDA (Continued)

Note 2 - Deposits and Investments (Continued)

Investments (Conduded) and deposits with the State Board of Administration pool, or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act The City is further U

authorized to invest in securities of, or other interests in, any open-ended or close-ended management type investment company or investment trust registered under the Investment Company Act of 1940, 15 United States Code.

U The investment policy for the General Employees and Police Officers Pension Fund was established in 2002, pursuant to the Florida Statutes requirements. Both policies were written to state the same guidelines and objectives as noted below.

The investment policy of the Crystal River m Decommissioning Fund was established by Florida Municipal Power Corporation who acts as trustee for the fund. The City of Bushnell is U

only a participant in that fund. U The City investments and required disclosures in the General Employees and Police Officers Pension Fund for the year ending September 30,2005, are as follows:

Police General L Officers Employees Pension Fund Pension Fund Investment TYDM Fair Value Fair Value Equities $ 220,993 $ 192,030 U.S. Government Agencies 49,357 43,429 U.S. Treasury Notes/Bonds 67.975 59.727 Total $ 338,325 $ 295,186L The City's investments and required disclosures for the Crystal River m Decommissioning Fund as shown in the Electric Fund for the year ending September 30, 2005, is as follows:

Investment Type Fair Value Money Market Funds $ 3,490 Commercial Paper 107,759 U.S. Government Agencies 74.438 Total MM6 Interest Rate Risk The City's pension plans do not have a formal investment policy that limits investment L

maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Both pension plans' interest rate risk is measured using the weighted average maturity method (WAM). The WAM method expresses investment time horizons-the time when investments L become due and payable-in years or months, weighted to reflect the dollar size of individual investments. The WAM for the General Employees Pension Plan fixed income investments is 3.75 years. The WAM for the Police Officers Pension Plan fixed income investments is 3.73 years.

U L

The interest rate risk for the Crystal River m Decommissioning Fund's fixed income investments using WAM is 3 days for Commercial Paper and 1,102 days for U.S. Government Agencies.

37L

NOTES TO FINANCLAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Continued)

Note 2 - Deposits and Investments (Conduded)

Custodial Credit Risk The City's pension plans' policy requires securities be held with a third party custodian; and all securities purchased by, and all collateral obtained by the City shall be properly designated as an asset of the City.

The Crystal River Decommissioning Ill Fund's investments are exposed to custodial credit risk because they are uninsured and are held in the counterparty's trust party in the name of the agent, Florida Municipal Power Agency.

Concentration of Credit Risk The City's pension plans' policy states that except for Treasury and Agency Obligations, the debt portion of the investments shall contain no more than ten percent (10%) of a given issuer irrespective of the number of differing issues.

As of September 30, 2005, the following investments had greater than 5% concentration by any one issuer other than those explicitly guaranteed by the U.S. Government:

Issuer Percentane of Concentration Police Officers Pension Plan:

Federal Home Loan Mortgage Corporation 13.30%

General Employees Pension Plan:

Federal Home Loan Mortgage Corporation 13.18%

Crystal River Decommissioning Fund:

GE Commercial Paper 58.03%

Federal Home Loan Mortgage Corporation 49.1%

Credit Risk The City's pension plans' policy states that all securities must hold a rating in one of the three highest classifications by a major rating service. All of the fixed income investments in the pension's fimds hold a rating of AAA by S & P.

The investments held in the Crystal River HI Decommissioning fund have a credit rating of the following:

GE Commercial Paper S & P A-1+

Federal Home Loan Mortgage Corporation S & P AAA Foreign Currency Risk The City's pension plans' policy does not address applicability in investments in foreign currency. Neither the pension plans nor the Crystal River Im Decommissioning Fund have exposure to foreign currency risk.

Note 3 - Restricted Assets Nuclear Decommissioning The Florida Public Service Commission requires utilities to set aside monies to pay the estimated future cost of dismantling or decommissioning nuclear power plants. The City has set aside such monies in the custody account with a third party trustee.

38

tl NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNE14 FLORIDA (Continued)

U Note 3 - Restricted Assets (Conduded)

Customer Deposits L

Customer deposits have been restricted to indicate that the amount is not available for the financing of current utility operations. U Note 4 - Capital Assets Capital asset activity for the year ended September 30, 2005, was as follows:

B- Decreasesl L

Ending Governmental Activities Capital Assets Not Beng Depreciated Balance Increases Transfers Balance U

LaLnd S 486370 S 332-204 S 0 S 818.574 Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated:

Buildigs 4863 1,554,518 332.204 7,010 0

0 818.574 1,561,528 U

hapovements OtherThan Buildings 706,805 301,455 0 1,008,2W Eqipmnt and Furniture Total Capital Assets Being Depreca Less Accumulated Depreciation.

1.643.760 3905083 117.702 426d167 0

0 1.761 4331.250 L Buildings hnpwovemnts Other Than Buildings uipmnent snd Furniture (233,583)

(279,051)

(1.030.485)

(34,259)

(27.807)

(113.731 0

0 (267,842)

(306,858)

(1-144.216)

L Total Accumulated Depieciation (1543.11) (175797) 0 (1.S216)

Total Capital Assets Being Deprecated, Net Governmental Activities Capital Depredated, Net Business-4ype Activities S

2.361.964

,2S483.34 250,370 2.612334 l

S O Capital Assets Not Being Depreciated:

Land Construction in Progress Total Capital Assets Not Being Depqiated S 541,936 0

S 14,729 92,311 S

O0 S 556,665 92311 L

41 107.040 648376 Capital Asset Being Depreciated:

Utility Plant in Service Buildings 8,796,278 367,084 224,371 840 (33,399) 0 8,987,250 367,924 L

Machinery and Equipment 2.293.464 113.594 0 2.407.058 Totl Capital Assets Being Depreciated Less Accumulated Deprecation Utility Plant in Sevice IIAS6.S26 (1,654,324) 338.S05 (264,489)

(33.39 12,989 11.762,232 (1,905,824)

L Buildings Machinery and Equipment Total Accumulated Depreciation (140,229)

(1326.853)

(3.121.0)

(10,278)

(0Li.0l2

_(382.779> 12.99 0

0 (150,507)

(1.434.865d (3.491,196W U

Total Capital Assets Being Depreciated, Net 833S42 (43.974) (20.40 8.271.036 Total Buslness-ype Activltes Capital Assets, Net Depredation Expense - Governmental Activities General Government S AA7L5 S 16,192 L

Public Safety 67,261 Physical Envirnment Transpoation Culture and Recreation 330 27,165 64.S49 L

Total Depredation Expense - Governmental Activities Depredation Expense - BusIness-type Activities water Utility S 79,050 U

Elctric Utility 120,453 Sanitation Utility Wastewater Utility Total Depreciation Expense - Business-type Activities 19,300 163,975 U 39 U

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Contnued)

Note 5 - Lonnf-term Liabilities Long-term liability activity for the year ended September 30, 2005, was as follows:

Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental Activities Notes Payable and Certificates ofObligation:

Note Payable - SunTmust Bank S 266,667 S 0 S (33,334) S 233,333 S 33,333 Catificate of Obligation -

SunTnust Bank 127,922 0 (28,572) 99,350 28,571 Note Payable - Comunuity National Bank 130,500 0 (29,000) 101,500 29,000 Certificate ofObligation -

SunTnist Bank 136,000 0 (8,000) 128,000 16,000 Certificate of Obligation -

SunTfust Bank 151.904 Total Notes Payable and Ceutificates ofObligation 661.0S 166.000 (113.002 714.087 121 284 Other liabilities:

Capital Lease Oblgation 40,432 0 (8,231) 32,201 8,522 Capital Lease Obligation 0 44,608 (4,459) 40,149 8,203 Compensated Absences S3.661 73.230 (71.011) S5.SS0 17.176 Total Other Liabilities 124.093 117.S38 S(836,701)

SS2,1 158.230 33.901 Total Governmental Activlies Business-type Activities Revenue Bond and Notes Payable:

Water and Sewer Fund Revenue Bond, Series 2002 S 2,800,000 S 0 S (28,000) $2,772,000 S 30,000 Electric Utility Fund Note Payable 51,013 0 (25,518) 25,495 25,495 Florida Municipal Power Agency - Pooled Loan Note 161.000 0 (20.0001 141.000 20.000 Total Revenue Bond and Notes Payable 3.012.013 0 (73.51) 2.938.495 75.95 Other Uiabilities:

Compensated Absences 78h927 Liabi L4tie 87A: 17A Total Buslness-type Activities Notes Payable - Governmental Activities On August 7, 2001, the City borrowed $600,000 from the SunTrust Bank of Brooksville, Florida, with quarterly interest only payments at 4.98% until June 30, 2003, at which time a

$300,000 principal plus accrued interest payment was due. Thereafler, beginning December 30, 2003, seventeen semiannual principal payments of $16,667 plus accrued interest are due with the final payment due on or before June 30, 2012.

40

L NOTES TO FNANCIAL STATEMENT CITY OF BUSHNELL, FLOREDA (Continued)

U Note 5 - Lone-term Liabilities (Continued) L Notes Payable - Governmental Activities (Conduded)

On August 25, 1998, the City borrowed $290,000 from the Community National Bank of Pasco L County, for the purpose of financing the construction of the City's new public works building.

The loan is collateralized by a first lien on 50% of the annual local option gas tax revenue, with minimum annual collateral of $90,000. The loan is payable in semiannual payments of $14,500, including interest at 4.88%, beginning June 1, 1999, and is due December 1,2008.

L Certificates of Obligation - Governmental Activities On November 7, 2001, the City borrowed $200,000 through the issuances of a Certificate of L

Obligation Note from SunTrust Bank for the purpose of purchasing a fire truck. The terms of the note include thirteen semiannual payments of principal in the amount of $14,286 each plus L accrued interest at 4.40% per annum, beginning May 7, 2002. The loan is due November 7, 2008. L On April 7, 2003, the City borrowed $160,000 through the issuance of a Certificate of Obligation Note from SunTrust Bank, for the purpose of purchasing a bucket truck. The terms of the note include twenty semi-annual payments of principal in the amount of $8,000 beginning on October 15, 2003, and monthly interest payments beginning on May 15, 2003. The loan matures on April 15, 2013.

L On October 6, 2004, the City borrowed $166,000 through the issuance of a Certificate of Obligation Note from SunTrust Bank, for the purpose of purchasing land. The terms of the note U

include twenty semi-annual payments of $10,098, including interest at 3.89% per annum, beginning April 1, 2005. The loan is due October 1,2014.

Revenue Bond and Notes Payable - Business-type Activities During the 2003 fiscal year, the City obtained financing for the Wastewater Treatment Facility from the U.S. Department of Agriculture, Rural Utility Services (RUS). RUS issued a U

$2,800,000 bond to the City for the refunding of the interim financing and completion of construction costs for the Facility. The bond is payable over 40 years with interest at 4.625% L and annual principal payments. There are no federal arbitrage regulations applicable to this revenue bond. 0 During 2003, the City borrowed $100,000 from SunTrust Bank to finance the purchase of a bucket truck. The loan is payable in semiannual installments of principal and interest at the rate of 3.95% per annum. The loan matures on July 20,2005. L The City entered into a financing agreement with the Florida Municipal Power Agency (FMPA). Interest is payable at a variable rate (currently .85% plus a 0.60% administration fee). L Final maturity is July 1, 2011.

L L

41 L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Continued)

Note 5 - -Long-term Liabilities (Concluded)

Revenue Bond and Notes Payable - Business-type Activities (Conduded)

Debt service to maturity on the City's bonded indebtedness, notes payable and certificates of obligation are as follows:

Year Governmental Activities Business-Type Activities Endine Prindpal Interest Principal Interest 2006 $ 121,284 $ 30,309 $ 75,495 $ 131,370 2007 121,026 24,747 51,000 128,891 2008 122,446 17,592 57,000 127,114 2009 93,626 13,240 59,000 125,206 2010 66,130 9,938 61,000 123,206 2011-2015 189,575 13,307 231,000 585,741 2016-2020 0 0 256,000 533,264 2021-2025 0 0 320,000 468,515 2026-2030 0 0 402,000 387,253 2031-2035 0 0 504,000 285,226 2036-2040 0 0 632,000 157,390 2041-2042 0 0 290.000 20.166 Total $ ~24 $3,073,342 Defeased Debt There are no outstanding defeased bonds.

Note 6 - Capital Lease Obligations The City has entered into a lease agreement for financing the acquisition of police vehicles and related equipment.

The assets acquired through capital leases are as follows:

Governmental Activities Asset:

Police Vehicles $ 90,720 Less: Accumulated Depreciation (9 0)

Total $ 80,819 Future minimum lease payments under terms of the lease are as follows:

Year Governmental Ending Prindcial Interest 2006 $ 16,725 $ 2,998 2007 17,488 2,238 2008 18,287 1,436 2009 15,898 616 2010 3.952 75 Total $ 2,30$ ,6 42

NOTES TO FINANCIAL STATEMENTS CITY OF BUSIINELL, FLORIDA (Confinued)

Note 7 - Other Liabilities L Crystal River 3 Decommissioning Trust Fund Federal law requires that an external trust fund be created to accumulate amounts to pay the future plant decommissioning. The City contributes to a common trust fund, maintained by U

FMPA, for all its members that own a portion of the Crystal River 3 Nuclear Generating Unit.

As of September 30,2005, the City has a balance in the trust fund of $185,687.

Note 8 - Electric Power Agreements Crystal River Power Unit 3 Participation Agreement The City is a participant in an agreement with Florida Power Corporation, which was entered U

into on July 31, 1975. Under terms of the agreement, the City acquired a 0.0388% ownership interest and generation entitlement share in the nuclear steam electric generating unit.

Participants are entitled to energy output of the unit based upon their respective generation entitlement share.

Florida Power Corporation has been appointed by the participants to act as their agent and has L sole authority to manage, control, maintain and operate the unit. Operating costs of the unit, in general, are shared in proportion to each generation entitlement share on a monthly basis.

L Common and external facilities of the generating unit are solely owned by Florida Power Corporation, and participants share in the operating and maintenance expenses of such facilities in proportion to their generation entitlement share. L The participation agreement provides for reversion of the ownership interest of the unit to Florida Power Corporation on August 1, 2050, or upon retirement from service, whichever occurs first.

florida Municipsa Power Agency (FMPA)

The City is a member of the FMPA, which is a joint action agency formed by a number of Florida municipalities for the purpose of providing electric power alternatives for its members.

FMPA is a nonprofit, joint action agency formed pursuant to Florida Statutes. FMPA has the authority to undertake joint power supply projects and to issue tax-exempt bonds or other obligations to finance or refinance the costs of such projects.

Due to the diverse needs of Florida's municipal electric systems, FMPA was established as a project-oriented agency. Under this structure, each member has the option whether or not to participate in a project. Members may choose to participate in more than one project; however, each of the FMPA's five projects is independent from the other and no revenues or funds available from one project can be used to pay the costs of any other project.

The City has elected to participate in the "All Requirements Project," which supplies all of the City's power requirements. The agreement will remain in effect until October 1, 2035, with optional successive five-year renewal periods. The contract provides for optional withdrawal by the City, but would require the City to make all remaining project members whole. The cost to the City withdrawing from the contract has not been calculated. '

Power rates charged to the City by FMPA are subject to a majority vote of the Board of Directors of FMPA. In addition, the City has elected participation in the "Pooled Loan Project" in which FMPA issues debt, then loans the money to individual systems to finance utility-related projects.

L 43L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Continued)

Note 9 - Employee Retirement Systems Florida State Retirement System All full-time employees of the City hired prior to January 1, 1996, participate in the Florida State Retirement System (the System). This System was created by the Florida Legislature and is a cost-sharing, multiple-employer defined benefit public retirement plan available to governmental units within the state of Florida. The System issued a publicly available financial report that includes financial statements and required supplementary information for the System.

That report may be obtained by writing to the State of Florida Division of Retirement, Department of Management Services, P.O. Box 9000 Tallahassee, FL 32315, or by calling (850) 488-5706.

All full-time employees of the City hired prior to January 1, 1996, are eligible to participate in the System. Special risk employees who retire at or after age 55, with six years of creditable service; and all other employees who retire at or after age 55, with six years of creditable service; are entitled to a retirement benefit, payable monthly for life, equal to the product of: 1) average monthly compensation in the highest five years of creditable service; 2) creditable service during the appropriate period; and 3) the appropriate benefit percentage. Benefits fully vest on reaching six years of service. Vested employees may retire after six years of creditable service and receive reduced retirement benefits. The System also provides death benefits, disability benefits and annual cost-of-living adjustments. Benefits are established by Florida Statute.

The funding methods and the determination of benefits payable are provided in various acts of the Florida Legislature. These acts provide that employers, such as the City, are required to contribute 7.39% of the compensation for regular members, 18.53% for special risk, 9.37%

senior management and 15.23% for elected officials through June 30, 2005. Beginning July 1,2005, the required contribution rate is changed to 7.83%, 18.53%, 10.45% and 15.23%

of the member's gross compensation for regular members, special risk, senior management and elected officials, respectively. The City's contributions to the System for the years ended September 30, 2005, 2004, 2003, were as follows:

Year Amount 2005 $ 41,230 2004 42,345 2003 35,809 Florida State Retirement System Opt-Out In December 1995, the City Council approved opting out of the Florida State Retirement System effective with all new employees hired after January 1, 1996. City employees covered under the System at December 31, 1995, will continue to participate in the state System and the City will continue to make contributions on their behalf. Administrative costs for each plan are financed through investment earnings.

44

L NOTES TO FINANCIAL STATEMENTS C]TY OF BUSHINEL4 FLORIDA Lo (Con Onued)

Note 9 - Emplovee Retirement Systems (Continued) L Pension Trust Funds

• Plan Description L In January 1996, the City adopted two separate single-employer pension plans, one for police officers and a general employees' retirement plan that covers substantially all full-time City employees employed after January 1, 1996, pursuant to the Citys opt out of the Florida Retirement System. These plans are maintained as pension trust funds and included as part L

of the City's reporting entity. City ordinance and state law requires contributions to be determined by actuarial studies every three years. Stand-alone financial reports are not issued.

The general employees' retirement plan covers all full-time employees, except for police L officers. The plan is noncontributory, and the City provides the full contribution to fund the plan. The annual pension cost related to the plan includes amortization, over a thirty-year period, of a prior service cost established October 13, 1995. U The police officers' retirement plan covers all full-time police officers. The plan is contributory and requires participants to contribute 1% of their salary to the plan. The City provides the balance of contributions required after the participants' contributions. In addition, state funds collected under Florida Statutes Chapter 185 are contributed to the plan.

U Substantially all full-time City employees hired on or after January 1, 1996, are eligible to participate in their respective plans. Benefits vest after six years of credited service for all L

employees. I Benefits and refunds of both the general employees' and police officers' pension plans are recognized when due and payable in accordance with the terms of the plan. U

• Membership Membership ofeach plan consisted ofthe following as of September 30, 2005:

Police General Pension ,

Employees Officers Active Plan Members 23 11 Retirees and Beneficiaries Receiving Benefits 0 0 Terminated Plan Members, Entitled but Not Yet Receiving Benefits 4 3 L

Total 27 14 Li

• Annual Pension Costs The Board of Trustees of each plan establishes, and may amend, the contribution requirements of plan members and the City. The City's contribution rates for current year L and annual pension cost and related information per most recent actuarial report for each plan is shown below:

45 L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Continued)

Note 9 - Employee Retirement Systems (Condnued)

Pension Trust Funds (Continued)

• Annual Pension Costs (Conduded)

General Police Employees Officers Contribution Rates Employer 13.80% 15.80%

Employee 0.00% 1.00%

Annual Required Contribution (ARC) $ 62,586 $ 38,347 Adjustment to (A) 2,065 0 Interest on Net Pension Obligation (Asset) (1,816) 0 Annual Pension Costs 62,835 38,347 Contributions Made (84.963! (38.347)

(Increase) in Net Pension Obligation (22,128) 0 Net Pension Obligation (Asset), Beginning of Year (2L.692) sS3n0 Net Pension Obligation (Asset), End of Year $ (44,825)

General Employees And Police Officers Actuarial Valuation Date October 1, 2004 Actuarial Cost Method Aggregate Amortization Method N/A Remaining Amortization Period N/A Asset Valuation Method Market Value Actuarial Assumptions:

Investment Rate of Return 8.0%

Projected Salary Increases (*) 6.0%

(*) Includes Inflation at 3.0%

Postretirement COLA 3.0%

Both the general employees' and police officers' plans use the aggregate actuarial cost method, which does not identify or separately amortize unfunded actuarial liabilities.

• Three-Year Trend Information Three-year trend information for the plan based on the most recent actuarial valuation reports dated October 1,2004, is as follows:

Net Fiscal Annual Percentage Pension Year Pension of APC Obligation Plan Ending Cost (APC) CnntributeA

_w A..-----,.

(Asset)

General Employees 9/30/2004 $ 62,586 136% $ (44,825) 9/30/2003 41,677 118% (22,697) 9/30/2002 30,146 111% (15,154)

Police Officers 9/30/2004 38,347 100%/ 0 9/30/2003 19,552 119%/0 0 9/30/2002 4,508 363% 0 46

U NOTES TO FINANCIAL STATEMENTS CMTY OF BUSMNELL, FLORIDA (Continued)

L Note 9 - Employee Retirement Systems (Contnued) L Pension Trust Funds (Contnued)

Schedule of Pension Plan Net Assets as of September 30. 2005 U

General Employees' Fund Police Officers' Pension Fund Total L

Assets Cash and Cash Equivalents Investments

$ 46,314 295,186 S 43,301 338,325

$ 89,615.

633,511 L

Contnbutions Receivable .939 30.317 37 256 Total Assets 348.439 411.943 760.382 L

Liabilities -0 0 0 Net Assets Reserved for U

Employees' Pension Benefits S 348.32 S 4119243 S 760.382 L

Schedule of the Chanae in Pension Plan Net Assets as of September 30, 2005 General Employees' Police Officers' Retirement Retirement Fund Fund Total Additions Contibutions: iII Employer $ 87,717 $ 48,724 $ 136,441 State 0 25,305 25,305 Employee 0 2.518 2.518 Total Contributions Investment Income Less: Investment 87.717 30,087 76.547 35,250 164.264 65,337 U Management Fees (6.336- (5.4231 (1 .759)

Net Investment Income Total Additions 23.751 111.468 29.827 106.374 53578 217.842 L

L LI U

47 L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Contnued)

Note 9 - Emplovee Retirement Systems (Concluded)

Pension Trust Funds (Concluded)

Schedule of the Chanze in Pension Plan Net Assets as of September 30. 2005 (Concluded)

General Employees' Police Officers' Retirement Retirement Fund Fund Total Deductions General and Administrative $ 787 $ 1.150 S 1.937 (Total Deductions) (787) (1.150) (1.937)

Net Increase 110,681 105,224 215,905 Net Assets Reserved for Employees' Pension Benefits:

Beginning of Year 237.758 306.719 544.477 End of Year L 3,9 411,943 2760,3 Note 10 Post Retirement Benefits The City allows retired employees to participate in the City's health insurance plan. These retirees are responsible for 50% of their premium payments. The City records an expense or expenditure at the time of payment of the retirement benefits. There were two retirees participating in the City's health insurance plan as of September 30, 2005.

Note 11 - Interfund Receivables. Pavables and Transfers Interfund Receivables and Payables Interfind receivables and payables at September 30, 2005, are as follows:

Interfund Interfund Receivable Pavables Major Funds Electric Fund $ 358,871 $ 0 Wastewater Utility Fund 0 370,676 Water Utility Fund 11.805 0 Total Interfund Receivables and Payables $ 370,676 S 370,267 The outstanding balances between funds result mainly from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and/or payments between funds are made.

48

NOTES TO FINANCLAL STATEMENTS CITY OF BUSHNELL, FLORIDA L (Continued)

Note 11 - Interfund Receivables, Pavables and Transfers (Conduded) L Interfund Transfers Interfund transfers at September 30,2005, are as follows: L Interfund Interfund U?

Transfers In Transfers Out Major Funds General Fund Electric Utility Fund

$ 363,712 0

$ 0 300,000 34,795 L

Water Utility Fund 0 Sanitation Fund Total Interfund Transfers S 0

363,712 $

28.917 363,712 L Transfers are made, in accordance with the budget, to supplement the revenues needed to cover the expenditures of providing general governmental services. L Advances Advances to and from other funds at September 30, 2005, are as follows: L Advances Advances to Other from Other i Funds Funds Major Funds Water Utility Fund Wastewater Utility Fund

$ 0 0

$ 220,100 630,000 I

Electric Utility Fund 850.100 0 Total Advances S 850,100 $ 850,100 1

Advances to other finds were made to supplement capital costs for their respective utility distribution systems. None of the balances are scheduled to be collected in the subsequent year.

'MI Note 12 - Other Disclosures U

Deficiency of General Fund Expenditures Over Budgeted Expenditures Expenditures (in Excess)

L General Fund Final Budget

$

Actual 2,753,792 Budgeted Expenditures

$ (25,556)

L L

L 49 L

NOTES TO FINANCIAL STATEMENTS CITY OF BUSHNELL, FLORIDA (Concluded)

Note 12 - Other Disclosures (Concluded)

Allowances for Doubtful Accounts Allowances for doubtful accounts at September 30, 2005, are as follows:

Electric Utility Fund $ 3,000 Water Utility Fund 500 Sanitation Fund 500 Total Allowances for Doubtful Accounts $

Note 13 - State Financial Assistance During the fiscal year, the City expended less than $500,000 in state financial assistance therefore, no audit was required pursuant to the Florida Single Audit Act.

Note 14 - Governmental Accountin! Standards Board (GASB) Statement No. 34 The general provisions of GASB Statement No. 34 were implemented by the City during the fiscal year ending September 30, 2004, the City plans on implementing the retroactive reporting of infrastructure by the year ending September 30, 2008. No infrastructure assets acquired prior to the implementation of GASB Statement No. 34 has been reported.

Note 15 - Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters. The City transfers risk of loss through the purchase of commercial insurance from the Florida League of Cities, Inc. and independent agencies. Insurance against losses are provided for the following types of risk:

• Workers' Compensation and Employer's Liability

• General and Automobile Liability

• Real and Personal Property Damage

• Public Officials' Liability

• Accidental Death and Disability The City's coverage for workers' compensation is under a retrospectively rated policy.

Premiums are accrued based on the ultimate cost to-date of the City's experience for this type of risk. There have been no significant reductions in insurance coverage during fiscal year 2005.

Settled claims have not exceeded the commercial excess coverage in any of the past three years.

Note 16 - Continuencies Grants Amounts received or receivable from grantor agencies are subject to audits and adjustment by grantor agencies. If any expenditures are disallowed as a result of these audits, the claims for reimbursement to the grantor agency would become a liability of the City. In the opinion of management, any such adjustments would not be significant.

50

REQUIRED SUPPLEMENTARY INFORMATION The following supplementary schedules present trend information regarding the retirenent plans for the City's general employees and police officers. This information is necessary for a fair presentation in conformity with generally accepted accounting principles.

REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS - EMPLOYER AND OTHER GENERAL EMPLOYEES' RETIREMENT FUND AND POLICE OFFICERS' RETIREMENT FUND CITY OF BUSHNELL, FLORIDA Because the plans use the Aggregate Actuarial Cost Method for funding, the schedule of funding progress is not required per the Governmental Accounting Standards Board (GASB) Statement No. 25.

A schedule of contributions from the employer and other contributing entities based on the October 1, 2004, actuarial valuation report is as follows:

General Emplovees' Retirement Plan Annual Year Ended Required City's Percentage September 30, Contribution Contribution Contributed 2004 $ 62,586 $ 84,963 135.75%

2003 41,667 49,387 118.50%

2002 30,146 33,583 111.40%

2001 20,494 24,737 120.70%

2000 20,211 21,963 108.67%

1999 9,719 15,721 161.75%

1998 7,743 7,743 100.00%

1997 3,303 3,303 100.00%

Police Officers' Retirement Plan Annual Year Ended Required City's State's Percentage September 30, Contribution Contribution Contribution Contributed 2004 $ 68,118 $ 38,347 $ 29,771* 100.00%

2003 46,325 23,316 26,773 108.13%

2002 29,561 16,368 25,053 140.12%

2001 26,036 4,725 21,311 100.00%

2000 22,014 14,635 7,379 100.00%

1999 14,940 0 20,190 135.14%

1998 8,965 8,965 26,773 398.64%

1997 5,577 5,577 8,421 251.00%

• "Frozen" per Chapter 185, Florida Statutes, as amended.

Note: Both plans were established during the fiscal year ended September 30, 1997.

51

lW I< t

• l11 >(Y'iC<,,, ,,,.,,,,.. ' :

r7 r r r 1i7 rz7-rrr r r r - r r TABLE 1 GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION (1) (2)

LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Culture Fiscal General Public Physical Human Economic and Debt

-

Year _ .

Government _

Safety Environment Transportation Services Environment Recreation

_

Service Total 1996 $ 317,049 $ 439,703 $ 62,017 $ 208,376 $ 0 $ 12,250 $ 225,620 $ 0 $ 1,265,015 I 1997 279,604 469,726 258,109 201,520 0 13,000 289,541 0 1,511,500 1998 269,378 437,443 30,522 785,847 0 9,000 148,863 97,102 1,778,155 1999 306,366 440,907 33,001 431,133 0 12,000 264,934 43,069 1,531,410 2000 391,477 505,189 0 325,582 0 15,000 329,453 63,078 1,629,779 2001 335,139 562,608 69,426 280,747 0 2,000 417,086 64,502 1,731,508 2002 347,502 671,046 0 0 289,738 0 249,285 107,088 1,664,659 2003 368,574 570,454 0 0 568,038 0 446,017 419,515 2,372,598 2004 393,042 692,619 12,066 346,539 (a) 0 339,812 168,318 1,952,396 2005 440,068 776,868 30,466 711,798 (a) 0 665,339 162,905 2,787,444 (1) includes general and special revenue funds.

(2) Includes capital outlay expenditures by function.

During 2002, physical environment, transportation and economic environment functions were combined into the Human Services function.

(a) During 2004, expenditures for the physical environment and transportation function were reclassed from the Human Services function.

Information Source:

Audited Financial Reports 52

ir-I r-7-' r7 -E rz--ir77 r-T- r77 EW-.r r -- : r- r- Fr.

TABLE 2 GENERAL GOVERNMENTAL REVENUES BY SOURCE (1)

LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA License Charges Fines Interest Fiscal and

• for and and Year Taxes Permits Intergover amental Services Forfeitures Miscellaneous Total 1996 $ 536,217 $ 21,940 $ 506,840 $ 750 $ 37,014 $ 150,006 $ 1,252,767 1997 577,880 14,891 619,647 3,074 34,834 112,377 1,362,703 1998 708,234 25,446 507,413 5,388 23,348 113,954 1,383,783 1999 741,281 5,093 271,282 19,398 39,109 104,625 1,180,788 2000 752,375 10,120 329,337 15,675 28,262 118,663 1,254,432 2001 845,671 8,836 538,473 21,699 22,494 73,599 1,510,772 2002 759,625 21,021 532,377 20,008 26,319 73,019 1,432,369 2003 838,785 14,433 327,643 35,077 17,243 85,717 1,318,898 2004 1,042,770 12,150 421,217 32,615 56,931 64,453 1,630,136 2005 1,116,876 10,772 997,818 78,377 24,778 50,007 2,278,628 (1) Includes general and special revenue funds.

• Intergovernmental revenues includes grant revenues.

Information Source:

Audited Financial Reports 53

r. r r.. rr:77 7 7 r77 7 v- rmc r rc r r- riK TABLE 3 GENERAL GOVERNMENTAL TAX REVENUES BY SOURCE (1)

LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Sales Use Fiscal Property Franchise Utility and Total Year Taxes Fees Taxes Gas Taxes Taxes 1996 $ 94,340 $ 58,618 $ 233,307 $ 149,952 en 536,217 1997 96,703 70,562 263,724 146,891 577,880 1998 93,779 71,762 243,798 298,895 708,234 1999 95,341 67,172 254,215 324,553 741,281 2000 94,776 74,443 265,383 317,773 752,375 2001 103,989 87,545 306,902 347,235 845,671 2002 124,441 61,345 306,879 266,960 759,625 2003 180,345 79,443 311,320 267,677 838,785 2004 283,977 103,763 339,527 315,503 1,042,770 2005 398,811 104,225 373,445 240,395 1,116,876 (1) Includes general and special revenue funds.

Information Source:

Audited Financial Reports 54

FW7 Cr 1r7 r- r-:- r-.- U D - F 15 _. W, Ir U r7 rzl I.- C.-

TABLE 4 PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Percent of Total Percent Delinquent Total Total Tax Fiscal Tax Current of Levy Tax Tax Collections Year Levy Collections Collected Collections Collections to Tax Levy 1996 $ 97,598 $ 94,340 97% * $ 94,340 97%

1997 99,741 96,703 97%

• 96,703 97%

1998 98,259 93,526 95% $ 253 93,779 95%

1999 97,660 94,744 97% 597 95,341 98%

2000 93,261 94,566 101% 210 94,776 102%

2001 105,771 103,783 98% 206 103,989 98%

2002 129,973 124,309 96% 132 124,441 96%

2003 187,689 180,074 96% 271 180,345 96%

2004 401,341 283,977 71% 562 284,539 71%

2005 553,556 398,161 72% 650 398,811 72%

• Information not available.

Information Source:

Sumter County Tax Collector and City Clerk's Office 55

F_, _- I_- r: r r. irv r- .I I r~ r~V-W TABLE 5 ASSESSED AND ESTIMATED ACTUAL VALUE OF PROPERTY LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Real Property Personal Property Total Ratio of Total Estimated Estimated Fiscal Estimated Assessed to Total Assessed Actual Assessed Actual Assessed Actual Estimated Year Value Value Value Value Value Value Actual Value 1996 * * *

• $ 42,016,283 $ 49,430,921 85%

1997 *

• 44,689,547 52,575,937 85%

1998 $ 34,612,123 $ 44,538,727 $ 11,153,561 $ 11,160,563 45,765,684 55,699,290 82%

1999 37,489,724 53,308,291 11,621,364 12,911,203 49,111,088 66,219,494 75%

2000 42,971,688 53,748,501 13,039,744 13,046,244 56,011,432 66,794,745 85%

2001 49,955,255 61,049,808 14,793,127 14,799,627 64,748,382 75,849,435 85%

2002 55,848,388 67,919,372 18,975,340 19,370,643 74,823,728 87,290,015 86%

2003 66,137,442 79,041,600 17,905,037 17,912,138 84,042,479 96,953,738 87%

2004 71,762,910 94,846,097 18,958,581 24,403,456 90,721,491 119,249,553 76%

2005 91,310,123 120,017,745 19,969,293 25,413,251 111,279,416 145,430,996 77%

• Information not available.

Information Source:

Sumter County Property Appraiser 56

Or: tr7 : r IS-"- i Fr7f A=- r--- _- Co" rf- - r- r- C-7 f::7 - o- r7 FT TABLE 6 PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Total Total Fiscal city State and Year Millage County Millage Total 1996 2.38 20.09 22.47 1997 2.35 20.14 22.49 1998 2.18 20.08 22.26 1999 2.147 20.02 22.167 2000 1.997 21.073 23.07 2001 1.889 21.073 22.962 2002 2.5 21.273 23.773 2003 3.5 21.273 24.773 2004 4.5 24.339 28.839 2005 5.0 27.28 32.28 Information Source:

City Millage Records Sumter County Property Appraiser 57

a .r r.. r- r..:. r- a r7. r rr r r- r TABLE 7 COMPUTATION OF OVERLAPPING BOND DEBT FOR THE YEAR ENDED SEPTEMBER 30,2005 CITY OF BUSHNELL, FLORIDA Debt Percent Amount Overlapping Debt Outstanding Applicable Applicable Sumter County $ 12,245,000 3.62% $ 443,269 Sumter County School Board 4,425,000 3.62% 160,185 Total Overlapping Debt $ 603,454 Note:

The City has no general bonded debt.

Information Source:

Sumter County Finance Department Sumter County School Board 58

l. U rg _ Fr77. w_ r7 - r. _ r _ r r r r 1r TABLE 8 PRINCIPAL TAXPAYERS SEPTEMBER 30,2005 CITY OF BUSHNELL, FORIDA Percent of Total Assessed Assessed Taxpayer Valuation Valuation Wal-Mart ' $ 8,086,712 I 7.8%

Metal Industries 4,535,791 4.4%

Bellotto Properties, Inc. 4,447,945 4.3%

Sundance-Oaks LLC 2,927,114 2.8%

Sundance-Oaks LLC 2,120,640 2.0%

Osprey of North Florida 1,966,877 1.9%

420 N Main LLC 1,616,964 1.6%

MC Suites, Inc. 1,541,140 1.5%

American Television 1,047,152 1.0%

Yusef Gosla 951,467 .

-

0.9%

S Total Assessed Value 29.241.802 28.2%

Information Source:

Sumter County Property Appraiser * $ 103,753,167 Total Sumter County Assessed Property Value 59

r- r, r~ r-. trr".C-"El 97 C7l r7 1_~  : ri_- r- c r r r r TABLE 9 RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL DEBT TO TOTAL GENERAL EXPENDITURES LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Total Total Ratio of Debt Fiscal Debt General Service to Total Year Principal Interest Service Expenditures (1) General Expenditures 1996 $ 23,527 $ 13,172 $ 36,699 $ 1,265,015 2.90%

1997 25,813 12,483 38,296 1,511,500 2.53%

1998 86,526 10,576 97,102 1,778,155 5.46%

1999 27,923 15,146 43,069 1,531,410 2.81%

2000 45,663 17,415 63,078 1,629,779 3.87%

2001 45,255 19,247 64,502 1,731,508 3.73%

2002 60,341 46,747 107,088 2,464,711 4.35%

2003 376,208 43,307 419,515 2,367,432 17.72%

2004 131,806 36,512 168,318 1,952,393 8.62%

2005 125,692 37,213 162,905 2,787,444 5.84%

(1) Includes general and special revenue fiuds.

Information Source:

Audited Financial Reports 60

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AL lrT r7 7,r--r  !- r--U ~U r r Ir TABLE 10 SCHEDULE OF ELECTRIC UTILITY REVENUE DEBT SERVICE LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Net Operating Revenue Debt Fiscal Operating Operating Available for Debt Service Requirem ents Coverage Year Revenues Expenses Debt Service Principal Interest Total Ratio

• 1996 $ 1,652,681 $ 1,341,876 $ 310,805 $ 71,363 4.36%

1997 1,784,613 1,368,548 416,065

• 76,228 5.46%

1998 1,863,515 1,398,763 464,752 $ 107,905 $ 4,402 112,307 4.14%

1999 1,824,130 1,375,163 448,967 26,205 2,375 28,580 15.71%

2000 1,982,195 1,547,436 434,759 30,572 1,417 31,989 13.59%

2001 2,380,486 1,932,692 447,794 30,573 133 30,706 14.58%

2002 2,160,507 1,819,916 340,591 0 0 0 0.00%

2003 2,237,324 2,010,249 227,075 24,441 2,819 27,260 8.33%

2004 2,457,451 2,265,793 191,658 24,534 3,221 27,755 6.91%

2005 2,822,165 2,446,358 375,807 25,518 1,755 27,273 13.78%

• Information not available.

Information Source:

Audited Financial Reports General Ledger 61

r- r r 7 r_ r r.r- r__. rr. _ r r- r tr r r TABLE 11 SCHEDULE OF WATER REVENUE DEBT SERVICE LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Net Operating Revenue Fiscal Operating Debt Operating Available for Debt Service Requiren tents Year Revenues Coverage Expenses Debt Service Principal Interest Total Ratio 1996 $ 366,672 $ 236,155 $ 130,517 * *

$ 56,762 2.30%

1997 333,100 233,147 99,953

• 56,962 1.75%

1998 371,517 278,354 93,163 $ 28,222 $ 15,000 43,222 2.16%

1999 424,921 274,350 150,571 3.7,877 10,499 48,376 3.11%

2000 434,564 315,926 118,638 19,428 12,435 31,863 3.72%

2001 401,838 376,660 25,178 31,397 10,359 41,756 0.60%

2002 417,566 438,338 (20,772) 15,000 4,493 19,493 -1.07%

2003 534,521 411,942 122,579 15,000 3,089 18,089 6.78%

2004 464,557 432,697 31,860 20,000 2,500 22,500 1.42%

2005 568,844 452,277 116,567 20,000 4,353 24,353 4.79%

• Information not available.

Information Source:

Audited Financial Reports General Ledger 62

.

at r r- r7- r-7 r r- r r r r Or r r. r r r r TABLE 12 SCHEDULE OF SANITATION REVENUE DEBT SERVICE CITY OF BUSHNELL, FLORIDA Net Operating Revenue Debt Fiscal Operating Operating Available for Debt Service Requirements Coverage Year Revenues Expenses Debt Service Principal Interest Total Ratio 2002 $ 370,732 $ 298,701 $ 72,031 $ 22,500 $ 3,315 $ 25,815 2.79%

2003 380,763 355,715 25,048 22,500 2,379 24,879 1.01%

2004 432,064 393,435 38,629 22,500 1,070 23,570 1.64%

2005 461,477 435,321 26,156 0 0 0 0.00%

(1) The sanitation fund has no debt service requirements from 1996 through 2001 and 2005.

Information Source:

Audited Financial Reports General Ledger 63

r r" r' E-"r-7-r Er 7- 77 Crrz t- Er7 r-7 rz r-U fr ir- r Ir TABLE 13 SCHEDULE OF WASTEWATER REVENUE DEBT SERVICE CURRENT FISCAL YEAR ClTY OF BUSHNELL, FLORIDA Net Operating Revenue Debt Fiscal Operating Operating Available for Debt Service Requirements Coverage Year Revenues Expenses Debt Service Principal Interest Total Ratio 2003 $ 81,827 $ 201,492 $ (119,665) $ 0 $ 101,264 $ 101,264 -1.18%

2004 343,255 572,040 (228,785) 0 129,500 129,500 -1.77%

2005 529,867 528,376 1,491 28,000 129,500 157,500 0.01%

Information Source:

Audited Financial Reports General Ledger 64

r rf r -- r-7 r,-- rir-' V- r- r 7-.rr7 t - r- V r..- r - r- r TABLE 14 DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA Fiscal Per Capita Median School Unemployment Year Population Income Age Enrollment Rate/Percent 1996 2,358 $ 14,967 41.0 1,551 5.60%

1997 2,384 15,364 40.0 1,702 3.30%

1998 2,423 15,640 41.5 1,627 2.50%

1999 2,547 15,847 41.6 1,710 2.70%

2000 2,547 15,144 41.8 1,686 4.30%

2001 2,016 17,312 42.0 1,804 2.70%

2002 2,052 17,312 51.0 1,734 2.66%

2003 2,119 17,420 54.5 1,811 4.30%

2004 2,195 17,750 55.0 1,811 3.50%

2005 2,195 26,676 43.0 1,878 4.70%

Information Source:

Sumter County Economic Development Council 65

TABLE 15 PROPERTY VALUES AND NEW CONSTRUCTION LAST TEN FISCAL YEARS CITY OF BUSHNELL, FLORIDA New New Total Fiscal Construction Construction Estimated Year Units Estimated Value Property Value 1996 25 $ 806,752 $ 49,430,921 1997 13 528,244 52,575,937 1998 13 421,900 55,699,290 1999 11 1,177,184 55,698,064 2000

• 14 1,683,880 3,893,059 2001 15 1,278,616 1,704,061 2002 17 9,479,510 10,430,054 2003 13 1,598,538 674,780 2004 112 632,670 2,814,947 2005 5 907,668 2,084,712 Information Source:

City Building Department

• During the fiscal year ending 2000, the total estimated property value was changed to reflect only the new construction estimated value plus the land value the new construction is located on. Prior to 2000, the total estimated property value included all of the City's estimated property value.

66

TABLE 16 MISCELLANEOUS STATISTICS SEPTEMBER 30,2005 CITY OF BUSHNELL, FLORIDA Date of Incorporation 1911 Form of Government Council-Manager Area/Miles 2.5 i Miles of Streets 18.1 Fire Protection Volunteer Number of Stations I Number of Firefighters and Officers 18 Police Protection j Number of Stations I Number of Policeman and Officers 10 Education I High School I Elementary School 1 Alternative School A Municipal Water Department I Number of Consumers 1,111 Average Daily Consumption (Gallons) 218,000 Miles of Water Mains 21 L Municipal Wastewater Department Number of Consumers Average Daily Consumption (kwh Usage)

I 297 164,000 Miles of Sewer Main 18 i Municipal Electric Department I Number of Consumers 1,134 Average Daily Consumption (kwh Usage) 61 I Miles of Electric Lines 18 Sanitation Department Average Number of Consumers 1,094 i Building Permits Issued 7 Recreation and Culture Number of Parks 30 Acre Sports Recreation Complex S Acre Recreation Complex 4 Acre Recreation Complex

§ Public Library I Community Center I Employees 40 i Information Source:

City Records 67

TABLE 17 SCHEDULE OF INSURANCE COVERAGE SEPTEMBER 30,2005 CITY OF BUSHNELL, FLORIDA Carrier Type of Coverage Limits of Coverage Coregis Insurance Company General Liability Bodily Injury and Property Damage Deductible - $2,500 $100,000 Per Person Law Enforcement Operations $200,000 Per Occurrence Premises/Operations Excess Injury and Property Damage Products and Operations $900,000 Per Person "Insured" Contracts $900,000 Per Occurrence Host Liquor Law Liability Broad Form Property Damage Watercraft Liability (Under 26')

Limited Worldwide Coverage Additional Persons Insured Extended Bodily Injury Incidental Medical Malpractice Employees' Benefits Liability Program Management Services, Inc. Workers' Compensation Statutory - State of Florida L Preferred Governmental Insurance Trust Policy #001000000144100 Hartford Life Insurance Company Accidental Death/Dismemberment Principal Sum Accidental Medical Expense Benefit Maximum Benefit Amount - $100 Deductible Amount - None Disability Weekly Benefit Amount - $100 Maximum Payment Period - 104 Weeks Accidental Partial Disability See Benefits Maximum Benefit Amount - $5,000 Hartford Life Insurance Company Volunteer Fire Department Accidental Death and Dismemberment Catastrophic Loss Benefit - $100,000 Accident Total Disability Benefit Weekly Benefit Amount - $250 Maximum Payment Period - 104 Weeks Coregis Insurance Company Automobile Liability and Physical Bodily Injury/Property Damage Damage $100,000 Per Person

$200,000 Per Occurrence Number of City Vehicles (32) 68

TABLE 17 SCHEDULE OF INSURANCE COVERAGE SEPTEMBER 30,2005 CITY OF BUSHNELL, FLORIDA (Concluded)

Carrier Type of Coverage Limits of Coverage Coregis Insurance Company Automobile Liability and Physical Excess Bodily Injury/Property Damage Damage (Concluded) $900,000 Per Person

$900,000 Per Occurrence Personal Injury Protection - $10,000 Medical Payments - $5,000 Uninsured Motorists - $30,000 Liability Deductible - $1,000 Physical Damage Coverage - Actual Value Comprehensive Deductible - $1,000 Collision Deductible - $1,000 Coregis Insurance Company Public Officials' Liability $1,000,000 Each Loss

$1,000,000 Aggregate Retention - $2,500 Coregis Insurance Company Property - Building and Contents Building - $3,750,467 Deductible - $250 All Perils Contents - $1,034,200 Coverage Extensions:

Extra Expense $25,000 Per Occurrence Accounts Receivable $25,000 Per Occurrence EDP $10,000 Per Occurrence Building Ord. $250,000 Per Occurrence Inland Marine Coverage Contractor's Equipment - $67,963 Deductible - $250 EDP Equipment - $40,000 AU-risk Excluding Flood, Quake Miscellaneous Property Floater -

$138,840 69

TABLE 18 COMPUTATION OF LEGAL DEBT MARGIN SEPTEMBER 30,2005 CITY OF BUSHNELL, FLORIDA The Constitution of the State of Florida, Florida Statute 200.181, Sets No Legal Debt Margin.

70

Ll cazs ane

Purvis GrLay &

Company INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERVMENTA UDIT7ING STANDARDS Honorable Mayor and Council Members City of Bushnell Bushnell, Florida We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Bushnell, Florida (the City) as of and for the year ended September 30, 2005, which collectively comprise the City's basic financial statements and have issued our report thereon dated March 7, 2006. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the 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.

Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under GovernmentAuditing Standards.

This report is intended solely for the information and use of the City Council, management, and federal and 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.

March 7,2006 Ocala, Florida Certified Public Accountants PO. Box 23999

• 222 N.E. 1st Street

• Gainesville, Florida 32602 * (352) 378-2461

• FAX (352) 378-2505 Laurel Ridge Professional Center . 2347 S.E. 17th Street

• Ocala, Florida 34471 * (352) 732-3872

• FAX (352) 732-0542 443 East College Avenue

• Tallahassee, Florida 32301 . (850) 224-7144

• FAX (850) 224-1762 2201 Cantu Court, Suite #o00

• Sarasota, Florida 34232 * (941) 379-2800

• FAX (941) 379-2899 MEMBERS OF AMERICAN AND FLORIDA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATECOMPANIES AND S.E.C. PRACTICE SECTIONS 71

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MANAGEMENT LETTER After 104 years of lighting, cooling and powering the homes and businesses of Osceola County, the diesel generators at Kissimmee Utility Authority's Roy E. Hansel Generating Station fell silent on September 30.

The decommissioning marked the end of an era for KUA, as the plant's diesel units helped to form the city of Kissimmee and mold a way of life for its citizens.

As we celebrated the decommissioning of the plant, we took a few pictures to document its historical value. The photos seem to speak for themselves when it comes to describing the character of the plant, so we compiled some of them for your enjoyment in this annual report.

In addition, this report will shine a light on KUA's many accomplishments of 2005. Here's a small sample of what yodll read about:

As part of its ongoing commitment to introduce products and services that enable customers to interact, transact and protect their families, KUA launched residential and commercial security monitoring services this year.

KUA also unveiled a new interactive voice response (IVR) system which allows customers to pay their utility bill over the telephone.

In preparation for this year's hurricane season, KUA introduced a power restoration alert system called KUA ALERTS that delivers periodic text messages with updates on power restoration after a hurricane or severe storm passes through.

In a bid to boost downtown revitalization efforts, KUA launched a free Wireless Fidelity (Wi-Fi) mesh network or 'hot zone" in downtown Kissimmee.

Just 14 months after launching telephone service, KUA reached a major milestone this year with the signing of its 4,000th telephone subscriber.

Heat and high humidity in Central Florida led to seven record-setting days for electricity demand by KUA customers this year.

A survey conducted by the Orlando Business Journal named KUA one of Central Florida's best places to work, and for the eighth consecutive year, the Orlando Sentinel named KUA a "Mop 100 Company for Working Families."

As you can see, there were many bright spots in the year. Read on. We're sure you'll be impressed.

Sincerely (9.2 emC. M 7 e James C. Welsh Nancy E Gemskie President and General Manager Chairman of the Board

At just after 1:00 noon on September 30, 2005, the diesel generators at Kissimmee Utility Authority's Roy E. Hansel Generating Station were powered down - forever. The decommissioning honors went to KUA President and General Manager Jim Welsh, KUA Chairman Nancy Gemskie and two daughters of Roy Hansel, in whom the plant is named.

The KUA board of directors authorized the decommissioning of eight diesel units at the utility's downtown Kissimmee power plant because they were no longer economical to operate. The decommissioned units ranged in age from 22 to 45 years old and had a total generating capacity of 18 megawatts (MW)

The oldest unit, Unit No. 8, began operation in 1960. Five additional units (Units No. 14, i5, 16 17 and is) began operation in 1972. Units No. 19 and 20 were refurbished in 1983. AU of the units were fueled by natural gas or No. 2 fuel oil. A separate 50 MW combined cycle plant (made up of Units 21, 22 and 23) and related facilities will continue to operate at the Hansel site until its anticipated retirement date around 2013.

The decommissioned generators and their predecessors produced electricity continuously since 1901 and were housed inside a historic brick building on the northwest shore of take lbhopekaliga in downtown Kissimmee. The historic building and adjacent property will be returned to the city of Kissimmee for development The retirement of these units will have no effect on the reliability of service for KUA customers, and because of attrition, no utility employees will be immediately impacted by the retirement of the units.

MThis plant has built an extraordinary record of achievement because it possessed one exceptional asset generations of operators who were willing to do what it took to keep the lights on in Kissimmee,' said Welsh. 'And for that, they deserve out profound thanks.-

Decommissioning and site clean-up began in October, and will take approximately six to eight months to completex Prior to its shutdown, KUA opened the doors to the historic powerplant one last time for Individuals wishing to take a final tour of the- facility that served generations of Kissimmee residents. Free public tours were offered each Tlesday in September.

In addition, KUA unveiled a poster to commemorate the decommissioning of the plant The 24 x 36' black and white poster featiues a photh collage of the Hansel plant facade at dusk.

The pages that follow contain teing images of the 104-year-old power plant and the parts, pieces and machinery that mnade it what it was. Although none of the images show people they most certainly capture the spirit of the plant and what it must have been like to work there. Enjoy.

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2005 HIGHLIGHTS MILESTONES IN TECHNOLOGICAL ADVANCEMENTS with updates on power restoration progress in Kissimmee after a hurricane or While KUA spent part of 2005 looking back at the history of power generation severe storm passes through. Customers can receive the alerts through their in Kissimmee, we also surged ahead in the area of technology by making several inbox or other e-mail-enabled mobile devices like pagers and cell phones.

technological advancements to enhance the speed and efficiency of our business, expand our service offerings and make doing business with KUA easier and more Alerts are sent the moment new information is available, allowing customers to convenient for our customers. receive power restoration updates anytime, anywhere.

K-IU launches Residential, Commercial Security Serces; DEEP-ROOTED SEEDS Signs First Customer KUA has a long history of supporting the community where we work and live As part of its ongoing commitment to introduce products and services that through our unique combination of resources, equipment and employees. We enable customers to interact, transact and protect their families, KWA launched believe in the philosophy of giving back as an organization, and our employees residential and commercial security monitoring services this year. embody this philosophy as individuals, as well. Throughout the year, KUA and its employees donated countless hours and dollars to deserving local community The security service brings together the trusted names of KUA, Marlin Central projects.

Monitoring and GE Security to deliver protection against intrusion, carbon monoxide and fire. With optional modules, the system can also be used to Kissimmee Gets Downtown Wi-Fi 'Hot Zone' control appliances, lights and other electronic devices. In a bid to boost downtown revitalization efforts, KUA launched a free Wireless Fidelity (Wi-Fi) mesh network or 'hot zone in downtown Kissimmee this year, Security systems start at $180 with monthly monitoring at less than $20 per and in its first month of availability, the hot zone hosted more than 600 users.

month. Add-on services include CareGuardcP and KidSafe~'. CareGuard"I offers a way to monitor the well-being of senior citizens or other family members who The network makes it possible for people outdoors using a laptop computer or have medical issues, and KidSafe'm alerts working parents if their children do personal digital assistant (PDA) to check their e-mail, download material and have not arrive home at a predetermined time to disarm the system. full access to the Internet for free within the wireless coverage area.

The service offers 24-hour monitoring by certified operators in a UL-listed The project is the result of collaboration between KUA.net, the central monitoring center, based in Kissimmee. telecommunications division of KUA, and Kissimmee's Community Redevelopment Agency iRA).

KUA Launches New Payment Option In a continued effort to offer excellent service while serving large numbers of The network currently covers one square mile, but plans are underway to customers simultaneously, KUA launched a new interactive voice response (IVam expand the network to cover two square miles, or 80 percent of the downtown system that allows customers to pay their utility bill over the telephone. The area, within the next year. In addition, boaters anchored along the northern tip.

system is available in both English and Spanish. of Lake 'Ibhopekaliga can access the wireless network to download waterway navigational charts or check the latest weather forecast Equipped with voice recognition, the system allows customers to either speak their responses or use a touch-tone phone keypad for data entryh The system We are very proud to say that KUAtnet purchased and installed 'the network makes customer account information instantly and easily accessible - 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a without the use of electric revenues, and system expansions will be planned day, 7 days a week. utilizing revenue earned from premium features like faster connection speeds.

Customers can check account balances, update account information and pay their The availability of free Wi-Fi positions Kissimmee as a leading city for the bill. Payments can be made using Visa, MasterCard, Discover, American Express, application of new technology and is a great economic development tool for the debit cards and checks. community.

KUA Introduces Storm Restoration Alerts KUA Serves Up Osceolds Largest Apple Pie In preparation for this year's hurricane season, KUA introduced a power In February KUA employees unveiled Osceola County's largest apple pie at a restoration alert system called-KUA ALERTS that delivers periodic text messages community event held in the Kissimmee Civic Center. - -

KUA employees served the titanic tart to the zOOO residents who attended A 15-year veteran of the utility, Wilson always strives to improve his skills and Discover Osceola, a biennial event designed for both long-time residents and has an excellent work ethic. Throughout his entire employment at KUA, he has newcomers to become better acquainted with their community. Sponsored never taken a sick day.

by KUA, the Americana-themed event helped residents explore the key ingredients of economic development, employment opportunities, quality of life, Bill Groover Retires environment and education. While KUA celebrated employees, the utility also said "goodbye' to one who retired after more than 42 years of service. William N. "Bill" Groover, line crew The pie measured 10.5 feet across and two inches deep. It took 15 bushels of supervisor, retired after 42 years, one month and three days of service to the apples, 70 lbs. of shortening, 100 lbs. of flour, 280 lbs. of pie filling and 60 man- utility.

hours to prepare the pie that tipped the scales at more than 800 pounds.

KUA's board of directors honored Groover, 62, and presented him with KUA Dedicates New Pedestrian/Bicyde Pathway proclamations from the utility and city of Kissimmee as well as framed personal This year KUA dedicated a new pedestrian/bicycle pathway that provides letters of commendation from President Bush, Florida Gov. Jeb Bush and Sen.

residents with more convenient and safer access to the utility's customer service Mel Martinez.

center in Kissimmee.

Groover joined the utility as a lineman's helper on April 29, 1963, at the age of The new concrete path meanders through a cluster of oak trees and links Carroll 19 with a starting pay of $130 per hour. Groover worked his way up the utility Street to the front entrance of the utility building. The pathway also provides ladder to lineman apprentice (1964), second class lineman (1965), lineman (1966),

enhanced access to a nearby LYNX bus stop. foreman (1971), and finally in 1998 to his current position, line crew supervisor.

The sidewalk provides a safe, new transportation option for customers and is Over the years, Groover witnessed some of the most significant chapters in the just one more example of how KUA continues to work to meet the needs of our utilityqs history, including the unveiling of KUA's first modern energy control community. center in 1979, the creation of a separate utility authority in 1985 and the opening of the Cane Island Power Park in 1995.

KUA Lights Up the Sky on July 4 KUA has been lighting the city of Kissimmee since 1901, and on July 4th of this KUA Triing Facility Dedicated to Former VP year, the utility lit up the sky as the sponsor of Kissimmee's 2005 Old-Fashioned Also this year, KUA recognized a past employee by dedicating its employee Fourth of July Celebration. training facility in memory of former Vice President of Customer Service and Marketing Christine A. Beck.

Thousands of local citizens gathered at the event for a good old-fashioned time and enjoyed live entertainment, a water ski show, an arts and crafts show, The 900-square-foot Beck Training Room, located within KUA's customer service karaoke, a rock climbing wall and a spectacular fireworks finale. center, is used by utility employees for training and educational seminars and is also available free of charge to interested nonprofit and community groups. The As an organization with deep American roots, KUA was proud to be a sponsor room features classroom and lecture seating, a podium, a PC with high-speed of Osceola County's largest Independence Day celebration. Internet/email connectivity, an LCD projection system, DVD/VHS playback equipment and ample whiteboard space.

A LIFETIME OF DEDICATION The longevity of employees is part of what makes KUA - well, KUA. This A 15-year employee of the utility, Beck retired in January 2003 and died from year KUA honored 60 employees for a combined 840 years of service to the cancer in December of that same year.

utility, It's the dedication of employees like these that enable KUA to continue to provide personalized service to customers, while at the same time improving MAKING HISTORY. RECORDS ABOUND business practices and making technological advancements. Every day more than 300 people play a part in the history-making that takes place at KUA. Over the course of the past year, the utility experienced Wilson Named KUA Employee of the Y= tremendous growth in our customer base, growth in the breadth and depth of In addition to recognizing long-time employees, KUA also celebrated its 2004 services we provide to our customers, and significant growth in the demand for Employee of the Year, Anthony J. 'Ibnf Wilson. our electricity. Managing all of this growth required much adaptation on the part of our employees, and, not surprisingly, they handled it like pros.

Wilson, who is an inventory coordinator, was singled out for his professionalism, inventory control skills and for being an outstanding contributor to the utility's Buenaventura lakes Substation Undergoes Upgrade mission and goals. With this honor comes a $400 UA.Savings Bond, a plaque In an effort to increase service reliability for customers, KUA completed a and two days off with pay. -. - 481,000 upgrade of the Buenaventura Lakes substation, located adjacent to

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Florida's Turnpike and Osceola Parkway. The project included replacement of two Customer Growth and Energy Sales Fuel 2006 Budget 69113.2 kV transformers and 13.2 kV transformer low side breakers. The project Growth and increasing costs of doing business fueled the figures reflected in also included the addition of new transformer protection panels. Kissimmee- KUA's $239.4 million budget for fiscal year 2006.

based Terry's Electric, Inc. completed the upgrade.

The budget includes $985 million for fuel and purchased power and $16.3 KUA Completes $1 Million Gas Pipeline Relocation million for construction and capital expenditures. An electric rate change that Additionally, KEIA contracted with Alabama-based Big Warrior Corp. for the took effect July 1, is also reflected in the budget.

relocation of a gas pipeline that fuels the utility's Cane Island Power Park.

Additionally, customer growth in 2006 is expected to rise 4.7 percent while The relocation cost more than $1 million and was needed to accommodate future energy sales are forecasted to increase by 4.8 percent.

expansion of the Reunion Resort & aub of Orlando and potential widening of County Road 545. As co-owners of the pipeline, the Florida Municipal Power Finally, the budget also reflects several capital expenditure projects including Agency paid for 50 percent of the total relocation cost. reliability enhancements to KUA's transmission and distribution system and construction of a new electric substation to serve the rapid growth in the KUA Signs 4,000th Phone Subscriber Pleasant Hill Road area.

Just 14 months after the launch of local and long distance telephone service, KUA reached a major milestone this year with the signing of its 4,000th A SEASON OF HURRICANES telephone subscriber. Luckily, history did not repeat itself for KUA during Hurricane Season 2005.

However, KUA was prepared for whatever Mother Nature might deliver. Armed In partnership with New Smyrna Communications, KUA offers affordable, flat with lessons learned from last year, the utility approached the 2005 hurricane rate calling plans to residential and small business customers. Residential calling season with vigor and preparedness; and instead of having to clean up our own plans range from $24.95 - 72.95 per month and include local and long distance community, we were able to send employees to the aid of other impacted utilities calling as well as popular features like call waiting, call forwarding call block, across the Southeastern United States.

speed dialing and voice mail.

Hurricane Dennis Heat, Humidity ,ead to Seven Records for The only hurricane to impact KUA's service area this year caused minimal Electricity Demand in Kissimmee damage. High winds from Hurricane Dennis knocked out power to Heat and high humidity in Central Florida led to seven record setting days for approximately 1,000 of KUA's 58,000 customers on July 9, causing only scattered electricity demand by KUA customers this year. outages from lightning, uprooted trees and assorted debris. Electric service was restored to all customers in less than a day.

On July 4, KUA customers used 300.7 megawatts (MW) of electricity at 5:31 p m.

eclipsing the former mark of 298.7 MW set in July 2004. Hurricane Katrina Since KUA's service territory was not directly impacted by Hurricane Katrina, Kissimmee residents set another new record for electricity usage on July 5, with a utility employees were able to come to the aid of several other utilities.

system peak of 31L8 MW at 4:46 p.m.

KUA crews traveled to south Florida in late August to assist Keys Energy Continued summer heat resulted in a third day of record demand for electricity Services, a municipal utility based in Key West, after Hurricane Katrina on July 7,at 4:46 p.m., when KUA recorded a new system peak of 317.5 MW. devastated the island.

KUA established a fourth power record on July 27, at 4:34 p m., when strong Three contract tree-trimming crews traveled to Miami and two contract tree-customer demand forced a system peak of 3223 MW. trimming crews traveled to Gulfport, Miss.

Then, again, on July 28, at 4:34 p.m., the utility made history with a fifth system KUA also sent linemen, a convoy of vehicles and other supplies to Kiln, Miss.

peak of 325.1 MW. to assist Coast Electric Power Association, where KUA crews spent two weeks working 15-hour days, sleeping in makeshift tents and battling endless heat and On August 16, relentless heat and humidity pushed electricity consumption to a humidity.

sixth system peak of 326.1 MW at 4.57 p.m.

Two more utility employees spent nine days working with Long Beach, Miss. city The very next day strong customer demand once again pushed KUA to the employees to reestablish customer service and municipal billing functions.

seventh record at 543 p.m. withaJ system peak of 33L01M .

KUA Issues 2005 Hurricane Preparation Guide Conducted by the Orlando Business Journal in partnership with Wichita, Kan.-

This year KUA distributed more than 38,000 printed copies of its 2005 Osceola based QMR Market Research, the 'Best Places to Work 2005' survey covered the Hurricane Handbook to local residents. following areas: team effectiveness, retention risk, alignment with goals, trust with co-workers, individual contribution, manager effectiveness, trust in senior The popular guides, which are offered free of charge to Osceola County leaders, feeling valued, work engagement and people practices.

residents, are developed by the utility to help individuals and families prepare for the potentially devastating effects of hurricanes, tropical storms or other The results of confidential online surveys completed by employees of the natural disasters. nominated companies determined the finalists. Fifty percent of each organization's employees had to participate in the survey in order to receive a score and be The 36-page guide is packed with important information on hurricanes and eligible for ranking.

floods, plus helpful phone numbers, a disaster supplies checklist and a hurricane tracking chart. KUA offered downloads of the guide from the utility's website, Companies were ranked in four categories based on the number of employees:

which proved to be a huge success. Residents downloaded more than 1,000 copies smalL 10-50 employees; medium,51-150 employees; large,15-300 employees; and of the free handbook in the first 72 hours8.333333e-4 days <br />0.02 hours <br />1.190476e-4 weeks <br />2.7396e-5 months <br /> of availability and more than 10,700 giant, more than 301 employees.

copies in total.

In order for a company to make the Best Places to Work 2005 list, it had to KUA also released a Spanish language version of the guide, which enabled receive a score of 80 or higher. KUA ranked fifth overall in the large company Hispanic customers to have access to the information in their language of choke. category with an impressive score of 85.16.

KUA Hosts Hurricane Preparedness Meetings KUA was the only utility and the only government employer recognized in the KUA took hurricane preparedness one step further this year by hosting a regional competition. Honorees were recognized in a special section published in series of neighborhood meetings designed to inform the public about disaster the Orlando Business Journal in May.

preparedness and emergency response. Using lessons learned from the 2004 hurricane season, the well-attended 60-minute sessions were packed with helpful FMEA Honors KWA with 'Community Restoration Award' tips and information, including details on power restoration procedures and for Hurricane Recovery priorities. Residents who attended also received a free copy of the utilitiys 2005 Additionally this year, the Florida Municipal Electric Association (FMEA)

Osceola Hurricane Handbook. presented KUA with its coveted 'Community Restoration Award" for KUA's performance in 2004.

LONGEVITY = SUCCESS At KUA we're operating faster and smarter than ever before. Our goals are KUA was the hardest hit electric utility in Central Florida, having lost electric aligned among departments. Our employees operate as a team. Our organizational service to 100 percent of its customers in Hurricane Charley, 36 percent in culture stresses a healthy work-life balance. At KUA, we always have been and Frances and 59 percent in Jeanne.

continue to be a corporate leader, earning recognition for how we do business and how we take care of our employees. This year four regional organizations KUA workers logged 16 hours1.851852e-4 days <br />0.00444 hours <br />2.645503e-5 weeks <br />6.088e-6 months <br /> a day trimming trees, digging holes, setting poles, recognized our efforts. pulling wires and restoring electricity to tens of thousands of Osceola County residents. In addition, KMA sent repair crews to other affected areas of Florida KWA Named Top 100 Company for Working Families including Fort Pierce, likeland and Gainesville. This award is truly an award to For the eighth consecutive year, the Orlando Sentinel named KUA a Top 100 honor our employees.

Company for Working Families.'

KUA Wins Regional Innovation Award The Sentinel considers a number of areas to determine its annual rankings, The Metro Orlando Economic Development Commission was the fourth including total benefit package, organizational culture, ways the company has fun, organization to honor KIA this year as the Osceola County recipient of the 2005 work-life balance offerings and much more. KUA continues to be a corporate William C. Schwartz Industry Innovation Award.

leader, earning recognition from the judges for its offerings of unique programs for employee families, an ongoing employee reward system and in-house The award honors one company or individual in each Central Florida county who communications. has successfully created, developed and implemented creative products and ideas. Successful innovation is one of the driving forces behind expanding and KUA Ranked Among Central Florida's Best Places to Work' diversifying the economy.

KUA was also honored to have been named one of Central Florida's best places to work. The Commission recognized KUA for the launch of a variety of services i - 'including speech-enabled, self-service software for telephone bill payment, live

online customer chat to reduce hold times, text messaging to communicate power KLIA Wins Two APEX Awards outages and a new wi-fi network that provides free Internet access to residents Additionally, APEX 2005, an annual international awards program recognizing and businesses in downtown Kissimmee. excellence in printed and online publications, honored KUA with two awards of excellence.

KUlAs innovative partnerships that allow the utility to offer additional services like telephone and home security were also impressive to the Commission. KUA received a Grand Award - one of only 100 worldwide - for its residential energy guide, -The Case of the Rising Electric Bills" and an Award of Excellence MORE THAN ONCE IN A BLUE MOON for its 2004 annual report Communicator. Announcer. Commentator. Broadcaster. When it comes to getting key messages out, KEWs corporate communications division is top notch. This Winners were chosen from nearly 5,000 entries received from government, year the department captured 12 awards from seven different organizations while private corporations and nonprofit organizations throughout the United States advancing KUA's corporate message. Since 1995, KUA has won 17 regional, and Canada.

national and international public relations awards.

KUA Wins Two Image Awards KUA 2003 Annual Report Honored KUA took home two awards from the 2005 Image Awards, an annual competition In recognition of its creative approach to graphic design. Graphic Design-usa sponsored by the Orlando Area Chapter of the Florida Public Relations magazine honored KUAs 2003 annual report with an award of excellence in the Association.

2004 American Graphic Design Awards.

Image Awards are given to companies that exhibit and employ comprehensive The American Graphic Design Awards honor new, outstanding graphic design, public relations projects that meet the highest standards of excellence in PR advertising art and marketing communications. The awards program is judged by programming.

a national panel of creative professionals hailing from prominent graphic design firms, advertising agencies and corporate design departments. In the printed tool category, KlIA received an Image Award for its 2004 Osceola Hurricane Handbook, and in the annual report category, KUA received an Award KUA's corporate communications division produced the report with assistance of Distinction for its 2004 annual report.

from graphic designer Popcorn Initiative and commercial photographer Ed McDonald, both of Orlando, FIL KUA Wins PTwo Golden Image Awards KUA captured two statewide awards in the 2005 Golden Image Awards, an The 2003 annual report also received an Award of Excellence, the top award, annual competition sponsored by the Florida Public Relations Association.

in a national annual report contest conducted by the American Public Power Association (APPA). The competition recognizes outstanding public relations programs and encourages and promotes the development of excellence in internal and external But the recognition didn't stop there - the report also received a gold communications.

ADDY6 award from the Orlando dub of the American Advertising Federation (AAF). The ADDYD awards are the advertising industry~s largest and most In the annual report category, KUA received a Golden Image Award for its 48-representative competition, recognizing creative excellence and the very best page annual report, titled 'Beyond Measure," and in the poster/calendar category, advertising worldwide. KUA received a Golden Image Award for its 2005 Calendar of Electrical Safety.

KUA Wins Three International Communction Awards LASTING IMPRESSIONS Also this year, KUA received three 2005 Communicator Awards, an international The energy radiated from KUA employees is and has always been contagious.

awards program that honors excellence in printed communications. KUA employees are industry and community leaders. This year several of our employees earned honors from local, regional, statewide and national KUAEs 28-page energy conservation guide received a Crystal Award of Excellence, organizations.

and the 2004 hurricane handbook and 2004 annual report both received Awards of Distinction. Chris Gent Receives International Distinguished leadership Award Winning entries meet a high standard of excellence and serve as a benchmark The Community Leadership Association presented Chris Gent, corporate for their respective industries. More than 5,000 entries from throughout the communications manager, with its international Distinguished Leadership Award.

United States and several foreign countries were judged in the competition.

The Distinguished Leadership Award recognizes exceptional community leadership program graduates. Recipients have made significant and notable contributions for the betterment of their communities.

Gent is a 1994 graduate of Leadership Osceola County and has served on the Kissimmee City Commission Confirms Gemskie to Leadership Osceola County steering committee for the past 10 years, including Second Term on KUA Board one year as chairman. In addition, he serves on the board of directors of In another vote of confidence, the Kissimmee City Commission unanimously Community Vision, Inc. and the Florida Public Relations Association. confirmed Nancy E Gemskie to a second term on the Kissimmee Utility Authority board of directors.

Gent also received Osceola Count's distinguished leader award in 2003 and the Community Service Award from the UCF Alumni Association in 2002. Gemskie is a retired insurance executive and a Kissimmee resident since 1995.

Last year she served as chairman of KUA's five-member board of directors. Under Arthur Lacerte Named FMEA Member of the Year her new term, she will serve until September 30, 2010.

In appreciation for his ongoing dedication and commitment to Florida's municipal electric utilities, the Florida Municipal Electric Association named KUA Vice KUA Linemen Excel at Statewide and National Rodeos President and General Counsel Arthur J. 'Grant' Lacerte, Jr. their 2005 Member The state and the nation were watching KUA lineworkers this year as they of the Year. earned high honors in a competition of their skills.

The award was one of 13 given out at FMEA's 2005 annual conference. KUA lineworkers brought home high marks and two trophies from the fifth annual Florida Lineman's Competition in Tallahassee where twenty-two teams Lacerte joined KUA in 2002. He currently serves as board chairman for the from more than a dozen electric utilities gathered in April to demonstrate the Osceola County Children's Home Advisory Commission and serves on the board safety, skill and education of electric linemen.

for the Center for Drug-Free Living, Inc.

KtA's two teams scored 500 and 494 points respectively out of 500 possible He holds a bachelor's degree in history from Columbia University in New York, points. One team earned a second place trophy in the crossarm change out event.

NY and a J.D. degree from Marshall-Wythe School of Law at the College of William and Mary in Williamsburg, Vs. KUA crews also brought home the nation's second best ranking from the fifth annual Public Power Lineworkers' Rodeo. They scored highest among Greg Wbessner Receives Rotary Award participating Florida utilities.

Finally, the Rotary Foundation named Greg Woessner, manager of system operations, a Paul Harris Fellow. Sixty teams from throughout the United States gathered in Memphis, Tenn. in April to demonstrate the safety, skill and education of electric linemen. Held The Paul Harris Fellow honor is named for Paul Harris, who founded Rotary in conjunction with the American Public Power Association's Engineering &

with three business associates 100 years ago in Chicago, Ill. The award serves as a Operations Technical Conference, the rodeo consisted of five timed events.

way for Rotary to show appreciation to those who contribute $1,000, or in whose name that amount is contributed, to the foundation's international charitable and KUA's team earned a score. of 498 out of 500 possible points and took third place educational programs. event trophies for the alley arm insulator replacement and oil circuit recloser change out.

A 81,000 contribution to the foundation was made by the Kissimmee West club to honor Woessner's volunteer work in the local community. He has been a LONG-STANDING TRADITIONS member of the club for three years. While the decommissioning of the Roy E Hansel Generating Station diesel units marked the end of an era for KUA, the utility saw many new beginnings and Sharing the Knowledge much success during 2005 - a true testament to the cycle of life.

KUA and its employees are considered industry leaders, and this year, two KUA employees were recognized by being asked to share their expertise at two Although we generally refer to equipment when we speak of power generation prestigious national conferences. In May, Jef Gray, vice president of information and technological advancements, it is really the people behind the machinery that technology, spoke at the Primen 2005 Outlook Conference in Boulder, Colo. make things happen. KUA is fortunate to have a long lineage of professional about how KUA uses technology to enhance customer service, including dedicated employees who work tirelessly on behalf of the utility, and it seems customer service chat, automated cash bill payment centers and web-based billing only fitting during this year of reflection to offer an expression of gratitude to and payment each and every KUA employee - from the first operator of the Roy E. Hansel Generating Station all the way down to the employees responsible for today's In June, Jim Welsh, president and general manager, spoke at the American Public successes. Thank you for all that you do.

Power Association's National Conference and Public Power Expo in Anaheim, Calif. about recruitment and retainment of staff - a pertinent topic as utilities nationwide compete against other industries for technical and skilled employees.

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