Table Of ContentCity of Daphne, Alabama
Comprehensive Annual Financial Report
For the Year Ending
September 30, 2012
www.daphneal.com
City of Daphne, Alabama
Comprehensive
Annual Financial
Report
For The Year Ending
September 30, 2012
Kimberly M. Briley, Finance Director I Treasurer
CITY OF DAPHNE, ALABAMA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED SEPTEMBER 30,
TABLE OF CONTENTS
Pages
INTRODUCTORY SECTION
Transmittal Letter i-vi
City of Daphne, Alabama Map Vll
Organizational Chart Vll
List of Principal Officials IX
FINANCIAL SECTION
Independent Auditor's Report I and 2
Management's Discussion and Analysis 3- 19
Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Assets 20 and 21
Statement of Activities 22 and 23
Governmental Fund Financial Statements
Balance Sheet 24 and 25
Reconciliation of the Governmental Funds
Balance Sheet to the Statement of Net Assets 26
Statement of Revenues, Expenditures, and Changes in Fund Balances 27 and 28
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities 29
Proprietary Fund Financial Statements
Balance Sheet - Enterprise Funds 30 and 31
Statement of Revenues, Expenditures, and Changes in Fund Net Assets
Enterprise Funds 32
Statement of Cash Flows-Enterprise Funds 33
Component Unit Financial Statements
Statement of Net Assets 34
Statement of Activities 35
Fiduciary Fund Financial Statements 36-42
Notes to Financial Statements 43-73
Required Supplementary Information Other Than MD&A
Schedule of Revenues and Expenditures-Budget & Actual, General Fund 74-80
Notes to Schedule of Revenues and Expenditures-Budget and
Actual, General Fund 81
Combining Financial Statements
Balance Sheet-Summary-Non-Major Govermnental Funds 82
Balance Sheet-Non-Major Special Revenue Funds 83 and 84
Statement of Revenues, Expenditures, and Changes in
Fund Balance-Summary-Non-Major Governmental Funds 85
Statement of Revenues, Expenditures and Changes in Fund Balance
Non-Major Special Revenue Funds 86 and 87
Other Supplementary Information
Capital Assets Used in the Operation of Govermnental Funds-By Source 88-97
STATISTICAL SECTION
Net Assets by Activity Type 98 and 99
Change in Net Assets 100- 103
Governmental Activities Tax Revenue by Source 104
Fund Balances of Govermnental Funds 105 and 106
Changes in Fund Balances of Governmental Funds 107 and 108
Revenue Rates for General Sales Tax 109
Principal Revenue Remitters of Sales and Use Tax 110
Net Assessed Value of All Taxable Property Ill
Principal Remitters of Property Tax 112
Property Tax Rates Direct and Overlapping Govermnents 113andll4
Ad Valorem Levies and Collections 115
Ratios of Outstanding Debt by Type 116and 117
Ratio of Net Debt by Type 118
Direct and Overlapping Govermnental Activities Debt 119
Legal Debt Margin Information 120 and 121
Demographic and Economic Statistics 122
Principal Employers 123
City Government Employees by Function 124 and 125
Operating Indicators by Function 126- 133
Capital Asset Statistics by Function 134
Part I
Introductory
Section
March 29, 2013
TO: The Mayor, Members of the City Council, and the Citizens of the City of Daphne,
Alabama
The Comprehensive Annual Report (CAFR) of the City of Daphne, Alabama (the City)
for the fiscal year ended September 30, 2012 is hereby presented. The CAFR is
presented to give detailed information about the financial position and activities of the
City to its citizens, City Council, City Staff, and Readers.
Responsibility for both the accuracy of the data, and the completeness and fairness of
the presentation, including all disclosures, rests with the City of Daphne management.
To the best of our knowledge and belief, the enclosed financial statements, notes, and
other data are accurate in all material respects and are reported in a manner designed
to fairly present the financial position and results of operations of the City as a whole, as
well as the various funds of the City and its component units. All disclosures necessary
to enable the reader to gain an understanding of the City's financial activities are
included.
The City has an audit of its financial reports annually by independent certified public
accountants who must conduct the audit in accordance with generally accepted auditing
standards. The accounting firm of Smith, Dukes, and Buckalew, LLP, CPA's, conducted
the audit and their report on the City's financial statements is included herein.
The Report
The CAFR is presented in three sections: Introductory, Financial, and Statistical.
The Introductory Section includes this transmittal letter and the primary government's
organization chart.
The Financial Section includes the Management's Discussion and Analysis (MD&A), the
basic financial statements for the primary government and its separately presented
component unit, and the primary government's combining and individual financial
statements and schedules. Also included is the independent auditor's report on the
financial statements and schedules. The MD&A provides a narrative introduction,
overview, and analysis to accompany the basic financial statements. This Letter of
Transmittal is designed to complement the MD&A and should be read in conjunction
with it.
The Statistical Section includes selected financial and demographic information,
generally presented on a multi-year basis. In contrast to the Financial Section
information, the Statistical Section has not been audited.
The Reporting Entity
The report includes all funds of the primary government and its component unit. The
primary government provides a full range of services. These services include public
safety, public works, environmental services, culture and recreation, economic and
community development and planning, and general administrative services.
The Utilities Board of the City of Daphne is a related entity, but it does not meet the
established criteria for inclusion in the reporting entity, and accordingly is excluded from
this report. Additional information on the Utility Board is available at the Board's
business office at 900 Daphne Avenue, PO Box 2550, Daphne, Alabama 36526.
The City has implemented the Governmental Accounting Standard Board's (GASB)
statement on defining the reporting entity. As a result, the Renaissance
Cooperative/Improvement District is included as a separately presented component unit
of the reporting entity in the CAFR. See Note 19 for additional information.
GASB Requirements
Each year, management evaluates new GASB reporting requirements to determine
applicability to the City. GASB Statement 54 "Fund Balance Reporting and
Governmental Fund Type Definitions" became effective for the Fiscal 2011 period. This
statement establishes new categories for the reporting of fund balance and revises
definitions for governmental fund types. The City implemented this statement in Fiscal
2011 and new fund balance classifications are presented in the Statistical Section
beginning in Fiscal 2011.
City Profile
The City of Daphne was founded in 1927. The City is located on the eastern shore of
Mobile Bay and is adjacent to Interstate 10- a major east/west thoroughfare. The City is
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45 miles to the west of Pensacola, Florida and 15 miles east of Mobile, Alabama.
Located just across Mobile Bay, many residents commute daily to Mobile; Daphne has
developed as a bedroom community to the City of Mobile. The City's location along the
Interstate, along with the availability of land, has driven retail and light industrial growth.
Daphne is the most populous city in Baldwin County and comprises 14.1 square miles.
Wealth and income levels within the City are strong. The median income as of 2009 is
$ 60,541 and the median housing valuation is $ 183,063. According to the 2000
census, the City's population was 16,581; the 2010 census increased the population to
21,570. Daphne's population is well-educated; according to 2010 data, approximately
30% of the population has a bachelor's degree- the US average is 18%. As the
population has grown, the City of Daphne has responded in the quantity and quality of
services it provides to meet the needs and expectations of its citizenry. Approximately
273 regular, full-time employees work to provide these services.
The City was recently ranked 95th in the "Top 100 Best Places to Live" as presented on
the CNN/Moneywise website. Also, Baldwin County, where Daphne is located, recently
ranked as the 11th strongest metropolitan economy in the US and 4th in the Southern
United States.
The City of Daphne has a Mayor-Council form of government. The City Council
consists of seven members elected from seven single member districts; the Mayor is
elected at large. The current Mayor was appointed by the City Council due to the
untimely death of the Mayor elected at large in 2012. The Mayor and City Council are
elected to serve four year terms. Policy making and legislative authority are vested in
the City Council, who is, among other things, responsible for passing local ordinances,
adopting budgets, appointing committees, and appointing board members of related
organizations. The Mayor is responsible for carrying out the policies and ordinances of
the City Council and supervising the day-to-day operations of the City.
The annual budget serves as the foundation for the City's financial planning and control.
The Mayor submits the budget proposal of the various City departments to the City
Council for their consideration annually. The City maintains budgetary controls to
ensure compliance with legal provisions embodied in the annual budget approved by
the City Council. Budgetary control is on the departmental level.
Economic Condition
The recent economic down-turn impacted the City beginning in Fiscal Year 2008, with
General Fund Sales and Use Tax Revenues being the leading indicator. In 2008,
these revenues were down $ 600,000 from the prior year. The height of the City's
economic down-turn was experienced during Fiscal Years 2009 and 2010, when Sales
and Use Taxes were $ 1.8 million and $ 2 million, respectively, under pre-recession
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2007 revenues. The rebound began in Fiscal 2011 and continues in Fiscal 2012 and
2013. Revenues in Fiscal 2012 are within$ 300,000 of meeting the pre-recession 2007
revenues. Fiscal 2013 budgets $ 12.3 million for Sales and Use Taxes; this is
approximately$ 400,000 over the referenced 2007 revenue collections.
This recovery in the City has occurred sooner and stronger than other areas and is
partially due to the thriving of the Eastern Shore Park retail development which includes
Sam's and Lowes. Additionally, in Fiscal 2012 revenues begin to reflect the impact of
new major retail businesses located to Daphne which includes Publix Supermarket and
Dick's Sporting Goods. Both are located in shopping areas that were struggling and
have spurred on retail activity in the neighboring businesses.
While Sales and Use Tax revenues were down in Fiscal 2008-2010, Ad Valorem Taxes
continued to increase peaking at $ 5.6 million in Fiscal 2010. As Ad Valorem revenues
are collected one year in arrears, the revenue recognized in the governmental
statements did not "level out" until Fiscal 2011 and 2012 when the effects of re-valuation
began; 2012 Ad Valorem revenues total$ 4.9 million. Net Assessed Property Values
are$ 367,780,000 in Fiscal 2008 and$ 335,467,000 at September 30, 2012.
During the peak of the economic downturn in Fiscal 2008 through 2010, departmental
operating budgets were closely scrutinized and remained relatively unchanged ranging
from$ 17.7 to$ 18.1 million. This is reflective of the City's efforts to operate within its
currently available resources.
Despite the economic downturn, the General Fund continued to operate with revenues
in excess of expenditures for the Fiscal 2008-2010 reporting period. The Unreserved
Fund Balance increased from$ 10.05 million in Fiscal 2007 to$ 12.08 million in Fiscal
2010.
Major Initiatives
In Fiscal Year 2011, the City set its priority of resurfacing City streets on a largely pay
as-you-go basis. With the Fiscal 2010 Unreserved Fund Balance of the General Fund
being equal to approximately 55% of revenues, the City determined it prudent to use the
accumulated funds to finance a city-wide project Major road resurfacing projects had
not been undertaken in the past two decades and this was determined to be the most
critical infrastructure need. The City responded with a major resurfacing plan. Funds
totaling $ 3.5 million were spent between Fiscal 2011 and 2012. The Unassigned Fund
Balance of the General Fund continues to remain strong at$ $ 9.9 million at the end of
Fiscal 2012 (approximately 43% of revenues).
The City also recognizes the need for recreation facilities. Recreation facilities have not
been expanded to reach the City's increasing population. Therefore, this is another
iv
project the City Council has identified to be funded on a pay-as-you-go basis. This is
reported in the Lodging Tax Fund, a Special Revenues Fund. Sports Complex Location
II appropriations total$ 1,377,200 which is to be paid by present and future Lodging Tax
collections. The General Fund is advancing the Lodging Tax Fund as needed and at
the end of Fiscal 2012 $ 1,077,596 is due to the General Fund and is estimated to be
paid by Fiscal 2017.
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Financial Policv
Fund Balance. The City has an informal policy of maintaining the Unassigned Fund
Balance of the General Fund equal to 3 to 4 months of operating revenues.
Furthermore, this Unassigned Fund Balance may only be used for capital projects and
equipment.
Cash Management. Cash temporarily not required for operating requirements is
invested in government securities and securities backed by the full faith and credit of the
US government. The City's investment policy is to minimize credit and market risks
while maintaining a competitive yield on its portfolio. Accordingly, operating fund
deposits are insured under the Security for State of Alabama Enhancement (SAFE)
program. In the SAFE program, all public funds are protected through a collateral pool
administered by the State of Alabama Treasury.
Operation Efficiency. The Mayor's office continually challenges all City departments to
improve their operations and the quality of services provided to citizens. These efforts
are effective as personnel and operating costs are consistently less than budgeted.
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Description:Organizational Chart The Comprehensive Annual Report (CAFR) of the City of
Daphne, Alabama (the City) for the fiscal The median income as of 2009 is.
