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CC 2009-03-09 Agendas
CITY OF NORTH RICHLAND HILLS CITY COUNCIL WORK SESSION AGENDA NORTH RICHLAND HILLS CITY HALL PRE-COUNCIL CHAMBERS 7301 NORTHEAST LOOP 820 NORTH RICHLAND HILLS, TEXAS Monday, March 9, 2009 5:30 P.M. A.1 Discuss Items from Regular City Council Meeting A.2 IR 2009-022 Discuss Setting Dates for May Council Meetings (5 Minutes) A.3 IR 2009-018 Discussion of Ultraviolet (UV) Systems at NRH2O (20 Minutes) A.4 IR 2009-024 2009 Bond Sale (20 Minutes) B.0 EXECUTIVE SESSION -The City Council may enter into closed Executive Session to discuss the following as authorized by Chapter 551, Texas Government Code B.1 Executive Session: Pursuant to Section 551.072, Texas Government Code to deliberate the purchase of real property at: 5009 Cummings Dr. B.2 Executive Session: Pursuant to Section 551.072, Texas Government Code to deliberate the purchase, exchange or value of real property for municipal use -Central and Western Sectors of City C.0 Adjournment Certification I do hereby certify that the above notice of meeting of the North Richland Hills City Council was posted at City Hall, City of North Richland Hills, Texas in compliance with Chapter 551, Texas Government Code on March 6, 2009 at , r ~ ~ p~?a _~G2:i~~',~CL QYL City Secretary This facility is wheelchair accessible and accessible parking spaces are available. Requests for accommodations or interpretive services must be made 48 hours prior to this meeting. Please contact the City Secretary's office at 817-427-6060 for further information. The City Council may confer privately with its attorney to seek legal advice on any matter listed on the agenda or on any matter in which the duty of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with Chapter 551, Texas Government Code. March 9, 2009 -City Council Agenda Page 1 of 4 CITY OF NORTH RICHLAND HILLS CITY COUNCIL AGENDA CITY HALL COUNCIL CHAMBERS 7301 NORTHEAST LOOP 820 NORTH RICHLAND HILLS, TEXAS Monday, March 9, 2009 7:00 P.M. --------------------------------------------------------------------------------------------------------- Copies of the full City Council agenda information packet are accessible regularly scheduled Monday Council meeting according to the following schedule: ^ Library on the Friday prior to the meeting (available electronically) ^ City Hall on the day of the meeting (hard copy available) -------------- prior to every locations and Additionally, the agenda packet is available for download from the City's web site at www.nrhtx.com after 5:00 p.m. on the Friday prior to every regularly scheduled Council meeting. --------------------------------------------------------------------------------------------------------------- A.0 Call to Order -Mayor Trevino A.1 Invocation -Councilman Sapp A.2 Pledge -Councilman Sapp A.3 Special Presentation(s) and Recognitions) -Intellectual and Development Disabilities Awareness Month -Proclamation presented by Councilman Whitson A.4 Special Presentation(s) and Recognitions) -Presentation of Awards to the Parks and Recreation Department by the Texas Recreation and Park Society A.5 IR 2009-021 Special Presentation -Certificate of Achievement for Excellence in Financial Reporting for the Comprehensive Financial Report ending September 30, 2007 A.6 Citizens Presentation An opportunity for citizens to address the City Council on matters which are not scheduled for consideration by the City Council or another City Board or Commission at a later date. In order to address the Council, please complete a Public Meeting Appearance Card and present it to the City Secretary prior to the start of the Council meeting. The Texas Open Meetings Act prohibits deliberation by the Council of any subject which is not on the posted agenda, therefore the Council will not be able to discuss or take action on items brought up during the citizens presentation. March 9, 2009 -City Council Agenda Page 2 of 4 A.7 Removal of Item(s) from Consent Agenda B.0 CONSIDER APPROVAL OF CONSENT AGENDA ITEMS All consent agenda items listed below are considered to be routine items deemed to require little or no deliberation by the City Council and will be voted on in one motion. There will be no separate discussion of these items unless a Council Member so requests, in which event the item will be removed from the Consent Agenda and considered. B.1 Approval of Minutes of February 23, 2009 City Council Meeting B.2 PU 2009-008 Approve Purchase of Sewer Camera Inspection System from CUES, Inc. in the amount of $74,989.22 C.0 PUBLIC HEARINGS C.1 ZC 2009-01 Public Hearing and Consideration of a Request from Richard and Silvia Wooldridge for a Zoning Change from AG Agriculture to R-1-S Special Single Family on Tract 4809 in the Condra Survey (7421 Hightower Drive.) -Ordinance No. 3042 D.0 PLANNING AND DEVELOPMENT Items to follow do not require a public hearing D.1 FP 2009-01 Consideration of a Request from Richard and Silvia Wooldridge to Approve a Final Plat of Lot 1, Block 3, Northridge Meadows Addition (located at 7421 Hightower Drive.) E.0 PUBLIC WORKS No items for this category. F.0 GENERAL ITEMS F.1 GN 2009-012 Approve Investment Strategy and Investment Policy -Resolution No. 2009-008 F.2 GN 2009-013 Presentation of Fiscal Year 2008 Audited Financial Report G.0 EXECUTIVE SESSION ITEMS G.1 Action on Any Item Discussed in Executive Session Listed on Work Session Agenda H.0 INFORMATION AND REPORTS H.1 IR 2009-025 ISO Update H.2 Announcements -Mayor Pro Tem Turnage March 9, 2009 -City Council Agenda Page 3 of 4 H.3 Adjournment All items on the agenda are for discussion and/or action. Certification I do hereby certify that the above notice of meeting of the North Richland Hills City Council was posted at City Hall, City of North Richland Hills, Texas in compliance with Chapter 551, Texas ,_.... . Government Code on March 6, 2009 at .~~~'~i~ ~~G2~%1~lC.la, City Secretary This facility is wheelchair accessible and accessible parking spaces are available. Requests for accommodations or interpretive services must be made 48 hours prior to this meeting. Please contact the City Secretary's office at 817-427-6060 for further information. The City Council may confer privately with its attorney to seek legal advice on any matter listed on the agenda or on any matter in which the duty of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with Chapter 551, Texas Government Code. March 9, 2009 -City Council Agenda Page 4 of 4 City of North Richland Hills City Council Work Session Meeting Agenda North Richland Hills City Hall Pre-Council Chambers 7301 Northeast Loop 820 North Richland Hills, TX 76180 Monday, March 9, 2009 5:30 P.M. A.1 Discuss Items from Regular City Council Meeting A.2 IR 2009-022 Discuss Setting Dates for May Council Meetings (5 Minutes) A.3 IR 2009-018 Discussion of Ultraviolet (UV) Systems at NRH2O (20 Minutes) A.4 IR 2009-024 2009 Bond Sale (20 Minutes) B.0 EXECUTIVE SESSION -The City Council may enter into closed Executive Session to discuss the following_ as authorized by Chapter 551, Texas Government Code B.1 Executive Session: Pursuant to Section 551.072, Texas Government Code to deliberate the purchase of real property at: 5009 Cummings Dr. B.2 Executive Session: Pursuant to Section 551.072, Texas Government Code to deliberate the purchase, exchange or value of real property for municipal use - Central and Western Sectors of City C.0 Adjournment CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. A.1 Subject: Discuss Items from Regular City Council Meeting INFORMAL REPORT TO MAYOR AND CITY COUNCIL No. 2009-022 ,. . Date: March 9, 2009 . ~' ~ ``' Subject: Discuss Setting Dates for May Council Meetings ~,; Due to the May 25 Council meeting falling on the Memorial Day Holiday, Council needs to consider moving the meeting to another date. Also, following the May 9 Election Day, Council will need to take care of a couple of election related matters required by law. These election matters are to be completed within the statutory timeframe of May 13 to May 20. Neither of our regularly scheduled May council meetings falls within this timeframe. In light of this and the need to reschedule the second meeting in May, staff is recommending that the May 25 regular meeting be rescheduled to Monday, May 18. If Council is agreeable to May 18, the election related items would be handled at the beginning of the meeting followed by the regular meeting items. This item has been placed on the work session agenda for Council to reach a consensus on the scheduling of the May meeting. An action item will be placed on the next Council agenda to reschedule the meeting. Respectfully Submitted, Patricia Hutson City Secretary ISSUED BY THE CITY MANAGER NORTH RICHLAND HILLS, TEXAS ~~ INFORMAL REPORT TO MAYOR AND CITY COUNCIL No. IR2009-018 Date: February 23, 2009 ~~ Subject: Discussion of Ultraviolent (UV) Systems at NRH2O (15 Minutes) '~ The challenges faced by the DFW area aquatic industry this past summer were not due to weather, our typical culprit. It was not due to drought conditions, a major concern for our area. To be fair, part of the challenges can be attributed to gas prices and a softening economy. But the biggest overall challenge was a particular chlorine resistant protozoan parasite called Cryptosporidium or "Crypto" that invaded the Dallas/Fort Worth Metroplex in the second part of July 2008. What makes this parasite so challenging to eradicate is that it cannot be directly killed or inactivated in the pool. It has to happen in the mechanical area. This parasite, which is transmitted through fecal-oral contact, results in severe gastrointestinal challenges that can last for weeks. In other words, you get Crypto from recreational water by swallowing water infected with Crypto that has been introduced by another person. Even after symptoms subside, a person can still be "shedding" Crypto for two weeks or more. The good news, if you can call it that, is that the DFW area experienced what was termed a major outbreak as classified by the Centers for Disease Control and Prevention (CDC). It is good news, because an outbreak should not be that much bigger than we have already seen. The bad news is that according to Dr. Michael Beach of the CDC, a minor outbreak usually follows a major outbreak. So the area could see a return of Cryptosporidium during the 2009 Season. Cryptosporidium cases themselves are on the rise. The CDC hypothesizes that there may be a combination of factors why this is the case. Potentially, there is a real increase in the number of cases throughout the United States. However, improved surveillance by health officials, the emergence of a drug FDA approved to "treat" Cryptosporidium and a higher awareness about cryptosporidiosis and its connection to recreational water, are also hypothesized to be contributing factors to the increase in reported cases. Before the drug, Nitazoxanide, was FDA approved, doctors often did not order a test for Cryptosporidium as the treatment was the same for any gastrointestinal illness. Now that there is an available drug, testing is ordered more frequently, especially in areas of a reported outbreak. This results in an increase of laboratory confirmed cases where, in the past, a general diagnoses would be provided. There are additional procedures and equipment that can be implemented by facility ISSUED BY THE CITY MANAGER NORTH RICHLAND HILLS, TEXAS ~ operators to combat Cryptosporidium if it does enter an area. In the mechanical room, Crypto can be killed, trapped or rendered sterile. All three methods keep Crypto from re- entering the pool system once it has been through the mechanical room. As with many things, there are multiple ways to potentially accomplish this and each has their own effectiveness and costs associated with them. A commonly used system in rendering Cryptosporidium sterile is the use of Ultraviolet Systems (UV). Once Cryptosporidium is rendered sterile, it can no longer reproduce when introduced to a human host. It is during its reproduction cycle that symptoms develop causing gastrointestinal illness. UV systems offer a 3 log (99.9%) inactivation of Cryptosporidium in one pass. In order for UV systems to work at their peak, the pool water must be clear as the system basically works by shining a light on the stream of water passing in front of it. Therefore, proper basic water chemistry, in conjunction with proper filtration is necessary for UV to work most effectively. We have evaluated several methods to address the Crypto issue at NRH2O and believe the most effective is the UV system. We will discuss these in more detail at the Council work session so you can understand the differences better. The cost for UV is expensive, but the cost benefit is better than the other methods. The estimated cost of installing UV at NRH2O is approximately $200,000. Funding is available in the Aquatic Park Capital Projects Budget and the new system can be installed prior to the 2009 Season. The installation of UV at the park will send a strong message to our market and the DFW region that NRH2O is committed to the safety and wellbeing of our current and future guests. Staff will present information on the potential addition of UV systems at NRH2O, funding sources as well as a "nuts and bolts" discussion of the systems. Respectfully Submitted, Chris Swartz NRH2O Park Manager INFORMAL REPORT TO MAYOR AND CITY COUNCIL No. 2009-024 ...'';,,;; Date: March 9, 2009 ,~;-~ - - /~~' ' `~' Subject: 2009 Bond Sale '~ In the adopted 2008/2009 Capital Projects Budget, City Council approved debt financing for projects and equipment. Projects totaling $5,695,000 (see attached list) make up the proposed general obligation (G.O.) portion of the sale. Projects and equipment in the amount of $9,705,000 make up the proposed certificate of obligation (C.O.) portion of the sale. The C.O. sale (see attached list) includes funds for the fire quint replacement, utility water and wastewater projects, drainage projects, NRH2O strategic plan projects and TIF 1 expansion projects. Several FY 2009 CIP projects that originally were anticipated to be included in the bond sale have not been included in the 2009 bond sale list. This includes the TIF 2 Recreation Center project construction in the amount of $18,800,000. Due to delays in site acquisition and planning for design, it is anticipated that funds for construction will not be needed until FY 2010. Also, an aerial bucket truck and a dump truck replacement totaling $185,000, originally planned to be included in the bond sale, have been removed from the public works equipment list. Staff believes the existing vehicles can be used one more year without affecting service levels. Due to some other changes in reserves and equipment changes, we have also determined that it is financially possible that the crack sealing machine replacement in the amount of $60,000 can be paid for from Fleet Services fund reserves rather than issue debt. City funding needs for the North Tarrant Parkway Street Improvements (Davis to Whitley) has been reduced from $3,617,730 to $2,260,000 due to additional funds from Tarrant County and the City of Keller. TIF 1 Expansion Projects for the burial of utility lines along Boulevard 26 and Boulevard 26 intersection improvements at Rufe Snow Drive and Glenview Drive were approved by City Council in November 2008, and not a part of the FY 2008-2009 adopted CIP budget. The total dollar amount for the TIF 1 expansion projects is $3,500,000 and is part of the C.O. sale. ISSUED BY THE CITY MANAGER NORTH RICHLAND HILLS, TEXAS ~ The total new recommended debt issuance is $15,400,000, including G.O.'s of $5,695,000 and C.O.'s of $9,705,000. The G.O. bonds are all voter approved and follow the bond election plan of 2003. Debt service payments for the C.O.'s will be made from the Aquatic Park Fund, Drainage Utility Fund, Fleet Fund, TIF 1 Taxes and Utility Fund respectively. A Council resolution authorizing the intent to sell C.O.'s is required prior to issuance of the certificates. Such a resolution will be recommended for approval at the March 23, 2009 City Council meeting. A tentative calendar for the bond sale includes the following items: Monday, March 23 Council resolution authorizing intent to sell certificates of obligation Monday, April 20 Rating Agency reviews Monday, May 11 Receive competitive bids and present recommen- dations for Council approval Tuesday, June 16 Delivery of funds to the City of North Richland Hills The attached listing details the projects for the proposed sale. Our staff has carefully looked at these projects and our ability to prudently finance and pay for these and we have discussed the potential sale with our financial advisor, First Southwest. We believe that the City of North Richland Hills can adequately and soundly handle the financing of these projects and that we should be able to receive a good interest rate. We look forward to discussing these with Council Monday evening. Respectfully Submitted, Larry Koonce Director of Finance Capital Projects to be Financed Fiscal Year 200812005 2008-fl9 Recommended Total Debt CIP Budgeted Financing Approved Recommended Budget Financing Method February Budget (Some Projects Page Project Description Method 2009 Amount Rounded) 20fl3 Bond Election Projects Street improvement Projects Douglas Lane Street General General 33 Improvements (Hightower to Obligation Obligation ~ 150,000 $ 150,000 Starnes) Bands 2003 Bonds 2003 Election Election General General Obligation North Tarrant Parkway Street Obligation Bands 2003 3s Improvements (Davis to Whitley Bands 2003 Election; Cost of 3,617,730 2,260,000 Road) Election Project Changed February 2009 Rufe Snow Dr. Street & Utility General General a5 improvements (Mid-Cities to Obligation Obligation 2,49fl,000 2,490,000 Hightower) Bands 2003 Bonds 2003 Election Election Shady Grove Road Street General General 49 Improvements (Davis to Clay- Obligation Obligation 235,000 235,000 Hibbins) Bonds 2003 Bonds 2003 Election Election Briley Drive Street General General 69 Improvements (Lariat Tr. to Obligation Obligation 70,000 70,000 Rufe Snow Road) Bonds 2003 Bonds 2003 Election Election Cloyce Court Street General General 73 Improvements (Northeast Loop Obligation Obligation 100,000 100,000 820 to Maplewood Ave.) Bonds 2003 Bands 2003 Election Election Colorado Blvd Street General General 75 . Improvements (Boulevard 2fi to Obligation Obligation 100,000 100,000 Harwood Rd.) Bands 2003 Bonds 2003 Election Election K:1ACC71Bond Presentation12009 Bond12009 Project list to Council 3-9-09.x1s Capital Projects to be Financed Fiscal Year 200t3I2009 2048-09 CIP Budget Page roject Description Budgeted Financing Method Recommended Financing Method February 2009 Approved Budget Amount Total Debt Recommended (Some Projects Rounded] Mackey Drive Street General General 79 Improvements (Briley Dr. to Obligation Obligation g0 000 80 000 Glenview Dr.) Bands 2003 Bonds 2003 Election Election Trinidad Drive Street . General General e5 Improvements {Rafe Snow Dr. Obligation Obligation 140,000 140,000 to Holiday Lane) Bonds 2003 Bonds 2003 Election Election General General ~~ Yarmouth Avenue (Mid-Cities Obligation Obligation 70 000 70,000 Blvd. to Newcastle Pj.} Bonds 2003 Bands 2003 , Election Election Total G.O.2003 Band Election Projects 7,052,730 5,695,000 Total 2009 G.O . Bond Sale $ 7,052,730 $ 5,695,000 Aquatic Park Projects 202 NRH2O Strategic Plan - Certificates Certificates of 255 000 255,000 Restrooms of Obligation Obligation , 203 NRH2O Strategic Plan -Third Certificates Certificates of 1,600,000 1,600,000 Phase Attraction of Obligation Obligation Subtotal C.O. Aquatic Park Project 1,855,000 1,855,000 TIF 1 Expansion Projects Boulevard 26 Intersection Council Approved Improvements at Rufe Snow Certificates Certificates of 500,000 500,000 17-24-08 and Glenview Road {TlF 1 of Obligation Obligation Expansion} council Burying Above Ground Utilities Certificates Certificates ofi Approved Approximately 1.25 miles NRH of Obligation Obligation 3,000,000 3,000,000 t1-24-08 side of Boulevard 26 Subtotal TIF 1 Expansion Projects 3,540,000 3,500,000 K.1.4CCT16ond Presentation12009 Bond12009 Project List to Council 3-9-09.x1s Capital Projects to be Financed Fiscal Year 2fl08l20fl9 2008-09 Recommended Total Debt ClP Budgeted Financing Approved Recommended Budget Financing Method February Budget {Some Projects Page Project Description Method 2009 Amount Rounded} TiF 2 Projects Certificates Project tVRH Recreation Center (TIl' #2} of Obligation Postponed until 18,80{1,000 FY 2009-10 Drainage Projects 95 Briarwood Estates Certifica#es Certificates of 170,000 170,000 Improvements of Obligation Obligation 99 Brookridge Drive Improvements Certificates of Obligation Certificates of Obligation 75 000 75 000 ~~ t3rookhaven Drive Certificates Certificates of 60 000 60,000 Improvements of Obligation Obligation 105 Odell Sfireet Improvements Certificates of Obligation Certificates of Obligation 110 000 110,000 X07 Steeple Ridge Improvements Certificates of Obligation Certificates of Obligation 35,000 35,000 Subtotal C.O. Drainage Projects 450,OOfl 450,000 Utility Capital Projects Amundson Elevated Tank 115 Certificates Certificates of 600,000 600,000 Rehabilitation of Obligation Obligation 117 Big Fossil Creek Wastewater Certi#icates Certificates of 700,000 700,000 Outfall Main of Obligation Obligation 123 Lift Station Expansion Blvd. 26 Certificates Certificates of 815,100 815,000 at Precinct Line of Obligation Obligation K:tiACCTl6and Presentationl2t)o9 Bond12D09 Project List to Council 3-9-09.x1s Capital Projects to be Financed Fiscal Year 2Qfl8/2009 2008-09 Recorn-nended Total Debt CIP Budgeted Financing Approved Recommended Budget Financing Method 1February Budget (Some Projects Page Project Description Method 2009 Amount Rounded} 135 Water Line Holiday Lane and Certificates Certificates of 335,000 335,004 College Circle of Obligation Obligation ~~~ Water Line Holiday Lane and Certificates Certificates of 665 000 665 000 Iron Horse Blvd. of Obligation Obligation Subto#al C.O. Utility Capital Projects 3,115,100 3,1'{5,000 Capital Equipment Replacement 238 Aerial Bucket Truck Replacement Certificates Project of Obligation Postponed until FY 2009-10 239 Crack Sealing Machine Replacement Certificates Pay-As-You-Go of Obligation {Fleet Fund} 241 Fire Quint Replacement Certificates Certificates of of Obligation Obligation Certificates Project 240 Dump Truck Replacement of Obligation Postponed until FY 2009-10 Subtotal C.Q. Equipment Replacement Total 2009 C.O. Sale TOTAL 2008 G.O. AND C.O. SALE 94,000 - 60,000 - 785,000 785,000 90,000 - 1,029,000 785,000 $28,749,100 $ 9,705,000 $35,8fl1,830 $ 15,400,0fl0 K:~,ACCT1Bond Presentation\2009 Bond12009 Project List to Council 3-9-09.xts CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. B.0 Subject: EXECUTIVE SESSION -The City Council may enter into closed Executive Session to discuss the following as authorized by Chapter 551, Texas Government Code CITY OF NORTH RICHLAND HILLS Department: City Manager's Office Presented by: Karen Bostic Council Meeting Date: 3-9-2009 Agenda No. B.1 Subject: Executive Session: Pursuant to Section 551.072, Texas Government Code to deliberate the purchase of real property at: 5009 Cummings Dr. CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. B.2 Subject: Executive Session: Pursuant to Section 551.072, Texas Government Code to deliberate the purchase, exchange or value of real property for municipal use -Central and Western Sectors of City CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. C.0 Subject: Adjournment City of North Richland Hills City Council Regular Meeting Agenda North Richland Hills City Hall Council Chambers 7301 Northeast Loop 820 North Richland Hills, TX 76180 Monday, March 9, 2009 7:00 P.M. A.0 Call to Order -Mayor Trevino A.1 Invocation -Councilman Sapp A.2 Pledge -Councilman Sapp A.3 Special Presentation(s) and Recognitions) - Intellectual and Development Disabilities Awareness Month -Proclamation presented by Councilman Whitson A.4 Special Presentation(s) and Recognitions) -Presentation of Awards to the Parks and Recreation Department by the Texas Recreation and Park Society A.5 IR 2009-021 Special Presentation -Certificate of Achievement for Excellence in Financial Reporting for the Comprehensive Financial Report ending September 30, 2007 A.6 Citizens Presentation An opportunity for citizens to address the City Council on matters which are not scheduled for consideration by the City Council or another City Board or Commission at a later date. In order to address the Council, please complete a Public Meeting Appearance Card and present it to the City Secretary prior to the start of the Council meeting. The Texas Open Meetings Act prohibits deliberation by the Council of any subject which is not on the posted agenda, therefore the Council will not be able to discuss or take action on items brought up during the citizens presentation. A.7 Removal of Item(s) from Consent Agenda B.0 CONSIDER APPROVAL OF CONSENT AGENDA ITEMS All consent agenda items listed below are considered to be routine items deemed to require little or no deliberation by the City Council and will be voted on in one motion. There will be no separate discussion of these items unless a Council Member so requests, in which event the item will be removed from the Consent Agenda and considered. B.1 Approval of Minutes of February 23, 2009 City Council Meeting B.2 PU 2009-008 Approve Purchase of Sewer Camera Inspection System from CUES, Inc. in the amount of $74,989.22 C.0 PUBLIC HEARINGS C.1 ZC 2009-01 Public Hearing and Consideration of a Request from Richard and Silvia Wooldridge for a Zoning Change from AG Agriculture to R-1-S Special Single Family on Tract 4809 in the Condra Survey~7421 Hightower Drive.) - Ordinance No. 3042 D.0 PLANNING AND DEVELOPMENT Items to follow do not require a public hearing D.1 FP 2009-01 Consideration of a Request from Richard and Silvia Wooldridge to Approve a Final Plat of Lot 1, Block 3, Northridge Meadows Addition (located at 7421 Hightower Drive.) E.0 PUBLIC WORKS No items for this category. F.0 GENERAL ITEMS F.1 GN 2009-012 Approve Investment Strategy and Investment Policy -Resolution No. 2009-008 F.2 GN 2009-013 Presentation of Fiscal Year 2008 Audited Financial Report G.0 EXECUTIVE SESSION ITEMS G.1 Action on Any Item Discussed in Executive Session Listed on Work Session Agenda H.0 INFORMATION AND REPORTS H.1 IR 2009-025 ISO Update H.2 Announcements -Mayor Pro Tem Turnage H.3 Adjournment CITY OF CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. A.1 Subject: Invocation -Councilman Sapp CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. A.2 Subject: Pledge -Councilman Sapp CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Councilman David Whitson Agenda No. A.3 Subject: Special Presentation(s) and Recognitions) -Intellectual and Development Disabilities Awareness Month -Proclamation presented by Councilman Whitson The Arc of Northeast Tarrant County, is aNon-Profit Organization serving individuals who experience life with a developmental disability, their family members and interested citizens. During the month of March, the Self-Advocate Leaders of Today (S.A.L.T.) group comprised of young adults ages 18-29 who experience life with a disability have requested the month of March 2009 be proclaimed as Intellectual and Developmental Awareness Month. Members of the S.A.L.T. group will be present at the March 9 meeting to receive the proclamation. N~tH CITY OF NORTH RICHLAND HILLS PROCLAMATION WHEREAS, the month of March, 2009, has been designated as "National Intellectual and Developmental Disabilities Awareness Month" (NAIDDA) in order to celebrate and recognize people with disabilities; and WHEREAS, disability is a natural part of the human experience and in no way diminishes the right of people with disabilities to make choices, contribute to society and experience in full the many blessings of American society; and WHEREAS, family members, friends and the community at large play all play a role in supporting people with disabilities as they pursue their dreams; and WHEREAS, the goals of the city properly include helping people with disabilities realize full access to housing, employment and the recreation activities which help create productive and satisfying lives, and to live as independently as possible. NOW, THEREFORE, BE IT RESOLVED, that I, Oscar Trevino, Mayor of the City of North Richland Hills, do herby proclaim the month of March, 2009, as "NATIONAL INTELLECTUAL AND DEVELOPMENTAL DISABILITIES AWARENESS MONTH" in the City of North Richland Hilts, and call upon the citizens of North Richland Hills to observe the month with appropriate programs and activities. Furthermore, I encourage the citizens of North Richland Hills to seek information from those organizations with expertise in matters concerning developmental disabilities. IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the City of North Richland Hills to be affixed this the 9th day of March 2009. Oscar Trevino, Mayor CITY OF NORTH RICHLAND HILLS Department: Parks and Recreation Presented by: Vickie Loftice Council Meeting Date: 3-9-2009 Agenda No. A.4 Subject: Special Presentation(s) and Recognitions) -Presentation of Awards to the Parks and Recreation Department by the Texas Recreation and Park Society The Parks and Recreation Department was recently presented three awards by the Texas Recreation and Park Society at its annual conference held February 25tH - 27tH in Austin. Julie Adkins, Regional Director for the Texas Recreation and Park Society and Recreation Superintendent for the City of Keller, will present two of the three awards on behalf of the Texas Recreation and Park Society. Vickie Loftice, Managing Director of Community Services, will present one of the awards, "Outstanding Young Professional" to Adrien Pekurney, NRH Recreation Center Manager. The following awards will be presented: • Marketing Award -For the City's Green Initiatives • Arts and Humanities Award -For the Art in Public Spaces Program • Outstanding Young Professional Award -Adrien Pekurney The Parks and Recreation Department is proud to share these awards with our citizens, City Council, the Parks and Recreation Board and City Management -whose vision, direction and support guides the success of the department. INFORMAL REPORT TO MAYOR AND CITY COUNCIL No. IR 2009-021 ~~ ., ,~ Date: March 9, 2009 :;== ~ .~~ Subject: Special Presentation - Certificate of Achievement for ~` Excellence in Financial Reporting for the Comprehensive Financial Report ending September 30, 2007 The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its Comprehensive Financial Report for the fiscal year ending September 30, 2007. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. The Certificate of Achievement is valid for a period of one year only. The City has been awarded a Certificate of Achievement for the last 25 consecutive years. The GFOA 2007 report of results of the program indicates that of the nearly 1,200 municipalities in the State of Texas 170 or 14% received the award. Of the nearly 36,000 cities in the United States, 1,782 or 5% received the award. The Certificate of Achievement for Excellence in Financial Reporting Program was established by the Government Finance Officers Association (GFOA) in 1945. The GFOA instituted the program to encourage all government units to prepare and publish an easily readable and understandable comprehensive annual financial report (CAFR) covering all funds and financial transactions of the government during the fiscal year. The GFOA believes that governments have a special responsibility to provide the public with a fair presentation of their financial affairs. CAFR's go beyond the requirements of generally accepted accounting principles (GAAP) to provide the many users of government financial statements with a wide variety of information useful in evaluating the financial condition of a government. The Certificate Program provides participants with extensive technical reference materials to improve their financial reporting techniques. Suggestions and comments from reviewers also help staff to improve the document. Another great benefit of the Certificate of Achievement program is that it provides a detailed vehicle by which bond rating analysts, market analysts, investors, potential investors and others may assess the relative attractiveness of our City's bonds compared to alternative investment opportunities. Users of the City financial statements look for this award and regard it as the "Good Housekeeping Seal of Approval" for governmental financial reporting. Council will notice a facsimile of the 2007 certificate on page XIV of the 2008 CAFR in your packet. ISSUED BY THE CITY MANAGER NORTH RICHLAND HILLS, TEXAS Fred Werner, Director of Finance with the City of Grapevine and past President of the Government Finance Officers Association of Texas, will be at the Council meeting to present the Certificate of Achievement award to the City. Although no action is needed by Council, we do commend the Accounting staff for their professional efforts that have made it possible for the City to again receive this prestigious award. This is truly a team effort by City Council, Management, and staff and meets Council Goal 4: Financially Responsible City Government. Respectfully submitted, Larry Koonce Director of Finance CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. A.6 Subject: Citizens Presentation An opportunity for citizens to address the City Council on matters which are not scheduled for consideration by the City Council or another City Board or Commission at a later date. In order to address the Council, please complete a Public Meeting Appearance Card and present it to the City Secretary prior to the start of the Council meeting. The Texas Open Meetings Act prohibits deliberation by the Council of any subject which is not on the posted agenda, therefore the Council will not be able to discuss or take action on items brought up during the citizens presentation. CITY OF NORTH RICHLAND HILLS Department: City Secretary Presented by: Council Meeting Date: 3-9-2009 Agenda No. A.7 Subject: Removal of Item(s) from Consent Agenda CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. B.0 Subject: CONSIDER APPROVAL OF CONSENT AGENDA ITEMS All consent agenda items listed below are considered to be routine items deemed to require little or no deliberation by the City Council and will be voted on in one motion. There will be no separate discussion of these items unless a Council Member so requests, in which event the item will be removed from the Consent Agenda and considered. CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. B.1 Subject: Approval of Minutes of February 23, 2009 City Council Meeting Recommendation: To approve the minutes of the February 23, 2009 City Council Meeting. MINUTES OF THE WORK SESSION AND REGULAR MEETING OF THE CITY COUNCIL OF THE CITY OF NORTH RICHLAND HILLS, TEXAS, HELD IN THE CITY HALL, 7301 NORTHEAST LOOP 820 -FEBRUARY 23, 2009 WORK SESSION The City Council of the City of North Richland Hills, Texas met in work session on the 23rd day of February, 2009 at 5:30 p.m. in the Council Work Room prior to the 7:00 p.m. regular Council meeting. Present: Oscar Trevino Mayor Scott Turnage Mayor Pro Tem, Council Place 6 John Lewis Council, Place 1 Ken Sapp Council, Place 2 Suzy Compton Council, Place 3 Tim Barth Council, Place 4 David Whitson Council, Place 5 Tim Welch Council, Place 7 Staff Members: Larry J. Cunningham City Manager Karen Bostic Assistant City Manager Jimmy Perdue Assistant City Manager Mike Curtis Managing Director Vickie Loftice Managing Director Patricia Hutson City Secretary Monica Solko Assistant City Secretary George Staples City Attorney Mary Peters Public Information Officer Elizabeth Reining Assistant to City Manager John Pitstick Director of Planning & Development Larry Koonce Finance Director Greg VanNeiuwenhuize Public Works Assistant Director Craig Hulse Economic Development Director Jamie Brockway Purchasing Manager Bill Thornton Park and Recreation Assistant Director Thomas Powell Fleet Services Director Chris Amarante Facilities and Construction Director Call to Order Mayor Trevino called the work session to order at 5:30 p.m. A.1 Discuss Items from Regular City Council Meeting None. RECESS TO EXECUTIVE SESSION B.0 EXECUTIVE SESSION -The City Council may enter into closed Executive Session to discuss the following as authorized by Chapter 551, Texas Government Code B.1 Executive Session: Pursuant to Section 551.072, Texas Government Code to deliberate the purchase, exchange, lease or value of real property -City Facilities B.2 Executive Session Pursuant to Section 551.072. Texas Government Code to deliberate the purchase exchange or value of real property for municipal use - Central Sector of City Mayor Trevino announced at 5:31 p.m. that the Council would adjourn into Executive Session as authorized by Chapter 551, Texas Government Code, specifically Section 551.072 to deliberate the purchase, exchange or value of real property -city facilities and for municipal use -central sector of City. Mayor Trevino recessed the executive work session at 6:39 p.m. and announced that Council would convene into Work Session and would return after .Regular Session to continue the Executive Session. C.0 RETURN TO OPEN SESSION Mayor Trevino called the work session back to order at 6:39 p. m. C.1 IR 2009-017 Presentation of new marketing video by N.E. Tarrant Chamber as presented by Mr. Bob Hamilton Bob Hamilton, CEO of the Northeast Tarrant Chamber presented a new marketing video to Council and thanked them for their continued support of the chamber. Mindy Mitchell, Chair of the Northeast Tarrant Chamber thanked the City for its partnership with the Chamber. RECESS TO REGULAR SESSION Mayor Trevino recessed the work session at 6:54 p.m. and announced that Council would convene into Regular Session and would return after Regular Session to continue the Executive Session. REGULAR COUNCIL MEETING A.0 CALL TO ORDER Mayor Trevino called the meeting to order February 23, 2009 at 7:00 p.m. ROLL CALL Present: Oscar Trevino Scott Turnage John Lewis Ken Sapp Suzy Compton Tim Barth David Whitson Tim Welch Mayor Mayor Pro Tem, Council, Place 1 Council, Place 2 Council, Place 3 Council, Place 4 Council, Place 5 Council, Place 7 Council Place 6 Staff: Larry J. Cunningham Karen Bostic Jimmy Perdue Mike Curtis Patricia Hutson Monica Solko George Staples City Manager Assistant City Manager Assistant City Manager Managing Director City Secretary Assistant City Secretary Attorney A.1 INVOCATION Councilwoman Compton gave the invocation. A.2 PLEDGE OF ALLEGIANCE Councilwoman Compton led the pledge of allegiance. A.3 SPECIAL PRESENTATION(S) AND RECOGNITIONS) ANNUAL BUNNY AND BEAR DRIVE Ms. Haley Whatley presented the Council with a memento from her 9th Annual Bunny & Bear Drive benefiting Cook Children's Medical Center in Fort Worth. Ms. Whatley was also recognized in Washington, DC as one of the Texas Top Two Youth Volunteers selected in the 13th Annual National Awards Program. A.4 SPECIAL PRESENTATION(S) AND RECOGNITIONS) FORT WORTH CHRISTIAN SCHOOL WEEK PROCLAMATION PRESENTED BY COUNCILMAN SAPP Councilman Sapp presented the Fort Worth Christian School Week Proclamation to members of the school and congratulated them on 50 years of excellent education and service to the community. A.5 SPECIAL PRESENTATION(S) AND RECOGNITIONS) OVERVIEW OF THE TEXAS HIGHWAY COMMISSION AWARD OF CONDITIONAL CONTRACT FOR CONSTRUCTION OF NORTH TARRANT EXPRESSWAY (LOOP 820/183) -TEXAS DEPARTMENT OF TRANSPORTATION REPRESENTATIVE Maribel Chavez, District Director of the Fort Worth division of Texas Department of Transportation updated Council on the process and progress of the Loop 820 expansion project and was available to answer any questions. A.6 CITIZENS PRESENTATION Penny Hontz, 8636 Stonecrest Trail came forward and expressed her concerns of high noise levels in her neighborhood. Ms. Hontz asked Council if anything could be done. Mayor Trevino asked Jimmy Perdue, Assistant City Manager to help Mrs. Hontz with her issue. A.7 REMOVAL OF ITEM(S) FROM THE CONSENT AGENDA None. B.0 APPROVAL OF CONSENT AGENDA ITEMS APPROVED B.1 APPROVAL OF MINUTES OF THE JANUARY 9-10, 2009 STRATEGIC VISION/GOALS WORK SESSION B.2 APPROVAL OF MINUTES OF FEBRUAY 9, 2009 CITY COUNCIL MEETING B.3 PU 2009-002 AUTHORIZE CONTINUED PURCHASE OF BADGER WATER METERS AND TELEMETRIC DEVICES AND PRICE INCREASES FROM ATLAS UTILITY SUPPLY COMPANY THROUGH DECEMBER 31, 2009 B.4 PU 2009-005 APPROVING THE PURCHASE OF A CRACK SEALER MACHINE FROM CRAFCO IN THE AMOUNT OF $51,564.43 COUNCILMAN WELCH MOVED TO APPROVE THE CONSENT AGENDA. MAYOR PRO TEM TURNAGE SECONDED THE MOTION.. MOTION TO APPROVE CARRIED 7-O. PUBLIC HEARINGS C.1 GN 2009-010 CONDUCT A PUBLIC HEARING FOR THE 35TH YEAR COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM APPROVED Mayor Trevino opened the public hearing and called on Elizabeth Reining, Assistant to the City Manager to come forward. Ms. Reining presented the item. The City participates in the CDBG program and each year the City must prepare and submit a CDBG program outlining the use of the funds in accordance with HUD guidelines. The City is proposing to use the funds in the following manner: • $210,156.62 for the design and reconstruction of a portion of the 3900 block of Honey Lane (approximately 400 feet starting at Harmonson Road and going north). • $45,000 for the rehabilitation of residential homes located within the target area identified by the most recent census as being of low to moderate homes. The City is required to hold a public hearing to receive comments and input from citizens regarding the proposed 35th CDBG program. Following the public hearing, a resolution to approve the program is required. Mayor Trevino called for comments on the 35th year CDBG program. There being no one wishing to speak, Mayor Trevino closed the public hearing. C.2 GN 2009-011 APPROVE 35TH YEAR (2009/2010) COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM -RESOLUTION NO. 2009-006 (THIS ITEM IS NOT A PUBLIC HEARING BUT RELATED TO ITEM C.1) APPROVED Elizabeth Reining, Assistant to the City Manager presented the item. Item is the second part of the CDBG process. Following the public hearing, the City Council is required to take action on the projects to be included in the 35t" year CDBG entitlement program. The funds will be used as presented in Agenda Item C.1 above. GQUNGILWOMAN COMPTON MQVED TQ APPRQVE GN 2009-011; RESOLUTION NQ. 2009-006. COUNCILMAN SAPP SECONDED THE MOTION.. MOTION TO APPROVE CARRIED 7-0. PLANNING & DEVELOPMENT D.1 No items for this category. PUBLIC WORKS E.1 PW 2009-005 APPROVE AN "ACCESS AGREEMENT AND PERMIT" TO ALLOW COBB, FENDLEY & ASSOCIATES, INC. TO CONDUCT SUBSURFACE UTILITY ENGINEERING INVESTIGATIONS WITHIN PUBLIC RIGHT-OF-WAY APPROVED Mr. Greg VanNieuwenhuize, Public Works Assistant Director, presented the item. DFW Midstream desires to construct a gas pipeline within an existing Oncor transmission easement/right-of-way within North Richland Hills. Prior to the construction of a gas pipeline, DFW Midstream needs to identify the location of all existing facilities that may come into conflict with a proposed pipeline. As such, Cobb, Fendley & Associates has been retained by DFW Midstream to determine the location of all facilities that exist within this specific Oncor transmission easement. The City's infrastructure that needs to be investigated is contained within existing street rights-of-ways where these streets cross the Oncor transmission easement. In almost all instances, the City's infrastructure is within the parkway portion of the right-of-way and not under the pavement portion of the right-of-way. Cobb, Fendley & Associates' investigation of the City's infrastructure will consist of digging an 8 inch diameter hole down to the infrastructure. Upon locating the infrastructure in this manner, Cobb, Fendley & Associates will confirm the exact size of the infrastructure and the elevation of both the top and bottom of the infrastructure. In order to conduct this work, Cobb, Fendley & Associates must obtain the City's permission to work within the right-of-way. Permission to work within the City's right-of-way can only be granted by the City Council. COUNCILMAN LEWIS MOVED TO APPROVE P"W 2009-0.05. COUNCILMAN EARTH SECONDED THE MOTION. MOTION TO APPROVE CARRIED 7-0. GENERAL ITEMS F.1 PU 2009-004 APPROVE THE PURCHASE OF A LENCO BEARCAT ARMORED VEHICLE THROUGH SECTION 1122 OF THE 1994 NATIONAL DEFENSE AUTHORIZATION ACT APPROVED Sean Hughes, Emergency Management Coordinator presented the item. Item is to consider the purchase of an armored vehicle for the Police Department. The City of North Richland Hills accepted a Federal Emergency Management Agency, Urban Area Security Initiative (UASI) Law Enforcement Assistance Program (LEAP) grant in the amount of $437,860. From this accepted grant, $226,600.00 is designated to purchase an armored vehicle. The Police Department performed an evaluation of the vendors that build these specialized vehicles and has selected the Lenco BearCat as the vehicle best suited to their future needs. Staff recommends the purchase of a Lenco BearCat through Section 1122 of the 1994 National Defense Authorization Act, utilizing funds from the Federal Emergency Management Agency, Urban Area Security Initiative, Law Enforcement Assistance Program, Texas Governor's Division of Emergency Management Grant in the amount of $225,913. MAYOR PRO TEM TURNAGE MOVED TO APPROVE PU 2009-004. COUNCILWOMAN COMPTON SECONDED THE MOTION. MOTION TO APPROVE CARRIED 7-O. F.2 PU 2009-006 AWARD BID 2009-007 BLEACHER SHADE STRUCTURE MATERIALS AT WALKERS CREEK PARK TO RECREATION CONSULTANTS OF TEXAS IN THE AMOUNT OF $62,461. APPROVED Bill Thornton, Park and Recreation Assistant Director, presented the item. Item is to consider the award of bid to purchase materials for shade structures at Walker Creek Park. The Local Government Purchasing Cooperative (BuyBoard) has contracts in place for shade structures and the installation for the shade structures being purchased. Staff met with vendors, some who supply material and installation of shade structures, and some who provide only either material or installation through direct purchase on the BuyBoard. After comparing design options and the price of each proposal, staff recommends Recreation Consultants of Texas for the purchase of materials for the shade structures over Walker's Creek Park bleachers in the amount of $62,461 with the installation provided by a separate company. MAYOR PRO TEM TURNAGE MOVED TO APPROVE PU 2009-006. COUNCILWOMAN COMPTON SECONDED THE MOTION, MOT[ON TO APPROVE CARRIED 7-0. F.3 PU 2009-007 AWARD BID 2009-007 PLAYGROUND SHADE STRUCTURES AT DICK FARAM PARK TO IN-SITE AMENITIES IN THE AMOUNT OF $94,355.60 APPROVED Bill Thornton, Park and Recreation Assistant Director, presented the item. Item is to consider the award of bid to purchase materials and installation of shade structures for both playgrounds at the Dick Faram Park The Local Government Purchasing Cooperative (BuyBoard) has contracts in place for shade structures and the installation for the shade structures being purchased. Staff met with vendors, some who supply material and installation of shade structures, and some who provide only either material or installation through direct purchase on the BuyBoard. After comparing design options and the price of each proposal, staff recommends In-Site Amenities for the purchase of materials and installation of the shade structures at Dick Faram Park in the amount of $94,355.60. COUNCILMAN WHITSON MOVED TO APPROVE PU 2.009-007, COUNCILMAN SAPP SECONDED THE MOTION., MOTION TO APPROVE CARRIED 7-0. EXECUTIVE SESSION ITEMS G.1 ACTION ON ANY ITEM DISCUSSED IN EXECUTIVE SESSION LISTED ON WORK SESSION AGENDA Mayor Trevino advised that Executive Session was not complete during the work session due to time constraints and that Council will convene in Executive Session following the regular Council meeting. If any action is needed following Executive Session, action will be taken in the Council Workroom in open meeting and then the Council meeting would be adjourned. INFORMATION AND REPORTS H.1 ANNOUNCEMENTS Councilman Barth made the following announcements. The City invites residents to a Spring Gardening Seminar from 9 a.m. to noon on Saturday, February 28th. Guest speakers will provide tips on preparing your yard for the upcoming growing season. The seminar will be held in the Community Room at the North Richland Hills Public Library. Admission is free. For more information, please call 817-427-6600. NRH2O is searching for team members who want a fun job this summer. Applicants must be at least 15 years old. For a list of upcoming job fairs and more information, please visit www.nrh2o.com/sobs or call 817-427-6500. The City of North Richland Hills recently launched Development. The site can be found online at www. information for existing businesses, new businesses an relocated to North Richland Hills. For more information, Economic Development Department at 817-427-6090. a new web site for Economic nrhed.com. It includes helpful d businesses that are looking to visit www.nrhed.com or call the Kudos Korner -Chun Mezger & Staff, Animal Adoption & Rescue Center. A letter was received from a resident complimenting the staff at the Animal Adoption & Rescue Center for the wonderful job that they do. They have always been helpful and receptive to issues the resident has reported to them. Their work is difficult in many aspects and they should be commended for their professionalism in spite of the challenges they face, the resident said. H.2 ADJOURNMENT TO EXECUTIVE SESSION Mayor Trevino announced at 8:15 p.m. that Council would convene into Executive Session in the Council Workroom pursuant to the provisions of the following sections of the Texas Government Code, Section 551.072 to deliberate the purchase, exchange, lease or value of real property -city facilities and for municipal use -central sector of city. Any action needed as a result of Executive Session will be taken following the Executive Session in the Council Workroom and the Council meeting will be adjourned in the Council Workroom. ADJOURNMENT Mayor Trevino adjourned the Executive Session at 10:08 p.m. and reconvened the regular session. Mayor Trevino announced there was no action required from Executive Session and the meeting was adjourned at 10:08 p.m. Oscar Trevino -Mayor ATTEST: Patricia Hutson, City Secretary CITY OF NORTH RICHLAND HILLS Department: Finance Presented by: MCurtis/LKoonce Council Meeting Date: 3-9-2009 Agenda No. B.2 Subject: PU 2009-008 Approve Purchase of Sewer Camera Inspection System from CUES, Inc. in the amount of $74,989.22 The 2008/09 Capital Projects Budget provides funding to replace the City's closed circuit television sewer camera, computer, and transporter for the camera (Project #UT0901). This equipment is used to view and record data concerning pipe deficiencies in sanitary sewer and storm drain lines. The camera attaches to the transporter, which moves through the sewer and storm drain lines being inspected. The computer is used to run a software application that records and identifies any deficiencies found in the line. The existing equipment being replaced is ten (10) years old; with repairs costing approximately $15,000 over the last two (2) years. As parts become obsolete it is becoming more difficult to have repairs done in a timely manner. During the budget preparation process, staff met with several vendors to determine what type of camera and transporter would work best for the City's operations. Staff preferred a single transporter that would allow for interchangeable wheels and tracks. One vendor was starting development of such a transporter and believed that it would be available sometime during 2008. The cost for the unit was anticipated to be less expensive than buying two transporters. The transporter was never developed and at this time there are no plans to make the transporter available this year. There are no other vendors that manufacture a single transporter with interchangeable wheels and tracks. In order to meet the City's operational needs, two transporters must be purchased. One transporter will be a track system and the other will be a wheel system. These two transporters will allow staff to move the camera through various types of sanitary sewer and storm drain lines. When starting the bid process, staff verified with the vendors and determined that two transporters would be necessary. The bid documents were developed so that the computer would be an alternate bid. After bids were received and reviewed it was determined that CUES Sewer Camera System met the City's specifications and was just under the approved budget if the computer was not included. Since the computer is necessary staff would recommend that the computer be purchased out of the regular operating budget. The estimated cost of the computer is $3,000. The Local Government Purchasing Cooperative (BuyBoard) and Houston-Galveston Area Council (H-GACBuy) have contracts in place for CUES Inc. equipment. The Public Works department has evaluated each response and recommends going with the HGAC CUES, Inc. contract pricing. H-GAC Buy BUYBOARD CONTRACT CONTRACT #SC01-08 #270-07 CUES Sewer Camera $74,989.22 $75,561.00 Inspection S stem The Local Government Code states that purchases made through a cooperative purchasing agreement satisfy any state law that would require the City to solicit competitive bids. Recommendation: Award the bid approving the purchase of Sewer Camera Inspection System from CUES, Inc. in the amount of $74,989.22 and the purchase of the computer needed to operate the equipment out of the operating budget. CONTRACT PRICING WORKSHEET EI'ar Standard Equipment ParcYaaes Contract No.: SCOI-08 Date 2 Prepared: ; 120/2009 T ib Fart rivet be~nai ij- C,ox~acl or. ourl~rot~aiad w F.wd Uaw ro ~adY ro Prtrc~e Offer, wirk a~ to fl-GAC tie X-G,~tC ~ jeti:~ ie c9slaai'atsrt etid~OMR a e !&ra kGrtt. llanrs et ~ ;North Richland Hills c.a~rubr. iCUES, lnc cPo.a~a. :Alan Knapp/Glynn Milkr p ~~ ;Robin Guthrie Pia.c ;817-427-6452 PYo~ @80U-327-7791 Fax: ;817-427-6444 Fax: :407-425-1569 &.aii: ~dknafJpCc3~nfitx.com E.au: ~rrabmq _t<uesinc cam tea 6012 Daa;~... Sewer laspeciioa Hi Cube Yen Product Item Hate Unit Price Pcr Coatractar': H-GAC Contract: s76.244.2 Pstblialted Option • Itealilaoe baiaw - Attscli sdditbssi tliset(aj if necaeaary - Inclade Qptbn Code i>t de>txititioa it appiiatbk. ott: Published Options are options which were sulmnitttd and pricaed in Contractor's bid} Dacriptioa Cast Descript3oa Cast Z lil camera in lieu of mainline camera 53.600.00 Granite XP system $14,153. ompact Pipe Ranger Transporter $22,500.00 ' neumatic tires $F,681.00 Less interior of wck/generatorltabor =. -524,852,00 computer for Grnnite .$3,x00,00 electronics and TV reel -S2S,227.00 USIII track transporter in lieu of US21 ` $3,200,00 Subtotal From Additional Sheet(s): xtenders 5745.00 Subtotal B: ; -52,500. Deacription Coat Description Cast lexar for laptop ~ 5380.00 latwr far installation ; 5400.00 12 cable end 5465.00 Subtotal From Additional Sheets}: Sabtotal C: ' 51,245. Cheek: Total cost of Unpublished Uptiats (C} cannot excex:d 25'f. of the total of the Banc Unit For this tt-annsaction toe pet-eertate is: 2°~ Price plw Published Options (A+B}. Outer Cost Items Not Itttati>oed Above (te.x. Isutallstiou. l?reiebt, Delivery. Etc.) Deceriptbn Cost Description Cat SubtoW D: Total Coat Bdere A.y AppUeabk Trtide-in /Outer Allowaaca / Disatnats (A+g+C+D) 574,989.2 Qaaatity Ordered: 1 X Subtotal of A t B + C + D: 74989.22 SabloW E: 3 $74,989.2 . Trade-Ins !Otter Albwanea ! Spseial Diis~uats Description Cost Description Cost SubtoW G: ; IfeliVC DatC:, 30-45 dlt H. TOtAi Parch>RSe Price +G : 574,989.2 1 E X A S UNDERGROU~~ Dallas Service Center Fetxuary 20, 2009 City of North Richland Hilb 7200 A Dick F~her Drive South North Richland Hilb, TX 78180 ATTN: Alan KnapplGlynn Miller RE: CUES Equipment Buy Board Pricing Contract number 270-07 Buy Board North Rkhland Hills 2~7 CUES Equipment OZlil camera $23,814.00 Granite XP 521,900.00 CPR $23, 500.00 pneumatic tires $1,792.00 less computer -$3,300,00 less monitor -$990.00 extenders $914.00 Total f 67,630.00 Less 109E discount -$5,763.00 Total after discount 650,>s5T.00 Non - Publ~hed Options w110'% dhzcount USNI $7,600.00 plexor for laptop $380.00 Total Non Published Options 67,9.00 Total with all Options 675,510.00 4710 Oon DNve Dallas, TX 7S?A7 214951.7899 Phone 800-373.1318 Toll Free 281.508-SOOT Fax CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. C.0 Subject: PUBLIC HEARINGS CITY OF NORTH RICHLAND HILLS Department: Planning and Development Council Meeting Date: 3-9-2009 Presented by: Eric Wilhite Agenda No. C.1 Subject: ZC 2009-01 Public Hearing and Consideration of a Request from Richard and Silvia Wooldridge for a Zoning Change from AG Agriculture to R-1-S Special Single Family on Tract 4B09 in the Condra Survey (7421 Hightower Drive.) -Ordinance No. 3042 Case Summary: The applicants, Richard and Silvia Wooldridge, are requesting a zoning change on a 1.961 acre parcel from AG (agricultural) to R-1-S (special single family). The property is currently developed with asingle-family residential structure, in which the Wooldrige's currently reside. The intention of the property owners is to add additional living space on to the existing residential structure. Current regulations require that in order to expand an existing dwelling unit located on un-plated property in agricultural zoning they must properly rezone and plat the property. There is an existing storage facility on the back part of the property that is allowed under the proposed R-1- S regulations and will remain. Plat Status: A final plat associated with this property is being processed concurrently with this zoning change request. Existing Site Conditions: A residential structure and an accessory building used for typical residential storage are located on the site. Comprehensive Plan: Low density residential uses are depicted for this area. Thoroughfare Plan: The lot has frontage on Hightower Drive which is designated as a C4U undivided Major Collector. Surrounding Zoning /Land Use: North: R-2/ Residential Structures South: R-1-S /Residential Structure East: R-2/ Residential Structures West: AG /Vacant Lot Planning & Zoning Commission Recommendation: Approval by a 6-0 vote. Staff Recommendation: Approval of Zoning Change request ZC 2009-01. Review Schedule: Application: 1/19/09 Final Hearing: 3/9/09 Staff Review: 2 weeks Applicant Revision Time: 1 week Scheduling Time: 4 weeks Total Review Time: 7 weeks LOCATION MAP ~'1 AERIAL PROPERTY OWNER NOTIFICATION ~~~~~~, NOTICE OF PUBLIC HEARING ~,,~ ' `~ ~~~x CITY OF NORTH RICHLAND HILLS ~"" PLANNING AND ZONING COIIAMISSION 1'Fj~p,S AND CITY COUNCIL Gase #: ZC 2009- 01 Applicant: Richard and Silvia Wooldridge Location: 7421 Hightower Drive You are receiving this notice because you are a property owner of record within 200 feet of the property shown on the attached map. Purpose of Public Hearino: A Public Hearing is being held to Consider a request from Richard and Silvia Wooldridge for a zoning change from AG Agriculture to R-1-S Special Single Family on Tract 4B09 in the Condra Survey located at 7421 Hightower Drive. Public Hearing Schedule: Public Hearing Dates: PLANNING AND ZONING COMMISSION THURSDAY, FEBRUARY i9, 2009 If recommended for approval by the Planning and Zoning Commission, this zoning request will be heard by the City Council on: CITY COUNCIL MONDAY, MARCH 9, 2009 Both Meeting Times: 7:00 P.M. Both Meeting Locations: CITY COUNCIL CHAMBERS 730'f N. E. LOOP 820 NORTH RICHLAND HILLS, TEXAS If you have any questions or wish to submit a petition or letter concerning the above request, please contact: Planning Department -City of North Richland Hills 7301 Northeast Loop 820 North Richland Hills, Texas 7fi1$0 Phone ($17) 427-6300 Fax (817) 427-6303 LIST OF NOTIFIED PROPERTY OWNERS Richard Etux Silvia Wooldridge James A Bellomy 7421 Hightower Dr fi912 Little Ranch Rd NRH Tx 76180-3802 Fort Worth Tx 76180-3805 Ty C Etux Suzanne M Bailey 7008 Douglas Ln Fort Worth Tx 761$0-2709 Rhonda T Etvir Ronald Robair 6917 Meadow Creek Rd Fort Worth Tx 76180-3819 Tobin R Etux Cindy Tucker 6924 Meadow Creek Rd Fort Worth Tx 76180-3813 Theodore R Jr Etux C Nehring 8939 Pado St Houston Tx 77055-3137 Vivian L Ferguson 7401 Christopher Ct NRH Tx 76180-6729 Son Etux xuan Nguyen Nguyen 7004 Ridge Crest Dr NRH Tx 76180-2825 Edward Etux Candice Gonzalez Wm R Twesten 7001 Ridge Crest Dr 7005 Ridge Crest Dr Fort Worth Tx 76180-2826 NRH Tx 76180-0000 Donald E Etux Carla K Strawn 7013 Ridge Crest Dr NRH Tx 76180-2826 Angela Etvir Zane Smith 7017 Ridge Crest Dr NRH Tx 76180-282fi Joe Etux Margaret Crane 7025 Ridge Crest Dr NRH Tx 76180-2826 Noreen M Corona 7016 Ridge Crest Dr NRH Tx 76180-2825 Joseph M Etux Tracy M Wood 7000 Ridge Line Dr NRH Tx 76180-2828 James E Day 7008 Ridge Crest Dr NRH Tx 76180-2825 Charley Etux Tamara Blount 7008 Ridge Line Or Fort Worth Tx 7fi180-2828 Jeffery Etux Melinda Scheeler 7001 Ridge Line Dr NRH Tx 76180-2$29 Robert Etux Susan Famigletti 7405 Hightower Dr Fort Worth Tx 76180-3802 Rodger Etux Diane Baker 6925 Meadow Rd Fort Worth Tx 76180-3827 David I Etux Kimberly Russell 7425 Hightower Dr NRH Tx 76180-3802 Jeffery Etux Angela Skeen 7000 Ridge Crest Dr NRH Tx 76180-2825 Thomas Etux Danielle Landers 7009 Ridge Crest Dr NRH Tx 76180-282fi Scott B Etux Barbara M Irwin 7021 Ridge Crest Dr NRH Tx 76180-282fi Jack L Etux Stephanie Baccus 7012 Ridge Crest Dr NRH Tx 76180-2825 Timothy Etux Christa Sawyer 7004 Ridge Line Dr NRH Tx 76180-2828 Lan Mei Etvir Mark Tol 7005 Ridge Line Dr Fort Worth Tx 76180-2829 Bradi Etvir Jerem Vannoy-Hays Michael Etux Catherin Bedford 7009 Ridge Line Dr 7104 Douglas Ln NRH Tx 76180-2829 Fort Worth Tx 76180-2701 ORDINANCE NO. 3042 ZONING CASE ZC 2009-01 AN ORDINANCE AMENDING THE COMPREHENSIVE PLAN AND THE COMPREHENSIVE ZONING ORDINANCE OF THE CITY OF NORTH RICHLAND HILLS; AMENDING THE ZONING MAP OF THE CITY OF NORTH RICHLAND HILLS, TEXAS, AND REZONING A 1.961 ACRE TRACT OF PROPERTY FROM AG (AGRICULTURAL) TO R-1-S (SPECIAL SINGLE FAMILY RESIDENTIAL) ZONING; ESTABLISHING A PENALTY; PROVIDING FOR PUBLICATION; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, notice of a hearing before the Planning and Zoning Commission was sent to real property owners within 200 feet of the property herein described at least 10 days before such hearing; and, WHEREAS, notice of a public hearing before the City Council was published in a newspaper of general circulation in the City at least 15 days before such hearing; and, WHEREAS, public hearings to zone the property herein described were held before both the Planning and Zoning Commission and the City Council, and the Planning and Zoning Commission has heretofore made a recommendation concerning the zone change; and, WHEREAS, the City Council is of the opinion that the zone change herein effectuated furthers the purpose of zoning as set forth in the Comprehensive Zoning Ordinance and is in the best interest of the citizens of the City of North Richland Hills; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF NORTH RICHLAND HILLS, TEXAS: Section 1: THAT the Comprehensive Plan, the Comprehensive Zoning Ordinance and the zoning map of the City of North Richland Hills are hereby amended by rezoning a 1.961 acre tract of land located in the City of North Richland Hills, Tarrant County, Texas, more particularly described in the legal description attached hereto as Exhibit A from AG (Agricultural) to R-1-S (Special Single Family Residential) zoning. Section 2: Any person, firm or corporation violating any provision of the Comprehensive Zoning Ordinance as amended hereby shall be deemed guilty of a misdemeanor and upon final conviction thereof fined in an amount not to exceed Two Thousand Dollars ($2,000.00). Each day any such violation shall be allowed to continue shall constitute a separate violation and punishable hereunder. Section 3: The City Secretary is hereby authorized and directed to cause the publication of the descriptive caption and penalty clauses of this ordinance as an alternative method of publication provided by law. Section 4: This ordinance shall be in full force and effect immediately after passage. AND IT IS SO ORDAINED. PASSED AND APPROVED on this 9th day of March, 2009. CITY OF NORTH RICHLAND HILLS By: Oscar Trevino, Mayor ATTEST: Patricia Hutson, City Secretary APPROVED AS TO FORM AND LEGALITY: George A. Staples, City Attorney APPROVED AS TO CONTENT: John Pitstick, Planning & Development Director EXHIBIT A LEGAL DESCRIPTION WHEREAS Richard Wooldridge and Silvia Wooldridge are the owners of a tract of land situated in the John Condra Survey, Abstract Number 311 in the City of North Richland Hills, Tarrant County, Texas, as evidenced by the deed recorded in Document Number D203232229 of the Official Public Records of Tarrant County,. Texas, said tract being more particularly described as follows: BEGINNING at a found 5!8 inch rebar at the southeast comer of Lot 7, Block 2 of Northridge Meadows, Phase II according to the plat recorded in Cabinet A, Slide 9S 16 of the Plat Records of Tarrant County, Texas, THENCE SOUTH 00 degrees 24 minutes 22 seconds WEST, a distance of 458.59 feet to a found 1/2 inch rebar located at the northeast comer of a parcel of land described in the deed to the City of North Richland Hills recorded in Volume 9024, Page 1648 of the Deed Records of Tarrant County, Texas; THENCE NORTH 89 degrees 35 minutes 3 8 seconds WEST, along the North line of said parcel of land described in the deed to the City ofNorth Richland Hills, a distance of 1$5.23 feet tv a found 1/2 inch rebar for the northwest comer of said Right-of--Way deed to the City of North Richland Hills, also being in the East line of a parcel of land recorded in deed to James A. Bellomy and wife, Sheryl Bellomy recorded in Volume 5488, Page $b of the Deed Records of Tarrant County, Texas; THENCE NORTH 00 degrees 24 minutes 22 seconds EAST, along the East line of a said parcel of land recorded in deed to James A. Bellomy and wife, Sheryl Bellomy, a distance of 458.59 feet to a set 112 inch capped rebar stamped "JPH LAND SURVEYING", in the South line of Lot 8R, Black 2 Northridge Meadows, Phase II, according tv the plat recorded in Cabinet A, Slide 11391 of the Plat Records of Tarrant County, Texas from which a found 112 inch capped rebar stamped "BE,ASLEY RPLS 4050" for the southwest corner of Lot 9R, Block 2 of said Northridge Meadows, Phase II recorded in Cabinet A, Slide 11391 of the Plat Records of Tarrant County, Texas bears NORTH 89 degees 35 minutes 38 seconds WEST, a distance of 111.7E feet; TRENCH SOUTH 89 degrees 35 minutes 38 seconds EAST, along the said South line of said Lot $R, Black 2 Northridge Meadows, Phase II, passing at 46.62 feet a found 1/2 inch rebar at the southeast comer of said Lot 8R, and continuing along the South line of said I.ot 7, for a fatal distance of 186.23 feet to the POINT OF BEGINNING, containing 1.961 acres. ZONING EXHIBIT ., ~, ,, ..,~.. ~, I ~ d~Wb~" --- "'A~~~: ~ ~~ ~ ~~.~, ~ -------nom-- ~___~ I -~.ti. L _-_________ _~_-____ ~-__- ..,. ,~ , ~,. < ~ .. ~ ~ v~ « r~se~ ~ A '"~"' + «, ~, *~ ~..~w ,. ~ . ,, S.xisli r~l~ nl, sn~r~~l~; a-~~ I.acS,Fikxfl `4~' ~ - ~ ~nnhriiyc ~tz~Sn.s,lmawn f 5.961 hcmx lira ~.t-~ .:,~»,. ,.. r «ih`«» ~ a+r.. f „~,~.... a. ~ I ~ .. mY~~ I N87 7B" au«wvv ime zv, ~+W~hr Ax '1' ++pfA >w ~ nr mmvn^r wf"°'"`~`~".+ny~ ..~~ ~~it`~`~ 4 ~x ,e ~irh~em~'.n+6k~wY:+ne:••. ,.._ Pk HI1„' SOfY'Cf ft C ~ x U~ ~.a ~~i ~. I I '~ ~ 11 ~ ~ q ~3,y,,.. ....~ ~~ I••;aan Z.(JNING EXHIBIT k;:~axia:~» ::r:etrxh~aS~: w':.:aw:.pdz:a.ik~^'1MwbeFd«mmwar.+e L.rs wL~ kpYiw.rNlMr.',h.,~lMw4e.~zvz '~a~n..~riw EXCERPT FROM THE MINUTES OF THE FEBRUARY 19, 2009 PLANNING AND ZONING COMMISSION MEETING ZC 2009-01 Public Hearing and Consideration of a Request from Richard and Silvia Wooldridge for a Zoning Change from AG Agriculture to R-1-S Special Single Family on Tract 4609 in the Condra Survey (7421 Hightower Drive.) Chairman Shiflet opened the Public Hearing at 7:07 p.m. Toby Smith, 2825 Exchange Blvd, Southlake, TX came forward representing applicant. The Wooldridge family is presently living in the house on this property. The property is not platted and is zoned AG. They would like to do an addition to their home and in order to do this they are required to change the zoning to R-1-S and plat the property. Mike Benton asked about the building in the back corner. Is this used for a business of any sort? Mr. Smith said no. It is used as a storage facility. His long term plan once this property is platted is to try to improve his building and bring it up to code. Eric Wilhite said this is a zoning change request to bring their property into conformance with the residential zoning to R-1-S so they can expand their home. Up to this point it has been a legal existing non-conformance and now that they want to expand the structure it is required to bring property into conformance and get residential zoning. It far exceeds the minimum 1 acre for R-1-S at nearly 2 acres. This request also matches what the Comprehensive Land Use Plan indicates in this area as low density residential. Staff and DRC have reviewed this request and recommend your approval. Mike Benton asked about the floor plan that is shown on the exhibit. They have the house and the finished floor elevation at 646.3. How far does the floor plan need to be above the ground level, is it one foot? Eric Wilhite asked if he meant above the flood plain or the finished grade on the outside edge of the house? Mike Benton said the finished grade outside the house. Eric Wilhite said that our ordinance is 6 inches below the brick ledge. Caroline Waggoner said that it should be 1 foot above the street. Eric Wilhite said that this will allow for it to drain towards the street. Chairman Shiflet asked if there was anyone asking to speak for or against the case, being none he closed the Public Hearing at 7:08 p.m. APPROVED Mark Haynes, seconded by Mike Benton, motioned to approve ZC 2009-01. The motion was carried unanimously (6-0). CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. D.0 Subject: PLANNING AND DEVELOPMENT Items to follow do not require a public hearing CITY OF NORTH R/CHLAND HILLS Department: Planning and Development Presented by: Eric Wilhite Council Meeting Date: 3-9-2009 Agenda No. D.1 Subject: FP 2009-01 Consideration of a Request from Richard and Silvia Wooldridge to Approve a Final Plat of Lot 1, Block 3, Northridge Meadows Addition (located at 7421 Hightower Drive.) Case Summary: The applicant is proposing to final plat this 1.961 acre tract that is currently occupied with a single family residence and an accessory structure. The Wooldrige's intend to expand the existing residential structure by adding additional living space to the house. Due to the property having not previously been platted (or zoned in a residential category) both zoning and platting must be completed prior to expansion of the structure. The platting of the property will not cause any setback issues since both structures are located on the lot in a manner that meets all setback requirements for the proposed zoning. This plat request meets the requirements given in Section 110-252 concerning qualifications for a short form final plat, including the provision that no public infrastructure or drainage improvements are necessary. Therefore no preliminary plat is required to be considered prior to processing the final plat. Current Zoning: Currently zoned AG- agricultural. Request for a zoning change to R-1-S is running concurrently with this case. Thoroughfare Plan: The lot has frontage on Hightower Drive which is designated as a C4U undivided Major Collector. Comprehensive Plan: The Comprehensive Plan depicts low density residential uses for this area. The lot proposed by this plat is consistent with the plan. Staff Review/Rough Proportionality Determination: The Development Review Committee has reviewed the plat and has determined that it complies with both the Zoning and Subdivision Ordinances. The city's engineer has determined that no additional paving, water, sanitary sewer, or drainage facilities are needed to provide service to this lot. Planning & Zoning Commission Recommendation: Approval by a 6-0 vote. Staff Recommendation: Approval of final plat request FP 2009-01. Review Schedule: Application: 1/19/09 Applicant Revision Time: 1 week Final Hearing: 3/9/09 Scheduling Time: 4 weeks Staff Review: 2 weeks Total Review Time: 7 weeks LOCATION MAP ~ L r Q J +.~ p~ (.~ 'D_ U v ~I ,.,c C AERIAL r ~ ~ tel. Y_ ~rtr,~ k ~. ' _ y~.i Y ~ w~ t , ~ ~ ~ ~.sZ ~ -i ~-- - - S s.~ ~ ' ,¢. ~~ '$ ?~ " ~ ~, '+'~ _ ~p "~K, f r .~p.- h ' ~' ~' .~. " 1. r ys . f 'i ~~y~ ° ~~ '~. =~ ~~'~ `' _ ? S/+ tl. ~,t :. .:. ~~ - t . ~ - •~ °~ ,z . _~' °~. ~ f ,~ ;„~,'~ N ~~ • ~ . 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Kvw.Xnf651 ,NSKXq % ~ ~ I Bnll wa' w ~''~{, ~ ' NPrryeGl 1' •%.~ .XnM.IYbl64v4Yfaywta6.#Wivll W 9bxrelerlASY:'m raRXdx krAgdrtsp3nndies~Efkl:lhf palmdla ~wdnN"•NIkPYY~~bll #Y+afY<WOlmMS.Ywpm.skbNe;§MC M .............. knr.lxrwewa rp:wdrdkw M~~O`n ix~w:.~Ces{k.n 60.1kld~ihm!.Mll tw>o.,am;k,.YCy ee'4~iar:SdrnVniKyv F:Wp YnV u[. LK-I I'rw WidepY..ndn Xwd kyWykOb,'ux[dq 6xObk, t~•a.%mwd /.lL[t.. Pllnek PnkdCesdr.Yaa ~'~ .................'• SYRM11YlbN 1d1#:YIRIAN! RP,lfl~.'.MYFn, k14nYAla iY.rrtk YwrFl7<'..WMY 14.ATC.i.MriYOR'x Ykxdt.ftamlmvk, Yen ISY:LtlL AdY iNtfAY;'lYt F.xbS Yp>I':IA:fR.'NO'viq nk5F:l.[WP. EXCERPT FROM THE MINUTES OF THE FEBRUARY 19, 2009 PLANNING AND ZONING COMMISSION MINUTES FP 2009-01 Consideration of a Request from Richard and Silvia Wooldridge to Approve a Final Plat of Lot 1, Block 3, Northridge Meadows Addition (located at 7421 Hightower Drive.) Toby Smith, 2825 Exchange Blvd, Southlake, TX came forward representing the applicant. In order for the applicant to expand their home they have requested a plat and have worked with the city to make sure that they adhere to everything that has been requested. Eric Wilhite said that the final plat request does meet all the subdivision rules and regulations. Because there aren't any public infrastructure improvements required it is listed on the staff report as a short form final plat. They were not required to submit any preliminary or final engineering plans as stated in the subdivision ordinance and this meets all the subdivision rules and regulations. There is no rough proportionality determination necessary since the expansion doesn't have any impact or require any additional public infrastructure. Staff has reviewed the request and recommends your approval. APPROVED Steven Cooper, seconded by Don Bowen, motioned to approve FP 2009-01. The motion was carried unanimously (6-0). CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. E.0 Subject: PUBLIC WORKS No items for this category. CITY OF CITY OF NORTH R/CHLAND HILLS Department: Finance Council Meeting Date: 3-9-2009 Presented by: Larry Koonce Agenda No. F.1 Subject: GN 2009-012 Approve Investment Strategy and Investment Policy - Resolution No. 2009-008 The Public Funds Investment Act ("PFIA"), requires that the City Council review and adopt the City's Investment Strategy and Investment Policy annually. Occasional legislative changes in the PFIA, as well as changes in the economic environment affecting investment decisions, require revisions to the Investment Strategy and Investment Policy. Several revisions have been made to the attached documents to maintain compliance with the PFIA, respond to economic conditions, and improve and update general procedures. The Investment Committee has reviewed these revisions and recommends adoption of the following revised Investment Strategy and Investment Policy. Significant changes, shown in red line type, are as follows: Investment Strategy • Page 3, Section I -Operating Funds -Building Services Fund was reclassified to Facilities/Construction Management Fund, Equipment Services was changed to Fleet Services Fund and Street Maintenance was renamed Permanent Street Maintenance Fund. These changes were as a result of changes to city departments reflected in the 2008-2009 Budget. • Page 4, paragraph 5 -The strategy was changed to reflect the weighted average maturity as allowed in the Investment Policy. This is replacing the previous maturity structure of throughout two years. • Page 6, paragraph 5 -The diversification paragraph was reduced to resemble that of section I -Operating Funds diversification. The paragraph being deleted described an investment strategy that was not true at all times. • Page 7 -The City has not issued revenue bonds in years; therefore, the second sentence under section V was deleted. If the City should issue revenue bonds at some point in the future, the City would not set aside a separate portfolio for revenue bonds. Investment Policy • Page 5 -Changes were made to the Operating Fund names as noted in item 1 above. • Page 10, paragraph 6 - A change was made to differentiate Flexible Repurchase Agreements (Flex-Repos) from Repurchase Agreements as an authorized investment for new bond issues. Flex repos are more suited to bond proceeds as they may be timed to mature as construction projects are completed. • Page 12, paragraph 5 -The stated maturity was changed from 5 to 3 years from the date of purchase as stated in the Investment Strategy. The Investment Committee is required to vote for any investment that has a maturity greater than three years. • Page 14 - A change was made to the first paragraph under Investment reporting to establish the fourth quarter report as the annual report. This comment will identify the annual report as required in Appendix A Section 4. Other minor changes were made as deemed necessary to improve grammar and spelling throughout the documents. Such minor changes, which do not materially change the strategy or policy, are not shown in red line type. Overall, the revised Investment Strategy and Investment Policy are designed in a manner responsive to the public trust and consistent with federal, state and local law. Recommendation: Approve Resolution No. 2009-008. N FZH RESOLUTION NO. 2009-008 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF NORTH RICHLAND HILLS, TEXAS: 1. The City of North Richland Hills acknowledges the high priority of providing the necessary guardianship of public funds in the municipal sector. The City Council expressly intends to set high fiscal standards, delegate treasury and investment duties to appropriate officials, and to review the actual performance at regular intervals. The City Council hereby intends to implement investment requirements set forth in Tex. Rev. Civ. Stat. Ann., Art. 4413 (34c) and 2256. 2. The City Council has reviewed and hereby adopts the City of North Richland Hills' Investment Policy March 9, 2009, including all revisions and changes required under state law or recommended by City staff. This Investment Policy replaces the investment policy dated January 14, 2008. The City Council has also reviewed and approved the City of North Richland Hills' Investment Strategy document, as prepared by the City's Investment Committee. PASSED AND APPROVED this the 9th day of March, 2009. CITY OF NORTH RICHLAND HILLS By: Oscar Trevino, Mayor ATTEST: Patricia Hutson, City Secretary APPROVED AS TO FORM AND LEGALITY: George A. Staples, City Attorney APPROVED AS TO CONTENT: Larry Koonce, Director of Finance CITY OF NORTH RICHLAND HILLS INVESTMENT STRATEGY JANUARY 27, 2009 N FLH PREFACE It is the policy of the City of North Richland Hills that, giving due regard to the safety and risk of investment, all available funds shall be invested in conformance with State and Federal Regulations, applicable Bond Resolution requirements, and the adopted Investment Policy and Investment Strategy. In accordance with the Public Funds Investment Act (Texas Government Code 10, Chapter 2256), the City of North Richland Hills' investment strategies shall address the following priorities (in order of importance): • Understanding the suitability of the investment to the financial requirements of the City • Preservation and safety of principal • Liquidity • Marketability of the investment prior to maturity • Diversification of the investment portfolio • Optimization of interest earnings Effective investment strategy development coordinates the primary objectives of the City of North Richland Hills' Investment Policy and cash management procedures to enhance interest earnings and reduce investment risk. Aggressive cash management will increase the available "investment period" and subsequently interest earnings. Maturity selections shall be based on cash flow and market conditions to take advantage of various interest rate cycles. The City's investment portfolio shall be designed and managed in a manner responsive to the public trust and consistent with the Investment Policy. The City's Funds shall be analyzed and invested according to the following major fund types: I. Operating Funds II. Capital Improvement Funds III. Debt Service Funds IV. General Fund Balance Reserve V. Revenue Bond Reserves INVESTMENT STRATEGY In order to minimize risk of loss on a sale because of fluctuating market prices, investment maturities will not exceed the anticipated cash flow requirements of the funds. In general, the City will hold a purchased security until it matures, unless otherwise dictated by cash 2 flow needs, or if the investment loses its status as an authorized investment. Investment guidelines by fund type are as follows: I. Operating Funds The City of North Richland Hills Operating Funds are as follows: • General Fund • Special Revenue Funds o Special Investigation Fund o Drainage Utility Fund o Crime Control and Prevention District Fund o Promotional Fund o Economic Development Fund o Donations Fund o Parks and Recreation Facilities Development Fund o Grant Fund o Gas Development Fund o Traffic Safety Fund • Enterprise Funds o Utility Fund o Aquatic Park Fund o Golf Course Fund • Internal Service Funds o _ Facilities/Construction Management Fund o ~~ ~~~°~Q°%s Fleet Services Fund o Self-Insurance Fund o Information Services Fund • Capital Projects Funds o General CIP Fund o Permanent Street Maintenance Fund o Sidewalk Maintenance Fund • Component Units o Tax Increment Financing District 1 (TIF #1) o Tax Increment Financing District 2 (TIF #2) 1) Suitability -Any investment eligible in the Investment Policy is suitable for the Operating Funds. 2) Safety of Principal -All investments shall be in high quality securities with no perceived default risk. The maximum allowable investment in commercial paper 3 shall be limited to 10% of total Operating Fund investments. Market price fluctuations will occur. By managing the weighted average days to maturity for the operating fund portfolio to be less than 365 days and restricting the maximum allowable maturity to five years, the price volatility of the overall portfolio will be minimized. 3) Marketability -Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Historical market "spreads" between the bid and offer price of a particular security type of less than 0.25% will define an efficient secondary market. 4) Liquidity -The Operating Funds require the greatest short-term liquidity of any of the fund types. Short-term constant dollar investment pools and money market mutual funds shall provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. 5) Diversification -Investment maturities shall be staggered throughout the fiscal year to provide cash flow based on the anticipated operating needs of the City. Market cycle risk will be reduced by diversifying the appropriate maturity structure not to exceed the weighted average maturity allowed by the Investment Policy, and through diversification by market sector. 6) Yield - Attaining a competitive market yield for comparable securities and portfolio restrictions is the desired objective. The City's portfolio shall be designed with the purpose of obtaining an optimized rate of return, through budgetary and economic cycles, commensurate with the investment risk, policy constraints, and cash flow requirements. II. Capital Improvement Funds The City of North Richland Hills Capital Improvement Funds are comprised of the monies available from the sale of debt and other sources to finance capital improvement projects. Bond proceeds are segregated from operating funds on the general ledger and in investment accounts for arbitrage compliance purposes. Capital Improvement Funds include all funding for the design and construction of capital projects, including streets, drainage facilities, utility adjustments, park improvements, and municipal buildings as well as the acquisition of capital assets. 1) Suitability -Any investment eligible in the Investment Policy is suitable for Capital Improvement Funds. 2) Safety of Principal -All investments shall be in high quality securities with no perceived default risk. The maximum allowable investment in commercial paper shall be limited to 10% of total Capital Improvement Fund investments. Market price 4 fluctuations will occur. By managing the various Capital Improvement accounts in anticipation of cash flow requirements, the impact of market risk for the portfolio will be minimized. 3) Marketability -Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Historical market "spreads" between the bid and offer price of a particular security type of less than 0.25% will define an efficient secondary market. 4) Liquidity -The City's funds used for construction and capital improvement programs have reasonably predictable draw down schedules. Therefore, investment maturities shall generally follow the anticipated cash flow requirements. Investment pools and money market mutual funds shall provide readily available funds generally equal to one month's anticipated cash flow needs, or a competitive alternative for short-term fixed maturity investments. A singular repurchase agreement may be utilized if disbursements are allowed in the amount necessary to satisfy any expenditure request. This investment structure is commonly referred to as a Flexible Repurchase Agreement. 5) Diversification -Market conditions and arbitrage regulations influence and limit the selection and the laddering of maturities of fixed rate investments for bond proceeds and other construction and capital improvement funds. When investing these types of funds, every effort will be made to at least meet the maximum allowed yield, and to select and ladder maturities to meet the cash flow needs of the funds. Maturities should not exceed the normal life of the underlying projects supported by the fund. 6) Yield - Achieving a positive spread to the applicable arbitrage yield is the desired objective for bond proceeds. The City's portfolio shall be designed with the purpose of obtaining an optimized rate of return, through budgetary and economic cycles, commensurate with the investment risk, policy constraints and cash flow requirements. III. Debt Service Funds The City's Debt Service funds include the General Debt Service Fund and the Sales Tax Revenue Debt Service Fund. The General Debt Service Fund is funded from ad valorem tax collections and transfers from various other funds. The Sales Tax Revenue Debt Service Fund is funded solely from transfers from the Park and Recreation Facilities Development Fund. 1) Suitability -Any investment listed as eligible in the Investment Policy is suitable for the Debt Service Funds. 2) Safety of Principal -All investments shall be in high quality securities with no perceived default risk. The maximum allowable investment in commercial paper 5 shall be limited to 10% of total Debt Service Fund investments. Market price fluctuations will however occur. By limiting the Debt Service Funds Portfolio maturity dates to the next scheduled debt service payment, the market risk of the overall portfolio will be minimized. 3) Marketability -Securities with active and efficient secondary markets are not necessary as the event of an unanticipated cash requirement is not probable. 4) Liquidity -Debt service funds have predictable payment schedules. Therefore, investment maturities shall not exceed the anticipated cash flow requirements. Investment pools and money market mutual funds may provide a competitive yield alternative for time deposits and short-term fixed maturity investments. A singular repurchase agreement may be utilized if disbursements are allowed in the amount necessary to satisfy any expenditure request. This investment structure is commonly referred to as a Flexible Repurchase Agreement. 5) Diversification -Market conditions influence the attractiveness of fully extending maturities to the next unfunded payment date. w~r;~~~~~~~ ;f ;^„°~~~± r^+o~ .,ro At no time shall the debt service schedule be exceeded in an attempt to bolster yield. 6) Yield - Attaining a competitive market yield for comparable securities and portfolio restrictions is the desired objective. The City's portfolio shall be designed with the purpose of obtaining an optimized rate of return, through budgetary and economic cycles, commensurate with the investment risk, policy constraints and cash flow requirements. IV. General Fund Balance Reserve The City's objective regarding the General Fund Balance is to maintain a sufficient fund balance to operate the City for a period of sixty days or 15% of the following year's budgeted expenditures. The amount of funds to be invested in non-liquid other-than- overnightinvestments shall be limited to not more than 50% of this amount of the General Fund Balance. 1) Suitability -Any investment eligible in the Investment Policy is suitable for General Fund Balance Reserves. 2) Safety of Principal -Generally, the investment quality of all securities allowed as investments in the Operating Funds will be allowable in the General Fund Balance Reserve. All investments shall be in high quality securities with no perceived default risk. The maximum allowable investment in commercial paper shall be limited to 10% of total General Fund Balance Reserve investments. Market price fluctuations 6 price fluctuations will occur. Under no circumstance shall any investment from this portfolio cause the combined portfolio's weighted average maturity to exceed the maximum allowed by the Investment Policy. The maximum allowable maturity is restricted to three years. 3) Marketability -Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Historical market "spreads" between the bid and offer price of a particular security type of less than 0.25% will define an efficient secondary market. 4) Liquidity -The Fund Balance Reserve requires the liquidity necessary to cover the City's expenditures in the event of a cash shortfall. Short-term constant dollar investment pools and money market mutual funds shall provide daily liquidity and may be utilized as a competitive yield alternative to time deposits and fixed maturity investments. 5) Diversification -Maturing investments shall be reinvested within the desired maturity to provide cash flow in the event that cash is needed for the operating needs of the City. Market cycle risk will be reduced by diversifying the appropriate maturity structure throughout three years and through diversification by market sector. 6) Yield - Attaining a competitive market yield for comparable securities and portfolio restrictions is the desired objective. The City's portfolio shall be designed with the purpose of obtaining an optimized rate of return, through budgetary and economic cycles, commensurate with the investment risk, policy constraints and cash flow requirements. V. Revenue Bond Reserves Debt service reserves are required by bond covenants for a particular revenue bond issue. ren~ ~iremon~e 1) Suitability -Any investment eligible in the Investment Policy is suitable for Debt Service Fund Reserves. 2) Safety of Principal -Generally, the investment quality of all securities allowed as investments in the Operating Funds will be allowable in the Debt Service Fund Reserve. All investments shall be in high quality securities with no perceived default risk. The maximum allowable investment in commercial paper shall be limited to 10% of total Revenue Bond Reserve investments. Market price fluctuations will occur. Under no circumstance shall any investment from this portfolio cause the combined portfolio's weighted average maturity to exceed the maximum allowed by the Investment Policy. The maximum allowable maturity is restricted to three years. 3) Marketability -Securities with active and efficient secondary markets are necessary 7 in the event of an unanticipated cash requirement. Historical market "spreads" between the bid and offer price of a particular security type of less than 0.25% will define an efficient secondary market. By utilizing the yield advantages of fixed income securities, maximum yield should be attained while meeting cash requirements. 4) Liquidity -The Debt Service Reserve Funds require the amount of liquidity necessary to convert securities into cash if needed for payment of debts on schedule. Short-term constant dollar investment pools and money market mutual funds shall provide liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. 5) Diversification -Market cycle risk will be reduced by diversifying the appropriate maturity structure throughout three years and through diversification by market sector. 6) Yield - Attaining a competitive market yield for comparable security-types and portfolio restrictions is the desired objective. The City's portfolio shall be designed with the purpose of obtaining an optimized rate of return, through budgetary and economic cycles, commensurate with the investment risk, policy constraints and cash flow requirements. 8 N Ti~H CITY OF NORTH RICHLAND HILLS INVESTMENT POLICY JANUARY 27, 2009 TABLE OF CONTENTS Preface I. Purpose and Objectives II. Scope III. Responsibility and Control IV. Investment Committee V. Suitable and Authorized Investments VI. Investment Parameters VII. Investment Procedures VIII. Custodial Credit Risk Management IX. Arbitrage X. Depositories XI. Investment Policy Adoption Page 1 3 5 6 8 9 12 13 15 17 17 18 APPENDICES Page A. City of North Richland Hills Ordinance Number 2079 21 B. Investment Bid Form 23 C. Security Information Worksheet 24 D. Broker/Dealer Rotation Procedures 25 E. Trading History by Broker 27 F. Broker/Dealer Questionnaire 29 G. Approved Securities Dealers 37 H. Primary Dealers 38 I. TBMA Master Repurchase Agreement 39 J. Public Funds Investment Act of 1997 51 K. Public Fund Collateral Act of 1993 85 L. Inter-local Agreements 99 M. Glossary 109 N FLH PREFACE "A public office is a public trust." Charles Sumner, 1872 If a public office is a public trust, then the trust must be administered properly. Public funds are acquired by governments largely through involuntary payments, particularly through taxation. In a modern democratic society, public officials are obligated to manage these funds in a discipli ned manner. In most cases, laws govern the investment process. Laws alone however cannot compel public officials to a series of actions that assure the public's best interests. The actions of public officials responsible for investing public funds must be guided by knowledge, skills, systems, policies, procedures and confidence that can be described only as professional discipline. It is the policy of the City of North Richland Hills that, giving due regard to safety and risk of investments, all available funds shall be invested in conformance with these legal and administrative guidelines, and, to the maximum extent possible, at the highest rates obtainable at the time of the investment. Effective cash management is recognized as essential to good fiscal management. An aggressive cash management and investment policy will be pursued to take advantage of investment interest as viable and material revenue to all operating and capital funds. Investment income will be used in a manner that will best serve the interest of the City of North Richland Hi Ils. The City's portfolio shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. N FAH I. PURPOSE AND OBJECTIVES A. Purpose The purpose of this document is to set forth the specific investment policy and strategy guidelines for the City of North Richland Hills. All investment activity shall be consistent with Texas law as defined in Government Code 10, Chapter 2256, known as the Public Funds Investment Act (the Act), and local law. - safety of investments and City funds - preservation of capital and protection of principal - maintenance of sufficient liquidity to meet operating needs - diversification of investments to avoid unreason able risks - public trust from prudent investment activities - optimization of investment income for the City's portfolio The City is required under the Public Funds Investment Act, Section 5, to adopt a formal written Investment Policy regarding the investment of its funds and funds under its control. This policy is to be adopted annually to meet the requirements of the Act, and has been revised periodically to comply with updated state requirements. The City of North Richland Hills' Ordinance Number 2079 (See Appendix A) states that all investment activities and procedures shall be governed by a written Investment Policy. The Investment Policy addresses the methods, procedures, and practices that must be exercised to ensure the effective and judicious management of the City's funds. B. Objectives The City shall manage and invest its cash with four primary objectives, listed in the order of priority: safety, liquidity, public trust, and yield, expressed as optimization of investment income. The safety of the principal invested always remains the primary objective. All investments shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. An aggressive cash management program and investment policy will be pursued by the Investment Officer to take advantage of investment interest as viable and material revenue to all operating and capital funds. Cash management is defined as the process of managing monies in order to ensure maximum cash availability and maximum investment income on short-term investments of idle cash. The City's portfolio shall be designed and managed in a manner responsive to the public trust. Income from investments will be used in a manner that will best serve the interests of the City of North Richland Hills. 3 1. Safety Safety of invested principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit and interest rate risk. a. Credit Risk and Concentration of Credit Risk The City will minimize credit risk, the risk of loss due to the failure of the issuer or backer of the investment, and concentration of credit risk, the risk of loss attributed to the magnitude of investment in a single issuer, by: (1) Limiting investments to the safest types of investments, (2) Pre-qualifying the financial institutions and broker/dealers with which the City will do business, and (3) Diversifying the investment portfolio to minimize potential losses on individual issuers. b. Interest Rate Risk The City will manage the risk that the investment income and the market value of investments in the portfolio will fall due to changes in the general interest rates by: (1) Structuring the investment portfolio so that investments mature to meet cash requirements for ongoing operations, thereby avoiding the need to liquidate investments prior to maturity, (2) Investing operating funds primarily in certificates of deposit, shorter- term securities, money market mutual funds, or local government investment pools functioning as money market mutual funds, (3) Diversifying maturities and staggering purchase dates to minimize the impact of market movements over time, and (4) Limiting the maximum weighted average maturity of the investment portfolio to 365 days. 2. Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that investments mature concurrent with cash needs to meet anticipated demands. Because all possible cash demands cannot be anticipated, a portion of the portfolio will be invested in shares of money market mutual funds or local government investment pools that offer same-day liquidity. 4 3. Public Trust All participants in the City's investment process shall seek to act responsibly as custodians of the public trust. Investment officers shall avoid any transaction that might impair public trust in the City's ability to govern effectively. 4. Yield (Optimization of Investment Income} The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. I I. SCOPE This investment policy applies to all financial assets of the City of North Richland Hills in all current funds, any funds to be created in the future, and any other funds held in custody by the City, unless expressly prohibited by law or unless it is in contravention of any depository contract between the City and its depository bank. However, this policy does not apply to the assets administered for the benefit of the City by outside agencies. These funds are accounted for in the City's Comprehensive Annual Financial Report and include: Operating Funds • General Fund • Special Investigation Fund • Drainage Utility Fund • Crime Control and Prevention District Fund • Promotional Fund • Economic Development Fund • Donations Fund • Parks and Recreation Facilities Development Fund • Grant Fund • Gas Development Fund • Traffic Safety Fund • Utility Fund • Aquatic Park Fund • Golf Course Fund • Facilities/Construction Management Fund • ~^~~~^^^°^+ Fleet Services Fund • Self-Insurance Fund • Information Services Fund • General CIP Fund • Permanent Street Maintenance Fund • Sidewalk Maintenance Fund • Tax Increment Financing District 1 (TIF #~ } • Tax Increment Financing District 2 (TIF #2} 5 Capital Improvement Funds Debt Service Funds General Fund Balance Reserve Revenue Bond Reserves The City will consolidate cash balances from all funds with the exception of bond proceeds to optimize investment income. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles . III. RESPONSIBILITY AND CONTROL A. Delegation of Authority This Investment Policy and the outlining of investment practices and authorities is compiled in accordance with the Public Funds Investment Act, which requires the adoption of rules governing investment policies and strategies and the designation of an Investment Officer, as well as City Ordinance Number 2079 which designates investment officers and provides prudent investment rules. Collateral requirements are created in accordance with the Public Funds Collateral Act (Texas Government Code 10, Chapter 2257). Ultimate responsibility and authority for all investment transactions and cash management reside with the City Manager and the City's Director of Finance. The Director of Finance is also responsible for considering the quality and capability of staff to be involved in investment management and procedures. The Director of Finance may delegate responsibility for the day to day investment activities to other qualified staff members. These staff members will be termed Investment Officers of the City. One of these Investment Officers will be designated the Primary Investment Officer by the Director of Finance to conduct daily investment activity and prepare required investment reports. Investment Officers will not conduct any investment or banking activities involving City funds until a resolution or ordinance giving them authority to do so has been approved by the City Council of the City of North Richland Hills. All participants in the investment process shall seek to act responsibly as custodians of public trust. B. Quality and Capability of Investment Management The City shall provide periodic training in investments for the designated Investment Officers and other investment personnel through courses and seminars offered by professional organizations, associations, and other independent sources approved by the Investment Committee in order to ensure the quality and capability of investment management in compliance with the Public Funds Investment Act. C. Training Requirements In accordance with the Public Funds Investment Act, all authorized Investment Officers shall attend an investment training session no less often than once every two years commencing on September 1, 1997 and shall receive not less than ten hours of 6 instruction relating to investment responsibilities. Anewly appointed Investment Officer must attend a training session of at least ten hours of instruction within twelve months of taking over or assuming duties. The two year period is determined based on the anniversary of the last ten hours of instruction received. The investment training session shall be provided by an independent source approved by the Investment Committee. For purposes of this policy, an "independent source" from which investment training shall be obtained shall include a professional organization, an institution of higher education, or any other sponsor other than a business organization that the City may engage in an investment transaction. D. Management and Internal Controls The Director of Finance is responsible for establishing and maintaining an internal control structure designed to ensure the City's assets are protected from loss, theft, or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Director of Finance shall establish a process for annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points: • Minimize risk of collusion • Separation of transactions authority from accounting and record keeping • Custodial safekeeping • Avoidance of physical delivery securities • Clear delegation of authority to subordinate staff members • Written confirmation for telephone (voice) transactions for investments and wire transfers • Development of a wire transfer agreement with the depository bank or third party custodian E. Prudence The standard of prudence to be applied by the Investment Officer shall be the "prudent investor" rule, which states: "Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of capital as well as the probable income to be derived." It should be noted that, in a diversified portfolio, occasional losses are inevitable and must be considered within the context of the overall portfolio's return. In determining whether an Investment Officer has exercised prudence with respect to an investment decision, the determination shall take into consideration the investment of all funds, or funds under the City's control, over which the Investment Officer had responsibility rather than a consideration as to the prudence of a single investment, and whether the investment decision was consistent with the written investment policy of the City. 7 F. Indemnification The Investment Officer, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific security's credit risk or market price changes, provided that these deviations are reported in a timely manner and appropriate action is taken to control the effects of such adverse developments. The City shall provide for the defense and indemnification of any Investment Officer or Investment Committee member who is made party to any suit or proceeding, other than by actions of the City, or against whom a claim is asserted by reasons of their actions taken within the scope of their service as Investment Officers or appointed members of the Investment Committee. Such indemnity shall extend to judgments, fines, and amounts paid in settlement of any such claim, suit or proceeding, including any appeal thereof. This protection shall extend only to members who have acted in good faith and in a manner which they reasonably believe to be in, or not opposed to, the best interests of the City. G. Ethics and Conflicts of Interest City staff involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair the ability to make impartial investment decisions. City staff should disclose to the City Manager any material personal financial investments in financial institutions that conduct business with the City and they shall further disclose positions that could be related to the performance of the City's portfolio. City staff shall subordinate their personal financial transactions to those of the City, particularly with regard to the timing of purchases and sales. An Investment Officer of the City who has a personal business relationship, as defined by the Public Funds Investment Act of 1997, Section 2256.005 (i), with an organization seeking to sell an investment to the City shall file a statement disclosing that personal business interest. An Investment Officer who is related within the second degree of affinity or consanguinity to an individual seeking to sell an investment to the City shall file a statement disclosing that relationship. A disclosure statement required under this section must be filed with the Texas Ethics Commission and the governing body of the City. IV. INVESTMENT COMMITTEE An Investment Committee shall be established to assist in monitoring the performance and structure of the City's portfolio and approved brokers. Members of this committee shall include the Director of Finance (as Chairman) and the Assistant Director of Finance as permanent members. Additional members, numbering no less than three, will be appointed at the discretion of the Director of Finance. The Primary Investment Officer will report to and make recommendations to the Investment Committee, but will have no vote concerning investment policy or suitability of investments. Any matters presented to the committee requiring a vote of the members shall be passed or denied by a simple majority. The Investment Officer or any other member of the committee shall have the power to call meetings of the committee. The committee shall meet no less than quarterly. 8 The Investment Committee shall perform the following functions: 1. Approve the process of selecting authorized dealers, brokers, investment advisors, and safekeeping agents/custodians used by the City. 2. Review the City's general portfolio activity and performance for compliance to this policy and recommend any changes or amendments to this policy to the City Council. 3. Approve the Investment Strategy document, as prepared by the Investment Officer. This document is required by State law to be separate from the Investment Policy. The Investment Strategy will be a guide to the investment of all funds controlled by the City as described in Section II of the Investment Policy. The strategy is intended to adapt to changes in market conditions. 4. Advise the Investment Officer as to recommendations regarding investment strategy and portfolio performance. 5. Approve the purchase of any securities with maturities over three (3) years. 6. Immediately notify the Investment Officer of any information brought to their attention that materially affects the portfolio or the marketability of any investments purchased in accordance with the Investment Policy. 7. Oversee the activities of the persons designated to carry out investment transactions and inform the City Council of unaddressed concerns with the management of the City's investment portfolio. V. SUITABLE AND AUTHORIZED INVESTMENTS The City currently has a "buy and hold" portfolio strategy. Maturity dates are matched with cash flow requirements and investments are purchased with the intention of being held until maturity. However, investments may be liquidated prior to maturity for the following reasons: - An investment with declining credit may be liquidated early to minimize loss of Principal - Cash flow needs of the City require that the investment be liquidated City funds governed by this policy may be invested in the instruments described below, all of which are authorized by Chapter 2256 of Government Code 10 (Public Funds Investment Act), with further restrictions imposed by local ordinances. Investments of City funds in any instrument or security not authorized for investment under the Act and City ordinance is strictly prohibited. The City will not be required to liquidate an investment that becomes unauthorized, for reasons other than loss of rating, subsequent to its purchase. All prudent measures will be taken to liquidate an investment that is downgraded to less than the required minimum rating. 9 A. Authorized Investments 1. Obligations of the United States, its agencies, and instrumentalities 2. Collateralized Mortgage Obligations ("CMOs") directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States 3. Direct Obligations of the State of Texas or its agencies 4. Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality of not less than A or its equivalent by a nationally recognized investment rating firm 5. Certificates of Deposit issued by a depository institution that has its main office or a branch office in the State of Texas. The certificate of deposit must be guaranteed or insured by the Federal Deposit Insurance Corporation or its successor, and secured by obligations in a manner and amount as provided by law 6. Fully Collateralized Repurchase Agreements that are structured in compliance with the Public Funds Investment Act. A flexible repurchase agreement can be utilized for the investment of bond proceeds to meet projected cash outflows. Repurchase agreements must be: secured by obligations of the United States or its agencies and instrumentalities; pledged to the City or held in the City's name; deposited at the same time the investment is made; and have a defined termination date. Flexible repurchase agreements (Flex-Repos) must be purchased through a primary government securities dealer, as defined by the Federal Reserve, or financial institutions doing business in this state (see Appendix E for a current list of Primary Dealers). Flex-Repos may be utilized on new bond issues as deemed necessary and advantageous to the City. Repurchase Agreements will only be executed with counterparties that have signed a TBMA Tri-Party Repurchase Agreement with the City. A sample TBMA Tri-Party Repurchase Agreement is incorporated in this investment policy as Appendix F. 7. Mutual Funds a. No-load Money Market Mutual Funds are acceptable investments provided they are registered and regulated by the Securities and Exchange Commission, have adollar- weighted average stated maturity of 90 days or less, maintain a stable net asset value of $1 per share, and provide the City with a prospectus and other information required by the Securities Exchange Act of 1934 or the Investment Company Act of 1940. b. No-load Mutual Funds are acceptable investments provided they are regulated by the Securities and Exchange Commission, have an average weighted maturity of less than two years, are invested exclusively in obligations as expressed in Section 2256, subchapter A, are continuously rated not less than AAA or it's equivalent by at least one nationally recognized credit rating agency, and conform to all requirements under the 10 Public Funds Investment Act relating to the eligibility of investment pools to receive and invest funds of investing entities. (See Appendix G for the complete requirements for authorized mutual funds under the Act.) 8. Investment Pools a. Investment pools must provide the Investment Officer with an offering circular or other similar disclosure instrument that contains specific and detailed information required by the Act. Additionally, the pool shall provide transaction confirmations, detailed monthly transaction summaries, and monthly performance reports to the Investment Officer. The specific requirements for authorized investment pools are detailed in the Public Funds Investment Act, Subchapter A, Section 2256.016 (Appendix G.) Authorized pools must maintain credit ratings no lower than AAA or AAAm or an equivalent rating by at least one nationally recognized rating service. Investment pools created to operate as a money market mutual fund must mark investments to market daily and maintain a net asset value of $1 per share with the market value per share between .995 and 1.005. b. In order to participate in an investment pool, the City Council must approve by resolution or ordinance a Participation Agreement or Inter-local Agreement to be executed with the State or Inter-local authority responsible for the investment pool. This agreement will specify the City's authorized representatives and the standard delivery instructions for fund transfers and information reports. (See Appendix I for approved inter-local agreements.) B. Unauthorized Investments The following investment instruments are specifically not authorized: Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal (Collateralized Mortgage Obligations (CMO) - derived Interest Only Strips), 2. Obligations whose payment represent the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest (CMO-derived Principal Only Strips), 3. Collateralized Mortgage Obligations that have a stated final maturity date of greater than ten (10) years, 4. Collateralized Mortgage Obligations whose interest rates are determined by an index that adjusts opposite to the changes in a market index (Inverse Floaters), 5. Certificates of Deposit and other investments issued by Savings and Loans, 6. Share Certificates and other investments issued by Credit Unions, and 7. Guaranteed Investment Contracts. 11 VI. INVESTMENT PARAMETERS A. Diversification Diversification of funds and investments must be accompanied by competitive bidding of all investments to assure diversification among securities dealers. Diversification is necessary to reduce the portfolio's credit and market risks, while helping the portfolio attain a market rate of return. The City shall seek to conduct its investment transactions with several competing, reputable investment security dealers and brokers to protect principal while optimizing interest opportunities. To assure diversification of financial institutions, business involving two party transactions ~i.e. repurchase agreements} with any one investment broker should be limited to thirty percent (30%} of the par value of the total portfolio for any reporting period. In this way, a bankruptcy, receivership, or legal action would not immobilize the City's ability to meet payroll, operating, or other expenses. It is the policy of the City to diversify its investment portfolio so that reliance on any one issuer or broker will not place an undue financial burden on the City. B. Investment Type Depositories for Municipal Funds (Chapter ~ 05, Local Government Code}, the Public Funds Investment Act (Chapter 10, Government Code), and City Ordinance Number 2079 authorize depositories and define allowable investment programs for municipal governments. It is the policy of the City to purchase only securities authorized by both the Public Funds Investment Act and Section V., subsection A., of the City's investment policy. Market risk shall be minimized by diversification of investment types. The following limits, by instrument, are established for the City's total portfolio: ~ . Repurchase Agreements 50% 2. Certificates of Deposit 30% 3. U.S. Treasury Notes/Bonds/Bills 80% 4. U.S. Agencies and Instrumentalities 75% 5. Commercial paper (indirectly through investment pools} ~ 0% fi. State and Local Bonds and Notes 20% 7. Money Market Mutual Funds 80% S. Mutual Funds 15% 9. Investment Pools 100% The maximum maturity of any given investment in the portfolio shall not exceed a final, stated maturity of ~-3 years from the date of purchase. Reductions in the size of the portfolio due to cash outflows may cause an investment type to exceed the maximum percentage allowed for that investment type. In such situations, securities will be sold to reduce the percentage to 12 allowable levels only if no loss will be realized from the sale. If a loss will be realized, then the investment may be held to maturity. To allow for efficient and effective placement, a singular repurchase agreement can be utilized for the investment of bond proceeds, which exceeds the 50% limitation. VII.INVESTMENT PROCEDURES The City's portfolio shall be designed with the objective of obtaining a rate of return through budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow requirements. The risk-return relationship will be controlled through the investment parameters, operating requirements, and guiding policies of the City Council. Market value of all securities owned will be compared to current book value of those securities to determine portfolio performance on a quarterly basis. Safety of principal is the foremost objective of this investment policy. The City will practice competitive bidding when purchasing all investments to guarantee the highest rate of return for the desired maturity date. The right is reserved to reject the most financially favorable bid if it is potentially disruptive to the investment strategy or portfolio composition of the City. A. Approval of Broker/Dealers It is the policy of the City to purchase securities only from those institutions on the City's approved list of broker/dealers and banks. The Investment Committee shall at least annually, review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. All securities dealers must be registered and certified with the Texas State Securities Commission, National Association of Security Dealers ("NASD") and Securities and Exchange Commission ("SEC"). Those firms that request to become qualified bidders for securities transactions, including financial institutions, banks, money market mutual funds, and local government investment pools, will be required to provide a completed broker/dealer questionnaire that provides information regarding creditworthiness, experience, and reputation. Additional requirements include a certification stating that the firm has received, read, understood, and agreed to comply with the City's investment policy and implemented reasonable procedures and controls to preclude investment transactions that are not authorized by the City's investment policy. A blank broker/dealer questionnaire with certification is included in Appendix C. A current list of approved securities dealers and banks is included in Appendix D. This list may be revised by the Investment Committee as the City's investment needs change. The Investment Committee shall approve all broker/dealers and shall also have the ability to limit the number of authorized securities dealers/banks doing business with the City. All banks authorized to sell securities to the City will be Federal Reserve member banks and must be approved by the Investment Committee. No investments will be placed with Savings and Loan Institutions or Credit Unions. 13 B. Investment Transactions It is the policy of the City of North Richland Hills to require competitive bidding for all individual security purchases and sales except for transactions with money market mutual funds and local government investment pools. A minimum of three bids must be obtained to ensure a competitive price for the transaction. All investment transactions must be approved by the Assistant Director of Finance, or the Director of Finance, or, in their absence, an authorized Investment Officer. Appendix B contains the Investment Bid Form, Security Information Worksheet, Broker/Deafer Rotation Procedures, and Trading History by Broker worksheets necessary to provide documentation for all investment transactions. All securities purchased shall require delivery on the settlement date to the City or its third party accounts on a delivery versus payment ("DVP") basis, with the exception of investment pools and mutual funds. By so doing, City funds are not released until the City has received, through the Federal Reserve wire, the securities purchased. C. Investment Reporting The Public Funds Investment Act and City Ordinance Number 2079 require the preparation of quarterly management reports and an annual report of all investment transactions of the City be presented to the City Council. The fourth quarter report for the fiscal year will be considered as the annual report. The Primary Investment Officer will prepare the required quarterly and annual reports for evaluating investment portfolio performance. The reports will be approved and signed by all members of the Investment Committee. The reports will include the following information, as required by the Public Funds Investment Act: 1. A summary narrative of investment activity and portfolio performance over the Period 2. Size and composition of portfolio at the beginning and end of the reporting period 3. List all investments according to the fund for which they were purchased 4. Beginning and ending book and market value for all securities held 5. Beginning and ending book and market value for the total portfolio 6. All additions and changes to the market value during the period 7. State the compliance of the portfolio to the investment policy and the Public Funds Investment Act 8. Yield 9. Diversification of investments 10. Total sales, maturities, and purchases 11. Accrued interest 12. Performance compared to an established benchmark 14 These quarterly reports should be used along with the annual report to fully evaluate and explain market trends and adjustment of investment strategies to manage market fluctuations. The annual report will show on a fiscal year basis the results of the overall investment strategy. The quarterly reports will conform to GAAP and be reviewed annually by the City's independent auditor, with results reported to the City Council. D. Marking to Market Market value of all securities in the portfolio will be determined on a quarterly basis. These values will be obtained from a reputable and independent source and disclosed to the governing body in the quarterly investment report. VIII. CUSTODIAL CREDIT RISK MANAGEMENT A. Safekeeping and Custodial Agreements The laws of the State of Texas and prudent treasury management require that all purchased securities shall be held in safekeeping by either the City, a City account in a third party financial institution, or the City's safekeeping account with its designated depository bank. All securities owned by the City shall be held by a third party safekeeping agent, or in the Federal Reserve Bank, except for certificates of deposit that have FDIC insurance provided. For certificates of deposit with FDIC insurance, the City will hold the deposit receipt. Transfers of securities in safekeeping shall be processed with written confirmations. The confirmation will be used for documentation and retention purposes. One of the City's designated Investment Officers must approve release of collateral prior to its removal from the safekeeping account. B. Collateral Policy Consistent with the requirements of Texas law as defined in Government Code 10, Chapter 2257, known as the Public Funds Collateral Act, it is the policy of the City to require full collateralization of all City investments other than obligations of the United States and its agencies and instrumentalities. Collateral on investments shall be maintained by an appropriate third party safekeeping agent, as designated by the City. This policy also applies to any deposits held in an approved depository in excess of the amount protected by FDIC insurance. The City of North Richland Hills shall accept only the following securities as collateral: 1. FDIC insurance coverage 2. A bond, certificate of indebtedness, or Treasury Note of the United States, or other evidence of indebtedness of the United States that is guaranteed as to principal and interest by the United States 15 3. Obligations of the United States, its Agencies, and Instrumentalities 4. A bond of the State of Texas or of a county, city, or other political subdivision of the State of Texas having been rated as investment grade (investment rating no less than "A" or its equivalent) by a nationally recognized rating agency with a remaining maturity of ten (10) years or less Certificates of deposit plus accrued interest up to $100,000 per non-depository bank do not need to be collateralized pursuant to this policy as long as FDIC insurance is provided. Certificates of Deposit in excess of $100,000, including accrued interest must be secured by approved collateral for the amount in excess of FDIC insurance coverage . Collateral is valued at current market plus interest accrued through the date of the valuation. Collateral shall be marked to market daily to determine if adequate collateralization is being maintained. Repurchase agreement collateral must be maintained at the following levels, with respect to repurchase agreement par value plus accrued interest: Maturity of U. S. Treasury Other Collateral Securities Securities 1 year or less 101 % 102% 1 year to 5 years 102% 105% Over 5 years 103% 110% Collateral levels should be maintained during an investment transaction. The amount placed in the bank to cover the cost of a security purchase should be fully collateralized in the event the security fails to be delivered to the safekeeping agent. Collateralized investments often require substitution of collateral. Any broker or financial institution requesting substitution must contact the Primary Investment Officer, or in his absence any other authorized Investment Officer, for approval and settlement. The substituted collateral's value will be calculated and the substitution approved if its value is equal to or greater than the original collateralization level. The Director of Finance, or an authorized designee, must give immediate notification of the decision to the bank or third party holding the collateral. Substitution is allowable for all transactions, but should be limited, if possible, to minimize potential administrative problems and transfer expense. The Director of Finance may limit substitution and assess appropriate fees if substitution becomes excessive or abusive. Collateral shall be audited at least annually by the City's independent audit firm, and may be audited by the City at any time during normal business hours of the safekeeping party. The financial institutions with whom the City invests and/or maintains other deposits shall provide, as requested by the City, a listing of the City's certificates of deposit and other deposits at the institution and a listing of collateral pledged to the City marked to 16 current market prices. The listing shall include total pledged securities with the following information: Name Type/description CUSIP Par value Current market value Maturity date Moody's or Standard & Poor's rating (both if available) Under Chapter 2257, Public Funds Collateral Act, substitution and release of collateral must be approved by the governing body. City of North Richland Hills Ordinance Number 2079 Section 3 delegates the Investment Officers' overall responsibilities to ensure that investment objectives are accomplished, and therefore, the authority to release and substitute collateral as deemed necessary and reasonable within the guidelines of this policy. IX. ARBITRAGE The Tax Reform Act of 1986 (Title 26 U.S.C. Section 148) provides limitations on the City's yield from investing tax-exempt bond proceeds and debt service funds. These arbitrage rebate provisions require that the City compute earnings on investments from each issue of bonds on a periodic basis to determine if a rebate is required. To determine the City's arbitrage position, the City is required to calculate the actual yield earned on the investment of the funds and compare it to the yield that would have been earned if the funds had been invested at a rate equal to the yield on the bonds sold by the City. The rebate provisions state that periodically (not less than once every five years, and not later than sixty days after maturity of the bonds), the City is required to pay the U.S. Treasury a rebate of any excess earnings. These restrictions require extreme precision in the monitoring and record keeping of investments, particularly in computing yields to ensure compliance. Failure to comply can dictate that the bonds become taxable, retroactively from the date of issuance. The City's investment position relative to the arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is a fiscally sound position to continue maximization of yield and to rebate excess earnings, if necessary. X. DEPOSITORIES The Texas City Depository Act, Local Government Code Chapter 105, prescribes procedures for selection of a city depository designating that both general-law and home- rule cities are "authorized to receive applications (as depository) for the custody of city funds from any banking corporation, association, or individual banker doing business within the city." This clause indicates that cities are not required to designate one central depository. The City of North Richland Hills will, through a request for proposals process, designate one or more banks to serve as its primary depository(ies) to maximize investment capabilities and minimize banking cost. The depository designation does not limit investment activity to one financial institution. 17 The consideration the City of North Richland Hills will use to execute a banking services contract will include: • Ability of Bank to perform and provide the required and requested services • Reputation of bidder and quality of services provided • Cost of banking services • Interest paid on interest bearing accounts and deposits • Earnings credit calculation on account balances • Completeness of proposal and agreement to points outlined in the request for proposals • Convenience of locations • Previous service relation ship with the City • Financial strength and stability of institution Obtaining competitive proposals on the City's depository specifications will be the responsibility of the Director of Finance. Selection of the depository shall be based on the institutions offering the most favorable terms and conditions for the handling of City funds and the services available to the City. The maximum term for a depository contract under State law is five years. The City's contract shall not exceed five years. A performance review will be conducted at least once every six months by the Investment Committee to evaluate the working relationship between the City and the depository bank. Special banking needs may be contracted for by the City outside the depository contract if approved by City Council. If a depository does not meet the City's requirements in the banking services contract, the bank will be required to meet the requirements within ninety days or lose the depository contract. XI. INVESTMENT POLICY ADOPTION The investment policy shall be adopted by ordinance or resolution of the City Council. It is the City's intent to comply with state laws and regulations. The policy shall be reviewed annually by the Investment Committee and the City Council. City Ordinance Number 2079 states that policy revisions that require enactment due to updates of applicable state or federal laws may be authorized by the City Manager; however, other significant revisions must be approved by the City Council. 18 APPENDIX 19 N ~~H 20 Appendix A ORDINANCE NO, ~~ AN ORDINANCE OF THE CITY OF NC3RTH RICHLAND HILLS, TEXAS PROVIDE NG FOR THE DESIGNATION OF INVESTMENT OFFICERS: PROVIDING FOR INVESTMENT RULES AND POLICIES: PROVIDING FOR MANAGEMENT REPORTS: REPEALING A PREVEOUS ORDINANCE: AND PROVIDING A SEVERABILfTY CLAUSE Whereas, the City of North Richland Hills acknowledges the high priority ofi providing the necessary guardianship of public funds in the municipal sector; and Whereas, the City Council expressly intends to set high fiscal standards, delegate treasury and investment duties to appropriate officials, and to review the actual performance at regular intervals; and Whereas, the City Council hereby intends to implement investment requirements set forth in Tex. Rev. Civ. Slat. Ann., Art. 4413 (34c) and 2256, NOW, THEREFORE, 8E 1T ORDAINED BY THE CITY COUNCIL OF THE CITY OF NORTH RICHLAND HILLS, TEXAS. Section 1. tnve~tr~nt Rules. Tha# the following policies and guideEines be established as investment rules governing the investment of local funds: A. Afl City funds from various revenue sources shall be hilted or requested as early as they are recognized, compu#ed, and determined #o be due to the Ci#y. B. Funds received by the City shall be deposited in#o the deposi#ory bank at the end ofi each business day or as early as practical operating circumstances will allow. C. Alf debts owed by the City shall be paid as of the date they come due and not before unless approval is given by the City Manager. D. Based on cash forecasts, all monies not required immediately to pay obligations shat! be invested in an income producing instrument or account. E. Atl investment activities and procedures shall be governed by a written investment policy. The Investment policy is at#ached to this ordinance. Revisions #o the Investment Policy required by updates to state and federal laws may be authorized by the City Manager. Any other significant alterations to the Investment Policy must be approved by the City Council. Section 2. t vestmert~, Ob'e ~~p~. The City's funds shalt be invested in appropriate instruments in such a manner to ensure the safely of investments, retention of inves#ment principal, maintenance of sufficient liquidity to cover operating needs, diversity of the portfolio, and maximization of yield. The preceding objectives are fisted in order of priority. The City shelf invest in instruments providing the highest rate of return, as long as such investments do not conflict with the other priorities of the City's investment portfolio or statutes of this state regulating investments of City funds. 21 Appendix A Section 3. Designated (ficia~,. The City Council hereby designates the investment Officers of the City to be the City Manager and Finance Director. The Cify Manager and Finance Director will have the overall responsibility to ensure that investment objectives are accomplished and that the guidelines of the investment policy are followed. The Finance Director will designate staff members to administer the daily functions of managing the cash and investments of the City. These persons mus# be authorized as investment officers by a Resolution of the City Council before they are delegated any investment duties. Section 4. ~,gage~ent Re orts, At least quarterly the investment officers shall prepare a written report concerning the City"s investment transactions for the preceding quarter. This report will describe in detail the investment position of the City at the end of each quarter. A report on investment activity for the fiscal year sha11 be presented as the report for the fourth quarter. The reports shall be signed by the City Manager, the Finance Director and all other authorized inves#ment officers and presented to the City Council. Section 5. Repeat of Previous Ordir~,n,,,~es. Ordinance No. 2076 is hereby repealed. Section 6. Severabil tv. Provisions of this ordinance shaft be, and they are hereby, declared to be severable; and should any portion of it be declared to be invalid for any reason by a court of competent jurisdiction, such holding shall not affect the remaining portions thereof. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY C7F NORTH RlCNLAND HILLS, TEXAS on this the 9th day of October, 7995. APPROVED: ATTEST: Secretary Tommy Brown ayor APPROVE S TO FORM AND LEGALITY: Att mey 22 Appendix B NORTH RICHLAND H I L L S city ~~t ch~~~~~ INVESTMENT BID FORM Trade Date /Time; Investment Account; Desired Security: Desired Par Value: Desired Maturity: Purchase: Sell: Settlement Broker Security Maturity Coupon YTM YTC Call Date Date Comments Accepted 1 2 3 4 5 K:IACCT1lnvestmentslFormsllnvestment Bid Form.xls 23 Appendix C N~RT~-I RICHLANC} H I L L S city ~,f ch~~~C~ SECURITY INVESTMENT WORKSHEET NAME OF SECURITY: CUSIP #: COUPON /DISC RATE: YIELD TO MATURITY/CALL: MATURITY/CALL DATE: PAR VALUE: TRADE DATE: SETTLEMENT DATE: PRINCIPAL: ACCRUED INTEREST: $0.00 PURCHASE PRICE: $0.00 SAFEKEEPING ACCT : 259091 NAME OF BROKER: TIME OF TRADE: ENTERED BY: FAx TO: BANK OF AMERICA SAFEKEEPING PHONE 1-800-657-9529 FAX # 980-233-7446 APPROVED BY: FUND: CONSOLIDATED CASH J.E./Group # K:\ACCT\Investments\Forms\Security Information Worksheet.xls 24 Appendix d Br~-kerlL~e~ler t~otatic~n Pr+acedures 1. .Open the broker rotation file located at K;IACCT1lnvestments~Formslbroker rotation YYYY.xIs (YYYY= numerical year}. 2. Three brokers are selected on the basis of successful. bids for the .previous investment purchase and on rotation in alphabetical order within the group of approved brokers. For each investment purchase, bids are requested from each of these three brokers: a. The successful bidder will remain in the bidding group for the next investment purchase. b, The two unsuccessful bidders will be rotated out of the bidding group for the next purchase, c. The next two brokers in alphabetical order wiH be rotated into the bidding group for the next investment purchase. 3. The three brokers selected for the bidding group are noted on the Investment Bid Form. Qnce bids are received from all three brokers and the successful bidder has. been approved, the. investment is purchased. 4. Using the completed and approved Investment Bid Form from the previous investment purchase as a source document, record the Yield to Maturity ("YTM") and/or Yield to Call ("YTC"~ percentage for each bid on the Trading History by Broker [Trading History~YTM] worksheet of this file. Recording an entry in the row for a broker will automatically increase the Nurrrber of Times Selected value for that broker. However, in the case of a successful bid by a broker, the 1Vc~mber of Tirr~es Awarded Bid value will need to be menually updated. 5. For the successful bidder, format the cell containing the YTM/YTC percentage in bald text with a light green background. Copy the name of the successful. broker to the light green highlighted box at the top: left of the page. This indicates that they will be included in the nex# bidding group. 5. For the unsuccessful bidders, copy each bidders name to one of the two boxes below the green highlighted box with the successful bidder's name. This indicates that these two brokers will be rotated out of the bidding graup far the next investment purchase. ?. In the spreadsheet column for the next investment purchase: a. Format the cells far the unsuccessful bidders with a tan color background. This shows they are excluded from the bidding graup for the next investment purchase. 25 Appendix D b. For the successful bidder and the two brokers who follow the last unsuccessful broker in alphabeti-cal order, leave the background of the cells clear. These will be the brokers included in the bidding group for the next Investment purchase. c. For all remaining brokers who will not be included in the bidding group for the next investment purchase, format the cells with a tan color background. 8. Add footnotes to the Trading History by ~3r~aker as necessary, 9. open the document K:IAGCT1lnvestmentslFormslBidform.xls. 4n the- [newform] worksheet in this file, note the. names and contact information of the selected bidding group of brokers in the appropriate space and save the document file. The contact information is found on the [Contact IistJ worksheet in this file.. This file will be further updated with information concerning .purchase of the new investment at a later time. 26 City of North Richland Hills Trading History by Broker First Southwest Great Pacific Morgan -Keegan Firm Appendix FY 08-09 Remains in bidding group for next investment purchase. Remains in bidding group for next investment purchase. Rotates into bidding group for next investment purchase. Number of Times 10130 11130 12131 Selected Awarded Bid 1 Duncan-Williams 0 0 2 First Empire 0 0 3 First Southwest 0 0 4 Great Pacific 0 0 5 Morgan-Keegan 0 0 6 Multi-Bank Securities 0 0 7 Seattle Northwest 0 0 8 Simmons First 0 D 9 Southwest Securities 0 0 10 Vining Sparks 0 0 11 Wells Fargo 0 0 12 BOA - CD 0 0 Investment purchased based on highest yield for the desired maturity Highest yield offered per broker Out of bidding group for this rotation 27 N FAH 28 Appendix F N ~~H City of North Richland Hills Broker/Dealer Questionnaire and Certification 1. Name of firm 2. Local address National address 3. Local telephone number National telephone number 4. Primary representative/manager/partner-in-charge Name Name Title Title Telephone # Telephone # 5. Is your firm a subsidiary of another firm? [ ]Yes [ ] No If yes, which firm? 6. Is firm a primary dealer in U.S. Government securities? [ ]Yes [ ] No If so, for how long has firm been a primary dealer? years 7. Is your firm an inventory dealer? [ ]Yes [ ] No Do you take a position in securities which you sell or buy? [ ]Yes [ ] No 8. What was your firm's total volume in U.S. Government and agency securities trading last year? Firm-wide $ Number of transactions Local office $ Number of transactions 29 Appendix F N FAH City of North Richland Hills Broker/Dealer Questionnaire 9. Which instruments are offered regularly by your local desk? [ ] T-bills [ ]Treasury notes/bonds [ ] GNMAs [ ] FHLMCs [ ]BAs (domestic) [ ]Commercial paper [ ]Bank CDs [ ]S&LCDs Other Federal Agencies (please specify) Instrumentalities (please specify) 10. Identify all personnel who will be trading with or providing security quotes to North Richland Hills employees. Name Primary Alternate Alternate Title Telephone # (Please attach resumes of the personnel listed above.) 11. Which of the above personnel have the City of North Richland Hills' investment policy? 12. Are the firm and the account representative registered with the Texas State Securities Commission? [ ]Yes [ ] No If yes, for how long? years Representative 30 Appendix F NF~H City of North Richland Hills Broker/Dealer Questionnaire 13. Please indicate which agents of your firm's local offices are currently licensed, certified, or registered and by whom. Agent Licensed or registered by 14. Please identify firm's public sector clients in our geographical area who are most comparable to North Richland Hills. Entity Contact Person Telephone # Client 15. Is firm a member of NASD? [ ]Yes [ ] No If not, why? 16. Please mark each regulatory agency by which firm is examined and/or to which firm is subject to agency rules and regulations: [ ]FDIC [ ]SEC [ ]NYSE [ ]Comptroller of currency ( ]Federal Reserve System Other regulatory or oversight agency: (Note: Multi-state firms need not include regulatory agencies which do not have jurisdiction over firm's activities in the State of Texas) 17. Have you obtained all required licenses to operate as a broker/dealer in the State of Texas? [ ]Yes [ ] No 31 Appendix F NFZH City of North Richland Hills Broker/Dealer Questionnaire 18. To the best of your knowledge, has there been any "material" litigation, arbitration, or regulatory proceeding, either pending, adjudicated or settled, to which the firm has been subject within the last five (5) years that involved issues concerning the suitability of the sale or purchase of securities to an institutional client? If so, please describe each such matter briefly. For purposes of this question, proceedings are "material" if your independent accountant applying generally accepted accounting principles determines that such proceedings required disclosure in the firm's financial statements. 19. Have any of the employees listed in item ten (10) ever had sanctions imposed due to any of the activities noted in item eighteen (18)? Explain the outcome, case, and/or case citation in an attached explanation. 20. Please provide samples of research reports that your firm regularly provides to public-sector clients. 21. Explain the firm's normal custody and delivery process. Who audits these fiduciary systems? What reports, transactions, confirmations, and paper trail will North Richland Hills receive? 22. Enclose a complete schedule of fees and charges for various transactions. 32 Appendix F N~rZH City of North Richland Hills Broker/Dealer Questionnaire 23. Provide the firm's most recent certified, audited financial statements. In addition, for those dealers preparing and submitting financial statements to the following organizations, provide publicly available financial documents filed with these agencies for the most recent reporting period. National Association of Securities Dealers Securities and Exchange Commission New York Stock Exchange Federal Deposit Insurance Corporation 24. Has firm consistently complied with the Federal Reserve Bank's capital adequacy guidelines? As of this date, does firm comply with the guidelines? Has firm's capital position ever fallen short? By what factor (1.5X, 2X, etc.) does firm presently exceed the capital adequacy guidelines? Include certified documentation of firm's capital adequacy as measured by the Federal Reserve standards. 25. Describe the capital line and trading limits that support/limit the office that would conduct business with North Richland Hills. 26. If firm is not a bank, provide the following information regarding the firm's principal banking relationship. Bank Name Address Contact Telephone # Length of relationship 33 Appendix F ~~~ City of North Richland Hills Broker/Dealer Questionnaire 27. Does firm participate in the SIPC insurance program? [ ]Yes [ ] No If not, please explain why. 28. What portfolio information do you require from your clients? 29. How many and what percentage of your transactions failed last month? Last year? 30. Describe the precautions taken by firm to protect the interests of the public when dealing with governmental agencies as investors. 34 Appendix F NF~H City of North Richland Hills Broker/Dealer Certification - CERTIFICATION - This certification is executed on behalf of the City of North Richland Hills (the Investor) and (the Business Organization) pursuant to the Public Funds Investment Act, Chapter 2256, Texas Government Code (the Act) in connection with investment transactions conducted between the Investor and the Business Organization. The undersigned Qualified Representative(s) of the Business Organization hereby certifies on behalf of the Business Organization that: The undersigned is a Qualified Representative of the Business Organization offering to enter an investment transaction with the Investor as such terms are used in the Public Funds Investment Act, Chapter 2256, Texas Government Code, and 2. The Qualified Representative of the Business Organization has received and reviewed the Investment Policy furnished by the Investor, and 3. The Qualified Representative of the Business Organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the Business Organization and the Investor that are not authorized by the Investor's investment policy, except to the extent that this authorization is dependent on an analysis of the Investor's entire portfolio or requires an interpretation of subjective standards. Qualified Representative of the Business Organization Signature: Name: Title: Date: 35 N ~r~H 36 Appendix G City of North Richland Hills Approved Securities Dealers As of January 27, 2009 Securities Dealers Duncan-Williams, Inc. First Empire, Inc. First Southwest Company Great Pacific Securities Morgan, Keegan, & Company, Inc. Multi-Bank Securities, Inc. Seattle-Northwest Securities Corporation Simmons First Investment Group Southwest Securities Vining-Sparks IBG, LP Wells Fargo Brokerage Services, LLC Investment Pools TexPool LOGIC MBIA CLASS TexSTAR 37 Appendix H City of North Richland Hills Primary Securities Dealers As of January 27, 2009 No primary dealers are currently approved. 38 Appendix I r~r~~.~~.~t Se.faternber 1J~G Versla~~ l~at:ed as c:~f Uetwec-~r]: incl. 1. ~4~~licability From. ti:rn.e to tin-~e tlae parties hereto r]~ray enter into transactions in ti~hich ono party ("Seller„) agrees to t~•zz:]sfer to the other ("I~L]yez`"~ se<:ur•ities oz` other assets ("Securities"} ag,airrst tl]e transfe]• of f~~r]ris ley Br.iyer, w°ith a simulta.zloous a~roement lay Fzlyer• to transfer to ~ell~r sz:~ch Securities at a date. certai.zz or nn der~nand, against the transfer of funds uy Seller. Each such transaction. shall tie referred to I]ereiri as a "`I'rarisacton" and, unless otrzerwise ar~eoci in t~vz-iting, shall ~e govFt•ned by tl]is ~~;r~ement, i tjclutiizag stay supplerrzer]tal. torn7s or conrl.i tiat]s c.car] t:4:~lracsd ;in l-~zln~~~:1 k]cxreto ~znd in a]:~y ott]er annexes icleritified heroin or therein as applicable l~ez•euncier. 2. T.~efinitians (a) "Act of Ir]sol~~ct~ry"; wl.t:h z~;sper to ar]y party, (i) the comr]~encement by s~.ich party as clrat~tor of any case or pracetdiz~ag t:zzade;r az]y bar~~z~uPtcy, :insolvency, ]~co]~gar]izatiori, Iicluldatian, znoratari-.. um, dissolutic]t~, clelinciLrene}~ Qr sirnflar lrzt~v, or such. ~avty seeking the. appointment or election of a receiver, consez-~~atar, trtisl:ee, custodian car similar offlc;ial for such party or any substantial. ladrt of its prvt}erty, or tyre. caia~~enin~, of any z~neeti~~7g czf creditors far p~:zrposes of craixzrnc~ncfn~ gray s~.rel~ case or iaroceeding or seeking such ara appointrnez]t or electi.arr, (ii) t1tF c~an]nzer]c~e- naent of ar~y such rase or pzbceedir~g against such par°ty, or` another seeking scrch an appoint- ment or election, or t:ho filing against a party of an application far a protecii~=e decree under the provisians of the Securities Iravcastor• Protection Pict: of 1.J7Q, ~rt]ich (~1) is crsr]senteci to or r]ot tiz]aely c:antested lay stzcla. party, (.B) results ir] the entry of an order fiar relief, swell aza alapa%nt- me~at ar election, the issuar]ce of such a protective decree or the entry° af' ar] order l~avir]g a sirn- ilar effect, tar (C'} is nat. disi`nissedwithin I5 clays, (iii.) the t-na.kiz~g hy~ sucla I3ar•ty' of a general assi~;z]mcant for tl~t.e Yaonefit of creditors, or (~=) tla:e adrn9ssion irz w~•ii:ing lay such. party of such part~t's inataility to pay such party's dents as thoy become due; (la) "~lclclitic~nal 1-'ttrcllasc~d Securities", Securiiic~ Iaravided b~~ Seller to l3uy~x• puz-suant to Paz°agrapl~~ 4 (a) hereof; 39 Appendix I (c,} "ELtyer's Margil~ Alr~.ount'; c~vitll respect to any Transaction. as of ax~y date, tl-le amaLtrlt obtained. Y~y alaplicanon oi' tI•le Buyer's Margin Percet~tagc tv tlae Re~Ltrchase Prig ft~r such Transaction as of such date; (d) °'Buyer's 1VIargin Percentage", With respect to arty `li'ar7saction as of al~y elate, a percentabe (Whctl tray be equal to the Seller's Margin Percentage} agreed to by BLtyer algid Seller ol~, in the absence of a.ny such ~l~;reement, the ~~err.enta~;e obtained by divlcling tllc Market Va.lur of the I'ul~rhr_lse=c~ See~.rri.ti~s oIi tl3e Purcllas~ Date lay the .Pureha5e Prlc:e o~~l tl~fy I'~_trrl~lasc .Date for such. 'I~al~sactiol~l; Vie) "Col~tfirnaati.on", tlxe n~eaning specified ire Paragraph 3 (la} hereof; (f) '"Incorl~Ie", with respect to any Secuz~ity ~t al~y time, any ~~rincipal thcreaf a.nci all interest, divicic~rlds or other distrllautions thereon; (g} ~ Ma.rgin Def'ic•it", the meal~iing specified in Paragraph ~1(a) t~lereof; ~l1) `Margin Excess", tJ~le meaning specified in Paragraph fi(b) hereof; (i) "Margin Notice Deadline»; the time agreed to L-y the parties in the reler~al~t Confirmation, Annex I hereto or otller~t~vise as the deadline- for giving rlatice r•ee~uiril,b same-day satisfac- tion Of 171ar~,111 Tlldlrltel'larlCe olal'I~atior~lS aS'IJrnvided iTl I'ara~;l`aph ~ l~el'eof (oI', in tl}e alJSenCe ~~ any s'uc'h agI'E'erTlc'_rlt, tl~e Clea.C111T1e for sllCll pLIrpC7SE'S f'Staiall.s~lecl Ire at:fOrd'dr]Ce With .tnar'ket practice); (j) "Market ~~alue", «~itli respt"Yct to any Securities as of al~y date,, the price for s~.tcli Securities on such. datc7 obtained. from. a generally recognized sottrGe agreed to Lay the parties or the r110St 1'ecC'Ilt closing bid gt:totation from such a stattrce, p1Lls aCCrUeGI Il~eome t0 the extent not irlclLl~it:d tl~IC~~rEiz~ (other. tlaari any h~eome ("I°e~iteti. or tral~sferred to, or appiied (:o the abligat:ialas of; Selle:t• pursrtatat to I'aI°a~;rapl-i 5 laerc~of~ as of srlch date (unless contrary to rrlar'i~~t practice fo;~ such Secul•ii-ies}; (k} "Price Differential ; ~~itl~ resl3e-ct to any Transactio~.l as of arty date,. tYYe ag~x~egat~ al~liat.Il7t ol3tail7ed lay daily aPpltcatio.ii of the Pricing kite for such `Transaction to the Purchase Price for such Transaction on a ~6a day per t'eal' basis for tlae actual nun~laer of days dur- ing th.e period cornmencil~lg on (and. inclLrdin~) the Purcl~.lase Date f©1~ cilcl7 rI'i'arlsactioxl anr], endil~g on ~iaut exclttdirlg} the date of cietermiriation (rerlucecl by an}~ amount of such Price D:ii'ferential preliiously priid lay 5c11eI~~ t:o F3uyer ~~~~ith rr sf~ect to such Ti•ansaction~; (l~ "Pricing Rate'; tlje per annum iaercer~tage rate for Betel°rninatiolry of t!'ae Price Differential; (rn) Prime Rate" the prime rate of U.S. ct.~r~Ztxtercial. banks as pLYlalislaed ire The Wall Street Joul•na,l dal-, if rnox~e tl~~an r~,1~Ie such rate. is pctl~lisl~.ed, tl~e average of st.tch. rates); (n) ':Purchase Date'; file date or7 Wliirla Purcl-laseci Sec ru'ities aI-e to 'be trF.~I~st~rrecl lay Sellclr tc~ BLlyer; Septe~nbei• 1996 Master Repurcl3ase A~reemeiat 40 Appendix I (o) "Purchase Price", (i) on t17e Purchase Date, the price at which Purchased. Sec~.Irilies are tI•axisferred by Seller to Buyer, anal (ii) thereafter, except where Buyer anti Seller agree oth- erwise, such price increased. by the amount of any cash transferred. by Buyer tsa Seller pur- suant to Paragraph 4(1:x) hereof and decreased by the arriaunt of any cash transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof ar appli:ed to reduce Seller's oUligations under clause (ii) of Paragraph 511ereof; (p) "Purchased Secu.ri:tles", the Securities transferred try Seller to Buyer i.n a Transaction 1-,.ere- ttnder, and any Securities stti~stituted therefor ire accordance with Paragraph 9 hereof. Th.e term "Purchased Sec~u°ities"with respect to any Transaction at any time also shall include Additi:ona.t Pu.rehased Securities .delivered pursuant to Paragraph 4 (a) hereof and shall exclude Securities returned pursuant to Paragraph 4(b) hereof; (c~ ~Repurcl~ase Date", the date on which Seller is to repurchase -the Purchased Securities frain Buyer, including 'any date deternuned by application of tl~e provisiol~IS of Paragraph 3 (c) or 1.1 hereof; (r) °'Repurchase Price", the pI•ice at which Purchased Securities aI•e to be transferred from Buyer to Seller i.Ipon termination of a Transaction, which. gilt lie determined in each case (including Transactions terminable upon demand) as tiZe sum of the Purchase Price and tl~e Price Differential as of the dike of such ciet~rn~ination; (s) °'Seller's Margin Amount", ~vitt:I respect to any Transaction as of any date, the amount ot~tained by application. of the Seller's Margin Percentage to tl~e Repurel-Iase Price for sclcli Transaction as of such date; (t) "Seller's Margin Percentage", ~~itl1 respect to any Transaction as of any date, a percel~tage (whicl•I may be equal to the Buyer's Margin Percentage) agI`eed to Uy $LIyeI' and. Seller UI`, iI~ the absence of any such agreement, the percentage oUtainecl by dividing the. MaI'itet Value of the Purchased Secul: hies on the Pu.I'cl~ase IJate by the Purchase Price on the: Purchase Date for such Transaction. 3. Iizitiatian; +i/c~nfir-niatiun', Tenn%na~iorl (a) An agreement to enter into a Transaction may be made orally or in ~vritil~g at t11e initia- tion of either Buyer or Sellc•. Oi~I the Purchase Date for the Trunsaction, the Purchased Securities slzail be transferred to Buyer or its agent against the transfel• of the Purchase PI~Ice to an account of Seller. (b) Upon agI-eeing to enter into a Transaction hereunder, $uyer or Seller (or both), as shall be agreed, shall promptly .deliver to the other party a written confirmation of each Transaction (a "Confirmation").The Confirmation shall describe the Purchased Securities (including CUSIP nulzaber, if any), identify Buyer anti Seller acid set forth (i) the Purchase Date, (ii) ttie Purchase Price, (iii) the Repurchase Date, ul~less the Transaction is to be terrnir~able on demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction, and. (v) any additional terms or conditions of the Transaction I~ot inconsistent with this Agreement. Tt~e Conflrmat:loa7, together witt~I this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to ti~Ie Ti•atzsaction to tivhieh the Col7firlnatIOn relates, unless with Septein~cr 196 Master Repurchase Agreement 41 Appendix { aspect to the Confirmation specific objection is made pt°omptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreemnn t shall prevail. (cj In the case of Transactions terminable upon demand, such. demand shall be oracle by Buyer or Seller; no later than such time as is customary in accordance with market prac- tice, by telephone or otherwise on or prior to the business day on which su.cll termination will be effective. Dn the date. specified. in such demand, or on the date fixed for termina- tion in the case of Transactions having a fixed term., termination of the Tr ansaetion will be effected 13y tt°axlsfer to Seller or its agent of tl~e Purcl7.ased Sect.tritles and -any Income in resr3ect thereof received by Buyer (and not previously credited or transferred fio, or applied to the obligations of, Seller ptttsuant to Paragraph 5 hereof) against the transfer of the Repurchase Price fio an account of Buyer. 4. 1Vl~rgin Mai nten.ar~ce (a) If at any `time the aggregate Market. Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as $uyer is less than the aggre- gate Buyer's Margin Amount for all such Transactions (a Margin Defieit~j, tYren F3uyer nkay by notice to Seller :require Seller in sucl~.'~Iira;nsactions, at Seller's option, to transfer to Buyer cash or additional Seci.rrities reasonably acceptable to $uyer ("Additional Purchased Secu~~ities"), so that the cash and aggregate Market ~lalue of tlxe Purchased Securities, including any such Additional Purchased Securities, will thereupon equal. ar exceed suc17 aggregate. Bttyet•'s Margin Amount (decreased by the arrtourlt of any Ivlargin Deficit as of such date arising fiotn any Transactions in which. such Buyer is acting as Seller] . (~b) If at any tune the aggregate Market Value of all Purchased Securities sLtbject to all Transactions in which a particular party hereto is acting as Seller exceeds. the aggregate Seller's Margin Amount for all such Transactions at such tune (~:t "Margin Excess"), then Seller tnay l,y notice to buyer :require Buyer in such Transactions, at Buyer's option., to transfer cash or Purchased Securities to Seller, sa that the aggregate Market ~~'alue of the I'urrhased Securities, after deduction of any such cash or any Purchased Sec~.u•itie~s so transferred, t~~ill thereupon. not exceed such aggregate Seller`s Margii~r Amount (increased by rile amount of any Margin Excess as of such. date arising fratx~ any Tra.ns~ctions in which such Seller is acting as Buyer} . (cj If any notice is gir~~en by $uyer or Seller under subparagraph (aj or (bj of This Paragraph at or before tl7e Margin l~totice Deadline on any business clay, the party receiving such notice shall transfer cash or Additional Purchased Securities as prrovided in such subpara- graph no later than the close of business in the relevant market on such clay. 1f any such notice is given after the. Margin Notice Deadline, the party receiving such notice shall transfer si.acl~.~ cash or Securities no later than. the close of business in i:he relevant market on the next business clay following such. notice. (dj Any cash. transferred pursuant to this Paragraph .shall be attributed to such Transactions as shall `fie agreed upon by Buyer and Seller. SepteinE~er 1.996 Muster Repurchase Agrecmei~k 42 Appendix ! (e) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of $uyer or Seller (or both) under subparagraphs {a) and (b) of this Paragraph maybe exercised. only where a. Margin. Deficit or Margin Excess, as the case may be; exceeds a specified dollar amount or a specified percentage of tl~te Repurchase Prices f'or such Transactions (v~rhicl7 amountor percentage shall he agreed. to by $uyer and Seller prior to entering into any such Transactions). {f) Seller artd Buyer tray agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer at7d Seller under subparagraphs {a) and (b) of this Paragraph to I~egttire tine eiirnination of a Margin Deficit or a Margil7 Excess, as the case. may be, maybe .exercised whenever such a MaI'gin Deficit or Margin Excess exists with respect to any single Ti'at~tsaction hereunder {calculated without regard to any other Tl an5acti017 Uutstalldin,~., llndeI' thl5 Flgreenlent), 5. IrYrume Payrnent~ Seller shall be entitled to t~ec:eive an amount equal to all Incorrle paid or distributed on or. irI respect of the Securities that is not otherwise received lay Seller, to the full extent it would be so entitled If the Securities had not been sold to Buyer. $uyer shall, as the parties may agree with respect to ~I7y Transaction (or, ir1 the absence o.f any such agreement, as Bttyer shall rea- sat7ably determine in its discretion), on the date such Income is paid or distributed either (i) transfer to or credit to the account of Seller suc13 Income with respect to any Purchased Securities. subject to such Transaction or (ii) with. respect to Income paid in cash, apply file Income payment oI• payments to reduce the. amount; if any, to be transferred to Buyer by Seller upon termination of such Ti°ansaction. $uyer shall not be obligated to take any action pursuant to the pI•eceding setztenee {A) to the extent that .such action would result in t17e cre- ation of a Margin Deficit, unless pI-ior ther•etct or simultaneously tl~Ierewith Seller transfers to l3ttyei-cash or Additional Purchased .Securities sttfflcient to eliminate such 11~Iargin Deficit, or (B) if an Event of Default with respect to Seller has occurred and is them continuing at the tune such Inrolne is paid. or distributed. fi. Sec~xrr•ity Int.ez•est Alihottgh the parties intend that a.ll Transactions hereunder be sales and purr_1'Iases and not loans, in the event ar~y such Transactiol~s are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for t11e performance by Seller of its obligations antler each such 'Transaction:, and. shall be deemed to have granted to $uyer a security interest in, all. of the Purchased Securities with respect to all Ti-ansactions l~Iereundei- and all. Income thereon and other proceeds thereof. 7. P~ynlent arrd Trar~sfcr l.Inless atl~erwise mtatualiy agreed, all tI~I7sfels of funds hereu~7der shall be in immediately available funds. All Seettrities transferred by one party hereto tx~ t~~e other parfiy (I) sha11 he in suitable form for transferor shall. be accornpanieci by duly executed instrtin~ents of transfel• or assignnlet~t in blank and such other documentation as the party receiving possession tray reasonably request, (ii} shall be ixal7sferrecl on the book-entry system of a Federal Reserve Banlt, or (iii) shall be transferred by any other method mutually acceptr~tbie to Seller and Buyer. Septernl~er 19~& Mosier Repiu•ciiase Agreen~ei~t 43 Appendix I $, Sega•e~~ti~n ~f Pilrchased securities To the extent required. by applicable lave, all Purchased Sect:u~ities iaa the possession of Seller shall be segregated from other securities in its possession and shall be identified as subject to this Agreement. Segregation may be accompllshed by appropriate identification on the books and records of the holder, inclt.~ding a financial or securities inteznzediary or a clearing carpa- ration, All of Seller's interest in the Purchased Securities shall pass to Buyer ox~ ttze Purchase Date and, unless otherwise agreed by Buyer and Seller, .nothing In this Aga•eetnent shall pre- lude Buyer from engaging iaz repurchase transactions witl~z the Purchased Securities ar other- wise seliirag, transferring, pledging ar hypothecating the Purchased Securities, l7ut no such. transaction shall relieve Bttyer of its obligations to transfer Purchased Securities to Seller put•- sua.nt to paragt~aph :i, 4 or 11 hereof, or- of Buyer's obligation to credit or pay Income tc7, ar apply Income to the obligati:ans of, Seller pursuant to Paragraph 5 hereof. R.e+~ur-ec~ I~iselustu~e far TransactYarls In ~1Uhich the S+~iler Reiains ~trstc~r~y of I:he Purchased Securities Seller is not permitted to substitute atl~er securities far those subject. to dais Agreement and therefore must beep $tzyer's securities segregated at all tlrnes, unless in this Agreement Buyer grants Seller the right fio substitute other securities, If Buyer grants the .right. to substitute, this meazas that Buyer's securities will likely be commingled with Seller's oven securities during. the trading day. Buyer is advised that; during any trading day that Buyer's securities are cai~nmingleti with Seller's securities, they [GVill] * [may) ** be subject to liens gzarated by Seller to [its clearing hank] * [third. parties] ** and znay be used by Seller fax: deliveries on other securities transactions, Whenever ~e secitrlties are canamingled, Seller's ability to resegregate substitute securities for Buyer yvill be subject: to Seller's abil:it}J to satisfy [the clear- ing]* [any)** lien or to ot~tain substitute securities, l.,an~uage to Ue used under 17 C.F.R. (3~1b3,~1~e) if Seller is a. governn7ent securities broker nr dealer Diller than a financial institution. ** Language to be used under 1.7 C.:l R, 13403.5 ~d} if Seller is a financial. institutionz, 9. Substitution (a) Seller nay; sixf3ject to agreement 4vith and acceptance by Buyer, sut~stitute other Securities for any Puz~chased Securities, Such substitution shall be oracle by transfer to Boyer of such olhc?r Sec~.irities and trarasfc~r tea Seller of such Purclz~tsed Secu.rfties. After substitution, the substituted Securities shall be deemed to be Purchased Securities, (b} In Transactions in wl~cla Seiler retains custody of Purchased Securities, tYae parties expressly agz-ee that Buyer shah be deemed, for purposes o1' subparagraph (a) of this Paz~agi•aph, to have aga~eed to and accepted in this Agreement substitution by Seller of other Securities for Purchased Sect~tz•ities; provided, l~owevei; that such other Securities shall ha~~e a Market Value. at least equal to the. Market Value of the Purchased Securities for which they are substituted., Septe~n~cr 1995 Master Repurchase Agree-nent 44 Appendix I 10, R~px•eseni~atic~ns Each of Buyer and Seller represents and warrants to the other -that {i) it is duly authorized to execute and deliver this Agreement, to enter into Transactions contemplated. hereunder and to perform its obligations hereunder and has taken all necessary .action to authorize such. exe- cution, delivery and pcrforma.nce, (ii) it will engage in such =I'ransactians as principal (or; if agreed in writing, in the .form of an arn:~ex hereto or othertivise, in advance of any Transaction by tl~e otrier party hereto, as agent for a disclosed principal}, (iii) the person signing. this. Agreement on its behalf is duly authorized to do so on its behalf (or Qn behalf of any such disclosed principal), (iv) it leas obtained all authorizations of any governmental. body required in coni~er.tion with this Agreement and the Transactions hereunder and such acitho- rizations are in full force. and effect and {v) the execution, clelivery and performance of this Agreement and the Transactions hereunder vvill. not violate. any law, ordinance, charter, by- law or rule applicable to it ar any agreement by which it is bound o~° by which. any of its assets are affected. Un the .Purchase Date fo7• any Transaction Bttyer and Seller shall each. be deemed to repeat all the for~egaing representations made by it. 11. Events ~f Default Ill the event that {i~ Seller fails to transfer or Buyer fails to purchase Purchased Securities upon the applicable Purchase Date, {ii:) Seller fails to repurchase or I3~:~yer fair to transfer Purchased. Securities. upon the applicable Repurchase Date, (iii) Seller or Buyer fails to com- ply with Paragraph 4 hereof, (iv, Buyer fails; after one business day's notice; to comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect to Seller or Buyer, (vi) any representation made by Seller or Buyer shalt have been incorrect or untrue in any material respect. when made or repeated or deemed to Have been made or repeated, or (vii) Seller ar Buyer s11a11 admit to the ether its inability to, or its intention riot ta, perfornx any of its ablig- ations hereunder (eacl~ an Event of De.fatalt"); (a) The nondefaulting party may, at its oi~tion (which option. shall be deemed to have bean exercised immediately upon tl'ie occurrence of an Act of Insolvency), declare. an Event of Default to have occurred Hereunder and, upar~ tl~e exercise or cieen~ed exercise of such option,. the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occ~.u• (except that, in the event that the Purchase Date for any Transaction has not yet occttcrecl as of the date of such exercise or deemed exet~cise, such Transaction shall be deemed inunediately canceled) , Tl~e nondefauIting party shall except upon the occurrence of an Act of Insolvency) give notice to the defaulting poi: ty of file exercise of such option as pronZptly as practicable. (b) In all 'l:i~ansactions in ~~liich the defaulting party is acting as Selle~~, if the nondefauiting party exercises or is cleaned to have exercised the option referred. to in subparagraph {a) of this I'~aragraph, (i) tl~e defaulting party's obligations in such Transactions to repurchase all Purcl~iased Securities, at the Reputchase Prfce therefor on the Repurchase Date deter- rrtined in accordance with subparagraph {a) of this Paragraph, shall th,ea~upon become immediately due and payable, {ii) all Incoix~e paid after such exercise or deemed exercise shalt be retained by the. nondefaulting party and applied to the aggregate unpaid Repurchase Prices and any other amounts owing by the. defaulting party l~eie~ander, and {iii) the defaulting party shall immecii.ately deliver to the i7ondefaulting party arty Purchased Securities st~ib~ect to such Transactions then in tl~e defaulting party's posses- sion ar control. Se}~1enlber 196 Mosier itepurcl~as4 Agreement 45 Appendix (c) In all. Transactions in which the defaulting party is acting as Buyer, tzpan tender by the nondefaulting party of payment of the aggregate .Repurchase Prices for ail such Transactions, all right, title and interest in and entitlez~~ent to ail Purchased Securities subject to such. Transactions shall be deemed tr•aa~sferc•ecl to tlYe nondefaulting party, and the dt~faulting party shall deliver all such Purchased Securities to the nondefaulting party. (d) If the nondefaultix7g party exercises or fs deemed to have exercised the option I"efel•I:ed to in subparagraph Via) of this Paragraph, the nondefaulting party, witllot:~t prior notice to tl~e defaulting pal-ty, n-~ay: (l) as to Transactions in which the defaulting party is acting as Seller, (A} imxriediately sell, in a recognized market (or otherwise in a comrn~rc.ially reasonable. rrrannea-} at such price or prices as the nondefaulting party may reasonably cieeizi satisfactory, any ar all Ptln:hased Sectu•ities subject to sucl~z Transactions and apply the proceeds thereof to the aggregatet~.I~paid Reptlrcl~zase Prices and. any other amounts owing f]y the deftlulti.ng pa~~ty I~ereunder ar (B) in its sole discretion. elect, in lieu of selling all ot- a portion of such Purc:lrased Securities, to give the defaulting party credit For such Purchased. SeeLtlities in an :amount equal to t~~e price therefor on such date, obtained from a generally I~eognizecl. source or the most recent closing Kiel quotation from such a soul-ce, against the aggregate unpaid Repurchase Prices and ar7y other amounts awing by the defaulting party hereunder; and (ii) as to Transactions in wl~lch the defaulting party is acting as Buyer, (A) imn~ecl.iately purchase, in a recognized market (or otherwise in a commercially reasonable man- ner} at such price or prices as the nonciefaulting party may reasonably deem satisfac- tory, securities ~"Replacement Secttl~ities"} cif the sal7le class and amount as any Purchased Securities that are not delivered. by the ciefatilting party to the nondefault- ing party as required hereunder or ~B) in its sole discretion elect, in lieu of purchas- ing Replacement Securities, to be deemed to lia~~e purchased Replacement Securities at the price therefol: on such date, obtai.i~ed front a generally recognized source ar the most Decent closing offer quotation from such a source. Unless other-vise provided in Annex I, the. parties acknowledge and agree that ~1) the Securities subject to any'Transaction h~retrnder are instruments traded in a recognized market, ~2) in the absence of agenerally recognized souuce for prices o:-- bid oa° offer quo- tations for any Security, the nondefaulting party :may establish the source therefor in its s©Ie disci"etian and (3) alI prices, bids and offers shall. be determined together with accrued Income (except to the extent contl•ary to rnal•ket practice with respect to the rel- evan t Securities) . (e) As to Transac-bons in which the defaulting party is acting as Buyer, the defaulting pa?°ty shall l.~e liable to the nond~faulting party for any excess of the. price 1]aid (or cieenzed paid} by the nondefaulting party for Replacement Securities aver the Repurchase Price far the Purchased Securities replaced. thereby and for any amounts payable by the defaulting 1]arty under Paragraph 5 hereof or otherwise hereunder. ~f) For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect of which the defaulting party is acting as Buyer shall not increase above the September 1496 Master Repttrci~~.5e A~*reement 46 Appendix a:maunt of such Repurchase 'rice fnr such Transaction determined as of the date of the exercise or cleer~t~ted exercise by the nondefaulting party of the option referred to in sul~-~ parag2•aph (a) of this 1'aragt~ph. (g) The defaulting party shall be liable to the :nond:efaulting party far (ij tl3e amount of all reasonable legal or other expenses incurred ley the rtondefauiting party in connection with or as a result of an Event of Default, (iij damages in an amount equal to the cost (including all fees, expenses ar~d cornrn.lssiorasj of entering into replacement transactions and entering into or terminating hedge transactiolas in connection lvith ar as a result of an Event of Default, and {iii} any other loss, damage, cast. 02' expense directly a2°ising or resulting from trte occurrence of an Event of Default in respect of a Transaction. (li) Ta ttte-extent permitted by applicable law,. tl~e defaulting party shall. be liable to the rton- def~ulting party for interest on any atn©tints awing by the defaulting poi ty hereunder, from the date tl~e defaulting party becomes liable far such amounts hereunder until such amounts are ~ij paid. in full by the defaulting party or (iij satisfied. itl full by the exercise of the nandefaultng party's rights riereunder. Interest an any sum. payable by the default- lltg party to the ncandefaulting party under this Paragrapl111(hj shah be at a rate equal to t11e greater of the Pricing Rate for the ielevant'Transact~ion or the F'rlrne Rate. (ij The nondefaulting patty shall Dave, in addition to its rights l~tereunder, any I•ights other- wise availaUle to it under any outer agreement or applicable law. 12. Single A~reet~r~ent B~,tye2• at~d Se1le~' ackt:~o~vledge that, and have eltte~ed hereinto and will enter into each Trat~sactiart hereunder in cot7sideration of and in reliance upon tl~te fact that, all Transactions hereunder' constitute a single: business and conlx°actttal relationship attd have been made in consideratlan of each. ether. Accordingly, each of Buyer and Seller agrees (i) to perforrrl all of its obligati.rtns in respect of each Transaction hereunder, artd that a default in the pPrfar- rr~ance of arty such obligations shall. constitute a d.efatilt by it in respect of all Transactions hereunder, iii) -that each. of them shall. be entitled. to set off elain~ts and apply property held by them in respect of any Transactiort against ©bligatiol7s owing to them in respect of any other Transactions hereunder anti (iiij that payments, deliveries and other tratysfet•s made by either of diem in .respect of any `Transaction shall be deeniecl to Dave been made in consideration or payrateltts, deliveries and other transfers in respect of any other Transactions hex•e~u~tder, and the obligations to make any such payl7ients, deliveries and other transfers mar be applied against each other and. netted. 1 ~. Notices. ~tnd ~theY• Camrr~ttnicatic~ns Any and all notices,, statements, demands ox other cat~nmt~rtcatlons het~uncle2- may be given by a party to the other by mail, facsimile, telegraph, messenger or otherwise to the address specified in Annex II hereto, or so seat to such, party at any other place specified in a notice of t~h~=~27ge of address hereafter :received E~y the ether. loll notices,. dema~zds acid requests hereun- der may be made orally, to be confirmed promptly in writing, or• by ether cc~.rnmunic~ttion as specified in the preceding sentence, September 19~h Master Repurchase Agreement 47 Appendix I 14. Entire Agreement; Sever•ability This Agreement shall supersede any existing agreements l.~et~veen the parties containing gen_ eral terms az~d conditions for repurchase transactions. Each. provisian and agreement herein shall be treated as separate and independent franz any other provision or agreement herein and shall be enforceable natrn+ithstancling the unenforceability of any such other provision or agreement. 15. No~~~-assignability; Terx~~ination (a) The rights and obligations of tl~.e parties under this Agreelnerit anal. undez• any Transaction shall not be assigned by either party without the. prior written consent of the other party, anr~ any such assignment without the prior written consent of the othez` party shall. be null and void. SuUject to the foregoing, this Agreement and. arty Transactions shall be binding upon. and shall inure to the benefit of the parties and their respective successors and. assl~ns. This Agreement may be terrnlnated by either party ~rpgn giving urz•ltten notice to the other, except that this. Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outst~.nding. (b) S~.tbparagrapl~ (a) of this Paragralah.l5 shall. not precluele a Marty from assigning,. charg- ng, qr gtl~erwise dealing with all or any part of its interest in any sui~~ payable to it under Paragrapl~z 11 hez~eof. 16. Gaver~rzing Law '~l'11is Agreement shall be governed bythe la«rs of the St<~te of lVew York ~~~ithout giving effect to 'the conflict of laver principles thereof. 17. No Waivers, Etc.. No expz•ess or implied waiver of any Event of Default by either party shall canstitute a waiver of any other Event of Default and no exercise of any remedy hereundez- by any party shell constitute a waiver of its right to exercise any other remedy izez~euzider: Igo modification qr waiver of any provision of this AgreerTient and no consent by any party to a departure liere- from shall be. effective unless and until. such shall be In writing and duly executed ny bath of tl~.e parties hereto. Without limitation on any of the fot•egaing, the failure tq give a notice l]ur- suant to Paragraph 4(a) or 4(b) hereof will. not constitute a waiver of any right to do so at a later date. 1$. Use of Employee ~'i~r.~ Assets (a~ If assets of an employee benefit ptan subject to any provision of the Employee Retirement Income Security Act of 1974 ("FRIBA") are intended to i3e used by either party hereto (the "Plan Party") in a Ti:ansactiorz, the Plan Party shall so notify the other party prior to the Transaction.. rCh~ Plan Party shall represent in writing to tl~e other party that the Transaction does not constitute a prohibited transaction under EI~SA or is otherwise exempt therefi-oz~l, and the other party may proceed in reliance thereon butt shall not be required so to proceed. Septe«~ber I996 Master itepurchase Agrec,ment 48 Appendix I (b) Subject to tl~e last sentence of subparagraph (a~ of this Paragraph, at~y such Ti~ansaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited. statement of its financial. condition and its most recent subsequent unaudited statement of its ftnanelal condition. (c} By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i} to represent to Buyer that since the date of Seller's latest such financial statements, there has been no material adverse change in Seller's financial condition which Seller i~ras not dis- closed to Buyer, axrci (ii) to agree to provide- Buyer with future au.dlted and unar.rdited statements of its financial condition as they are issued, sa long as it is a Seller in az7y out- standirrg Transaction involving a Plan Party. 19. Intent (a) The parties recognize. that each. Transaction is a ".repurchase ab>^eement" as that terra is defined in Section 1171 of Title 11 of the United States Gode, as amended (except insofar as the type of Securities subject to such Transaction or the term of such Transaction would render such definition inapplicakrle), and a "securities contract" as ghat. term is defined in Section 741 of Title 11 of the United States Cade, as atl~encled (except insofar as the type of assets sitl~~jeet to such Transaction watald render such definition irrapplica- ble). (b) It is understaocl that either part's right to liquidate Securities delivered to it in connec- tion with Transactions hereunder or to exercise arly other temeciies pursuant to I'atagr~ph 11 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended. (c) Tl-~e parties ag;r:•ee and acknowledge that if a party hereto is an "insr_tr-ed depository insti- tution," as such town is defined. in the Federal Deposit Insurance t~.et, as anlendt~d ("FDIA"),then each. Transaction hereunder is a "qualified. financial contract," as that term is defined in FDIA and. any rules, orders or policy statements tl~er•eLU~der (exc:ept insofar as the type of assets suUf ect to such Transaction would render sirch definition inapplica- ble). (ci) Tt is understood that this AgreemerYt constitutes a "netting contract" as defined in and subject t© Title. IV of the Federal Deposit Imstrrance Corporation Ir~nprovement Act of 1991 ("FDIGIA") and each paynrent entitlement and payment obligation under any Transaction hereunder-shall constitute a "covered cot~rtractttal payment entitlement" or ``ct~r~~er~d eontracttral payment obligation'; respectively, as defined in and. subject tp FDI- GIA (except insofar as one or both. of the parties is not a "financial institution" as that terra is defined in FDICIA). 2d.Diiselostire R.el~tin~ to Certain Fede~~al P~•utectinris The parties acknowledge that they have been ad~llsed that; (a) i:n the case of Ti°ansactiar~s in which one of the parties is a broker or dealer r~glstered with the Securities and Exchange Gon~rnission (`SEC") under Section 15 of the Sec~rrities Exchange Act of 1934 (u 193.4 llct"),the Securities Investor Protection corporation has September 1996 .Master Repurcf~ase Agreement 49 Appendix I talon the position that the provisions of the Securities Investor Protection Act of 1~'TO ("SIPA"} do not protect the other party with respect to any Tr~r7sactioa~ hereunder; (b) ire tl~.e case of T'ransaetions in which one of t~~e parties is a ~averrnnerlt securities t~r•oker or a government securities dealer registered with the SFC under Section 15C of the 193.4 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; arld (c~ in the case of Transactions In which one of the parties is a financial. institution, funds h:elel by the financial institution pursuant to a Transaction hereunder are nat. a d~:posit and therefore are. not insured 13y t~~e Federal Deposit InsLirance Corporation or the National Credit Union. Share Insurance fund, as applical~ie. [Na.me of Party] (Name of Party) By: Title:: Date: By: Tice: Date: SeptemUer 1 ~9b .Master Re~urehase <~.~reemcr~C 50 Appendix J GOVERNMENT CODE CHAPTER 2256. PUBLIC FUNDS INVESTMENT SUBCHAPTER A. AUTHORIZED INVESTMENTS FOR GOVERNMENTAL ENTITIES Sec. 2256.001. SHORT TITLE. This chapter may be cited as the Public Funds Investment Act. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.002. DEFINITIONS. In this chapter: (1) "Bond proceeds" means the proceeds from the sale of bonds, notes, and other obligations issued by an entity, and reserves and funds maintained by an entity for debt service purposes. (2) "Book value" means the original acquisition cost of an investment plus or minus the accrued amortization or accretion. (3) "Funds" means public funds in the custody of a state agency or local government that: (A) are not required by law to be deposited in the state treasury; and (B) the investing entity has authority to invest. (4) "Institution of higher education" has the meaning assigned by Section 61.003, Education Code. (5) "Investing entity" and "entity" mean an entity subject to this chapter and described by Section 2256.003. (6) "Investment pool" means an entity created under this code to invest public funds jointly on behalf of the entities that participate in the pool and whose investment objectives in order of priority are: 51 Appendix J (A) preservation and safety of principal; (B) liquidity; and (C) yield. (7) "Local government" means a municipality, a county, a school district, a district or authority created under Section 52(b)(1) or (2), Article III, or Section 59, Article XVI, Texas Constitution, a fresh water supply district, a hospital district, and any political subdivision, authority, public corporation, body politic, or instrumentality of the State of Texas, and any nonprofit corporation acting on behalf of any of those entities. (8) "Market value" means the current face or par value of an investment multiplied by the net selling price of the security as quoted by a recognized market pricing source quoted on the valuation date. (9) "Pooled fund group" means an internally created fund of an investing entity in which one or more institutional accounts of the investing entity are invested. (10) "Qualified representative" means a person who holds a position with a business organization, who is authorized to act on behalf of the business organization, and who is one of the following: (A) for a business organization doing business that is regulated by or registered with a securities commission, a person who is registered under the rules of the National Association of Securities Dealers; (B) for a state or federal bank, a savings bank, or a state or federal credit union, a member of the loan committee for the bank or branch of the bank or a person authorized by corporate resolution to act on behalf of and bind the banking institution; 52 Appendix J (C) for an investment pool, the person authorized by the elected official or board with authority to administer the activities of the investment pool to sign the written instrument on behalf of the investment pool; or (D) for an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or, if not subject to registration under that Act, registered with the State Securities Board, a person who is an officer or principal of the investment management firm. (11) "School district" means a public school district. (12) "Separately invested asset" means an account or fund of a state agency or local government that is not invested in a pooled fund group. (13) "State agency" means an office, department, commission, board, or other agency that is part of any branch of state government, an institution of higher education, and any nonprofit corporation acting on behalf of any of those entities. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, Sec. 1, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, Sec. 1, eff. Sept. 1, 1999. Sec. 2256.003. AUTHORITY TO INVEST FUNDS; ENTITIES SUBJECT TO THIS CHAPTER. (a) Each governing body of the following entities may purchase, sell, and invest its funds and funds under its control in investments authorized under this subchapter in compliance with investment policies approved by the governing body and according to the standard of care prescribed by Section 2256.006: (1) a local government; (2) a state agency; 53 Appendix J (3) a nonprofit corporation acting on behalf of a local government or a state agency; or (4) an investment pool acting on behalf of two or more local governments, state agencies, or a combination of those entities. (b) In the exercise of its powers under Subsection (a), the governing body of an investing entity may contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control. A contract made under authority of this subsection may not be for a term longer than two years. A renewal or extension of the contract must be made by the governing body of the investing entity by order, ordinance, or resolution. (c) This chapter does not prohibit an investing entity or investment officer from using the entity's employees or the services of a contractor of the entity to aid the investment officer in the execution of the officer's duties under this chapter. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1999, 76th Leg., ch. 1454, Sec. 2, eff. Sept. 1, 1999. Sec. 2256.004. APPLICABILITY. (a) This subchapter does not apply to: (1) a public retirement system as defined by Section 802.001; (2) state funds invested as authorized by Section 404.024; (3) an institution of higher education having total endowments of at least $95 million in book value on May 1, 1995; (4) funds invested by the Veterans' Land Board as authorized by Chapter 161, 162, or 164, Natural Resources Code; 54 Appendix J (5) registry funds deposited with the county or district clerk under Chapter 117, Local Government Code; or (6) a deferred compensation plan that qualifies under either Section 401(k) or 457 of the Internal Revenue Code of 1986 (26 U.S.C. Section 1 et seq.), as amended. (b) This subchapter does not apply to an investment donated to an investing entity for a particular purpose or under terms of use specified by the donor. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 505, Sec. 24, eff. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 1421, Sec. 2, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 62, Sec. 8.21, eff. Sept. 1, 1999; Acts 1999, 76th Leg., ch. 1454, Sec. 3, eff. Sept. 1, 1999. Sec. 2256.005. INVESTMENT POLICIES; INVESTMENT STRATEGIES; INVESTMENT OFFICER. (a) The governing body of an investing entity shall adopt by rule, order, ordinance, or resolution, as appropriate, a written investment policy regarding the investment of its funds and funds under its control. (b) The investment policies must: (1) be written; (2) primarily emphasize safety of principal and liquidity; (3) address investment diversification, yield, and maturity and the quality and capability of investment management; and (4) include: (A) a list of the types of authorized investments in which the investing entity's funds may be invested; 55 Appendix J (B) the maximum allowable stated maturity of any individual investment owned by the entity; (C) for pooled fund groups, the maximum dollar-weighted average maturity allowed based on the stated maturity date for the portfolio; (D) methods to monitor the market price of investments acquired with public funds; and (E) a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis. (c) The investment policies may provide that bids for certificates of deposit be solicited: (1) orally; (2) in writing; (3) electronically; or (4) in any combination of those methods. (d) As an integral part of an investment policy, the governing body shall adopt a separate written investment strategy for each of the funds or group of funds under its control. Each investment strategy must describe the investment objectives for the particular fund using the following priorities in order of importance: (1) understanding of the suitability of the investment to the financial requirements of the entity; (2) preservation and safety of principal; (3) liquidity; (4) marketability of the investment if the need arises to liquidate the investment before maturity; (5) diversification of the investment portfolio; and 56 Appendix J (6) yield. (e) The governing body of an investing entity shall review its investment policy and investment strategies not less than annually. The governing body shall adopt a written instrument by rule, order, ordinance, or resolution stating that it has reviewed the investment policy and investment strategies and that the written instrument so adopted shall record any changes made to either the investment policy or investment strategies. (f) Each investing entity shall designate, by rule, order, ordinance, or resolution, as appropriate, one or more officers or employees of the state agency, local government, or investment pool as investment officer to be responsible for the investment of its funds consistent with the investment policy adopted by the entity. If the governing body of an investing entity has contracted with another investing entity to invest its funds, the investment officer of the other investing entity is considered to be the investment officer of the first investing entity for purposes of this chapter. Authority granted to a person to invest an entity's funds is effective until rescinded by the investing entity, until the expiration of the officer's term or the termination of the person's employment by the investing entity, or if an investment management firm, until the expiration of the contract with the investing entity. In the administration of the duties of an investment officer, the person designated as investment officer shall exercise the judgment and care, under prevailing circumstances, that a prudent person would exercise in the management of the person's own affairs, but the governing body of the investing entity retains ultimate responsibility as fiduciaries of the assets of the entity. Unless authorized by law, a person may not deposit, withdraw, transfer, or manage in any other manner the funds of the investing entity. (g) Subsection (f) does not apply to a state agency, local government, or investment 57 Appendix J pool for which an officer of the entity is assigned by law the function of investing its funds. Text of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 685, Sec. 1 (h) An officer or employee of a commission created under Chapter 391, Local Government Code, is ineligible to be an investment officer for the commission under Subsection (f) if the officer or employee is an investment officer designated under Subsection (f) for another local government. Text of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 1421, Sec. 3 (h) An officer or employee of a commission created under Chapter 391, Local Government Code, is ineligible to be designated as an investment officer under Subsection (f) for any investing entity other than for that commission. (i) An investment officer of an entity who has a personal business relationship with a business organization offering to engage in an investment transaction with the entity shall file a statement disclosing that personal business interest. An investment officer who is related within the second degree by affinity or consanguinity, as determined under Chapter 573, to an individual seeking to sell an investment to the investment officer's entity shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the governing body of the entity. For purposes of this subsection, an investment officer has a personal business relationship with a business organization if: (1) the investment officer owns 10 percent or more of the voting stock or shares of the business organization or owns $5,000 or more of the fair market value of the business organization; (2) funds received by the investment officer from the business organization 58 Appendix J exceed 10 percent of the investment officer's gross income for the previous year; or (3) the investment officer has acquired from the business organization during the previous year investments with a book value of $2,500 or more for the personal account of the investment officer. (j) The governing body of an investing entity may specify in its investment policy that any investment authorized by this chapter is not suitable. (k) A written copy of the investment policy shall be presented to any person offering to engage in an investment transaction with an investing entity or to an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio. For purposes of this subsection, a business organization includes investment pools and an investment management firm under contract with an investing entity to invest or manage the entity's investment portfolio. Nothing in this subsection relieves the investing entity of the responsibility for monitoring the investments made by the investing entity to determine that they are in compliance with the investment policy. The qualified representative of the business organization offering to engage in an investment transaction with an investing entity shall execute a written instrument in a form acceptable to the investing entity and the business organization substantially to the effect that the business organization has: (1) received and reviewed the investment policy of the entity; and (2) acknowledged that the business organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and the organization that are not authorized by the entity's investment policy, except to the extent that this authorization is 59 Appendix J dependent on an analysis of the makeup of the entity's entire portfolio or requires an interpretation of subjective investment standards. (I) The investment officer of an entity may not acquire or otherwise obtain any authorized investment described in the investment policy of the investing entity from a person who has not delivered to the entity the instrument required by Subsection (k). (m) An investing entity other than a state agency, in conjunction with its annual financial audit, shall perform a compliance audit of management controls on investments and adherence to the entity's established investment policies. (n) Except as provided by Subsection (o), at least once every two years a state agency shall arrange for a compliance audit of management controls on investments and adherence to the agency's established investment policies. The compliance audit shall be performed by the agency's internal auditor or by a private auditor employed in the manner provided by Section 321.020. Not later than January 1 of each even-numbered year a state agency shall report the results of the most recent audit performed under this subsection to the state auditor. Subject to a risk assessment and to the legislative audit committee's approval of including a review by the state auditor in the audit plan under Section 321.013, the state auditor may review information provided under this section. If review by the state auditor is approved by the legislative audit committee, the state auditor may, based on its review, require a state agency to also report to the state auditor other information the state auditor determines necessary to assess compliance with laws and policies applicable to state agency investments. A report under this subsection shall be prepared in a manner the state auditor prescribes. (o) The audit requirements of Subsection (n) do not apply to assets of a state agency that are invested by the comptroller under Section 404.024. 60 Appendix J Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 685, Sec. 1, eff. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 1421, Sec. 3, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, Sec. 4, eff. Sept. 1, 1999; Acts 2003, 78th Leg., ch. 785, Sec. 41, eff. Sept. 1, 2003. Sec. 2256.006. STANDARD OF CARE. (a) Investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. Investment of funds shall be governed by the following investment objectives, in order of priority: (1) preservation and safety of principal; (2) liquidity; and (3) yield. (b) In determining whether an investment officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration: (1) the investment of all funds, or funds under the entity's control, over which the officer had responsibility rather than a consideration as to the prudence of a single investment; and (2) whether the investment decision was consistent with the written investment policy of the entity. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.007. INVESTMENT TRAINING; STATE AGENCY BOARD MEMBERS AND OFFICERS. 61 Appendix J person provided required training under this section during that calendar year. An individual's reporting requirements under this subsection are satisfied by a report of the individual's employer or the sponsoring or organizing entity of a training program or seminar. (e) This section does not apply to a district governed by Chapter 36 or 49, Water Code. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, Sec. 5, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, Sec. 6, eff. Sept. 1, 1999; Acts 2001, 77th Leg., ch. 69, Sec. 4, eff. May 14, 2001. Sec. 2256.009. AUTHORIZED INVESTMENTS: OBLIGATIONS OF, OR GUARANTEED BY GOVERNMENTAL ENTITIES. (a) Except as provided by Subsection (b), the following are authorized investments under this subchapter: (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities; (2) direct obligations of this state or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, this state or the United States or their respective agencies and instrumentalities; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; and 62 Appendix J (a) Each member of the governing board of a state agency and its investment officer shall attend at least one training session relating to the person's responsibilities under this chapter within six months after taking office or assuming duties. (b) The Texas Higher Education Coordinating Board shall provide the training under this section. (c) Training under this section must include education in investment controls, security risks, strategy risks, market risks, diversification of investment portfolio, and compliance with this chapter. (d) An investment officer shall attend a training session not less than once in a two- year period and may receive training from any independent source approved by the governing body of the state agency. The investment officer shall prepare a report on this subchapter and deliver the report to the governing body of the state agency not later than the 180th day after the last day of each regular session of the legislature. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 73, Sec. 1, eff. May 9, 1997; Acts 1997, 75th Leg., ch. 1421, Sec. 4, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, Sec. 5, eff. Sept. 1, 1999. Sec. 2256.008. INVESTMENT TRAINING; LOCAL GOVERNMENTS. (a) Except as provided by Subsections (b) and (e), the treasurer, the chief financial officer if the treasurer is not the chief financial officer, and the investment officer of a local government shall: (1) attend at least one training session from an independent source approved by the governing body of the local government or a designated investment committee advising the investment officer as provided for in the investment policy of the local government and containing at least 10 hours of instruction 63 Appendix J relating to the treasurer's or officer's responsibilities under this subchapter within 12 months after taking office or assuming duties; and (2) except as provided by Subsections (b)and (e), attend an investment training session not less than once in a two-year period and receive not less than 10 hours of instruction relating to investment responsibilities under this subchapter from an independent source approved by the governing body of the local government or a designated investment committee advising the investment officer as provided for in the investment policy of the local government. (b) An investing entity created under authority of Section 52(b), Article III, or Section 59, Article XVI, Texas Constitution, that has contracted with an investment management firm under Section 2256.003(b) and has fewer than five full-time employees or an investing entity that has contracted with another investing entity to invest the entity's funds may satisfy the training requirement provided by Subsection (a)(2) by having an officer of the governing body attend four hours of appropriate instruction in a two-year period. The treasurer or chief financial officer of an investing entity created under authority of Section 52(b), Article III, or Section 59, Article XVI, Texas Constitution, and that has fewer than five full-time employees is not required to attend training required by this section unless the person is also the investment officer of the entity. (c) Training under this section must include education in investment controls, security risks, strategy risks, market risks, diversification ofinvestment portfolio, and compliance with this chapter. (d) Not later than December 31 each year, each individual, association, business, organization, governmental entity, or other person that provides training under this section shall report to the comptroller a list of the governmental entities for which the 64 Appendix J (6) bonds issued, assumed, or guaranteed by the State of Israel. (b) The following are not authorized investments under this section: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity date of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1999, 76th Leg., ch. 1454, Sec. 7, eff. Sept. 1, 1999; Acts 2001, 77th Leg., ch. 558, Sec. 1, eff. Sept. 1, 2001. Sec. 2256.010. AUTHORIZED INVESTMENTS: CERTIFICATES OF DEPOSIT AND SHARE CERTIFICATES. (a) A certificate of deposit or share certificate is an authorized investment under this subchapter if the certificate is issued by a depository institution that has its main office or a branch office in this state and is: (1) guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor; (2) secured by obligations that are described by Section 2256.009(a), including mortgage backed securities directly issued by a federal agency or instrumentality that have a market value of not less than the principal amount of the certificates, 65 Appendix J but excluding those mortgage backed securities of the nature described by Section 2256.009(b); or (3) secured in any other manner and amount provided by law for deposits of the investing entity. (b) In addition to the authority to invest funds in certificates of deposit under Subsection (a), an investment in certificates of deposit made in accordance with the following conditions is an authorized investment under this subchapter: (1) the funds are invested by an investing entity through a depository institution that has its main office or a branch office in this state and that is selected by the investing entity; (2) the depository institution selected by the investing entity under Subdivision (1) arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the investing entity; (3) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States; (4) the depository institution selected by the investing entity under Subdivision (1) acts as custodian for the investing entity with respect to the certificates of deposit issued for the account of the investing entity; and (5) at the same time that the funds are deposited and the certificates of deposit are issued for the account of the investing entity, the depository institution selected by the investing entity under Subdivision (1) receives an amount of deposits from customers of other federally insured depository institutions, 66 Appendix J wherever located, that is equal to or greater than the amount of the funds invested by the investing entity through the depository institution selected under Subdivision (1). Amended by Acts 1995, 74th Leg., ch. 32, Sec. 1, eff. April 28, 1995; Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, Sec. 6, eff. Sept. 1, 1997; Acts 2005, 79th Leg., ch. 128, Sec. 1, eff. Sept. 1, 2005. Sec. 2256.011. AUTHORIZED INVESTMENTS: REPURCHASE AGREEMENTS. (a) A fully collateralized repurchase agreement is an authorized investment under this subchapter if the repurchase agreement: (1) has a defined termination date; (2) is secured by obligations described by Section 2256.009(a)(1); and (3) requires the securities being purchased by the entity to be pledged to the entity, held in the entity's name, and deposited at the time the investment is made with the entity or with a third party selected and approved by the entity; and (4) is placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in this state. (b) In this section, "repurchase agreement" means a simultaneous agreement to buy, hold for a specified time, and sell back at a future date obligations described by Section 2256.009(a)(1), at a market value at the time the funds are disbursed of not less than the principal amount of the funds disbursed. The term includes a direct security repurchase agreement and a reverse security repurchase agreement. (c) Notwithstanding any other law, the term of any reverse security repurchase agreement may not exceed 90 days after the date the reverse security repurchase 67 Appendix J agreement is delivered. (d) Money received by an entity under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments, but the term of the authorized investments acquired must mature not later than the expiration date stated in the reverse security repurchase agreement. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.0115. AUTHORIZED INVESTMENTS: SECURITIES LENDING PROGRAM. (a) A securities lending program is an authorized investment under this subchapter if it meets the conditions provided by this section. (b) To qualify as an authorized investment under this subchapter: (1) the value of securities loaned under the program must be not less than 100 percent collateralized, including accrued income; (2) a loan made under the program must allow for termination at any time; (3) a loan made under the program must be secured by: (A) pledged securities described by Section 2256.009; (B) pledged irrevocable letters of credit issued by a bank that is: (i) organized and existing under the laws of the United States or any other state; and (ii) continuously rated by at least one nationally recognized investment rating firm at not less than A or its equivalent; or (C) cash invested in accordance with Section: (i) 2256.009; 68 Appendix J (ii) 2256.013; (iii) 2256.014; or (iv) 2256.016; (4) the terms of a loan made under the program must require that the securities being held as collateral be: (A) pledged to the investing entity; (B) held in the investing entity's name; and (C) deposited at the time the investment is made with the entity or with a third party selected by or approved by the investing entity; (5) a loan made under the program must be placed through: (A) a primary government securities dealer, as defined by 5 C.F.R. Section 6801.102(f), as that regulation existed on September 1, 2003; or (B) a financial institution doing business in this state; and (6) an agreement to lend securities that is executed under this section must have a term of one year or less. Added by Acts 2003, 78th Leg., ch. 1227, Sec. 1, eff. Sept. 1, 2003. Sec. 2256.012. AUTHORIZED INVESTMENTS: BANKER'S ACCEPTANCES. A bankers' acceptance is an authorized investment under this subchapter if the bankers' acceptance: (1) has a stated maturity of 270 days or fewer from the date of its issuance; (2) will be, in accordance with its terms, liquidated in full at maturity; (3) is eligible for collateral for borrowing from a Federal Reserve Bank; and (4) is accepted by a bank organized and existing under the laws of the United States or any state, if the short-term obligations of the bank, or of a bank holding 69 Appendix J company of which the bank is the largest subsidiary, are rated not less than A-1 or P-1 or an equivalent rating by at least one nationally recognized credit rating agency. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.013. AUTHORIZED INVESTMENTS: COMMERCIAL PAPER. Commercial paper is an authorized investment under this subchapter if the commercial paper: (1) has a stated maturity of 270 days or fewer from the date of its issuance; and (2) is rated not less than A-1 or P-1 or an equivalent rating by at least: (A) two nationally recognized credit rating agencies; or (B) one nationally recognized credit rating agency and is fully secured by an irrevocable letter of credit issued by a bank organized and existing under the laws of the United States or any state. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.014. AUTHORIZED INVESTMENTS: MUTUAL FUNDS. (a) A no-load money market mutual fund is an authorized investment under this subchapter if the mutual fund: (1) is registered with and regulated by the Securities and Exchange Commission; (2) provides the investing entity with a prospectus and other information required by the Securities Exchange Act of 1934 (15 U.S.C. Section 78a et seq.) or the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.); (3) has adollar-weighted average stated maturity of 90 days or fewer; and (4) includes in its investment objectives the maintenance of a stable net asset 70 Appendix J value of $1 for each share. (b) In addition to a no-load money market mutual fund permitted as an authorized investment in Subsection (a), a no-load mutual fund is an authorized investment under this subchapter if the mutual fund: (1) is registered with the Securities and Exchange Commission; (2) has an average weighted maturity of less than two years; (3) is invested exclusively in obligations approved by this subchapter; (4) is continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent; and (5) conforms to the requirements set forth in Sections 2256.016(b) and (c) relating to the eligibility of investment pools to receive and invest funds of investing entities. (c) An entity is not authorized by this section to: (1) invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in mutual funds described in Subsection (b); (2) invest any portion of bond proceeds, reserves and funds held for debt service, in mutual funds described in Subsection (b); or (3) invest its funds or funds under its control, including bond proceeds and reserves and other funds held for debt service, in any one mutual fund described in Subsection (a) or (b) in an amount that exceeds 10 percent of the total assets of the mutual fund. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, Sec. 7, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, Sec. 8, eff. 71 Appendix J Sept. 1, 1999. Sec. 2256.015. AUTHORIZED INVESTMENTS: GUARANTEED INVESTMENT CONTRACTS. (a) A guaranteed investment contract is an authorized investment for bond proceeds under this subchapter if the guaranteed investment contract: (1) has a defined termination date; (2) is secured by obligations described by Section 2256.009(a)(1), excluding those obligations described by Section 2256.009(b), in an amount at least equal to the amount of bond proceeds invested under the contract; and (3) is pledged to the entity and deposited with the entity or with a third party selected and approved by the entity. (b) Bond proceeds, other than bond proceeds representing reserves and funds maintained for debt service purposes, may not be invested under this subchapter in a guaranteed investment contract with a term of longer than five years from the date of issuance of the bonds. (c) To be eligible as an authorized investment: (1) the governing body of the entity must specifically authorize guaranteed investment contracts as an eligible investment in the order, ordinance, or resolution authorizing the issuance of bonds; (2) the entity must receive bids from at least three separate providers with no material financial interest in the bonds from which proceeds were received; (3) the entity must purchase the highest yielding guaranteed investment contract for which a qualifying bid is received; (4) the price of the guaranteed investment contract must take into account the 72 Appendix J reasonably expected drawdown schedule for the bond proceeds to be invested; and (5) the provider must certify the administrative costs reasonably expected to be paid to third parties in connection with the guaranteed investment contract. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, Sec. 8, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1454, Sec. 9, 10, eff. Sept. 1, 1999. Sec. 2256.016. AUTHORIZED INVESTMENTS: INVESTMENT POOLS. (a) An entity may invest its funds and funds under its control through an eligible investment pool if the governing body of the entity by rule, order, ordinance, or resolution, as appropriate, authorizes investment in the particular pool. An investment pool shall invest the funds it receives from entities in authorized investments permitted by this subchapter. (b) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must furnish to the investment officer or other authorized representative of the entity an offering circular or other similar disclosure instrument that contains, at a minimum, the following information: (1) the types of investments in which money is allowed to be invested; (2) the maximum average dollar-weighted maturity allowed, based on the stated maturity date, of the pool; (3) the maximum stated maturity date any investment security within the portfolio has; (4) the objectives of the pool; (5) the size of the pool; 73 Appendix J (6) the names of the members of the advisory board of the pool and the dates their terms expire; (7) the custodian bank that will safekeep the pool's assets; (8) whether the intent of the pool is to maintain a net asset value of one dollar and the risk of market price fluctuation; (9) whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of payment, such as insurance or guarantees, and a description of the secondary source of payment; (10) the name and address of the independent auditor of the pool; (11) the requirements to be satisfied for an entity to deposit funds in and withdraw funds from the pool and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool; and (12) the performance history of the pool, including yield, average dollar-weighted maturities, and expense ratios. (c) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must furnish to the investment officer or other authorized representative of the entity: (1) investment transaction confirmations; and (2) a monthly report that contains, at a minimum, the following information: (A) the types and percentage breakdown of securities in which the pool is invested; (B) the current average dollar-weighted maturity, based on the stated maturity date, of the pool; (C) the current percentage of the pool's portfolio in investments that have 74 Appendix J stated maturities of more than one year; (D) the book value versus the market value of the pool's portfolio, using amortized cost valuation; (E) the size of the pool; (F) the number of participants in the pool; (G) the custodian bank that is safekeeping the assets of the pool; (H) a listing of daily transaction activity of the entity participating in the pool; (I) the yield and expense ratio of the pool; (J) the portfolio managers of the pool; and (K) any changes or addenda to the offering circular. (d) An entity by contract may delegate to an investment pool the authority to hold legal title as custodian of investments purchased with its local funds. (e) In this section, "yield" shall be calculated in accordance with regulations governing the registration of open-end management investment companies under the Investment Company Act of 1940, as promulgated from time to time by the federal Securities and Exchange Commission. (f) To be eligible to receive funds from and invest funds on behalf of an entity under this chapter, a public funds investment pool created to function as a money market mutual fund must mark its portfolio to market daily, and, to the extent reasonably possible, stabilize at a $1 net asset value. If the ratio of the market value of the portfolio divided by the book value of the portfolio is less than 0.995 or greater than 1.005, portfolio holdings shall be sold as necessary to maintain the ratio between 0.995 and 1.005. (g) To be eligible to receive funds from and invest funds on behalf of an entity under 75 Appendix J this chapter, a public funds investment pool must have an advisory board composed: (1) equally of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool, for a public funds investment pool created under Chapter 791 and managed by a state agency; or (2) of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool, for other investment pools. (h) To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must be continuously rated no lower than AAA or AAA-m or at an equivalent rating by at least one nationally recognized rating service. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1421, Sec. 9, eff. Sept. 1, 1997. Sec. 2256.017. EXISTING INVESTMENTS. An entity is not required to liquidate investments that were authorized investments at the time of purchase. Added by Acts 1995, 74th Leg., ch. 76, Sec. 5.46(a), eff. Sept. 1, 1995; Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Amended by Acts 1997, 75th Leg., ch. 1421, Sec. 10, eff. Sept. 1, 1997. Sec. 2256.019. RATING OF CERTAIN INVESTMENT POOLS. A public funds investment pool must be continuously rated no lower than AAA orAAA-m or at an equivalent rating by at least one nationally recognized rating service or no lower than investment grade by at least one nationally recognized rating service with a weighted average maturity no greater than 90 days. 76 Appendix J Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Amended by Acts 1997, 75th Leg., ch. 1421, Sec. 11, eff. Sept. 1, 1997. Sec. 2256.020. AUTHORIZED INVESTMENTS: INSTITUTIONS OF HIGHER EDUCATION. In addition to the authorized investments permitted by this subchapter, an institution of higher education may purchase, sell, and invest its funds and funds under its control in the following: (1) cash management and fixed income funds sponsored by organizations exempt from federal income taxation under Section 501(f), Internal Revenue Code of 1986 (26 U.S.C. Section 501(f)); (2) negotiable certificates of deposit issued by a bank that has a certificate of deposit rating of at least 1 or the equivalent by a nationally recognized credit rating agency or that is associated with a holding company having a commercial paper rating of at least A-1, P-1, or the equivalent by a nationally recognized credit rating agency; and (3) corporate bonds, debentures, or similar debt obligations rated by a nationally recognized investment rating firm in one of the two highest long-term rating categories, without regard to gradations within those categories. Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.0201. AUTHORIZED INVESTMENTS: MUNICIPAL UTILITY. (a) A municipality that owns a municipal electric utility that is engaged in the distribution and sale of electric energy or natural gas to the public may enter into a hedging contract and related security and insurance agreements in relation to fuel oil, natural gas, and electric energy to protect against loss due to price fluctuations. A hedging transaction 77 Appendix J must comply with the regulations of the Commodity Futures Trading Commission and the Securities and Exchange Commission. If there is a conflict between the municipal charter of the municipality and this chapter, this chapter prevails. (b) A payment by a municipally owned electric or gas utility under a hedging contractor related agreement in relation to fuel supplies or fuel reserves is a fuel expense, and the utility may credit any amounts it receives under the contract or agreement against fuel expenses. (c) The governing body of a municipally owned electric or gas utility or the body vested with power to manage and operate the municipally owned electric or gas utility may set policy regarding hedging transactions. (d) In this section, "hedging" means the buying and selling of fuel oil, natural gas, and electric energy futures or options or similar contracts on those commodity futures as a protection against loss due to price fluctuation. Added by Acts 1999, 76th Leg., ch. 405, Sec. 48, eff. Sept. 1, 1999. Sec. 2256.0205. AUTHORIZED INVESTMENTS; DECOMMISSIONING TRUST. (a) In this section: (1) "Decommissioning trust" means a trust created to provide the Nuclear Regulatory Commission assurance that funds will be available for decommissioning purposes as required under 10 C. F. R. Part 50 or other similar regulation. (2) "Funds" includes any money held in a decommissioning trust regardless of whether the money is considered to be public funds under this subchapter. (b) In addition to other investments authorized under this subchapter, a municipality that owns a municipal electric utility that is engaged in the distribution and sale of 78 Appendix J electric energy or natural gas to the public may invest funds held in a decommissioning trust in any investment authorized by Subtitle B, Title 9, Property Code. Added by Acts 2005, 79th Leg., ch. 121, Sec. 1, eff. Sept. 1, 2005. Sec. 2256.021. EFFECT OF LOSS OF REQUIRED RATING. An investment that requires a minimum rating under this subchapter does not qualify as an authorized investment during the period the investment does not have the minimum rating. An entity shall take all prudent measures that are consistent with its investment policy to liquidate an investment that does not have the minimum rating. Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.022. EXPANSION OF INVESTMENT AUTHORITY. Expansion of investment authority granted by this chapter shall require a risk assessment by the state auditor or performed at the direction of the state auditor, subject to the legislative audit committee's approval of including the review in the audit plan under Section 321.013. Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Amended by Acts 2003, 78th Leg., ch. 785, Sec. 42, eff. Sept. 1, 2003. Sec. 2256.023. INTERNAL MANAGEMENT REPORTS. (a) Not less than quarterly, the investment officer shall prepare and submit to the governing body of the entity a written report of investment transactions for all funds covered by this chapter for the preceding reporting period. (b) The report must: (1) describe in detail the investment position of the entity on the date of the report; (2) be prepared jointly by all investment officers of the entity; 79 Appendix J (3) be signed by each investment officer of the entity; (4) contain a summary statement, prepared in compliance with generally accepted accounting principles, of each pooled fund group that states the: (A) beginning market value for the reporting period; (B) additions and changes to the market value during the period; (C) ending market value for the period; and (D) fully accrued interest for the reporting period; (5) state the book value and market value of each separately invested asset at the beginning and end of the reporting period by the type of asset and fund type invested; (6) state the maturity date of each separately invested asset that has a maturity date; (7) state the account or fund or pooled group fund in the state agency or local government for which each individual investment was acquired; and (8) state the compliance of the investment portfolio of the state agency or local government as it relates to: (A) the investment strategy expressed in the agency's or local government's investment policy; and (B) relevant provisions of this chapter. (c) The report shall be presented not less than quarterly to the governing body and the chief executive officer of the entity within a reasonable time after the end of the period. (d) If an entity invests in other than money market mutual funds, investment pools or accounts offered by its depository bank in the form of certificates of deposit, or money market accounts or similar accounts, the reports prepared by the investment officers 80 Appendix J under this section shall be formally reviewed at least annually by an independent auditor, and the result of the review shall be reported to the governing body by that auditor. Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Amended by Acts 1997, 75th Leg., ch. 1421, Sec. 12, eff. Sept. 1, 1997. Sec. 2256.024. SUBCHAPTER CUMULATIVE. (a) The authority granted by this subchapter is in addition to that granted by other law. Except as provided by Subsection (b), this subchapter does not: (1) prohibit an investment specifically authorized by other law; or (2) authorize an investment specifically prohibited by other law. (b) Except with respect to those investing entities described in Subsection (c), a security described in Section 2256.009(b) is not an authorized investment for a state agency, a local government, or another investing entity, notwithstanding any other provision of this chapter or other law to the contrary. (c) Mortgage pass-through certificates and individual mortgage loans that may constitute an investment described in Section 2256.009(b) are authorized investments with respect to the housing bond programs operated by: (1) the Texas Department of Housing and Community Affairs or a nonprofit corporation created to act on its behalf; (2) an entity created under Chapter 392, Local Government Code; or (3) an entity created under Chapter 394, Local Government Code. Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.025. SELECTION OF AUTHORIZED BROKERS. The governing body of an entity subject to this subchapter or the designated investment 81 Appendix J committee of the entity shall, at least annually, review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the entity. Added by Acts 1997, 75th Leg., ch. 1421, Sec. 13, eff. Sept. 1, 1997. Sec. 2256.026. STATUTORY COMPLIANCE. All investments made by entities must comply with this subchapter and all federal, state, and local statutes, rules, or regulations. Added by Acts 1997, 75th Leg., ch. 1421, Sec. 13, eff. Sept. 1, 1997. SUBCHAPTER B. MISCELLANEOUS PROVISIONS Sec. 2256.051. ELECTRONIC FUNDS TRANSFER. Any local government may use electronic means to transfer or invest all funds collected or controlled by the local government. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.052. PRIVATE AUDITOR. Notwithstanding any other law, a state agency shall employ a private auditor if authorized by the legislative audit committee either on the committee's initiative or on request of the governing body of the agency. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995. Sec. 2256.053. PAYMENT FOR SECURITIES PURCHASED BY STATE. The comptroller or the disbursing officer of an agency that has the power to invest assets directly may pay for authorized securities purchased from or through a member in good standing of the National Association of Securities Dealers or from or through a national or state bank on receiving an invoice from the seller of the securities showing that the securities have been purchased by the board or agency and that the amount to 82 Appendix J be paid for the securities is just, due, and unpaid. A purchase of securities may not be made at a price that exceeds the existing market value of the securities. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1423, Sec. 8.67, eff. Sept. 1, 1997. Sec. 2256.054. DELIVERY OF SECURITIES PURCHASED BY STATE. A security purchased under this chapter may be delivered to the comptroller, a bank, or the board or agency investing its funds. The delivery shall be made under normal and recognized practices in the securities and banking industries, including the book entry procedure of the Federal Reserve Bank. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1423, Sec. 8.68, eff. Sept. 1, 1997. Sec. 2256.055. DEPOSIT OF SECURITIES PURCHASED BY STATE. At the direction of the comptroller or the agency, a security purchased under this chapter may be deposited in trust with a bank or federal reserve bank or branch designated by the comptroller, whether in or outside the state. The deposit shall be held in the entity's name as evidenced by a trust receipt of the bank with which the securities are deposited. Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1423, Sec. 8.69, eff. Sept. 1, 1997. 83 N FAH 84 Appendix K GOVERNMENT CODE CHAPTER 2257. COLLATERAL FOR PUBLIC FUNDS SUBCHAPTER A. GENERAL PROVISIONS Sec. 2257.001. SHORT TITLE. This chapter may be cited as the Public Funds Collateral Act. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.002. DEFINITIONS. In this chapter: (1) "Bank holding company" has the meaning assigned by Section 31.002(a), Finance Code. (2) "Control" has the meaning assigned by Section 31.002(a), Finance Code. (3) "Deposit of public funds" means public funds of a public entity that: (A) the comptroller does not manage under Chapter 404; and (B) are held as a demand or time deposit by a depository institution expressly authorized by law to accept a public entity's demand or time deposit. (4) "Eligible security" means: (A) a surety bond; (B) an investment security; (C) an ownership or beneficial interest in an investment security, other than an option contract to purchase or sell an investment security; (D) a fixed-rate collateralized mortgage obligation that has an expected weighted average life of 10 years or less and does not constitute ahigh- risk mortgage security; or 85 Appendix K (E) a floating-rate collateralized mortgage obligation that does not constitute ahigh-risk mortgage security. (5) "Investment security" means: (A) an obligation that in the opinion of the attorney general of the United States is a general obligation of the United States and backed by its full faith and credit; (B) a general or special obligation issued by a public agency that is payable from taxes, revenues, or a combination of taxes and revenues; or (C) a security in which a public entity may invest under Subchapter A, Chapter 2256. (6) "Permitted institution" means: (A) a Federal Reserve Bank; (B) a clearing corporation, as defined by Section 8.102, Business & Commerce Code; (C) a bank eligible to be a custodian under Section 2257.041; or (D) a state or nationally chartered bank that is controlled by a bank holding company that controls a bank eligible to be a custodian under Section 2257.041. (7) "Public agency" means a state or a political or governmental entity, agency, instrumentality, or subdivision of a state, including a municipality, an institution of higher education, as defined by Section 61.003, Education Code, a junior college, a district created under Article XVI, Section 59, of the Texas Constitution, and a public hospital. 86 Appendix K (8) "Public entity" means a public agency in this state, but does not include an institution of higher education, as defined by Section 61.003, Education Code. (9) "State agency" means a public entity that: (A) has authority that is not limited to a geographic portion of the state; and (B) was created by the constitution or a statute. (10) "Trust receipt" means evidence of receipt, identification, and recording, including: (A) a physical controlled trust receipt; or (B) a written or electronically transmitted advice of transaction. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.48(a), eff. Sept. 1, 1995; Acts 1995, 74th Leg., ch. 914, Sec. 5, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 254, Sec. 1, eff. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 891, Sec. 3.22(4), eff. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 1423, Sec. 8.70, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 62, Sec. 7.63, eff. Sept. 1, 1999. Sec. 2257.0025. HIGH-RISK MORTGAGE SECURITY. (a) For purposes of this chapter, affixed-rate collateralized mortgage obligation is a high-risk mortgage security if the security: (1) has an average life sensitivity with a weighted average life that: (A) extends by more than four years, assuming an immediate and sustained parallel shift in the yield curve of plus 300 basis points; or (B) shortens by more than six years, assuming an immediate and sustained parallel shift in the yield curve of minus 300 basis points; and 87 Appendix K (2) is price sensitive; that is, the estimated change in the price of the mortgage derivative product is more than 17 percent, because of an immediate and sustained parallel shift in the yield curve of plus or minus 300 basis points. (b) For purposes of this chapter, afloating-rate collateralized mortgage obligation is a high-risk mortgage security if the security: (1) bears an interest rate that is equal to the contractual cap on the instrument; or (2) is price sensitive; that is, the estimated change in the price of the mortgage derivative product is more than 17 percent, because of an immediate and sustained parallel shift in the yield curve of plus or minus 300 basis points. Added by Acts 1997, 75th Leg., ch. 254, Sec. 2, eff. Sept. 1, 1997. Sec. 2257.003. CHAPTER NOT APPLICABLE TO DEFERRED COMPENSATION PLANS. This chapter does not apply to funds that a public entity maintains or administers under a deferred compensation plan, the federal income tax treatment of which is governed by Section 401(k) or 457 of the Internal Revenue Code of 1986 (26 U.S.C. Sections 401(k) and 457). Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.004. CONFLICT WITH OTHER LAW. This chapter prevails over any other law relating to security for a deposit of public funds to the extent of any conflict. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.005. CONTRACT GOVERNS LEGAL ACTION. A legal action brought by or against a public entity that arises out of or in connection 88 Appendix K with the duties of a depository, custodian, or permitted institution under this chapter must be brought and maintained as provided by the contract with the public entity. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. SUBCHAPTER B. DEPOSITORY; SECURITY FOR DEPOSIT OF PUBLIC FUNDS Sec. 2257.021. COLLATERAL REQUIRED. A deposit of public funds shall be secured by eligible security to the extent and in the manner required by this chapter. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.022. AMOUNT OF COLLATERAL. (a) Except as provided by Subsection (b), the total value of eligible security to secure a deposit of public funds must be in an amount not less than the amount of the deposit of public funds: (1) increased by the amount of any accrued interest; and (2) reduced to the extent that the United States or an instrumentality of the United States insures the deposit. (b) The total value of eligible security described by Section 45.201(4)(D), Education Code, to secure a deposit of public funds of a school district must be in an amount not less than 110 percent of the amount of the deposit as determined under Subsection (a). The total market value of the eligible security must be reported at least once each month to the school district. (c) The value of a surety bond is its face value. (d) The value of an investment security is its market value. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 89 Appendix K 2003, 78th Leg., ch. 201, Sec. 46, eff. Sept. 1, 2003. Sec. 2257.023. COLLATERAL POLICY. (a) In accordance with a written policy approved by the governing body of the public entity, a public entity shall determine if an investment security is eligible to secure deposits of public funds. (b) The written policy may include: (1) the security of the institution that obtains or holds an investment security; (2) the substitution or release of an investment security; and (3) the method by which an investment security used to secure a deposit of public funds is valued. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.024. CONTRACT FOR SECURING DEPOSIT OF PUBLIC FUNDS. (a) A public entity may contract with a bank that has its main office or a branch office in this state to secure a deposit of public funds. (b) The contract may contain a term or condition relating to an investment security used as security for a deposit of public funds, including a term or condition relating to the: (1) possession of the collateral; (2) substitution or release of an investment security; (3) ownership of the investment securities of the bank used to secure a deposit of public funds; and (4) method by which an investment security used to secure a deposit of public funds is valued. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1999, 76th Leg., ch. 344, Sec. 5.006, eff. Sept. 1, 1999. 90 Appendix K Sec. 2257.025. RECORDS OF DEPOSITORY. (a) A public entity's depository shall maintain a separate, accurate, and complete record relating to a pledged investment security, a deposit of public funds, and a transaction related to a pledged investment security. (b) The comptroller or the public entity may examine and verify at any reasonable time a pledged investment security or a record a depository maintains under this section. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 891, Sec. 3.16, eff. Sept. 1, 1997. Sec. 2257.026. CHANGE IN AMOUNT OR ACTIVITY OF DEPOSITS OF PUBLIC FUNDS. A public entity shall inform the depository for the public entity's deposit of public funds of a significant change in the amount or activity of those deposits within a reasonable time before the change occurs. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. SUBCHAPTER C. CUSTODIAN; PERMITTED INSTITUTION Sec. 2257.041. DEPOSIT OF SECURITIES WITH CUSTODIAN. (a) In addition to other authority granted by law, a depository for a public entity other than a state agency may deposit with a custodian a security pledged to secure a deposit of public funds. (b) At the request of the public entity, a depository for a public entity other than a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. (c) A depository for a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. The custodian and the state agency shall agree in 91 Appendix K writing on the terms and conditions for securing a deposit of public funds. (d) A custodian must be approved by the public entity and be: (1) a state or national bank that: (A) is designated by the comptroller as a state depository; (B) has its main office or a branch office in this state; and (C) has a capital stock and permanent surplus of $5 million or more; (2) the Texas Treasury Safekeeping Trust Company; (3) a Federal Reserve Bank or a branch of a Federal Reserve Bank; or (4) a federal home loan bank. (e) A custodian holds intrust the securities to secure the deposit of public funds of the public entity in the depository pledging the securities. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 1010, Sec. 1, eff. June 17, 1995; Acts 1997, 75th Leg., ch. 891, Sec. 3.17, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 344, Sec. 5.007, eff. Sept. 1, 1999. Sec. 2257.042. DEPOSIT OF SECURITIES WITH PERMITTED INSTITUTION. (a) A custodian may deposit with a permitted institution an investment security the custodian holds under Section 2257.041. (b) If a deposit is made under Subsection (a): (1) the permitted institution shall hold the investment security to secure funds the public entity deposits in the depository that pledges the investment security; (2) the trust receipt the custodian issues under Section 2257.045 shall show that the custodian has deposited the security in a permitted institution; and 92 Appendix K (3) the permitted institution, on receipt of the investment security, shall immediately issue to the custodian an advice of transaction or other document that is evidence that the custodian deposited the security in the permitted institution. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.043. DEPOSITORY AS CUSTODIAN OR PERMITTED INSTITUTION. (a) A public entity other than a state agency may prohibit a depository or an entity of which the depository is a branch from being the custodian of or permitted institution for a security the depository pledges to secure a deposit of public funds. (b) A depository or an entity of which the depository is a branch may not be the custodian of or permitted institution for a security the depository pledges to secure a deposit of public funds by a state agency. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.044. CUSTODIAN AS BAILEE. (a) A custodian under this chapter or a custodian of a security pledged to an institution of higher education, as defined by Section 61.003, Education Code, whether acting alone or through a permitted institution, is for all purposes the bailee or agent of the public entity or institution depositing the public funds with the depository. (b) To the extent of any conflict, Subsection (a) prevails over Chapter 8 or 9, Business & Commerce Code. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.045. RECEIPT OF SECURITY BY CUSTODIAN. On receipt of an investment security, a custodian shall: (1) immediately identify on its books and records, by book entry or another 93 Appendix K method, the pledge of the security to the public entity; and (2) promptly issue and deliver to the appropriate public entity officer a trust receipt for the pledged security. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.046. BOOKS AND RECORDS OF CUSTODIAN; INSPECTION. (a) A public entity's custodian shall maintain a separate, accurate, and complete record relating to each pledged investment security and each transaction relating to a pledged investment security. (b) The comptroller or the public entity may examine and verify at any reasonable time a pledged investment security or a record a custodian maintains under this section. The public entity or its agent may inspect at any time an investment security evidenced by a trust receipt. (c) The public entity's custodian shall file a collateral report with the comptroller in the manner and on the dates prescribed by the comptroller. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 891, Sec. 3.18, eff. Sept. 1, 1997. Sec. 2257.047. BOOKS AND RECORDS OF PERMITTED INSTITUTION. (a) A permitted institution may apply book entry procedures when an investment security held by a custodian is deposited under Section 2257.042. (b) A permitted institution's records must at all times state the name of the custodian that deposits an investment security in the permitted institution. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.048. ATTACHMENT AND PERFECTION OF SECURITY INTEREST. (a) A security interest that arises out of a depository's pledge of a security to secure a 94 Appendix K deposit of public funds by a public entity or an institution of higher education, as defined by Section 61.003, Education Code, is created, attaches, and is perfected for all purposes under state law from the time that the custodian identifies the pledge of the security on the custodian's books and records and issues the trust receipt. (b) A security interest in a pledged security remains perfected in the hands of a subsequent custodian or permitted institution. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. SUBCHAPTER D. AUDITS AND EXAMINATIONS; PENALTIES Sec. 2257.061. AUDITS AND EXAMINATIONS. As part of an audit or regulatory examination of a public entity's depository or custodian, the auditor or examiner shall: (1) examine and verify pledged investment securities and records maintained under Section 2257.025 or 2257.046; and (2) report any significant or material noncompliance with this chapter to the comptroller. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 891, Sec. 3.19, eff. Sept. 1, 1997. Sec. 2257.062. PENALTIES. (a) The comptroller may revoke a depository's designation as a state depository for one year if, after notice and a hearing, the comptroller makes a written finding that the depository, while acting as either a depository or a custodian: (1) did not maintain reasonable compliance with this chapter; and (2) failed to remedy a violation of this chapter within a reasonable time after receiving written notice of the violation. 95 Appendix K (b) The comptroller may permanently revoke a depository's designation as a state depository if the comptroller makes a written finding that the depository: (1) has not maintained reasonable compliance with this chapter; and (2) has acted in bad faith by not remedying a violation of this chapter. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 891, Sec. 3.19, eff. Sept. 1, 1997. Sec. 2257.063. MITIGATING CIRCUMSTANCES. (a) The comptroller shall consider the total circumstances relating to the performance of a depository or custodian when the comptroller makes a finding required by Section 2257.062, including the extent to which the noncompliance is minor, isolated, temporary, or nonrecurrent. (b) The comptroller may not find that a depository or custodian did not maintain reasonable compliance with this chapter if the noncompliance results from the public entity's failure to comply with Section 2257.026. (c) This section does not relieve a depository or custodian of the obligation to secure a deposit of public funds with eligible security in the amount and manner required by this chapter within a reasonable time after the public entity deposits the deposit of public funds with the depository. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 891, Sec. 3.19, eff. Sept. 1, 1997. Sec. 2257.064. REINSTATEMENT. The comptroller may reinstate a depository's designation as a state depository if: (1) the comptroller determines that the depository has remedied all violations of this chapter; and 96 Appendix K (2) the depository assures the comptroller to the comptroller's satisfaction that the depository will maintain reasonable compliance with this chapter. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 891, Sec. 3.19, eff. Sept. 1, 1997. SUBCHAPTER E. EXEMPT INSTITUTIONS Sec. 2257.081. DEFINITION. In this subchapter, "exempt institution" means: (1) a public retirement system, as defined by Section 802.001; or (2) the permanent school fund, as described by Section 43.001, Education Code. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 165, Sec. 6.31, eff. Sept. 1, 1997. Sec. 2257.082. FUNDS OF EXEMPT INSTITUTION. An exempt institution is not required to have its funds fully insured or collateralized at all times if: (1) the funds are held by: (A) a custodian of the institution's assets under a trust agreement; or (B) a person in connection with a transaction related to an investment; and (2) the governing body of the institution, in exercising its fiduciary responsibility, determines that the institution is adequately protected by using a trust agreement, special deposit, surety bond, substantial deposit insurance, or other method an exempt institution commonly uses to protect itself from liability. 97 Appendix K Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Sec. 2257.083. INVESTMENT; SELECTION OF DEPOSITORY. This chapter does not: (1) prohibit an exempt institution from prudently investing in a certificate of deposit; or (2) restrict the selection of a depository by the governing body of an exempt institution in accordance with its fiduciary duty. Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. 98 Appendix L ~sozvT~or~ No. 90-0~ Wl~REAS, the City of North Richland Hills is an agency or political subdivision of the State of Texas (the "Participant"} and is empowered to delegate to a public funds investment pool the authority to invest funds and to act as custodian of investments purchased with local investment funds; and WHEREAS, it is in the best interest of the .Participant and its inhabitants to invest local funds in investments that yield the highest possible rate of return while providing necessary safekeeping and protection of the principal; and Tr7:~~, the Treasurer of the State of Texas acting by and through the Texas Treasury Safekeeping Trust Company the "Trust Company") has created "TexPool", a public funds investment pool to effectuate the goals of providing investments at the highest possible yield and maintaining complete safety of the funds of the Participant, NoGV T~:~'OFtE, be it resolved as follows: 1. That. the City of North Richland Hills establish. an account in its name with the Trust Ccxrgaany's Public Funds Investment Pool "TexPool" for thQ purpose of transmitting loaeal funds for investment by the Trust Carr~pany in TexPool. ~. That the following individuals whose signatures appear below are officers or 1©yees of the Participant and are each hereby authorized to transmit funds tc7 the Trust Company for investment in TexPool and are each further authorized to withdraw- funo~s from time to time, to issue letters of instruction, and to take all other actions deemed necessary or appropriate for the investment of local funds: Name: Lee Maness Title: Director of Finance Si tore : ~r~~~C' ~~~~--~._..r~ Name: Jim Cook Title: Asst, Director of Finance Signature: -~''' ` ~ Nom: Camelia Fisher Title: Senior Staff Accountant ti h Signature: 99 Resoluta.on 96-Z9 Lord Oove.rn~ment TnvPstment Cooperative Resolution Appendix L RESOLUTION APPROVING AND AUTHORIZ,iNG E~CUTTON OF AN I3V'l"F.ItLOCAL AGR;~I~11+IENT FOR PARTICIP'ATION' IN A PUBLIC FUNDS IJV~TESZ1+viE.NT COOPERA'T'IVE ('T'HE "COOPERAT'IV'E"), DP,SIGNATTNG THE BOARD OF DIRECTORS OF THE COOPER,A'I''TVE AS AN AGENCY AND iNSTRT;~~LENTALTTY TO SUPERVISE `T H~ C~'?OPF.~.ATNE, APPROVING TlN"V"~S'T'~riE,NT POLi~~S OF THE COOPERATIVE, APPO.aV'T'ING AUTT3OR~I?.ED REPRESENTATTV`ES AND DESIGNATTI~TG INi VT'S'I'MENT O~CERS 'VS~IET't,EAS, the Interiorbt Cooperation Act, Chapter 791 of the Texas Government Cade, as amended (the 'Tntexlocat Act"}, permits any •l~ government' to contract with one or more other 'local governments" to perform •g4vernmentax functions and services,'" including investment of public funds (as such phrases arc defuYed in the Interloral Act); W.~~REAS, ~e Interiocal Act authorizes the contracting parties to any interiocal agreement to contract with agencies of the Stag of Texas, within the meanie ; of Chapter 771 of the Government Code, WI~.RF.AS, the Act permits the contracting parties to any interlocas agr+exment to create an administrative agency to supervise the performance of such interlocal agreement and to employ personnel and engage in other administrative activities and. provide other administrative services necessary rQ execute the Uerms of such interiocal agr~xmtnt; WH'ER£AS, the Public Funds Investment Act, Chapter 2256 of the Texas Government Code, as amended (the 'PFIA'), authorizes the entities described in Subsection (a) of the PFLA, to invest their funds in an eligible public funds investment pool, and the intends to become and remain an eligible public funds investment pool, under the terms and conditions set forth in PFIA VV~I,ETZFrAS, City of North Richland Hills (the 'Government Entity") desires to enter into- that certain Tntexiocal Agreement (the "Agreement"}, a copy of which is presenters with this Resolution. and is incorporated herein by reference, and to become a participant in a public funds investment pool created thereunder and under PFIA, Lo be known as Lc~at Government Investment Cvvperativc (the 'Cooperative'); WH~tEAS, the Government Entity is a Government Entity as defined in the Agreement; and Retalutioa 100 Appendix L ~- -~ ~I~EA.S, the Government Entity desires to cause administration of the Cooperative z4 be performed by a board of directors (tile 'Board",~, which shall be ~ administrative agency created under the Interlocal Act; and - ~S, the Government Entity desires to dexignate the Board as its agency and instrumentality with authority LQ xuperrise perf©rmance of the Agreement, employ personnel and engage in other adm,ilustrative activities and provide other adttuiustrative services nee tQ execute the terms of the Agreement; T'Y ~iEEI?.EAS, each capitalized term used in this Resolution and not othenvi~ defaned has the same meaning assigned to it in the Agreement; N4W, THF.83=.FQR.E, BE IT RESf~LVEL~: 1. The Agreement is hereby approved and adopted :and, upon execution thereof by an Authorized Representative defined below}and receipt of the GovernrncnL F.,ntity's application to join the Cooperative by the Administrator, the Government Entity shall bexome a Participant in the Cooperative for the purpose of investing its available funds therein from time to time in accordance with its terms. Z. The Board is hereby designated as an agency and instrumentality of the Government Entity, and the Board shall have the accthority to supervise performance of the Agreement and. the Cooperative, employ personnel and engage in other administrative activities and provide other administrative services necessary t~o execute the terms of the Agrer~nent. 3. The investment policies of the Cooperative, as set forth in the darcurnent entitled Investment Policies, as sumrrtarizcd in the Information Statement, and. as may be amended from time to time by the Baacd, are hereby adopted as investment policies of the Government Entity with respect to money invested in the Cooperative, and any existing investment policies of the Government Entity in conflict therewith shall not apply to investments in the Cooperative. ~• The following officers, offzcials or employees of the Government Entity are .hereby designated as 'Authorized Representatives' within the meaning. of the Agreement, with full power and authority to: execute the Agreement, an application to join the Cooperative and any other documents required to become a Participant; dcposa.t money to and withdraw money from the Government Entity's Cooperative account from time to time in accordance with the Agreement and the Information Statement; and take all other actions deemed nexessary or appropriate for the 'Investment of funds of the Government Entity; i~olutioa •~- 101 Appendix L _ ~~__.- Signaturc; - ~ c.. Printed Name; Bret Starr Tula. Accountant Signature: Printed Name: Jackie Theriot Title: Accounting Manager -.,.., Si~~f ~+ ~' ~ ~ l I FrintCd ~atn4': Charles Harris. TittC: Finance Director In accordance with Cooperative procedut+es, an Authorized Rrprasentative shall promptly notify the Cooperative in writing of any changes in who is serving as Authorized Repres~ntativesf S. xn addition to the foregoing Authori~ad Representatives, each Investment _. Cffficaer ofthe Coopera~.tzve appointed by the Beard fxom time to time is hereby designated as an investment officer of th,e Government Entity and, as such, shall have responsibility for investing the share of Cooperative assets representing funds of the GovGrnrnent Entity. Each depository and custodian appointed by the Board from time to dme arc hereby designated as a depository and custodian of the Gov+~rnment Entity for purposes • of holding the share of Cooprsarxve assets represerttin$ funds of the Government Entity. PASSED AND A.PPR4VED this _ z~5 ,_ day of March , Zg~, ATTEST: By: Jeanette Rewis, C~.ty Secretary Printed Hama and tide sEa~, Reic~~tioa -g. 102 s• To y Arown, Mayor ~~~ - __ Printed Name and Tine Appendix L Additional Party Agreement The Government Entity of the State of Texas. named below acting by and through T the undersigned Authorized Representative, hereby agrees. to become a party to that certain Interlocai Agreement to which this- page is attached, -and thereby become a Participant in the ~.ocal Government Investment Cooperative, subject to all of the terms and provisions of such Agreement. The undersigned hereby represents that it is a Government Entity as defined in such Agreement. Executed this ~nday of Maw , 19 ~ 6, ACCF.ii''i'ED: Name of Government Entity Y' Ruthoriz epresentative _ Tommy Brown, Mayor Frinted Marne and Title I.,ocal G ent investment Cooperative r j. LpG C Administrator PATRICK SI~IINKLE, V.P. Printed Name and Title G3tertoca,! A~reameat »ta 103 Appendix L Resolution No. 20Q1-046 WHEREAS, pursuant to the requirements of the Public Funds Investment Act, Texas Government Code, Section 2256.001 et seq. {the "Act"}, the City Council of the City of North Richland Hills has previously reviewed and adopted an investment policy that provides in part that the funds of the City of North Richland Hills will be invested in investments permitted by the Act in order to: {i) invest only in investments IegalJy permitted under Texas law; {ii) minimize risk by managing portfolio investments so as to preserve principa# and maintain a stable asset value; (iii) manage portfolio investments to ensure cash wil! be available as required to finance operations; and (iv) maximize current income to the degree consistent with legality, safety, and liquidity; and WHEREAS, the Act provides that funds under the control of the City of North Richland Hills may be invested through investment pools meeting the standards of Section 2256.Q16 of the Act and the City of North Richland Hills has reviewed the Information Statement, dated 313/96, as supplemented on 12/31198 (the "Statement"}, of Texas Cooperative Liquid Assets Securities System, an investment pool (the "Pooli'j administered by MBIA Municipal Investors Service Corporation, as the manager of the Pool (the "Manager"'} and has determined that the investments proposed to be acquired by the Pool are of a type permitted by the Act and consistent with the Policy will assist in achieving the goals set forth in the Policy; and WHEREAS, the City of North Richland Hills understands that the Pool is created through an instrument of trust, dated as of January 1, 1996, and amended as of .November 2Q, 1997 {the "Trust Instrument"}, which provides the terms on which the Pool will operate and the rights of the participants in the Pool who will be governed and sets for the responsibilities of the Manager, and of Bank C)ne, Texas, N.A. as trustee (.the "Trustee); NQ11V THEREFC7RE, BE IT RESOLVES BY THE CITY COUNCIL OF THE CITY OF NORTH RICMLAND HILLS, TEXAS, THAT: The form, terms and provisions of the Trust Instrument, a draft of which was presented and reviewed at this meeting, be and the same are hereby approved and adopted; and that tarry Koonce, Director of Finance, heretofore appointed by the- City of North Richland Hills pursuant to the Policy and the Act as its Investment Officer, be and he is hereby authorized and directed to execute and deliver to the Manager and the Trustee in the name and on behalf of the City of North Richland Hills, a Trust Instrument substantially in the form of the trust instrument reviewed and approved at this meeting, together with such changes as said officer may approve, such approval to be conclusively evidenced by the execution thereof; and be it further Resolved, that the investment program described in the Statement is hereby found and determined to be consistent with the Policy, and to preclude imprudent investment activities arising out of investment transactions conducted between the City of North Richland. Hi11s and the Pool; and be it further Resolved, that the City Council hereby officially finds and determines that the facts and recitations in the preamble of this Resolution are true and correct and adopts the preamble as part of the operative provisions of this Resolution; and be it further 104 Appendix L Resolved, that the City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted for the time required by law preceding this meeting, and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter thereof were discussed, considered and formally acted upon, ail as required by Chapter 551, Texas Government Code, as amended, and the Act,. and be it further Resolved, that the officers of the City of North Richland Hills, each is expressly authorized, empowered and directed from time to time to perform all acts and to execute, acknowledge, seal. and deliver in the name arld on behalf of the City of North Richland- Hills ali certificates, instruments and other documents as they may determine to be necessary or desirable to carry out the provisions of this Resolution and the Trust Instrument, such determination to be conclusively evidenced by the performance of such acts and the execution of any such documents; and be it further Resolved.,. that this Resolution shall take effect and be in full farce upon and after its passage. PASSED AND APPROVED this 27th day of August 2001. APPROVED: Ch ~:~~ ~' '~ r 1''L.... ~; ..~ ---- Pafrteia H~#son, City Secretary APPROV S TO LEGAL _,,,.'.._.-~~... .~...~.. .._.~-- J r IY~ y, /~ Rex McEntire, Attorney for the City APPROVED AS TO CONTENT: Lf , ~,,: Larry Ko ce, Director of Finance 105 Appendix L Resolution No. _2003-023 WHEREAS, pursuant to the requirements of the Public Funds Investment Act, Texas Government Code, Section 2250.001 et seq. (the "Act"}, the City Gouncil of the City of North Richland Hills has previously reviewed and adapted an investment policy that provides in part that the funds of the City of North Richland Hills will be invested in investments permitted by the Act in order to: (i) invest only in investments legally permitted under Texas law; (ii} minimize risk by managing portfolio investments so as to preserve principal and maintain a stable asset value; {iii) manage portfolio investments to ensure cash will be available as required to finance operations; and (iv} maximize current income to the degree consistent with legality, safety, and liquidity; and WHEREAS, the Act provides that funds under the control of the Gity of North Richland Hills may be invested through investment pools meeting the standards of Section 2256,016 of the Act and the City of North Richland Hills has reviewed the Information Statement,. dated 4/8102 (the "Statement"}, of Texas Short Term Asset Reserve Program ("TexSTAR"}, an investment pool (the "Poo!") administered by First Southwest Asset Management, Inc. and JPMorgan Fleming Asset Management {USA}, lnc. as the managers of the Pool (the "Managers") and has determined that the- investments proposed to be acquired by the Pool are of a type permitted by the. Act and consistent with the. Policy wi(I assist in achieving the goals set forth in the Policy; and WHEREAS, the City of North Richland Hills understands. that the Pool is created under the authority of applicable Texas law, including the Interlocal Cooperation Act, Chapter 79fi of the Texas Government Gode, as amended (the "Interlocal Act"}, and the Investment Act and tha# the attached agreement {the "Agreement), upon enactment, serves as the agreement between the City and the Pool and provides the terms on which the Pool will operate and the rights of the participants in the Pool who will be governed and sets for the responsibilities of the Managers, and of JPMorgan Chase Bank. as custodian (the "Custodian"); NOUII THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL C)F THE CITY OF NORTH RICHLAND HILLS, TEXAS., THAT: The form, terms and provisions of the Agreement, a draft of which was presented and reviewed at this meeting,. be and the. same are hereby approved and adopted;. and that Larry Koonce, Direct©r of Finance, heretofore appointed by the City of North Richland Hills pursuant to the Policy and the Act as its Investment Officer, be and he is hereby authorized and directed to execute and deliver to the Managers and the Custodian in the name and on behalf of the Gity of North Richland Hills, an Agreement substantially in the form of the agreement reviewed and approved at this meeting, together with such changes as said officer may approve, such approval to be conclusively evidenced by the execution thereof; and be it further Resolved, that. the investment program described in the Statement is hereby found and determined to be consistent with the Policy, and to preclude imprudent investmen# activities arising out of investment transactions conducted between the City of North Richland Hills and the Pool; and be it further Resolved, that the Gity Council hereby officially finds and determines that the facts and recitations in the preamble of this Resolution are true and correct and adapts the preamble as part of the operative provisions of this Resolution; and be it further 106 Appendix L Resolved, that the City Council hereby finds and declares that written notice of the date, hour, place and subject. ofi the meeting at which this Resolution was adapted was posted for the time required by law preceding this meeting, and that such meeting was open to the public as required by law at all times during which this Resolution and the subject. matter thereof were discussed, considered and formally acted upon, all as required by Chapter 551, Texas Government Code, as amended, and the Act; and be it further Resolved, that the officers of the City of North Richland Hills, each is expressly authorized, empowered and directed from time to time to perform all acts and to execute, acknowledge, seal and deliver in the name and vn behalf of the City of North Ridhland Hills all certificates, instruments and other documents as they may determine to be necessary or desirable to carry out the provisions of this Resolution and the Agreement, such determination to be conclusively evidenced by the performance of such acts and the execution of any such documents;. and be it further Resolved, that this Resolution shall take effect and be in full force upon and. after its passage. PASSED,~)VD APPR(JVED this 24th day of February 2003 ED. °'r, a Ga~:.Trevi~.~ilr ,,~ .~... ATTEST: G~~ZI~a ~~~'~1,~~rr~-- Patricia Hutson, City Secretary APPRC'V TC) LEGALITY: George S p es, homey for the City APPRUVED AS TQ CONTENT: arty Ko c , Director of Finance 107 N ~rZH 108 Appendix M C~.t)~SARY t3F ~QMMC3N TREASURY TERMl~4L~GY Accrued Interest; The accumulated interest due on a bond as of the last interest payment made by the issuer. Agency: A debt security issued by a federal or federally sponsored agency, Federal agencies are backed by the full faith. and credit of the U.S~. Government. Federally sponsored agencies (FSAsj are backed by each particular agency with a market perception that there is an implicit gQVernxnent :guarantee. An example of federal agency is the Government National Mortgage Association (GN1VIAj. An example of a FSA is the l~ederal National 1V.iortgage Association (FNMAj. Amortization; The systematic reduction of the amount awed an a debt issue through periodic payments of principal. Asked: The price at which securities are offered. Average Life: The average length of time that an issue of serial bonds and(or term. bonds with a mandatory sinking fund feature is expected to be outstanding. Basis Point; A unit of measurement used in the valuation offixed-income securities equal to 11100 of a percent ofyield. E.g., "I/4" of 1 percent is equal to 25 basis points. Bid: The indicated price at which a buyer is willing. to purchase a security ar commodity. Book Value: The value at which a security is carried on the inventory lists or other financial racards of an investor. The book value may differ significantly from the security's current value in the market. Broker, A broker brings buyers and sellers together for a commission paid by the initiator of the transaction or by both sides; he does not position. In the money market, brokers are active in markets in which banks buy and sell money and in interdealer markets. Callable Bond; A bond issue in which all or part of its ou#standing principal. amount. may be redeemed before maturity by the. issuer under specified. conditions. Cali Price: The price at which ail issuer may redeem a bond prior to rnatw ity, The price is usually at a slight premium to the bond's original issue price to campcnsate the bolder for loss of income and ownership. Call 12isk: The risk to a bondholder that a band may be redeemed prior to maturity. Cash Sale/Purchase; A transaction which calls for delivery and payment pf securities on the sa~-ne day that the transaction. is initiated. Certificate of Deposit (CD}: A tune deposit with a specific maturity evidenced by a certificate. Large-denominatio~~ CU's are typically negotiable. 109 Appendix. M Callateralizatian: Process by which a borrower pledges securities, property, ar other deposits for the purpose of securing the repayment of a loan and/or security. Commercial Paper: An unsecured short-term promissory note issued by corporations, with maturities ranging from ~ to 274 days. Comprehensive Annual Financial Report (CAFR}: The offcial annual report for the City of Mesquite.. It includes combined statements and. basic financial statements far each individual fund. and aocount group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal. and contractual provision, extensive introductory material, anal a detailed statistical section, Convexity: A measure of a bond's price sensitivity to changing. interest rates. A high. convexity indicates greater sensitivity of a bond's price to interest rate changes. Coupon Rate: The annual. rate of interest received by an investor from the issuer of certain types of fixed-income securities. Also known as the "interest rate." Credit t~-ua~lity: The measurement of the financial strength of a bond issuer. This zxaeasurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a band issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by nationally recognized rating agencies. Credit Risk: The risk to an investor that an issuer will default in the payment of interest andlar principa] on a security. Current Yield (Current Ret€rrn): A yield calculation determined by dividing the annual interest received on a security by the current. market price of that security, Dealer: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his awn account. Debenture: A bond secured only by the general credit of the issuer. Delivery versus Payment: Tl~zere are two methods of delivery of securities: delivery versus payment and delivery versus receipt{also called free). Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is the delivery of securi#ies with an exchange of a signed receipt for the securities. Derivative Security: Financial instrument created from, or whose value depends upon, one or more underlysng assets or indexes of asset valu+~s. Discount: The aznou}~t by which the par value of a security exceeds the price paid for t}tie security. Discount Securities: Nan-interest bearing money market instrumezats that are issued at a discount and redeemed at maturity for full fake value,. e.g., U.S. Treasury Bills. 110 Appendix M Diversification: A process of investing assets among a range of security types by sector, maturity, and. quality rating. Duration: A measure of the timing of the Dash flows, such as the interest payments and the principal repayment, to be received from a given fixed-income security, This calculation is based on three variables: terns to maturity, coupon rate, and yield to maturity. The duration of a security is a useful indicator of its price volatility for given changes in interest rates, Tair Value: The amount at which an investment could be exchanged in a current transaction between willing parties, other than. in a forced or liquidation sale. Federal Funds (Fed Funds): Funds placed in Federal Reserve banks ley depository institutions in excess of current reserve requirements.. These depositary institutions may lend. fed funds. to each other overnight ar on a longer basis, They may also transfer funds among each other an a same-day basis through. the Federal Reserve banking system. Fed funds are considered to be immediately available funds, Federal Funds hate: Interest rate charged by one institution lending federal funds to the other. Federal. Credit Agencies. Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g. SB~L's, small business firms, students,: fanners, farm cooperatives, and exporters. Federal Deposit Insurance Corporation FDIC): A federal agency that insures bank deposits, currently up to $100,00 pex deposit. Federal Dame Loan Banks (FHLB): The institutions that regulate and lend to savings -and loan associations.. The Federal Home Loan .Banks play a role analogous to that played by the Federal Reserve Banks vis-a-vis member commercial banks. Federal National Mortgage Association (FNMA): FNMA, like GNMA, was chartered under the Federal National Mortgage Association Act in 1938. FNMA. is a federal corporation working under the auspices of the Department of Hauling and Urban Development, H.U,D. It is the largest single provider afresidential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans in addition to fxed-rate mortgages. FNMA°s securities are also highly liquid and are widely accepted. FItiTMA. assumes and guarantees that all security Holders will receive timely payment of principal and interest. Federal 0-pen Market Committee (FOMC). Consists of seven members of ti7e Federal Reserve Board and five oi`-the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Deserve guidelines regarding purchases and sales of Government Securities ii~ the open-market as a means of influencing the volume of bank credit and money, 111 Appendix M Federal Reserve System: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in "t~ashington, U.C,, 12 regional banks and about 5,70U commercial banks that are members of the system. Government National Mortgage Association (GNMA or Ginnie Mae): Securities. guaranteed by GNMA and issued by mortgage bankers, corn.mercial banks, savings and loan associations, and other institutions. Security holder is protected by full with and credit of the U,S. Governrnent. Ginnie Mae securities. are backed by FHA, VA or FMHI'VY mortgages. The term pass thiough is often used to describe Ginnie Macs. Government 5ecuraties: An obligation of the U.S, government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available in the U.S. securities market, See "Treasury Bills, Notes, and Bonds." Interest Rate.:.See "Coupoa Rate." Interest Rate Risk: The risk associated with declines or .rises in interest rates which cause an investment in a fixed-income security to increase or decrease in value. Internal Controls: An internal control structure designed to ensure that the assets of the entity are protected .from loss, theft, or misuse. The internal control structuue is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognized that l)the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of casts and. benefits requires estimates and: judgments by management. Internal controls should address the following points: Control of collusion -Collusion is a situation where two or more employees are working in conjunction to defraud their employer. Separation of transaction authority from accounting and. record keepiing - By separating the person who authorizes or perforrns the transaction from the people wlio record or otherwise account for the transaction, a separation of duties is achieved. Custodial safekeeping -Securities purchased from any bank or dealer including appropriate collateral (as defined. by state law} shall be placed with an independent third party for custodial safekeeping. Inverted Yield Curve: A chart formation that illustrates long-term securiti~:s having. lower yields than short-term securities. This .configuration usually occurs during periods of high inflation coupled with low levels of confidence in the economy and a restrictive monetaz~ policy.. Investment Policy: A concise and clear statement of the objectives and parameters. formulated by an investor or investment. manager for a portfolio of investment securities. Investment-grade Obligations: An investment instrument suitable for purchase by institutiona! investors under the prudent persoR~ rule, Investment-grade is restricted to tlYOSe obligations rated. BBB or higher by a rating agency. Liquidity: A liquid asset is fine that can be converted easily and rapidly into cash withc~t~t a substantial loss of value. In tl~e money market, a security is said to be liquid if the spread between bicl and asked prices is narrow and reasonable size can be dare at those quotes. 112 Appendix 1111 Local Government Investment Pool (LIP}: An investment by local governments in which their money is pooled as a method for managing local funds. Dark-to-market: The process whereby the book value or collateral value of a security is adjusted. to reflect its current market value. Market Risk: The risk. that the value of a security will. rise or decline as a result of changes in market conditions. Market `Value: Current market pricy of a security. Master Repurchase .Agreement: To protect investors, many public investors wi11 request that repurchase agreements be preceded by a master repurchase agreement between the investor and the financial institution or dealer. The master agreement should define the nature of the transaction, identify the relationship between the parties, establish normal practices regarding awuership and custody of the collateral securities during the teen of the investment, provide remedies in the case of default by either party and clarify issues. of ownership. The master repurchase agreement protects the investor by eliminating the uncertainty of ownership and hence, allowing investors to liquidate collateral if a bank or dealer defaults during the term of the agreement. Maturity: The date on which payment of a.financial obligation is due. The final stated maturity is the date on which the issuer must retire a band and pay the face value to the bondholder. See "Weighted Average maturity." Money market: The market in which. short~term debt instruments {bills, commercial paper, bankers' acceptances, etc.} are issued and traded. Money Market Mutual. Fund: Mutual funds that invest solely in money market instruments. Mutual Fund: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments, Mutual funds are regulated by the Investment Company Act of 1940. National Association of Securities Dealers (NASD): A self regulatory organization (SRC7} of brokers and dealers in the over-tlie-counter securities business. lts regulatory mandate includes authority over fines that distribute mutual fund. sharps as well as ether securities.. Net Asset 'Value: The market value of one share of an investment company, such as a mutual fund. This figure is calculated by tatalii~g a fuizd's assets wl~icli includes securities, cash, a~sd any accrued ean~ings, subtracting this from the fund's liabilities and dividing this total by the number of shares outstanding.. This is calculated a~~ce a day based oil the closing price far each security in the fund's portfolio. No Load Ntutual Fund: A mutual fund which does not levy a sales charge on the purchase of its shares. 113 Appendix M Nominal ''Yield: the stated rate of interest that a bond pays its current owner, based on par value of-the security. Tt is also known as the "coupon," coupon rate," or "interest rate." Offer: An indicated price at which market participants are willing to sell a security or cammadaiy. Also referred to as the "ask price." Qpen Market Operations: Purchases and sales of government and certain .other securities in the open market by the New York Federal Reserve Bank as directed by the FOIVIC in ordc;r to influence the volume of money and credit in the economy. Purchases inject reserves .into the bank system and stimulate growth of money and credit; sales have the opposite effect. t7pen rr~arket operations are. the Federal Reserve's mast important and most flexible monetary policy tool. Par: Face value or principal value of a bond, typically $1,000 per bond. Portfolio: Collection of securities held by an investor. Positive Yield Curve: A chart formation that illustrates short.-term securities having lower yields than. long-term securities. Premium: The amount by which the price paid for a security exceeds the security's par value.. Prime Rate: A preferred interest rate charged by commercial banks to their mast creditworthy customers. Many interest rates are keyed to this rate. Primary Dealer: A group of government securities dealers that submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of I~Tew York and are subject to it informal oversight. Frirnary dealers include Securities and Exchange Commission (SEC) registered securities broker-dealers, banks. and a few unregulated firms. Principal: The face value or par value of a debt instxument. Also may refer to the amount of capital invested in a given. security. Prospectus: A legal document that. must be provided to any prospective purchaser of a new securities offering registered with the SEC. This can include information on the issuer, the issuer's business, the proposed use of proceeds, the experience of the issuer's management, and certain certified financial statements. Prudent Person Rule: An investment standard outlining the fiduciary responsibilities of public funds investors relating to investment practices. Qualified Public Tfepositories: A financial institution which does not claim exemption from tl~e payment of a~3y sales or compensating use or ad valorem taxes under the laws of the state, wlyich has segregated for the bcnef t of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. 114 ,Appendix M Rate cif ~teturn: The yield obtainable on a security based on its purchase price or its currant market price. This may be the amortized yield to maturity on a bond or the current incam~: return. Reinvestment Risk: The risk that a fixed income investor will be unable to reinvest income proceeds from a security holding at the same rate of return currently generated by that holding. Repurchase Agreement (RI°` or REPO}: An agreement of one party to purchase securities at a specified price from a second party and a simultaneous agreement by the first. party to resell the securities at a specified price to the second party on demand or at a specified date. Safekeeping: Holding of assets (e.g. securities) by a financial institution. 5EC 1"tule I~C341: See unifann net capital rule. Secondary Market:. A market made for the purchase. and sale of outstanding issues following the initial distribution. Securities & Exchange Commission: Agency created by Congxess to protect investors in securities transactions by administering securities legislation. Serial Bond: A band issue, usually of a municipality, with various maturity dates scheduled at regular intervals until the entire issue is retired.. Sinking ~~und: Money accumulated on a regular basis iv a separate custodial account that is used to redeem debt securities or preferred stack issues, Swap: Trading one asset for another. Term Bond: fonds comprising a large part of all of a particular issue which come due in a single maturity. The issuer usually agrees tt~ make periodic payments into a sinking fund. for mandatary redemption of term bands before maturity. Total Return: The sum of all investment income plus changes in the capital value of the portfolio. Far mutual funds, return. on aL~ investment is composed of share price appreciatio~3 plus any realized dividends ar capital gains. This is calculated: by taking the following components during a certain time period. (Price Appreciation)+(Dividends paid}+(Capital gains)=Total Return Treasury Bills: Anon-interest bearing discount security issued by the U.S, Treasury to finance the national debt Mast bills are issued to mature in three months, six months or one year ia~ mini;num denominations of $10,000.00. The yields an bills are monitored. closely in the money markets. for signs of interest rate trends. Treasury Bond: Lo~~g-term U.S. Treasury securities havii~.g initial maturities of more thou ten years. Treasury Dotes: lntet~ncdiate term coupon bearing U.S. Treasury securities having initial maturities from one to ten years• Currently, the longest outstanding maturity for such seeur•itics is 30 years. 115 Appendix M Uniform Net Capital Rule. Securities and Exchange Ca~nmisson requirement that member firms as well as nonmember broker-dealers insecurities maintain. a maximum ration of indebtedness to liquid capital of 15 to 1:also called net capital rule and net. capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments tU purchase securities. This is one reason new public issues are spread among members of underwriting syndicates. Liquid capital. includes cash. and assets easily converted into cash. 'Volatility: A degree of fluctuationrn the price and valuation of securities. Valafility Risk Rating: A rating system to clearly indicate the level of volatility and other non-credit risks associated with securities and certain band funds. The ratings for band funds range from those that have extremely law sensitivity to changing market conditions and offer the greatest stability of the return ("aaa" by S&P; "V-l" by Fitch} to those that are highly sensitive with currently identifiable market volatility risk ("ccc" by S&P, "V-10" by Fitch). Weighted Average 11'Iaturity (WAM}: 7'he average maturity of all the securities that comprise a portfolio. According to SEC rule 2A-7, the WAM for SEC registered money market mutual: funds may not exceed 90 days and no one security may have a maturity Chat exceeds 39?days. When Issued ~}: A conditional transaction in which an authorized new security ha.s not been issued. All "when issued" transactions are settled when the actual security is issued. Yield; The. rate of annual. income return ov an investment, expressed as a percentage. (a) Income Yield is obtained by dividing the current dollar income by the current market price of the security. (b) Net Yield ar Yield to Maturity is the current income yield minus any premium above par ar plus. any discount from par n purchase price, with the adjustment .spread .over the period from the date of purchase to the date of maturity of the bond.. Yield-to-coil (YTC}; The rate of return an investor earns from a bond assuming the bond is redeemed (called) prior to its nominal. maturity date. Yield Curve-A graphic representation that depicts the relationship at a given point in tune between yields and maturity for bonds that are identical in every way except maturity. A normal. yield curve may be alternatively referred to a positive yield curve. Yield-to-maturity: The rate of return yielded by a debt security held to maturity v~+l~e~x both .interest payments and the investor's potential capital gain or loss are included in the calculation of return. Zero-coupon Securities: Security that is issued at a discount and makes no periodic interest payments. The rate of return consists of a gradual accretion of the principal of the security and is Payable at par upon maturity. 116 CITY OF NORTH RICHLAND HILLS Department: Finance Council Meeting Date: 3-9-2009 Presented by: Larry Koonce Agenda No. F.2 Subject: GN 2009-013 Presentation of Fiscal Year 2008 Audited Financial Report The results of the fiscal year (FY) 2008 Annual Financial Report for the City will be jointly presented by Director of Finance, Larry Koonce and a representative of the independent audit firm of Pattillo, Brown & Hill. Larry Koonce will review the year-end results and fund balance data for the various Funds (General, Enterprise, etc.) as well as other financial impacts. Pattillo, Brown & Hill will present the audit opinion. The auditor's opinion is an unqualified opinion or "clean" opinion again this year. This means that they have found the Financial Statements of the City of North Richland Hills to present fairly our financial position. Included in the Council packet is a copy of the financial report, and attached to the cover sheet is a summary of the various City Funds showing the results of the changes in balances from 2007 to 2008. As of September 30, 2008, the General Fund undesignated balance was $8,354,612, a $46,974 increase over FY 2007. City Council's goal is to have at least 60 days of operations in undesignated reserve. The ending $8.3 million undesignated balance represents 78 days of fiscal year 2009 General Fund budgeted operating expenditures. In fiscal year 2008, in addition to the $8.3 million undesignated balance, $2,543,612 of the General Fund balance continues to be designated for economic development. In FY 2008, $250,360 continues to be designated for the savings incentive program to reward departments and employees for innovative approaches to business solutions approved by Council. Also in FY 2008, $115,800 of the General Fund balance was again designated for the long range replacement of Insurance Fund reserves approved by Council. Fund balance in the amount of $400,000 was designated for 820 facility planning. Fund balance in the amount of $800,000 was designated for rail station development. Fund balance in the amount of $250,000 is designated for municipal retirement stabilization to soften the impact of TMRS increases. In 2008 fiscal year is a designation for utility billing assistance in the amount of $98,962 as part of the TXU settlement. New designations of General Fund balance in FY 2008 include Municipal Court technology and security funds in the amount of $323,518. These are funds that have been collected over the last several years for this purpose in accordance with state law, but this is the first year the City is reclassifying them as a designation of fund balance. A designation of $100,000 was established for a benefit conversion program for budgeted or unforeseen employee separation payout. Also new in 2008 is the designation of $168,064 for the loan to the golf course for equipment replacement budgeted in FY 2009. A designation of $200,000 was established for the Crime Control District contingency plan. Two other designations include $34,416 for the education and training program, and $110,074 for the tuition assistance program. The Donations Fund ended the year with a balance of $669,311, an increase of $105,167. The Gas Development fund balance was $6,253,307. Designations include $3,942,332 for general use, $1,340,755 for parks use, $965,455 for economic development use, and $4,765 for utility use. The Parks and Recreation Facilities Development Fund constructed nearly a million dollars in budgeted capital expenditures for Parks in fiscal year 2008. This fund ended the year with a $4,753,396 balance, an increase of $226,909. The Crime Control District Fund ended fiscal year 2008 with a $897,447 transition fund balance compared to the $853,452 revised budget estimate. The Insurance Fund finished the year with $5,086,010 in cash. This was an increase of $1,567,599 and is the result of a good claims year and may be an indication that wellness awareness is helping. The Fleet Services Fund had a decrease in cash of $341,792 in fiscal year 2008. Most of this decrease was the use of nearly $250,000 received in 2007 from Insurance recovery proceeds to make repairs to storm damaged equipment. The City replaced over $600,000 of equipment in fiscal year 2008. Cash reserves for the replacement of City equipment in total was $2,261,953 at year end. The Facilities and Construction Services Fund had a balance of $2,486,136. Over $2.1 million was spent for facility up-keep and maintenance in fiscal year 2008. This includes all personnel, supplies and maintenance, and capital facility improvements and repairs. The Information Services Fund spent nearly $2.5 million for computer and telecommunication services in fiscal year 2008. This includes all personnel, supplies and maintenance, and equipment replacement. The Information Services Fund ended the year with $3,055,169 in cash reserves for computer and telecommunications replacement. The Water and Sewer Fund realized an increase in cash balances of $1.6 million for the year. The Water and Sewer fund used cash in the amount of over $1.8 million for system improvements, equipment and debt service during the year. The Aquatic Park Fund had a net increase in cash of $411,398. This increase included uses of cash in the amount of nearly $700,000 for debt service payments and capital improvements to the water park. The Aquatic Park Fund ended the year with just over $4.3 million in cash. The Golf Course Fund had a net increase in cash of $554,503 in fiscal year 2008. The increase in cash balances can be attributed mainly to $500,000 certificates of obligation issued for golf course drainage improvements and an increase of $54,503 cash from operations. All operating funds ended the year with positive cash balances. Overall, the City of North Richland Hills' results of operations during the 2008 fiscal year, as well as the financial position at year-end reflect a sound fiscal condition. This is in fulfillment of Council Goal 4: Financially Responsible City Government. Recommendation: To accept GN 2009-013 the 2008 fiscal year Audited Financial Report as presented. FOR FISCAL YEAR 2008 FUND BALANCE AS OF 09/30/07 BALANCE AS OF 09/30/08 (DECREASE) FY 2008 General Fund (Unreserved/Undesignated) $ 8,307,638 $ 8,354,612 $ 46,974 General Fund Designated for Economic Development $ 2,522,920 $ 2,543,875 $ 20,955 General Fund Designated for Municipal Court Technology & Security $ - $ 323,518 $ 323,518 General Fund Designated for Benefit Conversion Program $ - $ 100,000 $ 100,000 General Fund Designated for Savings Incentive Program $ 250,360 $ 250,360 $ - General Fund Designated for Retirement Stabilization (TMRS) $ 250,000 $ 250,000 $ - General Fund Designated for Utility Billing Assistance (TXU Settlement) $ 53,739 $ 98,962 $ 45,223 General Fund Designated for 820 Facility Planning $ 1,050,000 $ 400,000 $ (650,000) General Fund Designated for Crime Control District Contingency $ - $ 200,000 $ 200,000 General Fund Designated for Rail Station Project $ 700,000 $ 800,000 $ 100,000 General Fund Designated for FY 2009 Budgeted Loan for Golf Course for Equipment $ - $ 168,064 $ 168,064 General Fund Designated for Insurance Restoration Plan $ 347,400 $ 115,800 $ (231,600) General Fund Designated for Education and Training Program $ - $ 34,416 $ 34,416 General Fund Designated for Tuition Assistance Program $ - $ 110,074 $ 110,074 General Debt Service Fund $ 2,383,141 $ 3,149,010 $ 765,869 Utility Fund (Operating and Restricted Cash) $ 19,652,249 $ 21,288,242 $ 1,635,993 Golf Course Fund (Operating & Restricted Cash) $ 253,630 $ 808,133 $ 554,503 Aquatic Park Fund (Operating & Restricted Cash) $ 3,903,312 $ 4,314,710 $ 411,398 Facilities & Construction Services Fund $ 2,764,384 $ 2,486,136 $ (278,248) Fleet Services Fund $ 2,603,745 $ 2,261,953 $ (341,792) Self Insurance Fund $ 3,518,411 $ 5,086,010 $ 1,567,599 Information Services Fund (Operating & Restricted Cash Reserved for Improvements) $ 2,922,776 $ 3,055,169 $ 132,393 Promotional Fund $ 288,213 $ 345,566 $ 57,353 Donations Fund $ 564,144 $ 669,311 $ 105,167 Special Investigation Fund $ 464,174 $ 427,436 $ (36,738) Drainage Utility Fund $ 575,618 $ 727,425 $ 151,807 Permanent Street Maintenance Fund $ 725,920 $ 1,017,850 $ 291,930 Sidewalk Maintenance Fund $ 58,759 $ 70,808 $ 12,049 Gas Development Fund $ 545,057 $ 6,253,307 $ 5,708,250 Traffic Safety Fund (New in FY 2007) $ 1,815 $ 82,434 $ 80,619 Park & Recreation Facilities Development Fund $ 4,526,487 $ 4,753,396 $ 226,909 Economic Development Fund (Fund Balance) $ 1,225,466 $ 1,516,920 $ 291,454 Crime Control & Prevention District Fund (Fund Balance $ 1,643,100 $ 897,447 $ (745,653) City of North Richland Hills, Texas Comprehensive Annual Financial Report For the Fiscal Year Ended September so, Q0o8 i G Today's Vision, Tomorrow's Reality '~ U~Pice and ~ud~et and J~e~se~avcc~i l~epafd`.nten~ '~ a~ .lVoXtRc .l " ~~ CLct~st a~ tPte C~~'~cand G!urenue J a~ J Qa~za co.cvrteac~ a~ t~ce James and J 1`~epcr~d`,nten~t ~ ~ ~ ~i~anGc ~~ CITY OF NORTH RICHLAND HILLS, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED SEPTEMBER 30, 2008 City Officials T. Oscar Trevino, Jr. Mayor Scott Turnage Place 6 Mayor Pro Tem John Lewis Ken Sapp Place 1 Place 2 Suzy Compton Dr. Tim Barth Place 3 Place 4 David Whitson Tim Welch Place 5 Place 7 Larry J. Cunningham City Manager Jimmy Perdue Assistant City Manager Jared Miller Assistant City Manager Karen Bostic Assistant City Manager Mike Curtis Managing Director Development Services Vickie Loftice Managing Director Community Services Larry Koonce Director of Finance Prepared by: Finance Department NORTH RICHLAND H I L L S City of Choice ACKNOWLEDGEMENTS The Comprehensive Annual Financial Report was prepared by the Department of Finance Office of Accounting: Karen Bostic Assistant City Manager Larry Koonce, CPA, CGFM Director Financial Reporting Staff: Laury Fiorello, Assistant Director Phyllis O'Neal, Finance Assistant Dickie Stearns, Accountant II Huibi Wang , Accountant I Pamela Knapp, Accounting Technician Jennifer Day, Accounting Technician Ana Valdovinos, Accounting Technician Debbie Harris, Secretary Special appreciation is given to: Budget and Research Department Mark Mills, Director Shirley Hoover, Internal Auditor Jennipher Castellanos, Budget Analyst And to all the departments and personnel throughout the City whose extra effort to contribute, timely financial data for their departments made this report possible. City of North Richland Hills, Texas Comprehensive Annual Financial Report For Fiscal Year Ended September 30, 2008 Pa e s Title Page I Table of Contents III - V INTRODUCTORY SECTION Letter of Transmittal IX - XIII GFOA Certificate of Achievement XIV Organizational Chart XV List of Principal Officials XVI FINANCIAL SECTION Independent Auditors' Report 1 - 2 Management Discussion and Analysis 3 - 13 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Assets 17 Statement of Activities 19 Fund Financial Statements: Balance Sheet -Governmental Funds 20 - 21 Reconciliation of the Balance Sheet of Governmental Funds to the Statements of Net Assets 23 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 24 - 25 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 27 Statement of Net Assets -Proprietary Funds 28 - 29 Statement of Revenues, Expenses, and Changes in Net Assets -- Proprietary Funds 30 Statement of Cash Flows -- Proprietary Funds 31 Notes to Basic financial Statements 33 - 63 City of North Richland Hills, Texas Table of Contents Required Supplementary Information: Schedule of Funding Progress -- Texas Municipal Retirement System 67 Schedule of Revenues, Expenditures, and Changes in Fund Balance -- Budget and Actual General Fund 68 - 69 Crime Control and Prevention District 70 Other Supplementary Information: Non-major Governmental Funds: Combining Balance Sheets 72 - 73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 74 - 75 Budget to Actual Comparisons --Governmental Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balances -- Budget and Actual: Promotional Fund 76 Donations Fund 77 Drainage Utility Fund 78 General Debt Service Fund 79 Sales Tax Revenue Debt Service Fund 80 Internal Service Funds: Combining Statement of Net Assets 82 Combining Statement of Revenues, Expenses, and Changes in Net Assets 83 Combining Statement of Cash Flows 84 Non-Major Discretely Presented Component Units: Combining Statement of Net Assets 86 Combining Statement of Activities 87 iv City of North Richland Hills, Texas Table of Contents STATISTICAL SECTION (UNAUDITED) Pa e s Government-Wide Information: Net Assets by Component Table 1 91 Changes in Net Assets Table 2 92 - 93 Fund Information: Fund Balances -Governmental Funds Table 3 94 Changes in Fund Balances -Governmental Funds Table 4 95 Assessed and Actual Value of Taxable Property Table 5 96 Property Tax Rates -Direct and Overlapping Governments Table 6 97 Principal Taxpayers Table 7 98 Property Tax Levies and Collections Table 8 99 Ratios of Outstanding Debt by Type Table 9 100 Computation of Direct and Overlapping Debt Table 10 101 Computation of Legal Debt Margin Table 11 102 Pledged Revenue Coverage Table 12 103 Demographic Statistics Table 13 104 Principal Employers Table 14 105 Full-time Equivalent Municipal Employees by Function/Program Table 15 107 Operating Indicators by Function/Program Table 16 108 - 109 Capital Asset Statistics by Function/Program Table 17 110 - 111 v 1~I ~~H This page intentionally left blank. Introductory Section NCH ~~~ This page intentionally left blank. vin Nca~~~ra Ct~r:r3Lnr,c7 3°{tt.t. TraE ~e'rY ~3t Cr-€catE:~: March 9, 2009 Department of Finance To the Honorable Mayor, Members of City Council, City Manager, and Citizens of the City of North Richland Hills, Texas: State law requires that all local governments publish within six months of the close of each fiscal year a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America ("GAAP") and audited in accordance with auditing standards generally accepted in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of North Richland Hills, Texas (the "City") for the fiscal year ended September 30, 2008. This report consists of City management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in the report. To provide a reasonable basis for making these representations, management of the City 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's financial statements inconformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City'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 respects. The City's financial statements have been audited by Pattillo, Brown, & Hill, LLP, a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of the City for the fiscal year ended September 30, 2008, are free of material misstatement. The independent audit involved 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; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City's financial statements for the fiscal year ended September 30, 2008, are fairly presented inconformity with GAAP. The independent auditors' report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City's separately issued Single Audit Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis ("MD&A"). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City's MD&A can be found immediately following the report of the independent auditors. P.O. Box 820609 • North Richland Hills, Texas • 76182-0609 7301 Northeast Loop 820 • Finance • 817-427-6166 • Fax 817-427-6151 ix Profile of North Richland Hills The City, incorporated in 1953, is a growing community located in the heart of the Dallas/Fort Worth Metroplex. The City's estimated population is 65,750 for 2008. The City is also home to over 1,200 commercial and industrial businesses. The third largest city in Tarrant County, North Richland Hills is only 10 minutes from downtown Fort Worth and 25 minutes from downtown Dallas. Interstate Loop 820 and Texas 121/183 (Airport Freeway) traverse the City, providing freeway access to five additional interstates and numerous US and state highways. The City is also conveniently located 10 minutes from Dallas/Fort Worth International Airport and 15 minutes from Alliance Airport. D/FW International Airport has over 2,000 flights daily with non-stop service to all major North American cities and many overseas destinations. The Alliance development facilitates the transport of merchandise through both the airport and the Burlington Northern/Santa Fe Intermodal Facility. North Richland Hills operates under a charter adopted in 1964 which provides for aCouncil-Manager form of government. The Mayor and seven Council members are elected at large. The City Council is responsible for all matters of policy and is also the authority for levying taxes, securing revenues, authorizing expenditures of City funds, and incurring City debts. The City Manager is directly responsible to the City Council. An organizational chart follows to show the various levels of responsibility. The City provides a full range of services. These services include police and fire protection; municipal court operations; the construction and maintenance of streets and infrastructure; parks, library, and recreational activities including tennis center operations; neighborhood services activities; planning and inspections; and the operations of a water and wastewater system, a golf course, and a public waterpark. A private contractor, through a franchise agreement, provides solid waste collection and disposal services for the City. The annual budget serves as the foundation for the City's financial planning and control. The City maintains budgetary controls to ensure compliance with provisions in the annual budget adopted by the City Council. Annual operating budgets are adopted for the General Fund, certain Special Revenue Funds, Debt Service Funds, Enterprise Funds, and Internal Service Funds. Project-length financial plans are adopted for the Capital Project Funds. The level of budgetary control (that is, the level at which expenditures/expenses cannot legally exceed the appropriated amount) is established at the fund level. Detail control is accomplished by maintaining appropriations, encumbrances, and expended balances byline item within each operating department, within each operating fund. All annual appropriations lapse at the end of the fiscal year. Budgetary data for proprietary funds has not been presented since reporting on such budgets is not legally required. Prior to September 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted to obtain taxpayer comments. Prior to September 30, the budget is legally enacted through passage of an ordinance. The appropriated budget is prepared by fund, department, and division. The City Manager is authorized to transfer budgeted amounts between departments within any fund. Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. Transfers of appropriations between funds require the approval of the City Council. Budget-to-actual comparisons are provided in the report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund and the crime control and prevention district fund, comparisons begin on page 68 in the required supplementary information segment of the financial statements. The comparisons for other governmental funds with appropriated annual budgets are presented in the governmental fund subsection of this report, which starts on page 76. x Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local economy -The impact of the national recession has been much less severe on the City of North Richland Hills. While located in the more stable State of Texas and DFW Metroplex, the City is fortunate to reside in the strong socioeconomic area of Northeast Tarrant County. Neighbors with the Cities of Colleyville, Keller, Hurst and Southlake, the City of North Richland Hills has been able to weather the current recession as evidenced by numerous economic indicators and newsworthy projects. A central location in DFW and proximity to key transportation continues to be the biggest asset for North Richland Hills. Because of this, the City ended 2008 with: • A $238,800,000 increase in taxable property values over 2007, of which 47% came from new residential and commercial construction. • A $7,000,000 increase in taxable sales over 2007, a significant milestone given the weak economy. • The addition of 226 new business over 2007 & 2008, resulting in a net gain of 12 businesses overall. • An unemployment rate of 4.7%, albeit 1 % higher than 2007, it is 0.5% lower than DFW, and almost 2% below the national average. • A 1 % household foreclosure rate, slightly below the Northeast Tarrant County rate, 0.5% below Tarrant County overall, and approximately 2% below the national rate. A balanced mix of large employers, broad range of retail and a growing resident population; the City is poised to combat the economic pressures of 2009. Major employers include HealthMarkets, North Hills Hospital and Impel Management Services which employ over 2,400 in the growing healthcare sector; Fitz Manufacturing which employs over 140 in the growing aerospace sector, and Con-Way Freight with over 270 employees in the growing supply chain sector, to name a few. Further deflecting economic pressures is the City's mix of large discount retailers including two Wal-Mart Supercenters, a Sam's Club and a SuperTarget. Given that these discount retailers do well under both economic upturns and downturns, North Richland Hills' stability is further exacerbated by the absence of a regional mall whose taxable sales are on the decline. The City's central location and proximity to key transportation is going to be further strengthened by two completely separate, yet significant transportation projects; the North Tarrant Express and 'The T' Commuter Rail. The largest and most complex transportation project in the history of Tarrant County, the North Tarrant Express will bring needed relief to the residents living in one of the fastest growing areas of the country. Phase I of the project cuts right through the middle of North Richland Hills along I-820, which is projected to double existing capacity. Scheduled to begin in 2010, the project will facilitate the projected increase of 256,000 vehicles per day by 2030, doubling today's volume that passes through and into North Richland Hills. Meantime, the Fort Worth Transportation Authority (also known as The T) is developing plans for a commuter rail line across Tarrant County. This proposed 37-mile route follows existing rail lines from southwest Fort Worth, through North Richland Hills into Grapevine and the north entrance of Dallas Fort Worth Airport. Operating on existing tracks of the former Cotton Belt line, the route provides direct access to all activity and access centers in the corridor. Several locations have been identified for future rail stations, including two in North Richland Hills. As such the City is currently in the process of re-zoning while entertaining developer proposals for transit oriented developments that include retail, office and high density residential. Developer interest around both transportation projects is keeping City staff busy. xi Albeit projected to be a tough year, North Richland Hills is not only prepared to manage 2009, but ready to take advantage of the not-so-distant future. Long-term financial planning - In February 2003, the voters authorized the development of twenty-two street projects (arterial, collector, and residential), two drainage projects, and four municipal facilities projects with the passage of four propositions in the 2003 Bond Election. The authorized election package totaled $37,210,000 for the aforementioned projects. The City Council and management believe development of these projects is needed to improve infrastructure and provide essential services to its citizens. The projects are expected to continue through the year 2010. At least annually, management reviews and updates long-range financial plans for the general operations of the City as well as the proprietary activities. Forecasts are prepared using conservative growth estimates for major sources of revenue. Maintaining this conservative approach, coupled with an aggressive debt repayment policy, have assisted in the City maintaining a favorable bond rating since 1997. Analysis is continuously updated to reflect new bond issues and the repayment thereof, as well as updates to estimates based on new developments, historical trends, changes in applicable legal requirements, and Council and management priorities. The plans for the internal service funds include the accumulation of resources for meeting both current and future needs. For example, building and equipment support services as well as information services collect user fees to meet current maintenance needs as well as to meet future capital replacement needs. Similarly, the City's policy with regard to self-insurance premiums has been to collect sufficient amounts to cover current health and dental claims as well as additions to reserves for future claims. In fiscal years 2002 and 2003 the Self Insurance (Internal Service) Fund reserves of $3.1 million were depleted due primarily to spiraling inflation in the health care industry and unforeseeable extraordinary health claims. In fiscal year 2004, City Council adopted a strategy to rebuild reserves over asix-year period beginning in fiscal year 2005. Savings from changes in the health care plan, transfers from existing cash reserves in the General Fund and Water and Sewer Fund, and employee premiums are being used to re-establish the reserves. Similar plans for the build-up of reserves exist for the City's enterprise operations. Funds are set aside to meet future capital replacement needs such as infrastructure replacement and capital asset acquisitions. This approach has allowed the City's water and sewer operation to meet the majority of its capital replacement needs with the issuance of minimal debt. NRH2O, the City's Waterpark has funded new attractions and infrastructure improvements by utilizing cash reserves accumulated from operations. Cash management policies and practices -The City's current bank depository contract with Bank of America expires on September 30, 2009. Cash temporarily idle during the year was invested in four public funds investment pools and Agency securities. The maturities of the investments range from overnight to almost two years with the average maturity of nine to twelve months. The average yield on investments for fiscal year 2008 was 3.81 % compared with 5.06% for the prior year. The portfolio's weighted average maturity ("WAM") at the end of the fiscal year was 269 days which represents an 56 day increase from last year's WAM of 213 days on September 30, 2007. At fiscal year end, approximately 30% of the portfolio was invested beyond one year,17% was invested for one year or less, while the remaining 53% was invested in the overnight market. 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. While the City has historically retained a portion of these risks, coverage exists for: general, employment practice, law enforcement, and errors and omissions liability; excess workers' compensation; property damage; commercial crime coverage; and employee life insurance. The Self-Insurance Fund is responsible for workers' compensation, health, automobile liability, and general liability insurance. The City maintains a stop loss third party insurance policy with respect to health claims. This policy covers City medical claims in excess of $175,000 per individual per year, and/or $4,857,855 in the xn aggregate fora 12-month period beginning on January 1, 2008. Self Insurance Fund claims are funded by charges to other funds and employee, retiree, and dependent premiums. Additional information on the City's risk. management activity can be found in the notes to the basic financial statements. Pension and other post employment benefits- The City participates in the Texas Municipal Retirement System {"TMRS"), an agency authorized by the State of Texas. Employees of the City contribute a fixed percentage of their gross pay (currently 7%). TMRS participants are immediately vested in those funds they contribute plus allocated interest. Participants are vested in employer contributions after five years of credited participation. If participants withdraw from TMRS prior to five years of credited participation, they may withdraw from TMRS those funds they contributed plus interest earnings. The City also provides postretirement health and dental care benefits for certain retirees and their dependents. As of the current fiscal year, there were 90 retired employees receiving these benefits. Currently, GAAP do not require governments to report a liability in the financial statements in connection with an employer's obligation to provide these benefits. However, with the implementation of GASB Statement No. 45 "Accounting and Financial Reporting by Employers for Postemployment Benefits other Than Pensions" in fiscal year 2009, the Gity will begin reporting this information as required. Additional information on the City's pension arrangements and post employment benefits can be found in the notes to the basic financial statements. Awards--The Government Finance Officers Association of the United States and Canada {"GFOA°) awarded. a Certificate of AchievementforExcellence in Financial Reporting to the City for its GomprehensiveAnnuai Financial Report for the fiscal year ended September 30, 2007. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded the Certifrcate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report whose contents conform to program standards. Such comprehensive annual financial reports must satisfy both GAAP and applicable legal requirements. The Certificate of Achievement is valid for a period of one year only. The City has received a Cert~cate of Achievement for the last twenty-five consecutive years. Staff believes the current Comprehensive Annual Financial Report continues to conform to the Certificate of Achievement Program requirements and it will be submitted to the GFOA for review. The City also received an award in 2008 for the 2007-2008 operating budget. The Distinguished Budget Presentation award was granted to the City for the eighteenth consecutive year by the GFOA. Acknowledgments - Tirneiy preparation of this Comprehensive Annual Financial Report was made possible by the dedicated service of the Finance Department staff and our independent auditors. We would like to express sincere appreciation to those who contributed to the process. In closing, the continued leadership and support of the Mayor, City Council, and City Manager in planning and conducting the financial operation of the City is sincerely appreciated. Respectfully submitted, ~.°~~ Larry Koonce Director of Finance ~~ aury Fiorego Assistant Director of Finance xin Certificate of Achievement for Excellence in Financial Reporting Presented to City of North Richland Hills Texas For its Comprehensive Aiuulal Financial Report for the Fiscal Year Ended September 30, 2007 A Certificate of Achievement for Excellence in Financial Reporting is presented by the government Finance Officers Association of the United States and Canada to govern2nent units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the :highest sta~zdards in goveri~n-~ent accotmtin; aiid financial reporting. `~ ~ ~~ ,, u~( tQ1E637ATE'S~y C,t~YhDA © Pres~d.ent ~~ £OAP6f64TW4 '~~«w. tMCW~ " ' ~ Executive 1~irector xiv City of North Richland Hills CITIZENS Mayor ~ City Council 'MIIICIp]I 'e0Lld5 a CaW Judge Camrissbm .~. "City Manager .~, Secretary Aaomey Community Public5afety AdministrativelFiscal Development Services Services Services Police Department Fire Department FinanceDepartmeM Budget Department PuMicWarks Plannin and ParksB Library -EmergencyManagement -Accounting -IMemalAudtt -SUeets g Reaeation Zoning -Purchasing -Tax -Drainage - Uliltty Services 8 Collections -Engineering NRH2O Municipal Court Neighborhood Services Information Services Human Resources Utildies Building Inspections •ConsumerHeatth -ComputersRJetworks -Empbyment -CodeCompNance -Phones -Risk Management -Animal Services -Civil Service Economic FadlitieslConstrucUon Management Development -Building Services r.........~ • Construction Management Public Informaton I Solid Waste - Ctticeble r... a. a. a. a.... ~ Furttttiorel Resporeibi~ties ~ ~ -820 EJ¢ransion ~ Functional Responsibilities ~ ~ -Funding Deveopmert-Ar9mal ~ ~ 1DRQTC pmertReviewCommittee Fleet Services ~ GoH Course ~ Services FadNfies ~ -Equipment Sernces -RTC -Fire Equipment ~ -Water Utilities - Fort Worth ~ ~ - Rail ~itiatives ' Legslative Organizational Analysis ~ a...... a... a. - CoordinatioNAnalysis Functonal Responsibilities -Parks and Recreation Board -Library Board - Economic Developrnert Committee - Minerals I Gas Functional Responsibilities - Facilities Shtdy -Franchises -TAD -ROW Acquisition KEY r-----------} * Appointed by ~ Contracted Council ; Services CITY OF NORTH RICHLAND HILLS, TEXAS List of Principal Officials September 30, 2008 MAYOR T. OSCAR TREVINO JR. COUNCIL MEMBER, PLACE 1 JOHN LEWIS COUNCIL MEMBER, PLACE 2 KEN SAPP COUNCIL MEMBER, PLACE 3 SUZY COMPTON COUNCIL MEMBER, PLACE 4 DR. TIM BARTH COUNCIL MEMBER, PLACE 5 DAVID WHITSON MAYOR PRO TEM, COUNCIL MEMBER, PLACE 6 SCOTT TURNAGE COUNCIL MEMBER, PLACE 7 TIM WELCH City Manager Larry J. Cunningham Assistant City Manager Jimmy Perdue Assistant City Manager Jared Miller Assistant City Manager Karen Bostic Managing Director Development Services Mike Curtis Managing Director Community Services Vickie Loftice City Secretary Patricia Hutson City Attorney George Staples Human Resources Director Patrick Hillis Director of Finance Larry Koonce Assistant Director of Finance Laury Fiorello Budget Director Mark Mills Director of Economic Development Craig Hulse Director of Planning and Development John Pitstick Public Information Officer Mary Peters Director of Information Services Kyle Spooner Municipal Court Administrator Debbie Durko Director of Neighborhood Services JoAnn Stout Library Director Steve Brown Fleet Services Director Thomas Powell Fire Chief Andy Jones Facilities & Construction Director Chris Amarante xvi Financial Section 1~I ~H l~I ~~H This page intentionally left blank. • ~~ PATTILLO, BROWN ~ HILL., L. i.. n. CERTIFIED PUBLIC ACCOUNTANTS ^ BUSINESS CdNSULTANTS INDEPENDEiV~T AUDITORS' REPORT To the Honorable Mayor and Members of City Council. City of North. Richland Hills, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and. remaining fund information of the City of North Richland Hills, Texas, as of and for the year ended September 30, 2008, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial. statements are the responsibility of the City of North Richland Hills, Texas' management. Qur responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United. States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General. of the United States, Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 opinions. In our opinion, t11e financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, tl~e aggregate discretely presented. component units, each major fund, and remaining fiend information of the City of North Richland. Hills, Texas, as of September 30, 200$, and the respective changes in financial position and, where applicable, cash flows thereof, for the year then. ended in conformity with accauntil~g principles generally accepted in the United States of America. Tn accordance with Government .Auditing Standards, we have also issued. our report dated March 4, 2009, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain. provisions of laws, regulations, contracts and grant agreements and. other matters. The purpose of that report is to describe the scope of our testing of internal. control over financial reporting and compliance and the results of that testing and not to provide an opinion on tl~le internal control over financial repol~ing or on compliance. That report is an integral .part of an audit performed in accordance with Government Auditing Standards, and should be considered in conjunction with this report in considering the results of our audit. I 401 WEST HIGHWAY 6 ^ P. o. BC1X 20725 ^ WACO, TX 76702-4725 ^ (254) 772-4901 ^ FAX: (2S4) 772-4920 ^ www~.pbhcpa.com AFFILIATE oFFIC.ES: BROWNSVILLE, TX (956) 544-777$ ^ HILISBORO, TX (254) 582-2583 TEMPLE, TX (254) 791-34b0 ~ WHITNEY, TX (254) 694-46001 ALBUQUE1tQUE, NM (50S) 266-5904 The rrtanagement's discussion and analysis and the required supplemental information as described 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, which consisted principally of inquiries of management regarding the. methods of measurement and presentation. of the required supplementary information. However, we did not audit the information and express no opinion. on it. Qur audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of North Richland Hills,. Texas' basic financial statements. The i~itroductory section, combining and individual nonmajor fund financial statements and schedules, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund. financial statements and schedules Dave been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the, basic financial statements taken as a whole. 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. t March 4, 2009 2 CITY OF NORTH RICHLAND HILLS, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2008 The City of North Richland Hills, Texas (the "City") Management's Discussion and Analysis ("MD&A") is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the City's financial activity, (c) identify changes in the City's financial position (its ability to address the next and subsequent years' challenges), (d) identify any material deviations from the financial plan (the approved budget), and (e) identify individual fund issues or concerns. MD&A is designed to focus on the current year's activities, resulting changes, and currently known facts, and should be read in conjunction with the Letter of Transmittal (beginning on page IX) and the City's financial statements (beginning on page 17). Also, unless otherwise indicated, all discussion and amounts presented herein are based upon the activity of the primary government only. Financial Highlights • The assets of the City exceeded its liabilities at the close of the fiscal year ending September 30, 2008, by over $280 million (net assets). Of this amount, almost $83 million (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net assets increased by $13,313,308 in fiscal year 2008. Additional details of this increase may be found beginning on page 19. • As of September 30, 2008, the City's governmental funds reported combined fund balances of $54,109,375 which represents an increase of $8,851,130 in comparison to the prior fiscal year's ending balance. This increase is primarily attributable to the issuance of debt for financing of capital project expenditures and the receipt of proceeds for mineral rights lease bonuses and royalties. • Approximately 33% of total governmental fund balance, or $17,729,449, is available for appropriation at the government's discretion (unreserved, undesignated fund balance). • The City's objective regarding General fund balance is to maintain a sufficient fund balance to operate the City for a period of 60 days or 15% of the following year's budgeted expenditures. This objective was met at year end. • At the end of the current fiscal year, unreserved, undesignated fund balance for the General Fund was $8,354,612, or 22% of General Fund actual expenditures for 2008. • The City's total debt (including component units) increased by approximately $1.7 million during the current fiscal year. New general obligation bonds and certificates of obligation in the amounts of $4.2 million and $4.75 million, respectively, were issued in fiscal year 2008. CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis Overview of the Financial Statements MD&A is intended to introduce the reader to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The report also contains other required supplementary information in addition to the basic financial statements. Government-wide financial statements -The government-wide financial statements are designed to provide readers with a broad overview of the City's finances in a manner similar to private- sector business. The Statement of Net Assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City's net assets changed during the fiscal year. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, unused vacation leave). Both the Statement of Net Assets and the Statement of Activities are prepared using the accrual basis of accounting as opposed to the modified accrual basis used in prior reporting models and in governmental funds. In the Statement of Net Assets and the Statement of Activities, the City's operations are separated into two types of activities: • Governmental activities -Most of the City's basic services are reported here, including the activities of police, fire, municipal court, neighborhood services, library, parks and recreation, tennis center operations, planning and inspections, public works, and general administration. Property taxes, sales taxes, and franchise fees finance most of these activities. • Business-type activities -For this type of activity, the City charges a fee to customers to cover all or most of the cost of services provided including the recovery of costs of capital assets used in the delivery of such services. The City's water and sewer, golf course, and aquatic park activities are reported here. The government-wide financial statements can be found on pages 17 - 19 of the comprehensive annual financial report. 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. Fund financial statements provide detailed information about the most significant funds, not the City as a whole. Some funds are required to be established by state law or bond covenants. However, management establishes many other funds to help control and manage resources for particular purposes or to show that legal responsibilities for using certain taxes, grants, and other money are being met. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis Governmental funds -The majority of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances available for appropriation at year-end. These funds are reported using an accounting method identified as the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. Statements of governmental funds provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources available for appropriation in the near future to finance City programs. By comparing information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements, readers may better understand the long-term impact of the government's near-term financing decisions. The relationship or differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are detailed in a reconciliation following the fund financial statements. The City maintains six major individual governmental funds. Information is presented separately in the Governmental Funds Balance Sheet and in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds (pages 24 - 27). The General Fund, Parks and Recreation Facilities Development Fund, Crime Control and Prevention District Fund, General Debt Service Fund, and Gas Development Fund are the major governmental funds of the City. Data from the other fifteen governmental funds are combined into a single, aggregated presentation in the governmental statements. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report (pages 72 - 75). Proprietary funds -The objective of proprietary funds is to charge customers, both internal and external, for services provided an amount sufficient to cover virtually all costs associated with providing the services including recovery of amounts required to replace assets used in the delivery of such services. These services are generally reported in proprietary funds. Proprietary funds are reported in the same manner that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact, the City's enterprise funds (a component of proprietary funds) are almost identical to the business-type activities that are reported in the government-wide statements, but provide more detail and additional information, such as the statement of cash flows. The internal service funds (the other component of proprietary funds) are utilized to report activities that provide supplies and services for the City's other programs and activities, such as the City's building maintenance services, fleet management, employee and property insurance coverage, and telephone and computer services. Because these services benefit both governmental and business-type functions, they have been included in both the governmental and business-type activities in the government-wide financial statements. The City maintains three enterprise funds. The City uses enterprise funds to account for its provision of water and wastewater services, golf course operations, and water park activities. The City considers all enterprise funds to be major funds. Financial statements for the enterprise funds can be found on pages 28 - 31 of the report. CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis Notes to the financial statements -The notes to the financial statements provide additional information that is essential for 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 33 63 of this report. Government-Wide Financial Analysis The government-wide financial analysis highlights the information contained in the Statement of Net Assets and Statement of Activities. The City's combined net assets were $280,221,314 as of September 30, 2008. Analyzing the net assets of governmental and business-type activities separately, governmental activities net assets equal $187,664,641 and business-type activities net assets total $92,556,673. This analysis focuses on the net assets and changes in general revenues and significant expenses of the City's governmental and business-type activities. Statement of Net Assets -The largest portion of the City's net assets (68%) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment) less any related debt used to acquire those assets that is still outstanding. The City uses capital assets to provide services to citizens; consequently, capital assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these obligations. The following table presents the condensed government-wide statement of net assets as of September 30, 2008 and 2007. Current assets include restricted deposit and investment balances. Other assets represent bond issuance costs. Condensed Statement of Net Assets Amounts shown in thousands (000's) Current assets Other assets Capital assets, net of depreciation Total assets Long-temp liabilities Other liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Governmental Activities Business-Type Activities 2008 2007 2008 2007 2008 2007 Totals Totals $ 68,002 $ 56,330 35,913 405 384 130 33,165 103,915 89,495 109 535 493 178,375 177,743 70,445 72,225 248,820 249,968 246,782 234,457 106,488 105,499 353,270 339,956 44,835 11,765 8,753 4,828 53,588 16,593 14,282 46,343 5,178 7,469 19,460 53,812 59,117 58,108 13,931 12,297 73,048 70,405 129,534 127,276 60,829 63,950 190,363 191,226 3,984 3,270 2,710 2,891 6,694 6,161 54,147 45,802 29,018 26,360 83,165 72,162 $ 187,665 $ 176,348 92,557 93,201 280,222 269,549 Statement of Activities -Governmental activities increased the City of North Richland Hills' net assets by $11.3 million in fiscal year 2008, while business-type activities decreased net assets by $645,227. The following table presents the condensed government-wide statement of activities for the years ended September 30, 2008 and 2007. 6 CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis Changes in Net Assets Amounts shown in thousands (000's) Governmental Activities Business-Type Activities 2008 2007 2008 2007 2008 2007 Total Total Revenues: Program revenues: Charges for services $ 17,214 $ 10,528 32,796 27,845 50,010 38,373 Operating grants and contributions 354 1,029 - - 354 1,029 Capital grants and contributions 305 410 - 600 305 1,010 General revenues: Property tax 19,249 18,663 - - 19,249 18,663 Sales tax 17,446 16,865 - - 17,446 16,865 Mixed beverage 162 130 - - 162 130 Franchise taxes 4,605 4,450 - - 4,605 4,450 Occupancy taxes 260 284 - - 260 284 Unrestricted investment earnings 2,244 2,757 879 1,331 3,123 4,088 Contributions 196 - - - 196 - Miscellaneous 477 2,281 76 28 553 2,309 Total revenue 62,512 57,397 33,751 29,804 96,263 87,201 Expenses: General government 9,380 8,461 - - 9,380 8,461 Public safety 25,792 23,265 - - 25,792 23,265 Culture and recreation 7,973 7,328 - - 7,973 7,328 Public works 5,748 7,800 - - 5,748 7,800 Interest and other fees 2,302 2,562 - - 2,302 2,562 Water and sewer - - 27,441 23,154 27,441 23,154 Golf course - - 2,407 2,247 2,407 2,247 Aquatic park - - 3,991 3,434 3,991 3,434 Total expenses 51,195 49,416 33,839 28,835 85,034 78,251 Increase in net assets before special items and transfers 11,317 7,982 (88) 969 11,229 8,951 Transfers between governmental and business-type activities 557 713 (557) (713) - - Increase in net assets 11,874 8,695 (645) 256 11,229 8,951 Net assets at the beginning of the year 176,348 167,653 93,202 92,945 269,550 260,598 Prior period adj. (557) - - - (557) - Restated net assets - beginning balance 175,791 167,653 93,202 92,945 268,993 260,598 Net assets at the end of the year $ 187,665 $ 176,348 92,557 93,201 280,222 269,549 Governmental activities -Governmental activities increased the City of North Richland Hills' net assets by $11.3 million in fiscal year 2008. An increase in tax revenues provided a 3.3% increase to the City's overall net asset increase. Tax revenues saw an increase of $1.3 million in 2008. Charges for services realized significant growth of 63% or approximately $6.7 million increase CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis over 2007 revenues. This significant increase is attributed to the mineral rights leasing and royalty activity on City owned property. The total expenses for governmental activity did increase by approximately $1.8 million over 2007 totals. This was expected due to higher costs of services due to fuel consumption and utility charges. Operating grants and contributions decreased by $780,820 from fiscal year 2007 to 2008. Developer participation contributions declined. The slow down of the economic conditions of the new housing market correlates to this decline. Also, the City has reached over 88% build-out for new development. The contributions from developers are nearing maximum capacity. Sales, mixed beverage taxes, and franchise taxes realized increases ($580,524, $31,923, and $154,082 respectively) from fiscal year 2007 to 2008. Sales taxes are entirely dependent upon the local economy. As such, the 3.4% increase experienced in this revenue stream reflects a a leveling of consumer confidence correlated to the national economy. The City is expecting a slight decrease in sales tax revenues for 2009. The first quarter of fiscal year 2009 saw a decrease in the federal funds rates and by the second quarter the United States is in a recession. However, the City's main retailers are stores that cater to the budget conscious consumer and the City does anticipate a minor decrease in sales tax revenues in 2009. On September 30, 2008, the Federal Reserve Board ("Fed") dropped federal funds rates to a range of 0% to .25%. The "Fed" did this to minimize the severity of any recession of the United States. The City reviewed its interest earning projection to be on the same level as the "Fed." In 2009 the City estimated its return on investment to decline to approximately 2.30% by the end of the fiscal year. This rate of return is approximately 2% lower than the actual 2008 return of 4.34%. The City does not expect interest rates to rebound before the end of 2009 fiscal year. The most significant governmental expense occurred in the public safety program ("PS"), which incurred expenses of $25,791,827. This figure represents an increase from the prior fiscal year expenses of over $2.6 million. Approximately 80.8% of the PS costs is related to police and fire protection personnel salaries and related benefits. These costs are estimated at $21,062,230 which represent an approximate increase of $2 million from the prior fiscal year. Continued implementation of the compensation and classification study recommendations, changes to insurance premiums, and an increase in the retirement contribution rate are primarily responsible for the increase in personnel-related costs. The remainder of the increase is attributable to the numerous entries, such as compensated absences, depreciation, and the internal service fund allocation, required to prepare the government-wide financial statements. Other significant governmental expenses for 2008 include general government ("GG"), which incurred $9,379,422 in expenses, of which an estimated $5.1 million (excluding internal service employees) represent personnel and related charges. Personnel and related benefit expense for general government rose by approximately $700,000. Again, continued implementation of the compensation and classification study recommendations, changes to insurance premiums, and an increase in the retirement contribution rate are primarily responsible for the increase in personnel-related costs. General government expenses increased by $918,280 (respectively, 10.8%). The Internal Service Fund increased governmental activities assets by $1.03 million (or approximately 8.7%) of the overall $11.9 net asset increase. Facility and Construction Services and Fleet Services Funds had a net decrease of $135,189. This decrease is from using the insurance proceeds received in 2007 for repairs and replacements due to inclement weather damage in the prior year. Culture and recreation program expenses increased by approximately 8.9% from fiscal year 2007 to 2008. The public works activities of the City incurred $5,748,315 in expenses, of which over one-half is attributable to program-applicable depreciation expense. Governmental activities CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis interest expense and other fees decreased by 10.1 %, or approximately $259,741, from fiscal year 2007 to fiscal year 2008. Business-type activities -Business-type activities resulted in a minor negative depletion to the City's total net assets. 2008 decrease was $645,227. Several factors can explain this pattern. • Water and Sewer Fund realized a $2.9 million increase in costs to purchase water and sewer services from contracted parties. 2008 had increased sales revenue to offset the charges, but due to the unpredictability of actual consumption the costs were greater than anticipated thus reducing net assets slightly. • Investment income decreased by 33.9%, or respectively $451,986. This decrease correlates to a slowing of economy growth along with the utilization of funds set aside or held for capital acquisition. • Aquatic Park revenues remained level from 2007 to 2008. The Park realized only a $42,458 increase in admission sales. The Dallas/Ft Worth metroplex aquatic parks suffered from a water born illness that migrated from water park to water park during the 2008 summer season. The City of North Richland Hills aquatic park did not incur any illnesses, but due to the highly publicized incidents of other neighboring parks the public was cautioned about visiting any aquatic park in the region. • Golf Course realized a gain in 2008 of $329,665. This increase is due to a transfer in from the Gas Development Fund from the mineral right lease proceeds of the City for course renovations and improvements. Fund Level Financial Analysis The General Fund added $57,388 to fund balance for the year ended September 30, 2008 bringing the total fund balance to $14,372,753. Of this, $623,072 is reserved for encumbrances and inventories. Another $5.4 million is designated for economic development, savings incentive, special projects, restoration of insurance reserves, and other special programs. The unreserved, undesignated balance is $8,354,612 which represents approximately 22% of the 2008 fiscal year's expenditures. The General Fund property tax revenues realized an increase from the prior year of $707,414 due to an increase in taxable values and an increase in the operations and maintenance allocation. There was no change in the total property tax rate of $.57 which has been in effect since fiscal year 1994. Sales taxes increased by 3.6% due to new business openings. Franchise fees realized an increase of over $154,082 primarily as a result of increase in products available from franchisor's and options for the citizens (specifically related to cable and dish television services). Ambulance fees grew due to a higher volume of transports and an increase in the average transport charges. The Parks and Recreation Facilities Development Fund ended the year with a $4.7 million balance, an increase of $226,909. The Crime Control District Fund ended fiscal year 2008 with a $897,447 transition fund balance compared to the $1.6 million prior year (2007) ending balance. Two of the capital projects funds, General Capital Projects ("GCP") and Streets 1994 Election, ended the year with a decrease of fund balance of ($1,582,626) and a decrease in fund balance of ($623,475), respectively. The usage of prior year bond issuances is primarily responsible for the decrease of fund balance in GCP. Transfers into the "GCP" from various funds to facilitate capital projects totaled $1,616,302. Project expenditures funded from existing cash balances, CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis rather than from new debt issuance, and transfers out are responsible for the decrease in fund balance for Street 1994 Election. One of the three Enterprise Funds realized increases to their net assets for the year ending September 30, 2008. The Golf Course Fund had a transfer in from the General Fund for $162,000 in 2008. This transfer was the main reason for Golf's $329,665 addition to net assets. Water and Sewer Fund realized a net loss of $1.08 million. The loss is due to an increase in costs to purchase water and sewer processing for the citizens. General Fund Budgetary Highlights The City revised its General Fund budget during the course of the year. The revisions resulted in a final expenditure budget approximately $870,185 more than adopted. Following is a summary of notable adjustments to the 2007-2008 adopted budget (figures are approximated): • $758,158 increase for previous year encumbrances for goods and services ordered in 2006- 2007, but received in 2007-2008 • $112,052 increase for one-time, non-recurring costs originally requested by departments for 2006-2007, but funded in 2007-2007 The ending General Fund balance of $14,372,753 continues to meet the City's policy of maintaining a balance of at least 15% of expenditures. The policy was established to protect the City from unforeseen emergencies and to place the City in a more favorable financial position overall. General Fund Revised Budget to Actual Comparison Notable variances occurred in the General Fund revised budget to actual comparison as follows: • Property taxes negative variance of ($282,974) due to the unanticipated slow down of the housing market in 2008. • Franchise fees reflected a favorable variance of $328,761 which is primarily due to increases in gas, water and sewer payments, and cable utilities. Rates for gas and water and sewer utilities increased plus new services from cable franchises were implemented by providers. • General Fund had positive net expenditure budget variances totaling approximately $1.3 million. The General Fund activities with positive variances include: General Government ($889,195); Culture and Recreation ($177,060), and Public Works ($252,840). General Fund savings is partly caused by encumbrances of current year activities which will be carried to 2008-2009 budget and expensed in the new budget period. The total of prior year encumbrances to be expensed in 2008-2009 totals $457,054 (or approximately 35% of net amount under budget). • Culture and recreation final budget exceeded actual expenditures by $177,060. This variance can be attributed to general Parks and Recreation totaling approximately $70,000 and Library Services totaling $106,632. These amounts are cumulative totals for overall savings department wide and cannot be attributed to one single event. • Public Works expenditures were under the final budget by $252,840. Savings are tied to electricity charges under budget by $102,894, $31,963 in salary savings, $41,387 in repair and maintenance savings, and $16,158 for encumbrances to be expensed in 2009. 10 CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis Capital Asset and Debt Administration Capital assets - At the end of fiscal year 2008, the City had $248,820,997 (net of depreciation) invested in a broad range of capital assets including, but not limited to, police and fire equipment, buildings, park facilities, roads, bridges, aquatic park facilities, golf course assets, and the water and sewer system. The following table provides capital asset balances net of depreciation for each major category for both governmental and business-type activities for the fiscal years ending September 30, 2008 and 2007. Governmental Activities Business-Type Activities 2008 2007 2008 2007 2008 2007 Total Total Land & land imp. 67,760 $ 67,760 2,527 2,527 70,287 70,287 Works of art 72 72 - - 72 72 Buildings & imp. 11,251 12,034 2,047 2,198 13,298 14,232 Other imp. 77,228 75,160 11,918 12,798 89,146 87,958 Utility plant - - 49,328 50,881 49,328 50,881 Machinery & equip. 4,642 5,150 714 624 5,356 5,774 Const. in progress 17,422 17,566 3,911 3,198 21,333 20,764 Total capital assets $ 178,375 $ 177,742 70,445 72,226 248,820 249,968 This year's additions include: Description Amount 3-ea. Chevy Impala -Police Dept. $ 163,044 Ball Field Groomer 37,432 Ball Machine -Park and Recreation 5,370 Benchtop Chamber -Police Dept 7,065 Camera -Police Dept. 7,719 Camera Van Replacement 58,492 Canopy Shade 114,821 Concrete Saw 10,208 Fuel Storage Tank Monitoring System 10,862 Golf Course Maintenance Equipment 151,828 HTE Voice Response Upgrading 131,000 Mark Court Street Improvement 110,623 NRH2O Slid Restoration 13,900 Police Generator Replacement 64,447 Rufe Snow Bridge ST9604 666,611 RUFE SNOW/820 - MIDCITIES ST9605 5,374,464 Signal Timing Equipment Upgrade 30,470 Street Maintenance SM0701 676,267 Thermoplastic Melter Machine 49,500 Vehicle Lift 5,483 Vibratory trench roller -Public Work 28,900 X3M Autocite Series -Municipal Course 10,500 11 CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis Debt - At September 30, 2008 and 2007, the City had the following debt outstanding: Outstanding Debt Amounts shown in thousands (000's) Governmental Activities Business-Type Activities 2008 2007 2008 2007 2008 2007 Totals Totals General obligation bonds $ 37,823 $ 37,821 2,790 3,537 40,613 41,358 Certificates of obligation 7,041 7,842 6,865 4,866 13,906 12,708 Sales tax revenue bonds 4,520 5,410 - - 4,520 5,410 Totals $ 49,384 $ 51,073 9,655 8,403 59,039 59,476 In fiscal year 2008, the City issued new debt. The presently outstanding general obligation debt of the City is rated "Aa3" by Moody's and "AA" by S&P. The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through credit enhancement in the form of municipal bond insurance policies. As a home rule city, the City is not limited by law in the amount of debt it may issue. The City's Charter provides that general property taxes are limited to $1.50 per $100 of assessed valuation for general governmental services including the payment of principal and interest on general obligation debt. The City has maintained a property tax rate of $0.57 per $100 assessed valuation for twelve consecutive years. The current ratio of tax-supported debt to assessed value of all taxable property is 1.25%. Additional detailed information on long-term debt activity is disclosed in the notes (IV-E) to the financial statements. Risk -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. While the City has historically retained a portion of these risks, coverage exists for: general, employment practice, law enforcement, and errors and omissions liability; excess workers' compensation; property damage; commercial crime coverage; and employee life insurance. The Self-Insurance Fund is responsible for workers' compensation, health, automobile liability, and general liability insurance. The City maintains a stop loss third party insurance policy with respect to health claims. This policy covers city medical claims in excess of $175,000 per individual, and/or $4,857,855 in the aggregate fora 12-month period beginning on January 1, 2008. Self-Insurance fund claims are funded by charges to other funds and premiums from employees and retirees for self and dependent coverage. Economic Factors and Next Year's Budgets and Rates The two largest revenue sources for the General Fund are property tax revenues and sales tax receipts. Because of the volatile nature of the sales tax revenue source and the recent departure of major retailers, the City has been conservative in sales tax projections for fiscal year 2008- 2009. For budget year 2007-2008, sales tax receipts are anticipated to be aligned with budget and the City does not expect to see growth above the estimated amounts. When compared to the prior year actual receipts, sales taxes are also anticipated to increase slightly. 12 CITY OF NORTH RICHLAND HILLS, TEXAS Management's Discussion and Analysis The fiscal year 2008-2009 budget incorporates no increase in the property tax rate. For fiscal year 2007-2008 the tax rate distribution for the City is as follows: Tax Rate Distribution Schedule: General Fund -Maintenance & Operations Debt Service Fund Total distribution of tax rate of Total Tax Rate Tax Rate Distribution 60.07% $ 0.342406 39.93% 0.227594 100.00% $ 0.570000 By policy, the City maintains an unreserved General fund balance of 15% of budgeted expenditures. The use of available fund balance for one-time expenditures eliminates the financial impact of such purchases on future budgets. The fiscal year 2008-2009 Water and Sewer Fund operating budget includes base and volume rate changes for water service. In addition, sewer base and pass-through rates will increase in April 2009. Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of North Richland Hills, Director of Finance, P.O. Box 820609, North Richland Hills, Texas 76182-0609. 13 lei ~~H This page intentionally left blank. 14 BASIC FINANCIAL STATEMENTS 15 N ~H This page intentionally left blank. 16 CITY OF NORTH RICHLAND HILLS, TEXAS Statement of Net Assets September 30, 2008 Primary Government Governmental Business-Type Component Activities Activities Total Units Assets CURRENT ASSETS Deposits and investments $ 31,631,422 $ 8,784,865 $ 40,416,288 $ 905,071 Receivables, net of allowances: Accounts 688,282 3,661,123 4,349,404 - Property taxes 358,713 - 358,713 127,966 Other taxes 3,450, 356 - 3,450,356 - Interest receivable 614,222 191,010 805,232 62,724 Special assessments 230,005 - 230,005 - Intergovernmental 1,616, 935 135,627 1,752,562 - Court fines and fees 427,345 - 427,345 - Other 2,048, 560 - 2,048,560 - Prepaids 61, 783 23,464 85,247 - Inventories, at cost 314,968 464,464 779,432 - Internal balances (5,026,118) 5,026,118 - - Restricted deposits and investments 31,585,031 17,626,218 49,211,249 9,809,945 Total current assets 68,001,505 35,912,888 103,914,393 10,905,707 NONCURRENT ASSETS Capital assets -net: Land and nondepreciable land improvements 67,760,221 2,526,639 70,286,860 - Buifdings and improvements 24,429,686 3,718,257 28,147,943 - Improvements other than buildings 138,148,421 19,667,804 157,816,225 - Utility plant - 85,089,011 85,089,011 - Machinery and equipmenht 20,107,315 2,605,209 22,712,524 - Artwork and historical treasures 72,491 - 72,491 - Construction in progress 17,421,998 3,911,261 21,333,259 9,846,526 Accumulated depreciation (89,564,489) (47,072,828) (136,637,316) - Total capital assets -net 178,375,644 70,445,354 248,820,997 9,846,526 Other assets 404,818 129,449 534,267 86,087 Total noncurrent assets 178,780,462 70,574,802 249,355,264 9,932,613 Total assets 246,781,967 106,487,691 353,269,657 20,838,319 Liabilities CURRENT LIABILITIES Accounts payable and accrued liabilities 5,141,300 2,129,594 7,270,893 - Deposits and other liabilities 1,249,733 67,360 1,317,093 - Compensated absences 2,019,933 260,429 2,280,362 - Unearned revenue 250,707 64,900 315,607 - Accrued interest pay able 341,154 67,329 408,483 62,839 Bonds payable 5,622,157 972,902 6,595,059 615,000 Due to other governments 198,576 - 198,576 - Customers' deposits - 1,572,557 1,572,557 - Developers' deposits - 43,018 43,018 - Total current liabilities 14,823, 560 5,178,088 20,001,648 677,839 NONCURRENT LIABILITIES General obligation bonds payable 33,573,576 2,350,000 35,923,576 305,000 Certificates of obligation 6,045,976 6,293,842 12,339,818 10,602,918 Sales tax revenue bonds 3,600,000 - 3,600,000 - Compensated absences 908,348 109,087 1,017,435 - Accrued arbitrage liability 165,867 - 165,867 - Total long-term liabilities 44,293,766 8,752,929 53,046,695 10,919,556 Total liabilities 59,117,326 13,931,017 73,048,344 11,597,395 Net assets Invested in capital assets, net of related debt 129,938,753 60,958,059 190,896,812 8,675,350 Restricted for: Debt service 3,984,364 366,547 4,350,911 565,575 Grants - - - - Impact fees - 2,343,166 2,343,166 - Unrestricted 53,741,523 28,888,901 82,630,424 - Total net assets $ 187,664,641 $ 92,556,673 $ 280,221,314 $ 9,240,925 The notes to the financial statements are an integral part of this statement. 17 1~I ~~H This page intentionally left blank. 18 CITY OF NORTH RICHLAND HILLS, TEXAS Statement of Activities Year Ended September 30, 2008 Program Revenues Net (Expense) Revenue and Changes in Net Assets Operating Capital Charges for Grants and Grants and Governmental Business-type Component Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Units Primary Government Governmental activities: General government Public safety Culture and recreation Public works Interest and other fees Total governmental activities Business-type activities Water and sewer Golf course Aquatic park Total business-type activities Total primary government Component units Tax increment financing districts $ 9,379,422 $ 9,345,665 $ 155,488 $ - $ 121,731 $ 121,731 $ - 25,791,827 2,995,693 172,051 - (22,624,083) (22,624,083) - 7,973,359 2,517,122 26,277 - (5,429,960) (5,429,960) - 5,748,315 2,355,161 - 304,514 (3,088,640) (3,088,640) - 2,302,096 - - - (2,302,096) (2,302,096) - 51,195,019 17,213,641 353,816 304,514 (33,323,048) (33,323,048) - 27,441,398 26,301,693 - - (1,139,705) (1,139,705) - 2,407,427 2,551,046 - - 143,619 143,619 - 3,991,371 3,943,288 - - 48,083 (48,083) - 33,840,196 32,796,027 - - 1,044,169 (1,044,169) - $85,035,215 $ 50,009,668 $ 353,816 $ 304,514 $ (33,323,048) $ 1,044,169 $ (34,367,217) $ - $ 469,871 $ - $ - $ - $ - $ - $ - $ 469,871 General revenue: Taxes: Property Sales Mixed beverage Franchise Occupancy Unrestricted investment earnings Contributions Miscellaneous Transfers between governmental and business-type activities Total general revenue and transfers Change in net assets Adjustment to beginning fund balance, as previousy reported Net assets -beginning of year Net assets -end of year The notes to the frnanciat statements are an integral part of this statement. $ 19,248,707 $ - $ 19,248,707 $ 2,343,979 17,445,806 - 17,445,806 - 161,783 - 161,783 - 4,604,523 - 4,604,523 - 260,319 - 260,319 - 2,245,479 878,795 3,124,274 489,416 196,320 - 196,320 - 477,026 77,191 554,217 - 557,044 557,044 - - 45,197,007 398,942 45,595,949 2,833,395 11,873,959 (645,227) 11,228,732 2,363,524 (557,548) - (557,548) - 176,348,230 93,201,899 269,550,129 6,877,401 $187,664,641 $ 92,556,672 $ 280,221,313 $ 9,240,925 CITY OF NORTH RICHLAND HILLS, TEXAS Balance Sheet GOVERNMENTAL September 30, 2008 Parks and Crime Control Recreation and Facilities Prevention Gas General Development District Development Assets Deposits and investments $14,308,538 $ 2,721,245 $ - $ 4,429,544 Receivables (net of allowance): Accounts 577,445 - - - Property taxes 358,713 - - - Othertaxes receivable 1,874,134 778,266 725,509 - Interest receivable 78,779 14,832 3,255 17,823 Special assessments receivable - - - - Intergovernmental receivable 63,663 1,114,137 - - Other receivables 63,553 23,588 - 1,805,940 Due from other funds - - - - Prepaid items 21,598 2,946 - - Inventories, at cost 165,988 16,246 - - Advances to other funds - - - - Restricted: Deposits and investments: Construction funds - 162,528 - - Transition funds - - 222,965 - Total assets 17,512,410 4,833,788 951,728 6,253,307 Liabilities Accounts payable 1,792,496 62,565 25,143 - Accrued liabilities 246,744 14,789 29,139 - Intergovernmental payables - - - - Deposits and other liabilities 679,215 2,095 - - Deferred revenue 421,203 943 - - Totalliabilities 3,139,658 80,392 54,281 - Fund Balance Reserved for encumbrances 457,083 652,043 3,371 - Reserved for inventories 165,988 16,246 - - Reserved for advances - - - - Reserved for debt service - - - - Reserved for capital improvements - 4,085,107 - - Unreserved, designated for: Transition - - 894,077 - Economic development 2,543,875 - - - Muncipal court technology & security 323,518 - - - Benefit conversion program 100,000 - - - Savings incentive program 250,360 - - - Retirement stabilization 250,000 - - - Utility billing assistance 98,962 - - - 820 facilities project 400,000 - - - Crime control district contingency 200,000 - - - Rail station project 800,000 - - - Golf course equipment loan 168,064 - - - Insurance restoration plan 115,800 - - - Education and training program 34,416 - - - Tuition assistance program 110,074 - - - Unreserved, undesignated for: - General fund 8,354,612 - - - Special revenue - - - 6,253,307 Total fund balance 14,372,752 4,753,396 897,447 6,253,307 Total liabilities and fund balance $17,512,410 $ 4,833,788 $ 951,728 $ 6,253,307 The notes to the financial statements are an integral part of this statement. 20 General Capital General Debt Other Total Projects Service Governmental Governmental $ - $ 3,191,983 $ 4,731,863 $ 29,383,173 - - 97,743 675,188 - - - 358,713 - - 72,448 3,450,356 250,926 16,163 28,161 409,938 - - 230,005 230,005 230,005 - 209,130 1,616,935 - - 65,480 1,958,561 36,761 - - 36,761 - - 1,890 26,434 - - - 182,234 36,761 - - 36,761 6,843,879 - 13,714,634 20,721,041 - - - 222,965 7,398,332 3,208,146 19,151,355 59,309,067 181,080 59,135 301,927 2,422,346 3,101 - 710 294,484 - - 198,576 198,576 557,546 - 8,204 1,247,060 450,261 - 164,821 1,037,228 1,191,988 59,135 674,238 5,199,693 1,219,149 - 763,107 3,094,753 _ _ - 182,234 36,761 - - 36,761 - 3,149,010 835,354 3,984,364 4,950,434 - 13,757,125 22,792,666 - - - 894,077 _ - - 2,543,875 _ _ - 323,518 _ _ - 100,000 _ - - 250,360 _ _ - 250,000 _ _ - 98,962 _ _ - 400, 000 _ _ - 200,000 _ _ - 800,000 _ _ - 168, 064 _ - - 115,800 _ _ - 34,416 _ _ - 110,074 _ _ - 8,354,612 - - 3,121,531 9,374,838 6,206,344 3,149,010 18,477,117 54,109,373 $ 7,398,332 $ 3,208,146 $19,151,355 $ 59,309,066 21 N ~~H This page intentionally left blank. 22 CITY OF NORTH RICHLAND HILLS, TEXAS Balance Sheet Reconciliation GOVERNMENTAL September 30, 2008 Total fund balances--governmental funds Amounts reported for governmental activities in the statement of net assets (pages 18 and 19) are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. Certain receivables are not available to pay current-period expenditures and, therefore, are deferred in the funds. Internal service funds are used by the City's management for building and vehicle support services, self insurance, and information services. The assets and liabilities of the internal service funds are included with governmental activities in the Statement of Net Assets but are not included at the fund level. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Total net assets--governmental activities The notes to the financial statements are an integral part of this statement. See note II A for additional information on reconciliation calculations. $ 54,109,375 174,355,663 1,318,426 9,537,001 (51,655,824) $ 187,664,641 23 CITY OF NORTH RICHLAND HILLS, TEXAS Statement of Revenues, Expenditures, and Changes in Fund Balance GOVERNMENTAL Year Ended September 30, 2008 REVENUES Taxes Licenses and permits Charges for services Fines Civil citations Contributions Special assessments Investment income Intergovernmental Drainage fees Tennis center Forfeitures Mineral rights lease income Miscellaneous Total revenues EXPENDITURES General government Public safety Culture and recreation Public works Capital outlay: General government Public safety Culture and recreation Public works Debt service: Principal retirement Interest and fiscal agent charges Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Issuance of debt Proceeds from sale of assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Adjustment to beginning fund balance, as previously reported Fund balance -beginning of year Fund balance -end of year Parks and Recreation Crime Control Gas Facilities and Prevention Development General Development District Fund $ 26,287,991 $ 4,410,260 $ 4,158,622 $ - 1,705,703 - - - 5,309,838 - - - 2,394,920 - - - 2,000 3,600 - - 530,729 174,934 74,018 69,767 245, 604 - - - - 320,836 - - - - - 6,239,616 228, 967 159, 060 - 913 36,705,752 5,068,690 4,232,640 6,310,296 8,630,134 - - 2,046 19,823,025 - 4,934,575 - 4, 396, 531 2, 824, 368 - - 2,614,343 - - - - 430,577 - - 35,464,033 3,254,945 4,934,575 2,046 1,241,719 1,813,745 (701,935) 6,308,250 13,950 - - - 738,519 460,000 - - (1,936,800) (2,046,836) (43,718) (600,000) (1,184,331) (1,586,836) (43,718) (600,000) 57,388 226,909 (745,653) 5,708,250 14,315,364 4,526,487 1,643,100 545,057 $ 14,372,752 $ 4,753,396 $ 897,447 $ 6,253,307 The notes to the financial statement are an integral part of this statement. 24 General Capital General Debt Other Total Projects Service Governmental Governmental $ - $ 6,603,946 $ 260,319 $ 41,721,138 - - - 1,705,703 - - - 5, 309, 838 - - - 2,394,920 - - 825,191 825,191 32,885 - 157,835 196,320 77,638 - 76,487 154,125 254,608 122,266 452,599 1,678,921 - 19,785 935,102 1,200,491 - - 830,338 830,338 - - - 320,836 - - 142,874 142,874 - - - 6,239,616 - - 6, 246 395,186 365,131 6,745,997 3,686,991 63,115,497 - - 422,309 9,054,489 - - 1,293,908 26,051,508 - - 20,697 7,241,596 - - 48,658 2,663,001 1,079,579 - - 1,079,579 877,400 - - 877,400 - - 7,719 438,296 945,389 - 1,796,932 2,742,321 - 5,298,393 890,000 6,188,393 - 1,933,632 291,953 2,225,585 2,902,368 7,232,025 4,772,176 58,562,168 (2,537,237) (486,028) (1,085,185) 4,553,329 285,000 - 4,180,000 4,465,000 - - 2,403 16,353 1,616,302 1,251,897 2,206,925 6,273,643 (389,144) - (883,151) (5,899,649) 1,512,158 1,251,897 5,506,177 4,855,347 (1,025,079) 765,869 4,420,992 9,408,676 (557,548) - - (557,548) 7,788,971 2,383,141 14,056,125 45,258,245 $ 6, 206, 344 $ 3,149, 010 $ 18,477,117 $ 54,109, 373 25 1~I ~~H This page intentionally left blank. 26 CITY OF NORTH RICHLAND HILLS, TEXAS Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Net Activities Year Ended September 30, 2008 Net change in fund balances--total governmental funds Amounts reported for governmental activities in the statement of activities (pages 20 and 21) are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. The net effect of various miscellaneous transactions involving capital assets (i.e. sales, trade-ins, and donations) is to decrease net assets Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Certain long-term liabilities are accrued at the government-wide level but not at the fund level. The current year change in those liabilities is reported as expense in the statement of activities. Expenses recorded for accrual of interest and amortization expense are included in this category. Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long- term liabilities in the statement of net assets. This is the difference between repayments and proceeds received. Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet maintenance, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. Change in net assets of governmental activities The notes to the financial statements are an integral part of this statement. See note II B for additional information on reconciliation calculations. $ 9,408,676 7,954 (11,889) 104, 562 (356,644) 1,688,946 1,032,354 $ 11,873,959 27 CITY OF NORTH RICHLAND HILLS, TEXAS Statement of Net Assets PROPRIETARY September 30, 2008 Business-type Activities -Enterprise Funds N Assets CURRENT ASSETS Deposits and investments Accounts receivable, net of allowance: Billed Unbilled Other Interest receivable Intergovernmental receivable Prepaid items Due from other funds Inventories, at costs Restricted assets: Deposits and investments: Construction funds Debt service reserve funds Impact fees Customer deposits Rate stabilization Future construction Infrastructure Future claims Other funds Total current assets NONCURRENT ASSETS Capital assets, at cost: Land Building and improvements Other improvements Utility plant in service Machinery and equipment Construction in progress Accumulated depreciation Net capital assets Other assets, net of accumulated amortization Advances to other funds Total noncurrent assets Total assets Water and Sewer Golf Course Aquatic Park Total Enterprise Internal Service 7,983,320 218,491 583,054 8,784,865 2,248,244 1,876,231 - - 1,876,231 - 1,649,950 - - 1,649,950 - 43,665 49,092 42,185 134,942 103,094 155,859 467 34,684 191,010 99,726 135,627 - - 135,627 - 9,772 13,692 - 23,464 35,349 26,532 - - 26,532 - 381,024 67,117 16,323 464,464 132,734 5,206,492 508,800 373,250 6,088,541 718,872 - - 366,547 366,547 - 2,334,099 - - 2,334,099 - 1,573,407 - - 1,573,407 - 1,199,777 - - 1,199,777 - 2,991,147 - 144,482 3,135,629 5,367,834 - - 2,197,498 2,197,498 - - - 649,879 649,879 3,388,643 - 80,842 - 80,842 1,165,676 25,566,900 938,501 4,407,901 30,913,303 13,260,172 22,868 1,758,000 745,771 2,526,639 - 1,136,327 763,116 1,818,815 3,718,257 272,293 376,104 5,216,592 14,075,107 19,667,804 - 85,089,010 - - 85,089,010 - 727,424 1,346,432 531,353 2,605,209 7,211,826 2,726,133 131,462 1,053,666 3,911,261 1,627,845 (37,398,459) (4,278,577) (5,395,791) (47,072,828) (5,091,983) 52,679,406 4,937,025 12,828,921 70,445,353 4,019,981 55,881 14,172 59,395 129,449 - 264,379 - - 264,379 - 52,999,667 4,951,197 12,888,317 70,839,180 4,019,981 78,566,567 5,889,698 17,296,218 101,752,483 17,280,153 Liabilities N CURRENT LIABILITIES Accounts payable Accrued liabilities Other current liabiifties Compensated absences Deferred revenue Due to other funds Accrued interest payable Bonds payable Customer deposits Developer deposits Total current liabilities NONCURRENT LIABILITIES General obligation bonds payable Certificates of obligation bonds payable Compensated absences Advances from other funds Total noncurrent liabilities Total liabilities Net Assets Invested in capital assets, net of related debt Restricted for impact fees Restricted for debt service Unrestricted Total net assets 1,742,326 166,343 123,780 2,032,449 493,244 33,151 57,295 6,698 97,144 1,931,226 34,652 28,870 3,839 67,36D 2,673 230,496 - 29,934 260,429 138,569 - 64,900 - 64,900 - - 63,293 - 63,293 - 14,735 14,764 37,829 67,329 - 177,191 485,724 309,987 972,902 - 1,572,557 - - 1,572,557 - 43,018 - - 43,018 - 3,848,126 881,189 512,066 5,241,381 2,565,712 264,397 1,200,000 885,000 2,349,397 - 2,150,250 598,328 3,545,866 6,294,444 - 88,877 - 20,210 109,087 77,800 - 301,140 - 301,140 - 2,503,524 2,099,468 4,451,076 9,054,068 77,800 6,351,650 2,980,657 4,963,142 14,295,449 2,643,512 50,143,449 2,667,145 8,147,464 60,958,058 4,019,981 2,334,099 - - 2,334,099 - - - 366,547 366,547 - 19,737,369 241,895 3,819,065 23,798,329 10,616,660 $ 72,214,917 $ 2,909,040 $ 12,333,076 $ 87,457,033 $ 14,636,641 Reconciliation to business-type activities: Some amounts reported for business-type activities in the Statement of Net Assets are different because certain intemal balances are included with business-type activities. 5,099,640 Net assets of business-type activities $ 92,556,673 The notes to the financial statements are an integral part of this statement. CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Revenues, Expenses ,and Changes i n Net Assets PROPRIETARY Year Ended September 30, 2008 Business-type Activities -Enterprise Funds OPERATING REVENUES Water and sewer service Water and sewer connections Service charges Inspection fees Assessment revenues Golf course fees and charges Aquatic park admissions Recreation equipment rental Food, beverage, and gifts Sponsorships Other intergovernmental Internal service revenues Miscellaneous revenues Total operating revenues OPERATING EXPENSES Claims Contractual services Personnel services Golf course sales and service Repairs and maintenance Supplies Administration fees Franchise fees Depreciation Total operating expense Operating income (loss) NONOPERATING REVENUES (EXPENSES) Investment income Interest and fiscal agent charges Insurance recovery proceeds Other income (expense) Gain (loss) on disposal of assets Total nonoperating revenues (expenses) Income (loss) before transfers TRANSFERS Transfers in Transfers out Total transfers -net Change in net assets Net assets -beginning of year Net assets -end of year Water and Sewer Golf Course Aquatic Park Total Enterprise Internal Service $ 23,440,190 $ - $ - $ 23,440,190 $ - 316,341 - - 316,341 - 863,717 - - 863,717 - 33,886 - - 33,886 - 811 - - 811 - - 2,551,046 - 2,551,046 - - - 3,199,969 3,199,969 - - - 54,018 54,018 - - - 648,762 648,762 - - - 40,540 40,540 - 1,645,800 - - 1,645,800 - _ _ _ - 14,532,457 949 - 8,962 9,911 255,804 26,301,693 2,551,046 3,952,250 32,804,989 14,788,261 _ _ - - 7,031,884 15,054,545 - 973,880 16,028,425 1,069,089 4,654,648 - 1,476,033 6,130,681 3,037,147 - 1,970,523 - 1,970,523 - 2,683,674 - 98,407 2,782,081 1,015,301 91,877 - 566,186 658,063 1,892,739 1,485,548 - 107,412 1,592,960 - 691,337 - - 691,337 - 2,667,552 332,147 552,839 3,552,538 559,936 27,329,181 2,302,670 3,774,757 33,406,608 14,606,096 (1,027,488) 248,376 177,494 (601,619) 182,165 732,511 3,684 142,600 878,795 461,994 (112,217) (104,757) (216,614) (433,588) - _ _ _ - 38,411 _ _ _ - 1,489 47,866 20,363 - 68,229 37,472 668,160 (80,710) (74,014) 513,436 539,366 (359,328) 167,665 103,479 (88,183) 721,531 - 162,000 - 162,000 742,118 (727,119) - (60,000) (787,119) (363,220) (727,119) 162,000 (60,000) (625,119) 378,898 (1,086,447) 329,665 43,479 (713,302) 1,100,429 73,301,363 2,579,375 12,289,597 88,170,335 13,536,212 $ 72,214,916 $ 2,909,040 $ 12,333,076 $ 87,457,033 $ 14,636,641 Reconciliation of Change in Net Assets -Business-type Activities: Net income Some amounts reported for business-type activities in the Statement of Activities are different because the net revenue of certain internal revenue service funds is reported with business-type activities Change in net assets of business-type activities $ (713,302) 68, 075 $ (645,227) The notes to the financial stafements are an integral pan` of this statement. 30 CITY OF NORTH RICHLAND HILLS, TEXAS Statement of Cash Flows Proprietary Funds Year Ended September 30, 2008 Cash flows from operating activities: Receipts from customers Receipts from interfund services provided Other operating revenue (expense) Other revenue Payments to suppliers Payments to employees Payments for internal services Net cash provided by operating activities Cash flows from noncapital financing activities: Business-Type Activities -Enterprise Funds Water and Aquatic Total Internal Sewer Golf Course Park Enterprise Service $ 24,484,969 $ 2,711,145 $ 4,008,608 $ 31,204,722 $ - _ _ - 14,785,335 1,594,880 - 8,962 1,603,842 - (18,317,618) (2,258,999) (1,558,817) (22,135,434) (9,755,600) (4,631,008) - (1,470,085) (6,101,093) (2,820,778) (1,485,548) - (107,412) (1,592,960) (988,853) 1,645,675 452,146 881,256 2,979,077 1,220,104 Transfers from other funds - 162,000 - 162,000 742,118 Transfers to other funds (727,119) - (60,000) (787,119) (363,220) Interfund loan receipts and payments -net 24,378 (24,378) - - - Net cash used for noncapital and related financing activities (702,741) 137,622 (60,000) (625,119) 378,898 Cash flows from capital and related financing activities: Insurance recovery proceeds - - - - 38,411 Developer contributions 33,994 - - 33,994 1,489 Proceeds from capital debt 1,700,000 500,000 150,000 2,350,000 - Acquisition and construction of capital assets (1,465,535) - (155,471) (1,621,006) (1,051,462) Principal paid on capital debt (227,660) (454,931) (329,441) (1,012,032) - Interest paid on capital debt (121,092) (106,086) (210,777) (437,955) - Proceeds from the sale of assets 47,866 22,535 - 70,401 37,472 Net cash used for capital and related financing activities (32,427) (38,482) (545,689) (616,598) (974,090) Cash flows from investing activities: Interest and dividends received 725,486 3,217 135,831 864,534 455,040 Net cash provided by investing activities 725,486 3,217 135,831 864,534 455,040 Net increase (decrease) in cash and cash equivalents 1,635,993 554,503 411,398 2,601,894 1,079,952 Cash and cash equivalent beginning of year 19,652,249 253,630 3,903,312 23,809,191 11,809,316 Cash and cash equivalent end of year $ 21,288,242 $ 808,133 $ 4,314,710 $ 26,411,085 $ 12,889,268 Reconciliation of operating income to net cash provided by (used for) operating activities Operating income (loss) Adjustments to reconcile operating income to net cash provided by (used for) operating activities: Depreciation expense Other (expense) income (Increase) decrease in accounts receivable (Increase) decrease in inventories (Increase) decrease in prepaid items Increase (decrease) in customer deposits Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Total adjustments Net cash provided by operating activities $ (1,027,488) $ 248,376 $ 177,494 $ (601,618) $ 182,165 2,667,552 178,147 552,839 3,398,538 559,936 (52,679) 57,842 - 5,163 - (168,024) 125,703 65,320 22,999 (2,626) (22,882) 1,309 (5,671) (27,244) (29,789) (1,560) - 618 (942) (35,349) (1,141) - - (1,141) - 318,131 37,795 102,227 458,153 (3,837) (66,234) (197,026) (11,571) (274,831) 549,904 2,673,163 203,770 703,762 3,580,695 1,038,239 $ 1,645,675 $ 452,146 $ 881,256 $ 2,979,077 $ 1,220,404 Noncash financing activities: Disposal of capital assets $ - $ (154,000) $ - $ - $ (309,354) The notes to the financial statements are an integral part of this statement. 31 N ~~H This page intentionally left blank. 32 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements September 30, 2008 Page Note I Summary of Significant Accounting Policies 35 A. Reporting entity 35 B. Government-wide and fund financial statements 35 C. Measurement focus and basis of accounting 36 D. Assets, liabilities, and net assets or equity 38 Deposits and investments 38 Receivables and payables 38 Inventories and prepaid items 39 Restricted assets 39 Capital assets 40 Compensated absences 40 Long-term obligations 41 Fund Equity 41 Note II Reconciliation of Government-Wide and Fund Financial Statements 42 A. Balance sheet reconciliation 42 B. Statement of revenues, expenditures, and changes in fund balance reconciliation 43 Note III Stewardship, Compliance, and Accountability 45 A. Budgetary information 45 B. Excess of expenditures over appropriations 46 Note IV Detailed Notes on All Funds 46 A. Deposits and investments 46 Interest rate risk 48 Custodial credit risk 49 Credit risk 49 B. Receivables 50 C. Capital assets 51 D. Interfund receivables, payables, and transfers 54 E. Long-term debt 55 General obligation bonds 55 Certificates of obligation 56 Revenue bonds 56 Operating lease 5~ Changes in long-term liabilities 57 Bond refunding 57 Defeased debt outstanding 58 33 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements September 30, 2008 Page Note V Other Information 58 A. Risk management 58 B. Contingent liabilities 58 C. Conduit debt obligations 59 D. Other post-employment benefits 59 E. Employee retirement systems and pension plans 60 Plan description 60 Contribution 60 F. Operations of component units 62 G. Prior Period Adjustment 63 H. Implementation of GASB Statements 63 Recently implemented 63 Future implementation 63 34 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of North Richland Hills, Texas (the "City") Home Rule Charter was adopted by the voters at an election held on November 3, 1964. The City operates under aCouncil-Manager form of government. The City provides a full range of services including police and fire protection; municipal court operations; the construction and maintenance of streets and infrastructure; parks, library, and recreational activities including tennis center operations; neighborhood services activities; planning and inspections; and the operations of a water and wastewater system, a golf course, and a public waterpark. A private contractor, through a franchise agreement, provides solid waste collection and disposal services for the City. The accounting policies of the City conform to accounting principles generally accepted in the United States of America ("GAAP") as applicable to governmental units. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies of the City are described below. A. Reporting Entity As required by GAAP, these basic financial statements present the primary government and its component units, entities for which the government is considered to be financially accountable. The blended component units, although legally separate entities, are, in substance, part of the primary government's operations. As such, data from these units is combined with data of the primary government. Discretely presented component units are entities that are legally separate from the City, but for which the City is financially accountable or whose relationships with the City are such that exclusion would be misleading or incomplete. Discretely presented component units of the City are presented in a separate column in the combined financial statements to emphasize they are legally separate from the primary government. The component units have September 30th year-ends. Blended Component Units -The North Richland Hills Parks and Recreation Facilities Development Corporation ("PRD") is used to account for the accumulation of resources to build and improve City parks and recreational facilities and fund economic development activities. The North Richland Hills Crime Control and Prevention District ("CCD") is used to account for the accumulation and use of half-cent sales tax proceeds dedicated for crime reduction programs. The PRD and CCD are reported as special revenue funds of the primary government. The Boards of Directors of both component units are substantively the same as the City Council. Complete financial statements for the individual component units may be obtained at the City's offices. Discretely Presented Component Units -Tax Increment Financing District No. 1 ("TIF #1 ") was created to fund drainage improvements that would alleviate flooding problems, reduce property damage associated with the flooding, and stimulate development within the District. Tax Increment Financing District No. 2 ("TIF #2") was created to provide funding for public improvements that would benefit the participants in and citizens of the District as well as others in the Metroplex area. Planned public improvements totaling $65.2 million include construction of a conference center, a recreation center, a library, and infrastructure improvements. These TIFs meet the criteria for being classified as discrete component units as the City appoints a voting majority of the organizations' governing bodies and is able to impose its will on the organizations, and because the organizations are fiscally dependent on the primary government. Complete financial statements for the individual component units may be obtained at the City's offices. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been eliminated from these statements. However, interfund services provided and used are not eliminated in the consolidation process. 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 user fees and charges for support. Likewise, the primary government is 35 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and grants and 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. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund 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 revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The government reports the following major governmental funds: The General Fund is the City's primary operating fund. It accounts for all financial resources traditionally associated with governments which are not required to be accounted for in another fund. Major functions financed by the General Fund include general government, public safety, culture and recreation, and public works. Financing is provided from taxes (primarily property, sales, and franchise), licenses and permits, fines, and investment income. The Parks and Recreation Facilities Development special revenue fund accounts for the accumulation and use of resources to build and improve City parks and recreation facilities as well as economic development projects. Financing is provided primarily from sales taxes and intergovernmental revenues. The Crime Control and Prevention District special revenue fund accounts for the accumulation and use of half-cent sales tax proceeds dedicated for crime prevention and reduction programs. Financing is provided primarily from sales taxes and investment income. The Gas Development special revenue fund accounts for the accumulation and expenditures of resources from gas drilling and exploration on City owned property. 36 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements The General Capital Projects fund is used to account for financial resources used for the acquisition and construction of major street, drainage, and municipal facilities capital assets. The General Debt Service fund accounts for the accumulation of resources for the payment of principal, interest, and related charges on long-term general obligation debt of governmental funds. Financing is provided primarily by a specific annual property tax levy. The government reports the following major proprietary funds: The Water and Sewer enterprise fund accounts for the distribution of water, transportation of wastewater, and solid waste removal services provided to the residents of the City. All activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, financing and debt service, and billing and collections. The Golf Course enterprise fund accounts for the operations of Iron Horse Golf Course, the City's public golf course. All activities necessary to operate the course are accounted for in the fund, including, but not limited to, administration, operations, course maintenance, and financing and debt service. The Aquatic Park fund accounts for the operation of NRH2O, the City's public waterpark. All activities necessary to operate the park are accounted for in the fund, including, but not limited to, administration, park operations, park maintenance, and financing and debt service. Additionally, the government reports the following funds: Several additional special revenue funds are used to account for specific revenue sources as well as the specialized operations funded therewith. The Sales Tax Revenue Debt Service fund is used to accumulate monies for the payment of principal, interest, and related charges on sales tax revenue bonds. A multitude of capital projects funds are used to account for the financial resources to be used for the acquisition or construction of major capital assets, such as streets, drainage facilities, and municipal facilities. Financing is provided primarily by the sale of general obligation bonds as authorized by the voters in either the 1994 or 2003 bond elections. Internal service funds account for building maintenance services, fleet management, computer and telephone service, as well as insurance coverage provided to other departments of the City, on a cost reimbursement basis. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for the business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. However, interfund services provided and used are not eliminated in the consolidation process. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. 37 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds and of the internal service funds are charges to customers for sales and services. The City also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting the definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, Liabilities, and Net Assets or Equity Deposits and investments Deposits consist of cash and cash equivalents. Substantially all operating deposits and investments are maintained in pooled deposits and investment accounts. Interest income relating to pooled deposits and investments is allocated monthly to the participating individual funds based on each fund's pro-rata share of total pooled deposits and investments. Investments consist of (1) investments in public fund investment pools, (2) short-term investments that mature in 12 months or less from the time of purchase and (3) investments that mature in greater than 12 months from the time of purchase. Other than investment pools, most of the City's investments are long-term (i.e., at the time of purchase, the maturity equals or exceeds one year) and, accordingly, the investments are carried at fair value in accordance with GASB Statement No. 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools." Legal provisions generally permit the City to invest in certificates of deposit, repurchase agreements, public funds investment pools, direct obligations of the United States of America or its subdivisions, and state and local government securities. During the year ended September 30, 2008, the City did not own any types of securities other than those permitted by statute. For the purposes of presenting the statement of cash flows for Proprietary Funds, cash and cash equivalents are defined as demand deposits and pooled deposits and investments (Note I~. Receivables and payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All trade and property tax receivables are shown net of an allowance for uncollectibles. Trade accounts receivable in excess of 90 to 180 days comprise the trade accounts receivable allowance for uncollectibles. The property tax receivable allowance is equal to property taxes outstanding for 38 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements more than four fiscal years (the current fiscal year plus three prior years). As such, property taxes levied prior to fiscal year 2003 which remain outstanding at year end comprise the allowance balance of September 30, 2008. The City's property tax is levied each October 1 on the assessed value listed as of the prior January 1 for all real property and certain personal property located in the City. Tax liens attach as of February 1. Taxes are due upon receipt of the tax bill. Property taxes are limited by the Texas Constitution to $2.50 per $100 of assessed valuation and by City Charter to $1.50 per $100 assessed valuation. The combined tax rate to finance general governmental service and debt service for the year ended September 30, 2008 was $.57 per $100 of assessed valuation. Inventories and prepaid items All inventories are valued at cost using the first-in/first-out ("FIFO") method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Inventories are offset by a fund balance reserve account in applicable governmental funds to indicate the inventory values are not available for appropriation and are not expendable available financial resources. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Restricted assets Certain resources set aside for the repayment of outstanding City debt are classified as restricted assets on the balance sheet because their use is limited. The "debt service reserve funds -deposits and investments" and "interest and sinking fund reserves -deposits and investments" accounts are used to segregate resources accumulated for the current portion of outstanding debt. The "construction funds -deposits and investments" account includes, but is not limited to, unspent bond proceeds that are limited as to use for financing the acquisition or construction of capital assets. Net assets have been reserved for the excess of restricted assets over related liabilities to the extent such restricted assets were accumulated from revenues (i.e., in some cases, restricted assets were obtained in total or in part from bond proceeds). Assets have also been restricted by management for the following: The Crime Control and Prevention District (Special Revenue) Fund contains assets restricted for transition. In the event that the half-cent sales tax funding CCD activities is discontinued, the restricted assets will be used to fund those activities until an alternate funding source can be identified (i.e., during the transition period). The Water and Sewer (Enterprise) Fund and the Aquatic Park (Enterprise) Fund both contain assets restricted for future construction and infrastructure maintenance. The purpose is to designate funds for future capital projects and to reduce the amount of future bond issues for capital projects. The Water and Sewer (Enterprise) Fund also contains assets restricted for rate stabilization. The restriction is intended to lessen the impact of increases in contractual services from the Trinity River Authority and the City of Fort Worth for water and wastewater services. The Aquatic Park (Enterprise) Fund and the Self-Insurance (Internal Service) Fund both contain assets restricted for future insurance claims. Funds will be accumulated until needed to cover the 39 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements costs of excessive claims or until management has determined sufficient funds have been accumulated to cover future claims. The Information Services (Internal Service) Fund contains assets restricted for future system improvements. The intended purpose is to fund major computer system software and hardware system replacements and upgrades. The Facilities and Construction Services and Fleet Services (Internal Service) Funds contain assets restricted for building and equipment maintenance and replacement. The building restriction is used to accumulate funds for the implementation of the multi-year plan. Equipment restrictions are used to accumulate funds for the replacement of vehicles and heavy equipment. Capital assets Capital assets, including property, plant, equipment, and infrastructure assets (e.g., roads, bridges, drainage facilities, parks and related improvements, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the proprietary fund level financial statements. Capital assets are defined by the government as assets with an initial, individual cost of at least $5,000 and an estimated useful life in excess of one year. Assets purchased or constructed are recorded at historical cost when available or estimated historical cost if actual cost is unavailable. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets of the primary government are capitalized at the following thresholds and are depreciated using the straight-line method over the following estimated useful lives: Asset Category Buildings and improvements Other improvements Water and sewer system Capitalized interest Start-up costs, furniture and fixtures, and certain machinery and equipment Firetrucks and ambulances Other machinery and equipment including vehicles Assets purchased or constructed with Federal or State grant funds Useful Life Capitalization Threshold 30 years $ 100,000 30 years 100,000 33 years 100,000 33 years 5,000 10 years 5,000 20 years 25,000 3-6 years 5,000-25,000 various 5,000 Compensated absences City employees are granted vacation leave in varying amounts depending on length of service. Sick leave is also granted to employees after six months of service. In the event of termination after one or more years of service, an employee is paid for all accumulated unused vacation. No reimbursement is made for unused accumulated sick leave upon termination of employment, except upon retirement. Upon retirement, an employee may convert up to six weeks of accrued sick leave to vacation. Sick pay is recorded when taken. All vacation pay is accrued as vested and included in 40 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements accrued liabilities in the government-wide and proprietary fund financial statements. Accrued vacation pay, including converted sick leave, that is expected to be liquidated within one year, is reported as a short-term liability. The remainder of the liability is reflected as long-term. Compensated absences are reported in governmental funds only if they have matured. Accrued vacation pay and potential sick leave conversion reported on the government-wide financial statements at September 30, 2008 consisted of the following: COMPENSATED ABSENCES Governmental activities: Beginning Ending Due within Balance Additions Reductions Balance One Year Vacation $1,699,891 $1,005,609 $ 777,941 $1,927,558 $ 1,302,449 Retirement sick leave conversion 702,123 1,015,972 717,372 1,000,723 717,483 Total governmental activities 2.402.014 2.021.580 $1,495313 $2,928,281 2.019.933 Business-type activities: Vacation $ 495,070 $ 154,073 $ 400,117 $ 249,026 $ 168,267 Retirement sick leave conversion 99,180 104,369 83,059 120,490 92,162 Total business-type activities ~ 594,250 258442 ~ 483,176 $ 369,516 ~ 260,429 Long-term obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, issuance costs, and losses on bond refundings are deferred and amortized over the life of the related debt using the straight-line method which approximates the interest method. Bonds payable are reported net of the applicable unamortized loss on refunding. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. The General Fund equity contains designations for economic development ("ED"), savings incentive program, special projects, and insurance restoration plan. Council and management have established an ED cash reserve to participate in approved economic development activities throughout the City. The savings incentive program was established to encourage departments to identify and implement cost saving measures whereby savings would be accumulated for authorized use at a later date. Retirement stabilization is designated for anticipated increases in TMRS funding requirements. The designation for utility billing assistance is a result of a TXU settlement to be used 41 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements to help water and sewer customers who are able to prove need of assistance in paying their bills. The designation for special projects was established for rail station development and 820 facility planning. The insurance restoration plan is discussed in detail later in this section. The Education and training, tuition assistance programs were added this year to support the City's plan to help the employees with career growth within the entities succession plan. Rail station project designations are intended to support future infrastructure for alternative transportation methods for the citizens. The benefit conversion program will be utilized for retirements of long standing employees who have earned their vacation leave and retirement leave. The general fund plans to loan the golf course funding for new equipment and course upgrades in the 2009 fiscal year. The Crime Control District contingency designation is to help with the transition of this program when the referendum expires in 2011 (see further information in the following paragraph). The Crime Control and Prevention District (Special Revenue) Fund equity contains a designation for transition. Assets have been restricted in an amount equal to the designation. In the event that the half-cent sales tax funding CCD activities is discontinued at the conclusion of the current referendum in 2011, appropriations from the designation and the associated assets will be used to fund those activities until an alternate funding source can be identified (i.e., during the transition period). In fiscal years 2002 and 2003 the Self Insurance (Internal Service) Fund reserves of $3.1 million were depleted due primarily to spiraling inflation in the health care industry and unforeseeable extraordinary health claims. In fiscal year 2004, City Council adopted a strategy to rebuild reserves over asix-year period beginning in fiscal year 2005. Savings from changes in the health care plan, transfers from existing cash reserves in the General Fund and Water and Sewer Fund, and employee premiums are being used to re-establish the reserves. An estimated $1.6 million in reserves, representing 20% of anticipated 2010 claims, were expected as a result of the adopted strategy. For fiscal year 2008, the fund recorded a net increase in cash and cash equivalents of $1,567,599 to end the year at a balance of $5,086,010. II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets The governmental fund balance sheet includes a reconciliation between fund balance -total governmental funds and net assets -governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that "capital and other assets used in governmental activities are not financial resources and, therefore, are not reported as assets in the governmental funds." The details of the $174,355,663 difference are as follows: Capital assets, net of depreciation Construction in progress Net adjustment to increase fund balance -total governmental funds to arrive at net assets -governmental activities $ 158,561,510 15,794,153 $ 174,355,663 42 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Another element of that reconciliation explains that "certain receivables are not available to pay current-period expenditures and, therefore, are deferred in the funds." The details of the $1,318,426 difference are as follows: Municipal court receivables $ 427,345 Interest receivable 104,560 Deferred revenue 786,521 Net adjustment to increase fund balance -total governmental funds to arrive at net assets -governmental activities $ 1,318,426 The third element of that reconciliation explains that "the assets and liabilities of the internal service funds are included with governmental activities in the statement of net assets but are not included at the fund level." The details of the $9,537,001 difference are as follows: Net assets, internal service funds combined $ 14,636,641 Amount allocated to business-type activities (5,099,640) Net adjustment to increase fund balance -total governmental funds to arrive at net assets -governmental activities $ 9,537,001 The last element of that reconciliation explains that "long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds." The details of the $51,655,824 difference are as follows: Bonds payable -short-term $ (5,080,733) Bonds payable -long-term (43,760,976) Accrued interest payable (341,154) Arbitrage liability (165,867) Bond issuance costs 404,818 Compensated absences (2,711,912) Net adjustment to reduce fund balance -total governmental funds to arrive at net assets -governmental activities $ (51,655,824) B Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities The governmental fund statement of revenues, expenditures, and changes in fund balances includes reconciliation between net changes in fund balances -total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that "governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their 43 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements estimated useful lives and reported as depreciation expense." The details of this $7,954 difference are as follows: Capital outlay -assets acquisitions $ 5,315,452 Depreciation expense (5,307,498) Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ 7,954 The second element of that reconciliation explains that "the net effect of various miscellaneous transactions involving capital assets (i.e. sales, trade-ins, and donations) are to decrease net assets." The details of this $(11,889) difference are as follows: Gain (loss) on disposal of assets (11,889) Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ (11,889) The second element of that reconciliation explains that "revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds." The details of this $104,562 difference are as follows: Investment income Miscellaneous revenues Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ 104, 557 5 $ 104,562 The next element of that reconciliation explains that "certain long-term liabilities are accrued at the government-wide level but not at the fund level." The details of this $356,644 difference are as follows: Accrued interest/interest expense $ (42,057) Compensated absences (314,587) Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ (356,644) 44 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Another element of that reconciliation states that "bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the difference between repayments and proceeds received." The details of this $1,688,946 difference are as follows: Debt issued or incurred: General obligation bonds $ (4,180,000) Certificates of obligation bonds (285,000) Principal repayments: General obligation bonds 4,093,366 Certificates of obligation bonds 1,170,580 Sales tax revenue bonds 890,000 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ 1,688,946 Another element of that reconciliation states that "the net revenue (expense) of internal service funds is reported with governmental activities." The details of the $1,032,354 difference are as follows: Change in net assets -internal service funds combined $ 1,100,429 Income (Expenses) reflected in business-type activities (68,075) Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ 1,032,354 III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary information Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except the Special Investigation, the Parks and Recreation Facilities Development, the Grant, Traffic Safety, Gas Development, and the Economic Development special revenue funds. The capital projects funds adopt project-length budgets. All annual appropriations lapse at fiscal year end. Prior to September 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted to obtain taxpayer comments. Prior to September 30, the budget is legally enacted through passage of an ordinance. The appropriated budget is prepared by fund, department, and division. The City Manager is authorized to transfer budgeted amounts between departments within any fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. During the year, several supplementary appropriations totaling approximately $1.7 million were necessary, due to additional appropriations to the expenditure budgets of the following funds: General, Park and Recreation Development, Special Investigation, 45 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Crime Control, Gas Development, Traffic Safety, and Aquatic Park. Supplemental appropriations were due to payments of prior year encumbrances, increases in the cost of doing business during the fiscal year and additional capital outlay necessary to provide the program of services. Fund balances as well as additional estimated revenues were allocated to cover additional budgeted expenses. Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. B. Excess of expenditures over appropriations Crime Control and Prevention district exceeded their expense appropriation by $42,666. This negative variance was due to unexpected retirements of tenured ofFcers in 2008. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and investments As of September 30, 2008, the City's portfolio contained the following investments: Investment Type Fair Value of Portfolio WAM Rating Rating Agency Primary Government Overnight pools: TexPool $ 32,306,771 33% 89 AAAm S&P LOGIC 5,922,743 6% 16 AAAm S&P TexSTAR 5,991,215 6% 16 AAAm S&P MBIA Class 3,490,172 4% 11 AAA/V1+ Fitch Total overnight $ 47,710,901 48% U.S. Issues: FHLB 28,760,407 29% 79 Aaa Moody's FHLMC 4,993,252 5% 13 Aaa Moody's FNMA 4,058,125 4% 11 Aaa Moody's FAMCA 2,028,409 2% 5 Aaa Moody's FFCB 6,390,872 6% 16 Aaa S&P Total U.S. Issues $ 46,231,065 47% Component Units Overnight pool: TexPool $ 5,278,842 5% 13 AAAm S&P Total portfolio $ 99,220,808 100% 269 Weighted average maturity ("WAM") of the portfolio by investment type categories reflected in the previous table is stated in days. For the investment pools, the Reset WAM is presented. Investment type acronyms displayed in the previous table are defined as follows: FHLB -Federal Home Loan Bank, FHLMC -Federal Home Loan Mortgage Corporation, FFCB -Federal Farm Credit Bank, FNMA -Federal National Mortgage Association, and FAMCA -Federal Agricultural Mortgage Corporation. The rating agency acronyms are defined as follows: S&P -Standard and Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc.; Moody's - Moody's Investor 46 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Service, Inc.; and, Fitch -Fitch Ratings. Additional information about the rating agencies or the significance of the ratings provided may be obtained from each agency's web site. Legal provisions generally permit the City to invest in certificates of deposit, repurchase agreements, public funds investment pools, direct obligations of the United States of America or its subdivisions, and state and local government securities. Because the City is responsible for the investment portfolio of its component units, the City's investment practices and policies disclosed herein apply equally to its component units. During the year ended September 30, 2008, the City did not own any types of securities other than those permitted by statute. The City's investment pools are 2a7-like pools. A 2a7-like pool is one which is not registered with the Securities and Exchange Commission ("SEC") as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This type of pool uses amortized investment costs rather than market values to compute participant share values. Furthermore, the pools in which the City is currently participating seek to maintain a stable $1 net asset value per share or unit. Accordingly, the fair value of the City's position in these pools is substantially the same as the market value of the shares in each of the pools. TexPool falls under the purview of the Texas Comptroller of Public Accounts ("Comptroller") who is responsible for oversight of TexPool operations. Each of the other pools has established a governing board at least partially comprised of pool participants. Duties of the governing boards include oversight responsibility. The Comptroller and the governing boards exercise oversight of the pools' activities via daily, weekly, and monthly reporting requirements. Additionally, per the requirements of the Public Funds Investment Act ("PFIA"), all portfolios will maintain an AAA or equivalent rating from at least one nationally recognized rating agency. The PFIA also requires an annual examination of the financial statements of the pools by an independent certified public accounting firm. In connection with the financial audit, a compliance audit of management controls on investments and adherence to the Investment Policies is also required. This section of this page is intentionally left blank. Notes are continued on the next page. 47 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Fair Value of Investments -During 2008, the entity did not have any realized gain or losses from the sale of investments. The City practices holding securities to maturity. In 2008 all maturities where scheduled and none had to be liquidated before their maturity date. The calculation of realized gains is independent of the calculation of the net increase in the fair value of investments. Realized gains and losses on investments that had been held in more than one fiscal year and sold in the current year may have been recognized as an increase or decrease in the fair value of investments reported in the prior year. The net increase in the fair value of investments during 2008 was $261,065. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. Fair Value Analysis of Investment Activity Beginning Ending Changes FV FV in Type Cost 10/1/2007 Purchases Sales Subtotal 9/30/2008 FV FFCB $1,000,000 $ 1,000,000 $ - $ - $ 1,000,000 $ 1,013,438 $ 13,438 FHLB 1,000,000 1,000,000 - - 1,000,000 1,019,375 19,375 FHLB 1,000,000 1,000,000 - - 1,000,000 1,001,563 1,563 FHLB 1,000,000 1,000,000 - - 1,000,000 1,017,813 17,813 FHLB 1,000,000 1,000,000 - - 1,000,000 1,020,938 20,938 FHLB 1,000,000 1,000,000 - - 1,000,000 1,020,938 20,938 FFCB 1,370,000 1,370,000 - - 1,370,000 1,398,684 28,684 FHLMC 1,000,000 1,000,000 - - 1,000,000 996,626 (3,374) FHLMC 1,000,000 1,000,000 - - 1,000,000 996,626 (3,374) FHLB 1,000,000 1,000,000 - - 1,000,000 1,054,063 54,063 FHLB 1,000,000 1,000,000 - - 1,000,000 1,022,500 22,500 FNMA 1,000,000 1,000,000 - - 1,000,000 1,005,938 5,938 FNMA 1,000,000 1,000,000 - - 1,000,000 1,000,313 313 FHLB 1,500,000 1,500,000 - - 1,500,000 1,526,719 26,719 FHLB 1,000,000 1,000,000 - - 1,000,000 1,003,125 3,125 FAMCA 1,000,000 1,000,000 - - 1,000,000 1,028,409 28,409 FHLB 1,000,000 1,000,000 - - 1,000,000 1,000,938 938 FHLB 1,000,000 1,000,000 - - 1,000,000 1,000,938 938 FHLB 1,000,000 1,000,000 - - 1,000,000 991,875 (8,125) FHLB 1,000,000 1,000,000 - - 1,000,000 991,875 (8,125) FAMCA 1,000,000 1,000,000 - - 1,000,000 1,000,000 - FHLB 1,100,000 1,100,000 - - 1,100,000 1,078,688 (21,313) FFCB 1,000,000 1,000,000 - - 1,000,000 978,750 (21,250) FHLB 1,000,000 1,000,000 - - 1,000,000 977,500 (22,500) FHLB 1,000,000 1,000,000 - - 1,000,000 991,250 (8,750) FNMA 1,000,000 1,000,000 - - 1,000,000 1,006,875 6,875 FHLB 1,000,000 1,000,000 - - 1,000,000 1,040,313 40,313 FNMA 1,000,000 1,000,000 - - 1,000,000 1,045,000 45,000 $28,970,000 ~_ .~ X28,970,000 ~29~2 1,065 ~&;~QB. Interest Rate Risk -Interest rate risk is the potential for a decline in market value due to rising interest rates. In accordance with its formally-adopted investment policy, the City manages its exposure to declines in fair market value by limiting the portfolio's weighted average maturity to a maximum of 365 days. The City also employs an investment maturity laddering structure to stagger investment maturities at various monthly rungs on the ladder. This laddering structure provides the 48 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements City with the ability to reinvest the proceeds from the maturities in higher-yielding securities given the proceeds are not required to meet immediate cash flow needs. The City's current investments mature in 36 months or less. The following details the maturity schedule for the City's investments as of September 30, 2008. Maturity Schedule Maturity Value % of Total Overnight $ 52,989,743 53% 1 day to 3 months 6,000,000 6% 3 to 6 months 3,000,000 3% 6 to 9 months 4,000,000 4% 9 to 12 months 4,000,000 4% 12 to 15 months 6,094,065 6% 15 to 18 months 5,468,499 6% 18 to 24 months 7,566,380 8% 24 to 36 months 10,102,121 10% Total 99,220,808 100% Custodial Credit Risk -The risk that a government will not be able to recover (a) deposits if the depository financial institution fails or (b) the value of investment or collateral securities that are in the possession of an outside party if the counterparty to the investment or deposit transaction fails. To minimize such risk, the City requires collateralization of deposits in excess of Federal Deposits Insurance Corporation ("FDIC") coverage, utilizes the delivery vs. payment method for investment purchases, and contracts with athird-party safekeeping agent. Per the terms of its depository agreement, for bank deposits in excess of the coverage provided by the FDIC, the City requires the depository bank to pledge to the City securities (collateral) equal to the following percentages, as applicable, to the largest balances the City maintains in the Bank. U.S. Other Maturity of Collateral Treasuries Securities 1 year or less 101 % 102% 1 year to 5 years 102% 105% Over 5 years 103% 110% The percentages as shown reflect the requirement based on market value of the pledged securities. The City actively monitors and manages collateral levels for all deposits. On September 30, 2008, the City's bank balances were insured or fully collateralized. The City's depository bank also acts as its safekeeping agent per the terms of the depository contract. City policy dictates that all securities rendered for payment will be sent delivery vs. payment meaning that the funds required for purchase of a security will not be released until the safekeeping agent has received the security purchased in the City's name. No broker holds City funds. The City does not purchase securities from its depository bank or any subsidiary banks of the same bank holding company. Credit Risk -Risk that an issuer or other counterparty to an investment will not fulfill its obligations. In order to minimize credit risk, the City limits investments to those rated as to investment quality of not less than "A" or its equivalent by a nationally recognized rating firm. Diversification of the portfolio is also employed to manage credit risk. The investment policy limits the percentage of the portfolio that may be invested in any specific type of security. Ratings for the City's investments and 49 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements the percentage of the total portfolio of each investment type held at the end of year can be found on the first table in this section. B. Receivables Governmental funds receivables as of year end for the City's major funds and non-major in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Governmental Park & Crime General General Nonmajor Funds Rec Fac Control Debt Capital and Other Total General Dev District Service Projects Funds Governmental Receivables: Accounts $ 805,157 - - - - 97,743 902,900 Property taxes 543,504 - - - - - 543,504 Other taxes 1,874,134 778,266 725,509 - - 72,448 3,450,357 Interest receivable 78,779 14,832 3,255 16,163 250,926 45,987 409,942 Special assessments - - - - 230,005 - 230,005 Intergov't 63,663 1,114,137 - - - 439,136 1,616,936 Other 63,553 23,588 - - - 1,871,420 1,958,561 Gross receivables 3,428,790 1,930,823 728,764 16,163 480,931 2,526,734 9,112,205 Less: allowance for uncollectibles (412,504) - - - - - (412,504) Net total receivables $ 3,016,286 1,930,823 728,764 16,163 480,931 2,526,734 8,699,701 Proprietary Water Funds and Golf Aquatic Internal Total Total Sewer Course Park Service Proprietary Receivables Receivables: Accounts $ 3,593,920 - - 3,593,920 4,496,820 Property taxes - - - - 543,504 Other taxes - - - - 3,450,357 Interest receivable 155,859 467 34,684 99,726 290,736 700,678 Special assessments - - - - 230,005 Intergov't 135,627 - - 135,627 1,752,563 Other 43,665 49,092 42,185 103,094 238,036 2,196,597 Gross receivables 3,929,071 49,559 76,869 202,820 4,258,319 13,370,524 Less: allowance for - uncollectibles (67,739) - - - 67,739 (480,243) Net total receivables $ 3,861,332 49,559 76,869 202,820 4,190,580 12,890,281 Deferred Revenue Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer 50 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Delinquent property taxes receivable (General Fund) $ 358,713 Recreation memberships/fees (General Fund) - Escrow Deposits/customer deposits (General Fund) - Deferred Revenue (Park and Receration Fund) - Special assessments (General Capital Projects Fund) 450,261 Grant proceeds (Grant Fund) - Accounts (developer) receivable (Streets 1994 Election Fund) 20,047 Total deferred/unearned revenue for governmental funds $ 829,021 C. Capital assets Capital asset activity for the year ended September 30, 2008 was as follows: Unearned $ - 29,040 33,450 943 99,341 45,433 $ 208,207 Primary Government Beginning Ending Governmental activities: Balance Increases Decreases Balance Capital assets, nondepreciable Land $ 67,760,223 2 67,760,221 Works of art 72,491 - - 72,491 Construction in progress 17,565,843 - 143,846 17,421,997 Total nondepreciable 85,398,557 - 143,848 85,254,709 Capital assets, depreciable: Buildings 24,429,685 1 - 24,429,686 Other improvements 132,070,456 6,077,966 1 138,148,421 Machinery and equipment 20,077,306 591,591 561,582 20,107,315 Total depreciable 176,577,447 6,669,558 561,583 182,685,422 Less accumulated depreciation for: Buildings (12,395,583) (783,582) - (13,179,165) Other improvements (56,910,122) (4,010,606) - (60,920,728) Machinery and equipment (14,926,870) (1,073,245) 535,520 (15,464,595) Total accumulated depreciation (84,232,575) (5,867,433) 535,520 (89,564,488) Total depreciable -net 92,344,872 802,12.5 26,063 93,120,934 Governmental activities -net $ 177,743,429 802,125 169,911 178,375,643 51 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Primary Government Beginning Ending Business-type activities: Balance Increases Decreases Balance Capital assets, nondepreciable Land $ 2,526,639 - - 2,526,639 Construction in progress 3,197,880 713,382 - 3,911,262 Total nondepreciable 5,724,519 713,382 - 6,437,901 Capital assets, depreciable: Buildings 3,626,441 - - 3,626,441 Utility Plant 84,715,115 750,000 - 85,465,115 Other improvements 19,291,700 - - 19,291,700 Machinery and equipment 2,541,575 309,450 154,000 2,697,025 Total depreciable 110,174,831 1,059,450 154,000 111,080,281 Less accumulated depreciation for: Buildings (1,428,450) (122,632) 28,103 (1,579,185) Utility Plant (33,834,557) (2,573,629) (271,662) (36,136,524) Other improvements (6,493,606) (651,577) 228,576 (7,373,759) Machinery and equipment (1,917,677) (204,700) (139,017) (1,983,360) Total accumulated depreciation (43,674,290) (3,552,538) (154,000) (47,072,828) Total depreciable -net 66,500,541 (2,493,088) - 64,007,453 Business-type activities -net Component units: Capital assets, nondepreciable Construction in progress Total nondepreciable $ 72,225,060 (1,779,706) - 70,445,354 Beginning Ending Balance Increase Decrease Balance $ 6,370,185 3,476,342 - 9,846,527 6,370,185 3,476,342 - 9,846,527 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government Public safety Culture and recreation Public works Internal services Total depreciation expense -governmental activities Business-type activities: Water and sewer Golf course Aquatic park Total depreciation expense -business-type activities $ 390,688 369,398 1,018,567 3,528,845 559,935 $ 5,867,433 $ 2,667,552 32,147 552,839 $ 3,252,538 52 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Construction commitments The City has active construction projects as of September 30, 2008. The projects include street construction, widening, and streetscaping; as well as construction of drainage facilities, parks and park improvements, and municipal facilities. At year-end the City's commitments with contractors were as follows: Expended to Project September 30, Authorization 2008 Committed Streets, drainage, public safety and park improvements $ 27,606,253 17,482,122 10,124,131 This section of this page is intentionally left blank. Notes are continued on the next page. 53 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements D. Interfund receivables, payables, and transfers At September 30, 2008, interfund balances consisted of the following: Due to and due from other funds are the short-term portion of the advances to and advances from other funds. The Golf Course Fund is currently repaying two interfund loans to the General Capital Projects Fund and the Utility Fund. The GCP loan in the amount of $183,805 with an interest rate of 3.00% is scheduled for repayment through 2009. The Utility Fund loan amount was a little over $536,000 with an interest rate of 8.50%. The loan is currently being repaid based on water consumption. The current estimated pay-off is fiscal year 2016. Transfers in and Transfers Out PAYING FUND RECEIVING FUND (Transfers out) (Transfers in) Amount General Fund General CIP Fund $ 650,000 Permanent Street Maintenance 800,000 Permanent Sidewalk Maintenance 50,000 Golf Course 162,000 Facilities & Construction Services 50,000 Self Insurance Fund 115,800 Fleet Services Fund 100,000 Information Services (Citicable) 9,000 General CIP Fleet Services Fund 335,000 Parks & Rec. Facilities Dev. Economic Development 224,712 General Debt Service 189,911 Sales Tax Debt Service 1,132,213 General CIP 500,000 Crime Control & Prev. District Information Services Fund 43,718 Gas Development Parks & Rec. Facilities Dev. 400,000 General Fund 100,000 Permanent Street Maintenance 100,000 Aquatic Park Parks & Rec. Facilities Dev. 60,000 Facilities & Construction Serv. General Debt Service 50,327 Drainage Utility Fund General Debt Service 698,766 Fleet Services Fund General Debt Service 312,893 Utility Fund General Fund 638,519 Fleet Services Fund 50,000 Self Insurance Fund 38,600 Traffic Safety Fund General CIP Fund 60,000 Total Transfers $ 6,871,459 54 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements General fund had various appropriations to transfer funding to other activities and operations. $650,000 was transferred to General Capital Projects Fund for 2008 capital projects. The fund continued the support to the City's Self-Insurance fund by transferring $115,800. This transfer was to satisfy a fiscal plan to reestablish the total net assets reserves of the internal service activity. In 2008 General Fund transferred $9,000 to Information Services Fund (Citicable). $800,000 was transferred to Permanent Street Maintenance fund for future improvements. Permanent Sidewalk Maintenance Fund received a transfer of $50,000 for utilization for future projects. Fleet Services Fund received $100,000 and Facilities/Construction Management Fund received $50,000 from the General Fund. An additional $162,000 was transferred to the Golf Course as a loan from General Fund for replacement of maintenance vehicles and equipment. Parks and Recreations Facilities Development Fund appropriated and transferred $224,712 for Economic Development activity. Transfers were made for the fund's portion of debt service payments: $189,911 to General Debt Service Fund and $1,132,213 to Sales Tax Debt Service Fund. The General CIP Fund received $500,000 from Parks and Recreations Facilities Fund. The Aquatic Park Fund transferred $60,000 to Parks and Recreations Facilities Development Fund for landscaping. Crime Control District Fund transferred $43,718 to Information Services Fund. Gas Development appropriated and transferred funding to General Fund for $100,000, Permanent Street Maintenance Fund $100,000, and Parks/Recreation Development Fund $400,000. Facilities and Construction Management Fund transferred $50,327 to General Debt Service Fund for their portion of the debt service payment. The Drainage Utility Fund transferred $698,766 to the General Debt Service Fund. Utility Fund was transferred $283,515 to General Fund for general service activities. $50,000 was transferred to the Fleet Services Fund to support general equipment service in the City. $38,600 was transferred to Self Insurance Fund. E Fleet Services Fund transferred $312,893 to General Debt Service Fund for the payment of Debt. Traffic Safety Fund transferred $60,000 to General CIP Fund to support general capital projects. Long-term debt General Obligation Bonds The City issues general obligation bonds to provide funds for the acquisition and construction of major capital assets such as streets, drainage structures, and municipal facilities, as well as for the purpose of refunding a portion of its outstanding debt. General obligation bonds have been issued for both governmental and business-type activities. During the year, $4,180,000 in new general obligation bonds was issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. These bonds generally are issued as 20-year serial bonds with equal amounts of principal maturing each year. General obligation bonds currently outstanding are as follows: Purpose Governmental activities -improvement Governmental activities -refunding Business-type activities -refunding Component units -refunding Interest Rates Amount 3.50 - 6.50% $19,044,990 3.50 - 5.50% 13,270,263 3.50 - 4.63% 2,789,738 3.50 - 4.00% 305,000 $35,409,991 55 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Annual debt service requirements to maturity for general obligations bonds are as follows: Year Ending September 30, 2009 2010 2011 2012 2013 2014-2018 2019-2023 2024-2028 Governmental Activities Principal Interest 3,707,655 1,596,693 3,315,000 1,360,601 3,325,000 1,223,074 3,340,000 1,074,516 2,865,000 937,376 12,750,000 3,007,726 6,595,000 975,155 1,925,000 145,499 37,822,655 10,320,640 Business-type Activities Principal Interest 439,738 105,276 460,000 85,408 485,000 64,312 210,000 49,689 215,000 42,244 980,000 93,629 0 0 0 0 2,789,738 440,558 Component Units Certificates of Obligation Principal Interest 0 11,500 0 11,500 5,000 11,413 45,000 10,538 45,000 8,963 210,000 20,288 0 0 0 0 305,000 74,202 The City also issues certificates of obligation ("CO's") to finance the acquisition and construction of capital assets including certain capital improvement projects, municipal facilities, and machinery and equipment. In fiscal year 2008, the City issued new CO's in the amount of $4,750,000. Interest rates on the outstanding CO's range from 3.00% to 5.13%. Annual debt service requirements to maturity for certificates of obligation of the primary government and component units are as follows: Year Ending September 30, 2009 2010 2011 2012 2013 2014-2018 2019-2023 2024-2028 Governmental Activities Principal Interest 1,047,980 299,419 1,047,680 246,984 1,047,678 200,200 821,500 157,925 816,200 120,459 1,601,000 274,695 388,000 107,116 271,700 22,891 7,041,738 1,429,689 Revenue bonds Business-type Activities Component Units Principal Interest Principal Interest 581,780 277,131 657,640 472,699 576,780 245,414 662,640 422,195 571,780 223,610 667,640 397,841 390,000 204,984 615,000 372,432 387,500 189,472 620,000 344,882 1,962,500 711,506 3,145,000 1,356,393 1,599,600 339,921 3,147,800 730,255 800,400 71,368 1,702,200 132,363 6,870,340 2,263,406 11,217,920 4,229,060 Activity of the Park and Recreation Facilities Development Corporation is reflected in the financial statements of the City as a blended component unit. The corporation issues sales tax revenue bonds to finance new parks and recreation facilities as well as renovations and updates to existing parks and recreation facilities. Currently, the corporation has $4,520,000 in revenue bonds outstanding. Interest rates on outstanding sales tax revenue bonds range from 4.25% to 5.25%. Sales tax revenues are accumulated for the repayment of these revenue bonds. The debt and associated resources for repayment are included in the City's governmental activities. Revenue bond debt service requirements to maturity are as follows: 56 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Governmental Year Ending Activities September 30, Princi al Interest 2009 920,000 204,302 2010 960,000 165,202 2011 995,000 123,254 2012 1,030,000 78,479 2013 405,000 30,789 2014 - 2018 210,000 16,538 $ 4, 520 X000 $ 618, 563 Changes in long-term liabilities Long-term liability activity for the year ended September 30, 2008, is reflected in the following tables. Beginning Balance Governmental activities: Bonds payable: General obligation bonds $ 37,821,014 Certificates of obligation 7,842,320 Sales tax revenue bonds 5,410,000 Deferred loss on refunding (661,916) Premium on bond issues 73,622 Discount on bond issues (18,153) Arbitrage liability 165,867 Compensated absences 2,402,014 Total governmental activities ~ 53,tL 768 Business-type activities: All business-type activities: Bonds payable: General obligation bonds 3,536,926 Certificates of obligation 4,862,120 Deferred loss on refunding (128,745) Premium on bond issues 8,191 Discount on bond issues (2,881) Compensated absences 594,250 Total business-type activities $ 8.869,61 Component unit activities: Bonds payable: General obligation bonds $ 305,000 Certificates of obligation 9,755,560 Deferred loss on refunding (7,552) Premium on bond issues 2,892 Discount on bond issues (660) Total component unit activities ~ 10,(255 240 Ending Due within Additions Reductions Balance One Year $ 4,180,000 $ 4,178,359 $ 37,822,655 $ 3,707,655 285,000 1,085,582 7,041,738 1,047,980 - 890,000 4,520,000 920,000 - (67,014) (594,902) (53,478) 623 5,219 69,026 - - (1,345) (16,808) - - - 165,867 - 2,021,580 $ 6.487,203 1,495,313 $ 7,586,114 2,928,281 ~ 51;935,}57 2,019,933 $ 7 642 090 - 747,188 2,789,738 439,738 2,465,000 461,780 6,865,340 581,780 - (80,128) (48,617) (48,617) 5,380 712 12,859 - - (305) (2,576) - 258,442 $ 2 728 822 483.176 $ 1 612 423 369,516 ~ 9 986 260 260,429 ~ 1 233 331 $ - $ - $ 305,000 $ - 2,000,000 537,640 11,217,920 615,000 - (2,074) (5,478) - 4,372 1,037 6,227 - (91) - (751) - ~ 2,004,?81 $ 536,603 .$ 11,22,918 $ 61 x,000 57 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Defeased Debt Outstanding At September 30, 2008, certain outstanding debt of the city is considered to be defeased. The following table details such outstanding defeased debt: Defeased Debt Type of Obligation Outstanding General obligation bonds $ 1,815,000 Certificates of obligation 5,375,000 $ 7,190,000 V. OTHER INFORMATION A. Risk management The government is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. While the City has historically retained a portion of these risks, coverage exists for: general, employment practice, law enforcement, and errors and omissions liability; excess workers' compensation; property damage; commercial crime coverage; and employee life insurance. Premiums are paid into the self-insurance internal service fund by all other participating funds and are available to pay claims, claim reserves, and administrative costs of the program. As of September 30, 2008, the interfund premiums did not exceed expenses. However, total operating revenues which include dependent premiums did exceed expenses. Liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for health and dental as well as workers' compensation claims that have been incurred but not reported ("IBNR"). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of pay-outs), and other economic and social factors. An excess coverage medical insurance policy covers individual claims in excess of $175,000 and/or $4,857,855 in the aggregate fora 12-month period beginning on January 1, 2008. The amount of insurance claim settlements did not exceed the City's insurance coverage for the past three fiscal years. Changes in the balances of claims liabilities during the past two years are as follows: Unpaid claims, beginning of year Incurred claims (including IBNR) Claim expense Unpaid claims, end of year B. Contingent liabilities 2008 2007 2006 2005 1,372,185 1, 308,432 1,185,432 1,045,410 6,684,299 5,009,025 5,835,231 5,432,459 (6,172,772) (4,945,272) (5,712,231) (5,292,437) $ 1,883,712 $1,372,185 $1,308 432 $1,185,432 The City has participated in a number of State and Federal assistance grant programs. Amounts received or receivable under these programs are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that 58 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The City is a defendant in four lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City's counsel the resolution of these matters will not have a material adverse effect on the financial condition of the City. C. Conduit debt obligations The City has issued Health Facilities Development Bonds to provide financial assistance to private- sector entities to promote and develop new, expanded or improved health facilities to assist the maintenance of public health and welfare. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. The City is not obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of September 30, 2008, there was one issue of Health Facilities Development Bonds outstanding. The aggregate principal amount payable for the issue dated 1994 could not be determined; however, the original issue amount totaled $5,700,000. Additionally, from time to time, the City has issued Industrial Development Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. The City is not obligated in any manner for repayment of the bonds. Accordingly the bonds are not reported as liabilities in the accompanying financial statements. As of September 30, 2008, there were two issues of Industrial Development Bonds outstanding. The aggregate principal amount payable for the issues dated 1983 and 1985 could not be determined; however, the original issue amounts totaled $7,125,000. D. Other post-employment benefits The City provides postretirement health and dental care benefits for retirees and their dependents. The benefits vary depending upon a retiree's years of service. Retirees fall into three categories: full retirement, early retirement, and combined service retirement. The full retirement retiree pays 100% of the current premiums for health and dental care coverage for themselves and covered dependents. Early retirement and combined service retirement employees pay premiums for health and dental care coverage for themselves and covered dependents at 150% and 175%, respectively, of the current premium. The City's regular health and dental care benefit providers underwrite the retirees' policies. Retirees may not convert the benefit into an in-lieu payment to secure coverage under independent plans. As of year end, there were 85 full retirement, 11 early retirement, and 3 combined service retirement retirees receiving postretirement health and dental care benefits. The City offers its employees a deferred compensation plan (the Plan) created in accordance with Internal Revenue Code Section 457. The Plan is administered by Public Employees Benefit Services Corporation. In 1998, the City implemented the requirements of GASB No. 32, Accounting and Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. In accordance with this statement and tax law, the City has amended its trust agreements which establish that all assets and income of the trust are for the exclusive benefit of eligible employees and their beneficiaries. Due to the implementation of these changes, the City does not have any fiduciary responsibility or administrative duties relating to the deferred compensation plan other than remitting 59 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements employees' contributions to the trustees. Accordingly, the City has not presented the assets and liabilities of the Plan in these basic financial statements. E. Employee retirement systems and pension plans Plan Description The City provides pension benefits for all of its full-time employees through a nontraditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System ("TMRS"), one of 827 administered by TMRS, an agent multiple-employer public employee retirement system. TMRS issues apublicly-available annual financial report that may be obtained by writing to TMRS, P.O. Box 149153, Austin, Texas 78714-9153. Benefits depend upon the sum of the employees' contributions to the plan, with interest, and the City-financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150% and 200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit. An updated service credit is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer-financed monetary credits with interest were used to purchase an annuity. Members can retire at ages 60 and above with 5 or more years of service or with 20 years of service regardless of age. The plan also provides death and disability benefits. A member is vested after 5 years. The plan provisions are adopted by the City Council, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contribution The contribution rate for employees is 7%, and the City's matching percent is currently 2 to 1, both as adopted by the City Council. Under the state law governing TMRS, the actuary annually determines the City contribution rate. The rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his retirement becomes effective. The prior service contribution rate amortizes the unfunded actuarial liability over the remainder of the plan's 30-year amortization period. Contributions are made monthly by both the employees and the City. The actuarial valuation is performed annually to determine the City's required contribution percentage. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one year delay between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect (i.e. December 31, 2007 is effective for rates beginning January 2007). Effective for the valuation dated December 31, 2007, the TMRS Board of Trustees elected to change the actuarial cost (funding) method and assumptions. 60 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Significant assumptions used in preparation of that valuation as well as the previous valuation are as follows: Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method December 31, 2006 Unit Credit Level Percent of Payroll 30 years -open period Amortized Cost December 31, 2007 Projected Unit Credit Level Percent of Payroll 30 years -closed period Amortized Cost Actuarial assumptions: Investment rate of return Project salary increases 7%* None *includes inflation at 0% and cost of living adjustments at 3.0%. 7%* None The TMRS Board of Trustees, in an effort to assist cities with increases greater than .5% in the required contribution rates occurring as a result of the changes in funding method and assumptions, voted to (2) extend the period for amortizing the unfunded actuarial accrued liability ("UAAL") to a 30 year closed period, and (2) allow the contribution rate increase to be phased in over an 8-year period (2009-2016) in determining the required contribution rate. Both options are automatic, but not mandatory. At a city's request, TMRS will recalculate the contribution rate for a city that chooses a 25-year, closed amortization period. Cities may also choose to pay contributions in excess of the phase-in rate. For cities with repeating features in their plans, these changes in the valuation methodology would likely result initially in higher required contributions and lower funded ratios. However, the funded ratio should show steady improvement over time. NRH has adopted the updated service credit and annuity increase provisions on an annually repeating basis. The schedule of funding progress, presented as Required Supplementary Information immediately following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The changes in actuarial funding method and assumptions adopted for the 2007 valuation resulted in an unfunded actuarial accrued liability ("UAAL") of $33,195,918, which represents an increase over the prior valuation of over $17 million. The funded ratio of the city's plan dropped from 83.25% to 70.44% as a result of the increased UAAL. The City's contributions to the plan were $4,057,393, $3,587,475, and $3,391,214, for the years ended September 30, 2008, 2007, and 2006, respectively, in accordance with actuarially determined requirements. Contributions by the City were 13.63% for the months in calendar year 2008 and 13.41 % for the months in calendar year 2007. The total covered payroll in the current fiscal year was $29,594,542. 61 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements Annual pension cost and percentage of pension cost contributed are as follows: Annual Percentage Year Ended Pension Cost Contributed September 30, 2008 $4,057,394 100% September 30, 2007 3,587,475 100% September 30, 2006 3,391,214 100% F. Operations of Component Units Net Pension Obligation at Year End In fiscal year 1998, the City created the Richland Plaza Tax Increment Financing District (TIF #1). The following schedule represents the portion of the Certificates of Obligation, Series 1998 allocated to TIF #1. The original issue for the amount allocated to TIF #1 was $850,000. A portion of the outstanding 1998 certificates were refunded in fiscal year 2006 with general obligation bonds. The TIF #1 portion of the refunded debt was $295,684 and its portion of the refunding debt was $310,000. All TIF District funds are deposited in TexPool until needed for payments. During the 1999 fiscal year, the City, along with Tarrant County, Tarrant County College and Tarrant County Hospital District created the Town Center Tax Increment Reinvestment Zone (TIF #2). In 2003, $1,450,000 of Certificates of Obligation, Series 2003 were issued for costs associated with land acquisition and design of the new library to be located within the boundaries of TIF #2. In fiscal year 2006, the City issued $8,750,000 of Certificates of Obligation for construction of the library. All TIF District funds are deposited in TexPool until needed for payments. The repayment terms of all of General Obligation and Certificates of Obligation are as follows: Year Ending General Obligation September 30, Principal Interest 2009 - 11, 500 2010 - 11,500 2011 5,000 11,413 2012 45,000 10,538 2013 45,000 8,963 2014 - 2018 210,000 20,288 2019 - 2023 - - Certificates of Obligation Total Principal Interest Principal Interest 657,640 474,170 657,640 485,670 662,640 446,864 662,640 458,364 667,640 421,564 672,640 432,977 615,000 394,558 660,000 405,096 620,000 365,883 665,000 374,846 3,145,000 1,437,718 3,355,000 1,458,006 3,147,800 763,947 3,147,800 763,947 2024 - 2028 - - 1,702,200 132,363 1,702,200 132,363 $ 305,000 $ 74,200 $11,217,919 $4,437066 $11,522,919 $4511,266 s2 CITY OF NORTH RICHLAND HILLS, TEXAS Notes to Basic Financial Statements G. Prior Period Adjustment During 2008, the City recognized prior year deferred revenue as current year income developer escrows for subdivision additions and for other planning and zoning requirements. This revenue had been previously recorded in prior fiscal periods but has not been earned as of the fiscal year ended 9/30/08. This prior period adjustment amends beginning fund balances to reflect the deferment of these funds. Total adjustment equaled $557,548 in the General Capital Projects fund in Governmental Funds. H. Implementation of GASB Statements Recently implemented The City has adopted the provisions of the Governmental Accounting Standards Board ("GASB") Statements No. 42, "Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries," No. 44, "Economic Condition Reporting: The Statistical Section," No. 46 "Net Assets Restricted by Enabling Legislation," and No. 47 "Accounting for Termination Benefits" for the year ended September 30, 2007. Future implementation The City has not completed the process of evaluating the impact that will result from adopting GASB Statements No. 45 "Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions," No. 48 "Sales and Pledges of Receivables and Future Revenues and Intra- Entity Transfers of Assets and Future Revenues," and No. 49 "Accounting and Financial Reporting for Pollution Remediation Obligations." Therefore, the City is unable to disclose the impact adopting those statements will have on its financial position and results of operations when such statements are adopted. ****** 63 1~I ~H This page intentionally left blank. 64 REQUIRED SUPPLEMENTARY INFORMATION 65 This page intentionally left blank. 66 CITY OF NORTH RICHLAND HILLS, TEXAS Required Supplementary Information Texas Municipal Retirement System Plan Schedule of Funding Progress Unfunded Valuation Actuarial Actuarial Actuarial Accrued Annual UAAL Dated Value of Accrued Liability Fund Covered as % of December 31, Assets Liability (UAAL) Ratio Payroll Payroll 1998 37,098,279 45,495,046 8,396,767 81.54% 16,626,374 50.50% 1999 41,272,641 50,371,740 9,099,099 81.94% 17,610,468 51.67% 2000 47,123,567 56,704,362 9,580,795 83.10% 19,398,779 49.39% 2001 53,084,647 63,056,333 9,971,686 84.19% 20,841,759 47.84% 2002 58,119,949 69,337,935 11,217,986 83.82% 22,372,019 50.14% 2003 64,726,698 79,113,589 14,386,891 81.81% 24,485,409 58.76% 2004 69,410,855 81,993,021 12,582,166 84.65% 23,787,759 52.89% 2005 72,129,416 86,165,248 14,035,832 83.71% 24,586,641 57.09% 2006 75,748,895 90,985,317 15,236,422 83.25% 25,328,096 60.16% 2007 79,089,871 112,285,789 33,195,918 70.44% 24,915,619 133.23% Note: The Schedule of Funding Progress summarizes the actuarial value of the plan's as sets and actuarial accrued liability as of December 31, 2007 and each of the nine preceding calendar yeas. The data presented in the schedule were obta ined annually from TMRS and were based on the annual actuarial valuation for the years represented. The c ity is financially responsible for its own portion of the plan. Therefore, the numbers shown above reflect only the condition of the city's plan. The schedule is presented to provide a consistent basis for measuring the plan's annual progress toward funding its actuarial accrued liability in accordance with its actuarial funding method. The primary measure of funding progress is the plan's funded ratio (i.e., actuarial value of assets expressed as a percentage of the actuarial accrued liability). An increase in the funded ratio indicates improvement in the plan's ability to pay all projected benefits as they come due. The plan is fully funded if the funded ratio is greater than or equal to 100%. During the year ended December 31, 2007, the plan's funded ratio dropped from 83.25% to 70.44%. The Schedule of Funding Progress also discloses the relationship between the plan's covered payroll (i.e., all elements included in compensation paid to active members on which contributions are based) and the unfunded actuarial accrued liability ("UAAL"). This relationship, expressed as a ratio, is a measure of the significance of the UAAL relative to the capacity to pay all contributions required to fund the liability. During the year ended December 31, 2007, the plan's ratio of the UAAL to its covered payroll increased from 60.16% to 133.23%. For the actuarial valuation dated December 31, 2007, the TMRS Board of Trustees adopted changes in the actuarial funding method and assumptions; as such, those changes are reflected in the above numbers. For a complete description of these changes, see Note E Employee Retirement Systems and pension plans in the accompanying notes to the financial statements. For Calendar Year 2008 2007 2006 2005 2004 City's annual contribution stated as a percentage of covered payroll 13.50% 13.63% 13.20% 13.42% 12.81% Note Source: TMRS Comprehensive Annual Report for the Year Ending December 31, 2007, Actuarial Section and City records. 67 CITY OF NORTH RICHLAND HILLS, TEXAS Required Supplementary Information Schedule of Reve nues, Expenditures, and Changes in Fund Balance -Budget and Actual GENERAL FUND Year Ended September 30, 2008 Variance with Final Budget - Original positive Budget Final Budget Actual (negative) Revenues Taxes Property taxes $ 12,745,403 $ 12,755,403 $ 12,472,429 $ (282,974) Penalities and interest on delinquent accounts 115,000 130,000 172,332 42,332 City sales taxes 8,788,488 8,788,488 8,876,924 88,436 Mixed beverage taxes 130,000 130,000 161,783 31,783 Franchise taxes 4,291,818 4,275,762 4,604,523 328,761 Total taxes 26,070,709 26,079,653 26,287,991 208,338 Liscenses and permits Building inspection 740,000 1,090,000 868,208 (221,792) Paving inspection 20,000 75,000 80,342 5,342 Electrical and plumbing inspection 135,000 125,000 105,023 (19,977) Other 518,550 645,250 652,129 6,879 Total liscenses and permits 1,413,550 1,935,250 1,705,702 (229,548) Charges for services Administration fees 3,039,268 3,039,268 3,039,268 - Planning and zoning fees 32,000 25,000 27,691 2,691 Recreational activity fees 571,100 596,027 613,997 17,970 Ambulance fees 1,373,895 1,440,515 1,399,676 (40,839) Auto impoundment fees 15,000 13,000 17,812 4,812 Other 228,490 221,140 211,395 (9,745) Total charges for service 5,259,753 5,334,950 5,309,839 (25,111) Fines Muncipal court 2,270,000 1,822,410 2,164,654 342,244 Warrant and arrest fees 220,000 160,000 163,049 3,049 Library 80,000 75,000 67,216 (7,784) Total fines 2,570,000 2,057,410 2,394,919 337,509 Intergovernmental 212,000 212,050 245,604 33,554 Investment income 478,185 460,789 530,730 69,941 Contributions - - 2,000 2,000 Miscellaneous 216,800 224,875 228,967 4,092 Total revenues 36,220,997 36,304,977 36,705,752 400,775 The budget is reflected on a GAAP basis. 68 CITY OF NORTH RICHLAND HILLS, TEXAS Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual GENERAL FUND Year Ended September 30, 2008 Expenditures General government Legal (city attorney) Legislative (city council) Administration (city management) Public information (city secretary) Judicial (municipal court) Finance Nondepartmental Human resources Building maintenance Planning and inspections Neighborhood services Budget and research Economic development Public relations Total general government Public safety Fire Police Total public safety Culture and recreation Parks, recreation, and library Variance with Final Budget - Original positive Budget Final Budget Actual (negative) 350,000 350,000 249,869 100,131 134,755 135,948 84,535 51,413 558,180 559,230 559,133 97 483,277 459,270 435,169 24,101 1,235,754 1,243,366 1,163,550 79,816 817,447 802,705 798,301 4,404 1,410,608 1,389,330 1,180,928 208,402 119,940 116,940 116,910 30 628,288 628,288 628,288 - 1,033,506 1,046,607 1,019,389 27,218 1,553,983 1,725,932 1,429,313 296,619 373,443 325,932 318,367 7,565 145,097 145,097 111,342 33,755 511,693 590,684 535,040 55,644 9,355,971 9,519,329 8,630,134 889,195 8,925,086 9,230,966 9,115,333 115,633 10,385,846 10,584,387 10,707,692 (123,305) 19,310,932 19,815,353 19,823,025 (7,672) 4,555,327 4,573,591 4,396,531 177,060 Public works Administration, traffic control, and Street repair and maintenance 2,833,041 2,867,183 2,614,343 252,840 Total expenditures 36,055,271 36,775,456 35,464,033 1,311,423 Excess (deficiency) of revenues revenues over expenditures 165,726 (470,479) 1,241,719 1,712,198 Other financing sources (uses) Sales of capital assets - 15,000 13,950 (1,050) Transfer in 755,750 756,450 738,519 (17,931) Transfer out (1,136,800) (1,286,800) (1,936,800) (650,000) Total other financing sources (uses) - net (381,050) (515,350) (1,184,331) (668,981) Net change in fund balance $ (215,324) $ (985,829) $ 57,388 $ 1,043,217 Fund balance -beginning of the year 14,315,365 Fund balance -end of year $ 14,372,753 The budget is reflected on a GAAP basis. 69 CITY OF NORTH RICHLAND HILLS, TEXAS Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual CRIME CONTROL AND PREVENTION DISTRICT Year Ended September 30, 2008 Revenues Sales tax Investment income Total revenues Expenditures Public safety Excess (Deficiency) of Revenues over expenditures Other financing sources (uses) Transfers out Total other financing sources (uses) - net Net change in fund balance Fund balance -beginning of the year Fund balance -end of year The budget is reflected on a GAAP basis. Variance with Final Budget - Original positive Budget Final Budget Actual (negative) $ 4,122,044 $ 4,122,044 $ 4,158,622 $ 36,578 58,402 23,935 74,018 50,083 4,180,446 4,145,979 4,232,640 86,661 4,811,750 4,891,909 4,934,575 (42,666) (631,304) (745,930) (701,935) 43,995 (135,000) (43,718) (43,718) - (135,000) (43,718) (43,718) - $ (766,304) $ (789,648) $ (745,653) $ 43,995 1,643,100 $ 897,447 70 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Promotional Fund - to account for the operations and expenditures for which hotel/motel occupancy taxes are used. Occupancy tax revenues are used primarily to attract tourists and new businesses to the City. Donations Fund - to account for the operations for which voluntary contributions by citizens are used. Contributions are used primarily to support library activities, animal control, and special events/public art. Special Investigation Fund - to account for the accumulation and use of resources from the forfeiture of contraband and certain other specialized police activities. Traffic Safety Fund - to account for sources that will assist in various traffic safety areas. Drainage Utility Fund - to account for the establishment of drainage facilities within the municipal boundaries of the City and the subsequent billing and collection of fees so established. Grant Fund - to account for certain grant programs of the City. Economic Development Fund - to account for the accumulation and expenditure of resources designed to stimulate the local economy, development, and redevelopment. DEBT SERVICE FUND Sales Tax Revenue Debt Service Fund - to accumulate monies for the payment of interest and principal on sales tax revenue bonds. Financing is provided by sales tax revenue. CAPITAL PROJECTS FUNDS The Streets 1994 Election capital projects fund is used to account for the financial resources used for the acquisition or construction of major street capital assets. Financing is provided primarily from the sale of general obligation bonds as authorized by the voters in the 1994 bond election. Drainage 1994 Election - to account for financial resources to be used for the acquisition or construction of major drainage capital assets. Financing is provided primarily by the sale of general obligation bonds as authorized by the voters in the 1994 Bond Election. Public Safety 1994 Election - to account for financial resources to be used for the acquisition or construction of major public safety capital assets. Financing is provided primarily by the sale of general obligation bonds as authorized by the voters in the 1994 Bond Election. Streets 2003 Election - to account for financial resources to be used for the acquisition or construction of street capital assets. Financing is provided primarily by the sale of general obligation bonds as authorized by the voters in the 2003 Bond Election. Drainage 2003 Election - to account for financial resources to be used for the acquisition or construction of major drainage capital assets. Financing is provided primarily by the sale of general obligation bonds as authorized by the voters in the 2003 Bond Election. Public Safety 2003 Election - to account for financial resources to be used for the acquisition or construction of major public safety capital assets. Financing is provided primarily by the sale of general obligation bonds as authorized by the voters in the 2003 Bond Election. Permanent Street Maintenance - to account for financial resources to be used for the maintenance of city streets. Financing is provided primarily by transfers from the General Fund. Permanent Sidewalk Maintenance - to account for the financial resources to be used for the maintenance of city sidewalks. Financing is provided primarily by transfers from the General Fund. 71 CITY OF NORTH RICHLAND HILLS, TEXAS Combining Balance Sheet NONMAJOR GOVERNMENTAL Year Ended September 30, 2008 Special Revenue Debt Service J N Sales Tax Revenue Special Drainage Economic Bonds Debt Promotional Donations Investigations Traffic Safety Utility Grant Development Service ASSETS Deposits and investments $ 273,905 $ 695,560 $ 425,804 $ 254,802 $ 626,992 $ 111,827 $ 1,509,860 $ 833,113 Accounts receivable - - - - 97,251 492 - - Othertaxes receivable 72,448 - - - - - - - Otherreceivable - - - - - - - - Interest receivable 1,483 3,590 2,231 533 3,182 1,025 7,060 2,241 Intergovernmental receivable - - - - - 147,874 - - Prepaid items - - 1,890 - - - - - Restricted: Deposits and investments: Construction funds - - - - - - - Total assets 347,836 699,151 429,926 255,335 727,425 261,218 1,516,920 835,354 Liabilities and Fund Balance Liabilities Accounts payable 1,822 22,138 2,436 91,618 - 5,159 - - Accrued liabilities - - - 710 - - - Deposits and other liabilities 448 7,702 54 - - - - - Intergovernmental payable - - - 80,573 - 118,003 - - Deferred revenue - - - - - 99,341 - - Totalliabilities 2,270 29,840 2,490 172,900 - 222,503 - - Fund Balance Reserved for encumbrances 10,000 4,186 - - - 195,010 477,080 - Reserved for debt service - - - - - - - 835,354 Reserved far capital improvements - - - - - - - Unreserved, Undesignated: Special revenue 335,566 665,124 427,436 82,434 727,425 156,296 1,039,840 - Total fund balance 345,566 669,311 427,436 82,434 727,425 38,715 1,516,920 835,354 Total liabilities and fund balance $ 347,836 $ 699,151 $ 429,926 $ 255,335 $ 727,425 $ 261,218 $ 1,516,920 $ 835,354 (continued) J w ASSETS Deposits and investments Accounts receivable Other taxes receivable Other receivable Interest receivable Intergovemmentalyeceivable Prepaid items Restricted: Deposits and investments: Construction funds Total assets Liabilities and Fund Balance Liabilities Accounts payable Accrued liabilities Deposits and other liabilities Intergovernmental payable Deferred revenue Total liabilities Fund Balance Reserved for encumbrances Reserved for debt service Reserved for capital improvements Unreserved, Undesignated: Special revenue Total fund balance Total liabilities and fund balance CITY OF NORTH RICHLAND HILLS, TEXAS Combining Balance Sheet NONMAJOR GOVERNMENTAL Year Ended September 30, 2008 (concluded) Capital Projects 1994 Bond Election 2003 Bond Election Permanent Permanent Total Public Public Street Sidewalk Nonmajor Streets Drainage Safety Streets Draina a Safety Maintenance Maintenance Governmental $ _ $ $ _ $ _ $ _ $ _ $ _ $ - $ 4,731,863 _ _ _ _ _ - - 97,743 _ _ _ _ - - - 72,448 65,480 - - - - - - - 65,480 1,202 1,106 - - - - 4,083 424 28,161 33,346 - - 257,915 - - - - 439,135 _ _ _ _ _ _ _ - 1,890 3,824,249 979,572 5,618 7,548,566 199,250 3,804 1,083,190 70,384 13,714,633 3,924,277 980,678 5,618 7,806,481 199,250 3,804 1,087,273 70,808 19,151,353 90,702 - - 18,629 - - 69,423 - 301,927 _ _ _ _ _ _ _ - 710 _ _ _ _ _ - - - 8,204 _ _ _ - - - - 198,576 65,480 - - - - - - - 164,821 156,182 - - 18,629 - - 69,423 - 674,238 3,200 - - 3,000 - - 70,631 - 763,107 _ _ _ _ _ _ 835,354 3,764,895 980,678 5,618 7,784,852 199,250 3,804 947,220 70,808 13,757,125 _ _ _ _ _ _ - - 3,121,530 3,768,095 980,678 5,618 7,787,852 199,250 3,804 1,017,850 70,808 18,477,116 $ 3,924,277 $ 980,678 $ 5,618 $ 7,806,481 $199,250 $ 3,804 $ 1,087,273 $ 70,808 $19,151,354 CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Revenues, Expenditures, and Changes in Fund Balances NONMAJOR GOVERNMENTAL Year Ended September 30, 2008 Special Revenue Debt Service Sales Tax Revenue Special Traffic Drainage Economic Bonds Debt Promotional Donations Investigations Safety Utility Grant Development Service REVENUES Occupancy tax $ 260,319 $ - $ - $ - $ - $ - $ - $ Contributions - 157,835 - - - - - - Investmentincome 10,340 25,772 17,257 401 21,748 5,220 21,607 10,670 Intergovemmenial - - 333,448 - - 290,154 53,585 - Drainagefees - - - - 830,338 - - - Finesand forfeitures - - 142,874 - - - - - Civilcitations - - - 825,191 - - - - Specialassessments - - - - - - - - Miscellaneous income - 1,641 3,933 - - 590 - - Totalrevenues 270,659 185,248 497,512 825,592 852,086 295,964 75,192 10,670 EXPENDITURES General government 213,306 59,384 - - 1,513 139,656 8,450 - Publicsafety - - 528,934 684,973 - 80,001 - - CuRures and recreation - 20,697 - - - - Public works - - - - - 48,658 - - Capital Outlay Public safety - - 7,719 - - - - - Publicworks - - - - - - - Debt Service Principal - - - - - - - 890,000 Interest and fiscal agent charges - - - - - - - 291,953 Total expenditures 213,306 80,081 536,653 684,973 1,513 268,315 8,450 1,181,953 Excess (deficiency) of revenues over expenditures 57,353 105,167 (39,141) 140,619 850,573 27,649 66,742 (1,171,283) OTHER FINANCING SOURCES (USES) Proceeds from sale ofassets - - 2,403 - - - - - Issuance of debt - - - - - - - - Transfers in - - - - - - 224,712 1,132,213 Transfers out - - - (60,000) (698,766) - - - Totalotherfinancingsources(uses) - - 2,403 (60,000) (698,766) - 224,712 1,132,213 Net change in fund balance 57,353 105,167 (36,738) 80,619 151,807 27,649 291,454 (39,070) Fund balance - beginning of year 288,213 564,144 464,174 1,815 575,618 11,066 1,225,466 874,424 Fund balance -end of year $ 345,566 $ 669,311 $ 427,436 $ 82,434 $ 727,425 $ 38,715 $ 1,516,920 $ 835,354 (continued) CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Revenues, Expenditures, and Changes in Fund Balances NONMAJOR GOVERNMENTAL Year Ended September 30, 2008 (concluded) Capital Projects 1994 Bond Election 2003 Bond Election Permanent Permanent Total Public Public Street Sidewalk Nonmajor Streets Drainage Safety Streets Drainage Safety Maintenance Maintenance Governmental REVENUES Occupancy tax $ - $ - $ - $ - $ - $ - $ - $ - $ 260,319 Contributions - - - - - - - - 157,835 Investment income 153,701 33,370 36 133,470 799 1,296 14,921 1,991 452,599 Intergovernmental - - - 257,915 - - - - 935,102 Drainage fees - - - - - - - - 830,338 Fines and forfeltures - - - - - - - - 142,874 Civil citations - - - - - - - - 825,191 Special assessments 76,487 - - - - - - - 76,487 Miscellaneous income 82 - - - - - - - 6,246 Total revenues 230,270 33,370 36 391,385 799 1,296 14,921 1,991 3,686,991 EXPENDITURES General government - - - - - - - - 422,309 Public safety - - - - - - - - 1,293,908 Cultures and recreation - - - - - - - - 20,697 Public works - - - - - - - - 48,658 Capital Outlay Public safety - - - - - - - 7,719 Public works 909,360 74,752 - 249,688 - - 522,991 39,941 1,796,932 Debt Service Principal - - - - - - - - 890,000 Interest and fiscal agent charges - - - - - - - - 291,953 Total expenditures 909,360 74,752 - 249,888 - - 522,991 39,941 4,772,176 (679,090) (41,382) 36 141,497 799 1,296 (508,070) (37,950) (1,085,185) OTHER FINANCING SOURCES (USES) Proceeds from sale ofassets - - - - - - - - 2,403 Issuance of debt 180,000 - - 4,000,000 - - - - 4,180,000 Transfers in - - - - - 800,000 50,000 2,206,925 Transfers out (124,385) - - - - - - - (883,151) Total otherfinancing sources (uses) 55,615 - - 4,000,000 - - 800,000 50,000 5,506,177 Net change in fund balance (623,475) (41,382) 36 4,141,497 799 1,296 291,930 12,050 4,420,992 Fund balance- beginning of year 4,391,570 1,022,060 5,582 3,646,355 196,451 2,508 725,920 58,759 14,056,125 Fund balance -end of year $ 3,768,095 $ 980,678 $ 5,618 $ 7,787,852 $199,250 $ 3,804 $ 1,017,850 $ 70,809 $18,477,117 CITY OF NORTH RICHLAND HILLS, TEXAS Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual PROMOTIONAL September 30, 2008 Variance with Final Budget - Positive Original Final Actual (Negative) REVENUES Occupancy tax revenue $ 205,000 $ 205,000 $ 260,319 $ 55,319 Investment income 4,460 7,493 10,340 2,847 Total revenues 209,460 212,493 270,659 58,166 EXPENDITURES General government 232,896 241,101 213,306 27,795 Total expenditures 232,896 241,101 213,306 27,795 Excess of revenues over expenditures (23,436) (28,608) 57,353 85,961 Net change in fund balance $ (23,436) $ (28,608) $ 57,353 $ 85,961 Fund balance -beginning of year 288,213 Fund balance -end of year $ 345,566 The budget is reflected on a GAAP basis. 76 CITY OF NORTH RICHLAND HILLS, TEXAS Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actu al DONATIONS September 30, 2008 Variance with Final Budget - Positive Original Final Actual (Negative) REVENUES Contributions $ 202,500 $ 147,500 $ 157,835 $ 10,335 Investment income 16,300 19,561 25,772 6,211 Miscellaneous income 4,050 3,986 1,641 (2,345) Total revenues 222,850 171,047 185,248 14,201 EXPENDITURES General government 89,653 93,941 59,384 34,557 Culture and recreation 51,500 51,500 20,697 30,803 Total expenditures 141,153 145,441 80,081 65,360 Excess of revenues over expenditures 81,697 25,606 105,167 (51,159) Net change in fund balance $ 81,697 $ 25,606 $ 105,167 $ (51,159) Fund balance -beginning of year 564,144 Fund balance -end of year $ 669,311 The budget is reflected on a GAAP basis. 77 CITY OF NORTH RICHLAND HILLS, TEXAS Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual DRAINAGE UTILITY September 30, 2008 Variance with Final Budget - Positive Original Final Actual (Negative) REVENUES Drainage fees $ 806,450 $ 819,500 $ 830,338 $ 10,838 Investment income 11,515 16,772 21,748 4,976 Total revenues 817,965 836,272 852,086 15,814 EXPENDITURES General government - - 1,513 (1,513) Excess of revenues over expenditures 817,965 836,272 850,573 17,327 OTHER FINANCIAL RESOURCES (USES) Transfers out (698,766) (698,766) (698,766) - Net change in fund balance $ 119,199 $ 137,506 $ 151,807 $ 17,327 Fund balance -beginning of year 575,618 Fund balance -end of year $ 727,425 The budget is reflected on a GAAP basis. 78 CITY OF NORTH RICHLAND HILLS, TEXAS Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual GENERAL DEBT SERVICE Year Ended September 30, 2008 Variance with Final Budget - Original positive Budget Final Budget Actual (negative) Revenues Property tax $ 6,598,877 $ 6,598,877 $ 6,603,946 $ 5,069 Investment income - 50,000 122,266 72,266 Intergovernmental revenue - 19,785 19,785 - Total revenues 6,598,877 6,668,662 6,745,997 77,335 Expenditures Debt service Retirement of general long-term debt 5,298,393 5,298,393 5,298,393 - Interest and fiscal agent charges 2,163,470 2,149,070 1,933,632 215,438 Total expenditures 7,461,863 7,447,463 7,232,025 215,438 Excess (deficiency) of revenues to expenditures (862,986) (778,801) (486,028) (138,103) Other financing sources (uses) Transfers in 1,251,897 1,251,897 1,251,897 - Total other financing sources (uses) - net 1,251,897 1,251,897 1,251,897 (138,103) Net change in fund balance $ 388,911 $ 473,096 $ 765,869 $ (276,206) Fund balance -beginning of the year 2,383,141 Fund balance -end of the year $ 3,149,010 The budget is reflected on a GAAP basis. 79 CITY OF NORTH RICHLAND HILLS, TEXAS Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual SALES TAX REVENUE BONDS DEBT SERVICE September 30, 2008 REVENUES Investment income Total revenues EXPENDITURES Principal payments Interest and fiscal agent charges Total expenditures Deficiency of revenues under expenditures OTHER FINANCING SOURCES (USES) Transfers in Net change in fund balance Fund balance -beginning of year Fund balance -end of year The budget is reflected on a GAAP basis. Variance with Final Budget - Positive Original Final Actual (Negative) $ - $ - $ 10,670 $ 10,670 - - 10,670 10,670 890,000 890,000 890,000 - 242,213 242,213 291,953 49,740 1,132,213 1,132,213 1,181,953 49,740 (1,132,213) (1,132,213) (1,171,283) 39,070 1,132,213 1,132,213 1,132,213 - $ - $ - $ (39,070) $ 39,070 874,424 $ 835,354 80 INTERNAL SERVICE FUNDS Facility and Construction Services Fund - To account for building maintenance and repair services provided to numerous departments located at various sites throughout the city. Facility and Construction Services Fund operations are financed by charges to user departments. Fleet Services Fund - To account for the maintenance, repair service, and replacement of vehicles and equipment provided to numerous departments responsible for the operation of city vehicles and equipment. Fleet Services Fund operations are financed by charges to user departments. Self-Insurance Fund - To account for the payment of substantially all claims except for fire insurance coverage and employee life insurance coverage. Self-Insurance Fund operations are financed by charges to user departments and employee contributions. Information Services Fund - To account for the acquisition, maintenance, and support of computer and telephone hardware and software. Information Services Fund operations are financed by charges to user departments. 81 CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Net Assets INTERNAL SERVICE September 30, 2008 Facility and Construction Information Totallnternal Services Fleet Services Self Insurance Services Services Assets CURRENT ASSETS Deposits and investments $ 315,959 $ 129,235 $ 1,697,368 $ 105,682 $ 2,248,244 Insurance deposits - - 90,000 - 90,000 Accounts receivable, other - 1,210 6,214 5,670 13,094 Interest receivable 20,022 15,956 39,389 24,359 99,726 Inventories, at costs 6,344 126,390 - - 132,734 Prepaid items - - 35,349 - 35,349 Restricted assets: Deposits and investments: Construction funds 18,291 - - 700,581 718,872 Future improvements 1,236,020 1,882,908 - 2,248,906 5,367,834 Insurance recovery funds 915,866 249,810 - - 1,165,676 Reserve for future claims - - 3,388,642 - 3,388,642 Total current assets 2,512,502 2,405,509 5,256,963 3,085,198 13,260,172 NONCURRENT ASSETS Capital assets, at costs: Building and improvements 272,293 - - - 272,293 Machinery and equipment 145,199 5,090,181 17,312 1,959,134 7,211,826 Construction in progress 535,779 283,713 - 808,353 1,627,845 Total property, plant, and equipment 953,271 5,373,894 17,312 2,767,487 9,111,964 Less accumulated depreciation (165,055) (3,676,960) (17,312) (1,232,656) (5,091,983) Total capital assets (net of accumulated depreciation) 788,216 1,696,934 - 1,534,831 4,019,981 Total noncurrent assets 788,216 1,696,934 - 1,534,831 4,019,981 Total assets 3,300,718 4,102,443 5,256,963 4,620,029 17,280,153 Liabilities CURRENT LIABILITIES Accounts payable $ 286,353 $ 53,007 $ 86,300 $ 67,584 $ 493,244 Accrued liabilities 6,669 8,096 1,908,931 7,530 1,931,226 Compensated absences 22,316 66,079 19,605 30,569 138,569 Other liabilities 622 2,051 - - 2,673 Total current liabilities 315,960 129,233 2,014,836 105,683 2,565,712 NONCURRENT LIABILITIES Compensated absences 14,228 18,300 24,219 21,053 77,800 Total noncurrent liabilities 14,228 18,300 24,219 21,053 77,800 Total liabilities 330,188 147,533 2,039,055 126,736 2,643,512 Net Assets Invested in capital assets, net of related debt 788,216 1,696,934 - 1,534,831 4,019,981 Unrestricted 2,182,314 2,257,976 3,217,908 2,958,462 10,616,660 Total net assets $ 2,970,530 $ 3,954,910 $ 3,217,908 $ 4,493,293 $ 14,636,641 82 CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Revenues, Expenses, and Changes in Net Assets INTERNAL SERVICE Year Ended September 30, 2008 OPERATING REVENUES Insurance premiums Maintenance services Computer services Telephone services Other Total operating revenues OPERATING EXPENSES Claims Contractual services Personnel services Repairs and maintenance Supplies Depreciation Total operating expense Operating income (loss) NONOPERATING REVENUES (EXPENSES) Investment income Insurance recovery proceeds Other income (expense) Gain (loss) on disposal of assets Total nonoperating revenues (expenses) Income (loss) before transfers TRANSFERS Transfers in Transfers out Total transfers -net Change in net assets Net assets -beginning of year Net assets -end of year Facilities and Construction Information Totallnternal Services Fleet Services Self Insurance Services Services $ - $ - $ 8,246,477 $ - $ 8,246,477 1,707,256 2,239,046 - - 3,946,302 - - - 1,941,391 1,941,391 - - - 398,286 398,286 - 44,928 96,056 114,821 255,805 1,707,256 2,283,974 8,342,533 2,454,498 14,788,261 - - 7,031,884 - 7,031,884 737,867 80,236 70,384 180,602 1,069,089 806,365 838,833 460,470 931,479 3,037,147 235,508 163,588 3,701 776,092 1,178,889 64,058 1,240,341 8,173 416,579 1,729,151 22,426 367,736 - 169,774 559,936 1,866,224 2,690,734 7,574,612 2,474,526 14,606,096 (158,968) (406,760) 767,921 (20,028) 182,165 92,037 89,350 172,215 108,392 461,994 - 38,411 - - 38,411 - 1,489 - - 1,489 15,708 21,764 - - 37,472 107,745 151,014 172,215 108,392 539,366 (51,223) (255,746) 940,136 88,364 721,531 50,000 485,000 154,400 52,718 742,118 (50,327) (312,893) - - (363,220) (327) 172,107 154,400 52,718 378,898 (51,550) (83,639) 1,094,536 141,082 1,100,429 3,022,080 4,038,549 2,123,372 4,352,211 13,536,212 $ 2,970,530 $ 3,954,910 $ 3,217,908 $ 4,493,293 $ 14,636,641 83 CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Cash Flows INTERNAL SERVICE Year Ended September 30, 2008 Cash flows from operating activities: Receipts from interfund services provided Payments to suppliers Payments to employees Payments for internal services Net cash provided by (used for) operating activities Cash flows from noncapital financing activities: Transfers from other funds Transfers to other funds Net cash provided by (used for) noncapital and related financing activities Cash flows from capital and related financing activities: Insurance recovery proceeds Grant proceeds Acquisition and construction of capital assets Proceeds from sale of capital assets Net cash provided by (used for) capital and related financing activities Cash flows from investing activities: Interest and dividends received Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalent beginning of year Cash and cash equivalent end of year Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation expense (Increase) decrease in accounts receivable (Increase) decrease in inventories (Increase) decrease in prepaid items Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Total adjustments Net cash provided by (used for) operating activities Noncash financing activities: Disposal of capital assets Facilities and Construction Information Services Fleet Services Self Insurance Services Totals $ 1,707,256 $ 2,282,764 $ 8,342,161 $2,453,154 $14,785,335 (292,570) (1,592,362) (6,608,858) (1,261,810) (9,755,600) (769,821) (754,454) (416,646) (879,857) (2,820,778) (737,867) - (70,384) (180,602) (988,853) (93,002) (64,052) 1,246,273 130,885 1,220,104 50,000 485,000 154,400 52,718 742,118 (50,327) (312,893) - - (363,220) (327) 172,107 154,400 52,718 378,898 - 38,411 - - 38,411 - 1,489 - - 1,489 (291,127) (604,561) - (155,774) (1,051,462) 15,708 21,764 - - 37,472 (275,419) (542,897) - (155,774) (974,090) 90,500 93,050 166,926 104,564 455,040 90,500 93,050 166,926 104,564 455,040 (278,248) (341,792) 1,567,599 132,393 1,079,952 2,764,384 2,603,745 3,518,411 2,922,776 11,809,316 $ 2,486,136 $ 2,261,953 $ 5,086,010 $3,055,169 $12,889,268 $ (158,968) $ (406,760) $ 767,921 $ (20,028) $ 182,165 22,426 367,736 - 169,774 559,936 - (1,210) (372) (1,344) (2,926) (2) (29,787) - - (29,789) - - (35,349) - (35,349) 54,154 2,216 (42,837) (17,370) (3,837) (10,612) 3,753 556,910 (147) 549,904 65,966 342,708 478,352 150,913 1,037,939 $ (93,002) $ (64,052) $ 1,246,273 $ 130,885 $ 1,220,104 $ - $ (309,354) $ - $ - $ (309,354) 84 DISCRETELY PRESENTED COMPONENT UNITS 85 CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Net Assets NONMAJOR DISCRETELY PRESENTED COMPONENT UNITS September 30, 2008 TIF #1 TIF #2 Totals Assets CURRENT ASSETS Deposits and investments Property tax receivable Interest receivable Restricted: Deposits and investments: Construction funds Total current assets NONCURRENT ASSETS Capital assets, at cost: Construction in progress Other assets Total noncurrent assets Total assets Liabiltiies CURRENT LIABILITIES Accrued interest payable Bonds payable Total current liabilities NONCURRENT LIABILITIES General obligation bonds payable Certificates of obligation payable Total noncurrent liabilities Total liabilities Net Assets Invested in capital assets, net of related debt Restricted for debt service Tot net assets $ 905,071 $ - $ 905,071 - 127,966 127,966 6,811 55,913 62,724 - 9,809,945 9,809,945 911,883 9,993,824 10,905,707 - 9,846,526 9,846,526 8,211 77,876 86,087 8,211 9,924,402 9,932,613 920,094 19,918,226 20,838,319 2,478 60,361 62,839 42,640 572,360 615,000 45,118 632,721 677,839 305,000 - 305,000 127,918 10,486,638 10,614,556 432,918 10,486,638 10,919,556 478,036 11,119,359 11,597,395 - 8,675,350 8,675,350 442,058 123,517 565,575 $ 442,058 $ 8,798,867 $ 9,240,925 86 CITY OF NORTH RICHLAND HILLS, TEXAS Combining Statement of Activities NONMAJOR DISCRETELY PRESENTED COMPONENT UNITS Year Ended September 30, 2008 TIF#1 TIF#2 Total component unit activities Expenses $ 61,373 408,498 $ 469,871 Net (Expense) Revenue and Changes in Net Assets TIF#1 TIF#2 Totals $ 61,373 61, 373 $ - $ 61,373 408,498 408,498 408,498 469,871 General Revenues: Property tax Investment income Total general revenues Chang in net assets Net assets -beginning of year Net assets -end of year 203,909 2,140,070 2,343,979 37,542 451,874 489,416 241,451 2,591,944 2,833,395 180,078 2,183,446 2,363,524 261,980 6,615,421 6,877,401 $ 442,058 $ 8,798,867 $ 9,240,925 87 N ~~H This page intentionally left blank. ss STATISTICAL SECTION 89 1~I ~H This page intentionally left blank. 90 CITY OF NORTH RICHLAND HILLS, TEXAS Table 1 Net Assets by Component (unaudited) Fiscal Year 2008 2007 2006 2005 2004 2003 Governmental Activities Invested in capital assets net of related debt $ 129,533,935 128,290,273 127,692,821 70,181,539 63,351,827 58,568,310 Restricted 3,984,364 3,270,409 2,973,821 2,759,099 2,954,135 2,858,468 Unrestricted 54,146,336 44,787,548 36,986,785 27,839,936 27,644,041 27,303,419 Total net assets 187,664,636 176,348,230 167,653,427 100,780,574 93,950,003 88,730,197 Business-type Activities Invested in capital assets net of related debt 60,828,610 65,485,796 62,776,005 63,610,252 65,122,142 64,023,232 Restricted 2,709,713 2,937,027 2,712,360 2,267,668 1,241,081 2,450,610 Unrestricted 29,018,350 24,779,076 27,457,208 22,623,841 20,443,728 19,036,895 Total net assets 92,556,673 93,201,899 92,945,573 88,501,761 86,806,951 85,510,737 Primary Government Invested in capital assets net of related debt 190,362,545 193,776,069 190,468,826 133,791,791 128,473,969 122,591,542 Restricted 6,694,077 6,207,436 5,686,181 5,026,767 4,195,216 5,309,078 Unrestricted 83,164,686 69,566,624 64,443,993 50,463,777 48,087,769 46,340,314 Total net assets 280,221,309 269,550,129 260,599,000 189,282,335 180,756,954 174,240,934 Notes: Fiscal year 2003 was the implementation year of GASB #34 for the City. Figures from fiscal years prior to 2003 are unavailable for inclusion in the tables. Right-of-way land was added to the financial statements in fiscal year 2006. 91 Expenses Governmental activities: General government Public safety Culture and recreation Public works Interest and other fees Total governmental activities Business-type activities: Water and sewer Golf course Aquatic park Interest and other fees Total business-type activities Total primary government Program Revenues Governmental activities: Charges for services General government Public safety Culture and recreation Public works Operating grants and contributions Capital grants and contributions Total governmental activities Business-type activities: Charges for services Water and sewer Golf course Aquatic park Operating grants and contributions Capital grants and contributions Total business-type activities Total primary government Net (Expense) Revenue Governmental activities Business-type activities Total primary government Table 2 Fiscal Year CITY OF NORTH RICHLAND HILLS, TEXAS Changes in Net Assets (unaudited) 2008 2007 2006 2005 2004 2003 $ 9,379,422 8,461,142 9,269,861 8,288,137 9,755,719 9,292,156 25,791,827 23,265,259 22,022,696 20,693,721 20,460,665 21,078,401 7,973,359 7,327,532 7,611,710 7,355,182 7,436,113 7,102,491 5,748,315 7,799,706 8,169,282 7,597,475 6,755,207 6,917,896 2,302,096 2,561,837 2,546,791 2,860,149 3,157,963 3,853,040 51,195,019 49,415,476 49,620,340 46,794,664 47,565,667 48,243,984 27,329,181 23,154,259 22,929,665 21,492,504 20,707,959 20,415,859 2,302,670 2,247,272 2,239,404 2,254,198 2,257,534 2,353,454 3,774,757 3,433,492 3,343,073 3,251,524 3,178,835 3,121,298 433, 588 - - - - - 33,840,196 28,835,023 28,512,142 26,998,226 26,144,328 25,890,611 85,035,215 78,250,499 78,132,482 73,792,890 73,709,995 74,134,595 9,333,482 6,505,029 6,881,843 5,672,569 5,548,912 5,221,263 2, 995, 693 1, 718, 460 1, 314, 329 1,154, 807 1, 031, 326 1, 062, 295 2,517,122 1,124,777 1,212, 343 1,214, 590 1,091, 618 1,363, 337 2,355,161 1,179, 302 174,166 61,063 100,192 475,788 353,816 1,028,853 1,153,543 1,539,736 612,519 865,108 304,514 410,297 2,910,568 4,367,529 6,404,966 2,087,935 859,788 17 11,966,718 13, 646,792 14, 010,294 14, 789,533 11, 075,726 , 26,349,559 21,630,336 25,858,511 22,237,742 20,861,262 20,945,508 2,571,409 2,298,065 1,775,963 2,287,494 2,154,714 2,356,941 3,943,288 3, 916,691 3,894, 274 3,421, 301 2,831, 743 2,892, 843 - - 66,466 46,847 344,296 64,334 - 599,983 1,288, 734 1,603, 834 2,128, 214 1,303, 870 32,864,256 28,445,075 32,883,948 29,597,218 28,320,229 27,563,496 044 50 724 40,411,793 46,530,740 43,607,512 43,109,762 38,639,222 , , (33,335,231) (37,448,758) (35,973, 548) (32,784, 370) (32,776,134) (37,168, 258) (975, 940) (389,948) 4,371, 806 2, 598, 992 2,175, 901 1,672, 885 (34, 311,171) (37, 838,706) (31,601, 742) (30,185, 378) (30,600, 233) (35,495, 373) 92 CITY OF NORTH RICHLAND HILLS, TEXAS Changes in Net Assets (unaudited) Table 2 Fiscal Year 2008 2007 2006 2005 2004 2003 General Revenues and Other Changes in Net Assets Governmental activities: Taxes Property taxes 19,248, 707 18, 663, 482 18,134, 230 17,458, 279 16,871, 892 16,871, 892 Sales taxes 17,445, 806 16, 865,282 15,934, 374 15,230, 354 16,477, 474 16,477, 474 Mixed beverage taxes 161,783 129,860 123,355 115,143 107,164 107,164 Franchise taxes 4,604,523 4,450,441 3,855,169 3,541,130 3,592,682 3,592,682 Occupancy taxes 260,319 284,099 199,850 191,848 172,197 172,197 Unrestricted investment earnings 2,245,479 2,757,208 2,047,583 1,088,547 652,153 652,153 Special items 196,320 1,499,140 - - (1,585,000) (1,585,000) Miscellaneous 477,026 651,376 2,341,327 688,555 602,568 602,568 Transfers 569,227 712,782 873,867 1,301,085 1,104,810 1,104,810 Total governmental activities 45,209,190 46,013,670 43,509,755 39,614,941 37,995,940 37,995,940 Business-type activities: Unrestricted investment earnings 878,795 1,330,781 945,873 396,903 225,123 225,123 Special items - - - - - - Miscellaneous 8,962 - - - - - Transfers (557, 044) (712,782) (873, 867) (1, 301, 085) (1,104, 810) (1,104, 810) Total business-type activities 330,713 617,999 72,006 (904,182) (879,687) (879,687) Total primary government 539 903 45 46,631,669 43,581,761 38,710,759 37,116,253 37,116,253 , , Changes in Net Assets Governmental activities 11,873,959 8,564,912 7,536,207 6,830,571 5,219,806 827,682 Business-type activities (645,227) 228,051 4,443,812 1,694,810 1,296,214 793,198 Total primary government 11,228,732 8,792,963 11,980,019 8,525,381 6,516,020 1,620,880 Notes: Fiscal year 2003 was the implementation year of GASB #34 for the City. Figures from fiscal years prior to 2003 are unavailable for inclusion in the tables. 93 General Fund Reserved Unreserved Total general fund All Other Govemmental Funds Reserved Unreserved, reported in: Special revenue funds Debt service funds CapOal projects funds Total all other govemmental funds CITY OF NORTH RICHLAND HILLS, TEXAS fund Balances -Governmental Funds Last Ten Fiscal Years (unaudited) Table 3 Fiscal Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 $ 623,072 833,307 597,644 544,903 632,000 660,637 1,300,795 927,566 880,447 721,868 13,749,681 13,482,057 12,823,749 11,147,990 10,087,107 9,403,250 8,742,689 8,357,236 7,437,950 6,282,261 14,372,753 14,315,364 13,421,393 11,692,893 10,719,107 10,063,887 10,043,484 9,284,802 8,318,397 7,004,129 29,467,707 26,246,317 23,279,769 22,253,738 29,120,849 9,534,829 13,566,962 10,114,920 9,356,481 13,046,275 10,268,915 4,696,564 4,784,020 3,856,173 4,436,440 6,690,780 7,263,638 7,546,762 8,440,448 4,926,230 14,372,751 - - - - 21,483,822 19,367,047 17,047,564 14,236,380 9,467,393 54,109,373 30,942,681 28,063,789 26,109,911 33,557,289 37,709,431 40,197,647 34,709,266 32,033,309 27,439,898 A CITY OF NORTH RICHLAND HILLS, TEXAS Table 4 Changes in Fund Balances -Governmental Funds Last Ten Fiscal Years Fiscal Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Revenues Taxes $ 41,721,138 40,393,165 39,296,101 37,565,652 38,099,241 36,455,642 35,866,286 34,848,255 32,935,292 30,834,340 Licenses and permits 1,705,703 1,526,636 2,251,292 1,473,542 1,421,831 1,432,955 1,268,203 1,293,114 1,391,263 1,163,821 Charges for services 5,309,838 5,203,037 5,237,388 5,109,802 4,649,344 4,817,750 4,639,573 4,292,940 4,559,674 3,738,739 Fines 2,394,920 2,064,187 2,130,968 1,787,547 1,775,899 1,582,165 1,821,922 1,864,181 1,550,554 1,493,628 Civil Citations 825,191 - - - - - - - - - Contributions 196,320 170,326 177,273 178,937 176,962 177,162 137,791 124,299 103,756 106,834 Special assessments 154,125 28,225 8,348 514 - 57,169 99,024 35,428 6,691 303,796 Invesimenlincome 1,678,921 2,258,877 1,719,493 922,870 569,532 822,474 1,477,290 2,491,631 2,396,457 1,924,921 Intergovernmental 1,200,491 1,261,639 1,730,684 1,792,392 3,139,929 1,044,102 550,253 1,020,699 1,076,730 652,393 Drainage fees 830,338 619,370 806,414 795,475 793,415 771,430 767,958 723,256 765,153 737,083 Tennis center 320,836 312,697 310,397 280,505 289,375 328,110 305,159 266,081 231,065 207,101 Forfeitures 142,874 74,448 86,752 70,117 47,068 33,874 106,358 35,346 39,121 135,657 Mineral rights lease income 6,239,616 - - - - - - - - - Miscellaneous 395,186 939,241 1,431,192 1,070,874 460,770 777,753 1,224,113 188,847 167,695 397,702 Total revenues 63,115,497 55,058,046 55,186,302 51,048,227 51,623,366 48,300,586 48,263,930 47,166,077 45,225,451 41,898,015 Expenditures General government 9,054,489 8,607,293 9,329,442 8,553,540 8,968,934 8,323,987 8,260,838 7,091,278 6,705,976 6,022,845 Public safety 26,051,508 23,414,877 22,049,690 21,289,536 20,616,986 20,543,273 19,912,790 17,822,650 17,162,067 14,892,523 Culture and recreation 7,241,596 6,684,263 6,431,291 6,331,728 6,266,762 5,988,300 5,633,847 5,331,237 4,847,691 4,548,879 Publicworks 2,663,001 2,522,751 2,468,619 2,536,836 2,278,247 3,270,197 7,012,492 1,953,501 2,005,802 1,960,966 Capital outlay 5,137,596 3,742,378 4,909,101 9,404,434 12,577,507 6,315,345 849,446 8,181,310 5,865,897 9,361,714 Debt service Principal 6,188,393 6,697,217 6,462,905 6,695,455 6,278,005 5,826,894 5,718,661 5,295,296 4,365,834 4,234,860 Interest 2,225,585 2,281,930 2,349,160 2,665,828 2,770,875 3,126,375 2,923,604 3,610,800 3,752,752 3,267,364 Total expenditures 58,562,168 53,950,709 54,000,408 57,477,361 59,759,318 55,394,371 50,311,678 49,286,072 44,706,019 44,309,151 Excess of revenues over (under) expenditures 4,553,329 1,107,339 1,185,894 (6,429,134) (8,135,952) (7,093,785) (2,047,748) (2,099,995) 519,432 (2,411,136) Other Financing Sources (Uses) Proceeds from borrowing 4,465,000 2,185,000 3,625,000 - 4,935,000 2,750,000 7,250,000 4,235,000 5,035,000 5,470,000 Proceeds from refunding - 5,085,000 8,245,000 - 3,815,000 - 10,255,000 8,624,000 - - Payments to escrow agent - (5,075,787) (8,100,166) - (3,694,386) - (10,394,890) (8,330,537) - - Insurance recovery proceeds - 282,000 - - - - - - - - Proceedsfrom sale of assets 16,353 9,864 - - - - - - - - Payment in lieu of taxes 355,004 - - - - - - - - - Transfersin 5,918,639 5,812,148 4,436,800 3,749,966 4,442,310 6,878,744 7,554,672 6,179,405 4,817,875 4,986,216 Transfers out (5,899,649) (5,990,349) (5,710,150) (3,794,426) (4,858,894) (5,002,772) (6,369,969) (4,965,513) (4,464,626) (4,231,516) Netcomponeniunittransfers - - - - - - - - - (758,351) Total other financing sources (uses) 4,855,347 2,307,876 2,496,484 (44,458) 4,639,030 4,625,972 8,294,813 5,742,355 5,368,247 5,466,349 Net change in fund balances 9,408,676 3,415,215 3,682,378 {6,473,592) (3,496,922) (2,467,813) 6,247,065 3,642,360 5,907,679 3,055,213 Debt service as a percentage of noncapital expenditures 15.7% 17.9°h 18.0°~ 19.5% 19.2°k 19.0% 17.5°k 21.7% 20.9°k 21.5°k rn CITY OF NORTH RICHLAND HILLS, TEXAS Appraised and Taxable Value of Property Last Ten Fiscal Years (unaudited) Table 5 Appraised Appraised Appraised Appraised Less: Fiscal Residential Commercial Industrial Other Personal Tax-Exempt Net Taxable Total Direct Year Property Property Property Property Property Property Value Tax Rate 1999 1,295,112,750 387,443,167 24,367,797 248,116,134 268,052,863 261,137,024 1,961,955,687 0.57000 2000 1,377,817,960 427,669,772 26,415,578 309,047,695 296,528,347 301,384,670 2,136,094,682 0.57000 2001 1,452,682,259 520,578,309 31,376,923 315,338,873 330,473,763 333,485,510 2,316,964,617 0.57000 2002 1,656,247,313 584,864,722 37,825,972 331,401,729 347,188,197 358,315,055 2,599,212,878 0.57000 2003 1,879,625,473 616,511,643 34,642,976 321,366,471 338,839,069 374,046,137 2,816,939,495 0.57000 2004 2,020,935,083 637,135,490 30,121,580 359,230,807 348,631,136 382,365,613 3,013,688,483 0.57000 2005 2,125,365,452 660,915,079 25,319,238 371,683,707 347,217,730 397,233,578 3,133,267,628 0.57000 2006 2,208,222,079 693,344,286 23,766,206 396,694,369 361,559,520 388,297,207 3,295,289,253 0.57000 2007 2,322,672,063 706,800,208 24,219,035 432,473,733 342,337,515 421,361,355 3,407,141,199 0.57000 2008 2,454,968,837 732,299,884 25,008,737 482,924,193 318,594,946 438,489,302 3,575,307,295 0.57000 Source: Tarrant Appraisal District Certified Tax Roll, July 25, City budget (2007-2008) Tarrant Appraisal District September Report, City budget (1998-2006) J CITY OF NORTH RICHLAND HILLS, TEXAS Property Tax Rates -Direct and Overlapping Governments (per $100 assessed value) (unaudited) Table 6 City of North Richland Hills Birdville Fiscal General Debt service Junior school Year fund 3 fund 3 Total 3 colle e 1 district(1)(2) Hospital (1) Coun 1 Total 1999 0.31510 0.25490 0.57000 0.10641 1.50050 0.23407 0.26484 2.67582 2000 0.32422 0.24578 0.57000 0.10641 1.53250 0.23407 0.26484 2.70782 2001 0.33164 0.23836 0.57000 0.10641 1.56980 0.23407 0.27479 2.75507 2002 0.33531 0.23469 0.57000 0.10641 1.56980 0.23407 0.27479 2.75507 2003 0.32935 0.24065 0,57000 0.13938 1.61700 0,23240 0.27250 2.83128 2004 0.32956 0.24044 0.57000 0.13938 1.61700 0.23540 0.27250 2.83428 2005 0.33173 0.23827 0.57000 0.13938 1.61700 0.23540 0.27250 2.83428 2006 0.34432 0.22568 0.57000 0.13938 1.61700 (4) 0.23540 0.27250 2.83428 2007 0.34695 0.22305 0.57000 0.13938 1.56500 (4) 0.23540 0.27150 2.78128 2008 0.34241 0.22759 0.57000 0.13938 1.40500 (4) 0.23040 0.26650 2.61128 Sources: (1) Tarrant County. (2) Birdville Independent School District from 1998-2006. (3) City records. (4) Began using Tarrant County as source in 2006. CITY OF NORTH RICHLAND HILLS, TEXAS Principal Taxpayers (unaudited) Year Ended September 30, 2008 Table 7 Percentage of 2007 assessed total assessed Taxpayer Type of business valuation* valuation Wal-Mart Retail $ 64,151,443 1.79% Hospital Corporation of America Healthcare Provider 45,042,523 1.26% Western RIM Investors LP Real Estate 38,419,527 1.07% Home Depot Retail 29,797,711 0.83% Alliance Park Portfolio Real Estate 28,081,064 0.79% TXU Electric Delivery Utility Service Provider 26,202,715 0.73% Five Star Ford/Pack Properties Automotive Dealership 25,562,877 0.71 BGPC Equestrian Real Estate 24,727,196 0.69% Delaware Oak River, LLC Property Developer 23,968,000 0.67% Heritage Southwest Real Estate 20,378,925 0.57% 326,331,981 9.13% Year Ended September 30, 1999 Percentage of 1998 assessed total assessed Taxpayer Type of business valuation* valuation Richland Center, Inc. Property Developer $ 26,536,552 1.35% H & M Food Food Manufacturer 24,577,063 1.15% Texas Utilities Electric Co. Utility Service Provider 21,087,653 0.91 E-Systems, Inc. Pool Trust Vacant land/apartments 19,403,323 0.75% Meadows NRH, Assoc., LP Real Estate 16,573,503 0.59% Midstar Properties Ltd Commercial/Real Estate 14,781,869 0.49% Hudiburg Chevrolet Ltd Automotive Dealership 12,759,374 0.41 Western Rim Investors Real Estate 12,700,000 0.39% Home Depot Retail 10,878,981 0.32% Five Star Ford/Pack Properties Automotive Dealership 10,863,251 0.30% 170,161, 569 6.65% * Source: Tarrant Appraisal District. 98 Fiscal Year 1999 2000 2001 2002 2003 2004 ~ 2005 c~ 2006 2007 2008 Total tax lev 11,149,327 12,164,692 13,450,403 14,745,229 16,056,553 17,178, 024 17,859,625 18,783,149 19,420,705 20,379,252 CITY OF NORTH RICHLAND HILLS, TEXAS Property Tax Levies and Collections Last Ten Fiscal Years (unaudited) Collected within the Fiscal Year of the Lev Percent of Amount levy 11,015,376 98.80 11,932,523 98.09 13,052,419 97.04 14,472,560 98.15 15,798,849 98.40 16,860,430 98.15 17,679,906 98.99 18,461,867 98.29 19,133,840 98.52 19,980,714 98,04 Collections in Subsequent Years 108,434 217,229 378,535 245,867 237,129 284,792 146,711 278,504 220,619 219,306 Total Collections to Date Percent of Amount Levy 11,123, 810 99.77 12,149,752 99.88 13,430,954 99.86 14,718,427 99.82 16,035,978 99.87 17,145,222 99.81 17,826,617 99.82 18,740,371 99,77 19,354,459 99.66 20,200,021 99.12 Table 8 0 0 CITY OF NORTH RICHLAND HILLS, TEXAS Ratios of Outstanding Debt by Type Last Ten Fiscal Years (unaudited) Table 9 (dollars in thousands, except per capita) Other govt General Bonded Debt Total Percentage Activities Debt Fiscal Estimated Net Taxable General Certificates of Note general of Per Sales tax Year population (1) value (2) obligation bonds obligation payable bonded debt assessed value ca ita 1 revenue bonds 1999 54,850 1,961,956 44,569 9,450 229 54,248 2.76% 989 10,925 2000 56,500 2,136,095 44,303 10,259 158 54,720 2.56% 968 10,340 2001 57,498 2,316,965 42,915 12,668 82 55,665 2.40% 968 10,070 2002 58,627 2,599,213 39,357 18,333 - 57,690 2.22% 984 9,375 2003 59,800 2,816,939 38,408 17,287 - 55,695 1.98% 931 8,650 2004 60,400 3,013,688 40,197 15,537 - 55,734 1.85% 923 7,890 2005 61,668 3,133,268 35,733 14,481 - 50,214 1.60% 814 7,095 2006 63,521 3,295,289 38,024 11,048 - 49,072 1.49% 773 6,270 2007 64,050 3,407,141 37,821 7,842 - 45,663 1.34°/a 713 5,410 2008 65,750 3,575,307 37,821 7,042 - 44,863 1.25°/a 682 4,520 Business•Type Activities Total Total (3) Total Percentage Fiscal Water & sewer General Certificates of Contractual Capital business-type primary bonded debt of personal Year revenue bonds obligation bonds obligation obligations leases activities government per capita (1) income (1) 1999 3,935 4,065 5,045 - - 13,045 78,218 1,426 11.98% 2000 3,560 3,835 4,512 - - 11,907 76,967 1,362 11.45% 2001 3,170 3,621 3,980 - - 10,771 76,506 1,331 5.24% 2002 2,760 3,376 3,448 - 220 9,804 76,869 1,311 5.16% 2003 2,335 3,061 5,161 - 164 10,721 75,066 1,255 4.39% 2004 - 4,258 5,364 - 104 9,726 73,350 1,214 4.13% 2005 - 3,598 5,018 - 40 8,656 65,965 1,070 3.58% 2006 - 4,255 4,589 - - 8,844 64,186 1,010 3.30% 2007 - 3,537 4,866 - - 8,403 59,476 929 2.94% 2008 - 2,790 6,865 - - 9,655 59,038 898 2.87% Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. (1) See Table 13 for additional population statistics. (2) See Table 5 for additional information on net taxable value. (3) I ncludes general bonded debt, other governmental activities debt, and business-type activities debt. CITY OF NORTH RICHLAND HILLS, TEXAS Computation of Direct and Overlapping Debt September 30, 2008 (unaudited) Jurisdiction Net bonded debt outstanding Percentage applicable to City of North Richland Hills Table 10 Amount applicable to City of North Richland Hills City of North Richland Hills $ 39,518,441 (1) 100.00% $ 39,518,441 Birdville Independent School District 272,220,479 44.54% 121,247,001 Hurst-Euless-Bedford Independent School District 214,930,493 0.12% 257,917 Keller Independent School District 603,100,492 4.77% 28,767,893 Tarrant County 346,495,000 3.09% 10,706,696 Tarrant County Hospital District 29,585,000 3.09% 914,177 Tarrant County College District 49,005,000 3.09% 1,514,255 Total overlapping debt 163,407,939 Total direct and overlapping debt $ 202,926,380 Source: Respective entities' records. (1) Less -self-supporting debt 101 CITY OF NORTH RICHLAND HILLS, TEXAS Table 11 Computation of Legal Debt Margin September 30, 2008 (unaudited) Article XI, Section 5 of the State of Texas Constitution states in part: "...no tax for any purpose shall ever be lawful for any one year, which shall exceed two and one-half percent of the taxable property of such city." As a home rule city, the City of North Richland Hills is not limited by law in the amount of debt it may issue. The City's Charter provides that general property taxes are limited to $1.50 per $100 of assessed valuation for general governmental services including the payment of principal and interest on general obligation bonds. The tax rate for fiscal 2008 was established at $.57 per $100 of assessed valuation based on 100% of appraised value. 102 CITY OF NORTH RICHLAND HILLS, TEXAS Pledged Revenue Coverage Last Ten Fiscal Years (unaudited) Table 12 Park and Recreation Facilities Development Sales Tax Revenue Bonds Fiscal Sales Tax Less: Current Net Revenue Debt Service Year Revenues Expenditures Available Principal Interest (1) Total Coverage 1999 3,927,053 2,190,476 1,736,577 555,000 700,678 1,255,678 1.38 2000 4,240,118 1,360,385 2,879,733 585,000 656,600 1,241,600 2.32 2001 4,374,699 1,626,350 2,748,349 695,000 768,387 (2) 1,463,387 1.88 2002 4,138,848 1, 743, 899 2, 394, 949 695,000 469,158 1,164,158 2.06 2003 4,041,388 1,780,254 2,261,134 725,000 429,635 1,154,635 1.96 2004 4,107, 934 2,064, 928 2,043, 006 760, 000 391, 045 1,151, 045 1.77 2005 3,855,727 2,130,866 1,724,861 795,000 348,170 1,143,170 1.51 w 2006 4,047,737 2,411,932 1,635,805 825,000 312,553 1,137,553 1.44 2007 4,284,040 2,426,805 1,857,235 860,000 278,083 1,138,083 1.63 2008 4,410,260 2,824,368 1,585,892 890,000 291,953 1,181,953 1.34 (1) Includes interest and fiscal agent charges. (2) Increase due to refunding issue in fiscal year 2001. CITY OF NORTH RICHLAND HILLS, TEXAS Demographic Statistics Last Ten Fiscal Years (unaudited) Table 13 School Fiscal Estimated Median Per capita Median Education enrollment Unemployment Year population (2) income (3) (7) income (3) (7) a e 3 7 level 5 8 (1) (6) rate (4) 1999 54,850 50,990 11,900 33.8 15 9,732 2.3 2000 56,500 53,157 11,900 33.5 15 9,836 1.9 2001 57,498 55,706 25,387 34.4 13 10,193 3.7 2002 58,627 55,706 25,387 34.4 13 10,193 3.7 2003 59,800 61,442 28,616 33.5 90% 10,562 4,1 2004 60,400 63,146 29,393 35.3 90% 10,651 4,0 2005 61,668 65,421 29,881 35.6 90% 10,873 4.4 2006 63,521 66,215 30,641 35.8 90% 10,827 4.1 0 2007 64,050 67,951 31,558 35.9 90% 10,724 3.8 ~ 2008 65,750 69,669 31,278 35.6 91% (7) 10,972 4.7 Sources: (1) Birdville Independent School District (2) North Central Texas Council of Governments and City estimates (3) Bureau of Census, Department of Commerce (1998-2002) (4) Texas Employment Commission (5) Haltom Richland Chamber of Commerce (1998-2007) (6) Includes North Richland Hills students only (7) ESRI Business Information Solutions, Inc (2003-2008) (8) Starting in 2003, reported as a percentage of residents v~ith a high school diploma or greater CITY OF NORTH RICHLAND HILLS, TEXAS Table 14 Principal Employers (unaudited) Year Ended September 30, 2008 Percentage of total City Employer Employees Rank employment** HealthMarkets 1,600 1 4.61 Birdville ISD~~3 1,122 2 3.23% Triad Financial Corporation 1,000 3 2.88% North Hills Hospital 803 4 2.31 City of North Richland Hills 527 5 1.52% Tarrant Country College - NE Campus 475 6 1.37% Tyson Prepared Food 410 7 1.18% Wal-Mart Supercenter 409 8 1.18% Silverleaf Resorts 408 9 1.17% Wal-Mart Supercenter 405 10 1.17% 7,159 20.62% Year Ended September 30, 1999 Percentage of total City Employer Employees Rank employment** Birdville ISD 875 1 4.58% MEGA Life & Health Insurance Center 740 2 3.88% Kimberly Clark/Tecnol Division 733 3 3.84% TCJC - NE Campus2 615 4 3.22% North Hills Hospital 613 5 3.21 City of North Richland Hills 537 6 2.81 H & M Food Systems, Inc. 432 7 2.26% Wal-Mart 400 8 2.10% Walker Building Corporation 250 9 1.31 Bates Containers 210 10 1.10% 5,405 28.32% 'Numbe r denotes employees working in schools in the City of NRH 2Spli t with Hurst 3Current as of December 2008. * Source: City records 105 N ~~H This page intentionally left blank. 106 CITY OF NORTH RICHLAND HILLS, TEXAS Full-time Equivalent Municipal Employees by FunctionlProgram Last Ten Fiscal Years (unaudited) Table 15 Fiscal Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 J J General government Administration 5.25 5.25 5.25 525 5.25 5.75 5.75 523 5.00 6.00 Legal - - - - - - - 1.00 1.00 1.00 Public information 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Judicial 16.50 14.00 14.00 14.00 14.00 14.00 14.00 15.00 14.00 13.50 Finance 23.50 23.50 24.50 24.50 24.50 24.50 24.50 24.50 25.00 25.00 Nondepartmental 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1,00 1.00 Human resources 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.90 0.70 Planning and inspections 11.30 12.30 11.30 11.30 11.50 15.50 16.50 16.50 16.00 14.00 Neighborhood services 18.75 18.75 18.66 18.66 18.66 14.66 14.66 14.50 13.43 13.43 Budget and research 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Public relations 6.75 7.19 7:19 7.19 7.19 7.19 7.19 7.00 6.99 6.99 Total general government 92.05 90.99 90.90 90.90 91.10 91.60 92.60 93.73 91.32 89.62 Public safety Police 164.65 159.65 159.65 159.39 161,39 161.39 161.39 160.39 154.38 149.38 Fire 91.00 92.00 92.00 92.00 87.00 87.00 87.00 84.00 84.00 84.00 Total public safety 255.65 251.65 251.65 251.39 248.39 248.39 248.39 244.39 238.38 233.38 Culture and recreation Parks and recreation 120.22 120.30 114.94 115.10 116.10 116.19 114.29 114.29 110.80 105.85 Library 28.16 23.33 23.33 23.33 23.33 23.33 23.33 23.33 22.93 22.43 Economic development 3.00 3.00 3.00 3.00 3.00 3.00 2.00 2.50 3.00 3.00 Total culture and recreation 151.38 146,63 141.27 141.43 142.43 142.52 139.62 140.12 136.73 13128 Public works 80.18 79.18 76.18 76.18 79.98 80.48 80.48 79.48 76.15 76.49 Internal services Building services 15.86 14.23 14.23 14.23 14.23 14.23 14.23 14.23 14.13 14.13 Equipment services 11.65 11.65 11.65 11.65 11.65 11.65 11.65 11.65 11.50 11.50 Self-insurance 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.58 6.53 Information services 12.00 12.00 12.00 12.00 12.00 13.00 13.00 13.00 13.00 11.50 Total internal services 45.51 43.88 43.88 43.88 43.88 44.88 44.88 44.88 45.21 43.66 Total full-time equivalents 624.77 612.33 603.88 603.78 605.78 607.87 605.97 602.60 587.79 574.43 Source: City operating budget CITY OF NORTH RICHLAND HILLS, TEXAS Operating Indicators by Function/Program General government Planning and Inspections Construction Commercial units Commercial value Residential units Residential value Public safety Police Law violations (2) Part one offenses Traffic violations Calls for service Case clearance Fire Total responses Fire responses EMS responses responses < 5 minutes Total inspections Culture and recreation Parks and recreation Water park admissions Golf rounds played Library Number of volumes Annual circulation Annual loans per capita Public works Water Avg daily consumption (4) Peak daily consumption (4) Streets Street overlay -miles Concrete pavement repair - sq. ft. Pothole repair - sq. ft. Street cut - sq. ft. Sign fabrication Table 16 Fiscal Year 2008 2007 2006 2005 51 7,907,730 116 31,498,499 56 15,083,593 235 54,190,911 40 53,708,815 382 79,332,989 29 14,139,519 420 77,631,113 4,289 3,403 4,694 4,767 3,458 3,216 3,318 2,911 28,899 20,010 22,124 22,810 124,212 103,137 107,096 (5) 114,058 41% 36% 37% 37% 6,929 6,749 5,770 5,570 1,843 1,651 1,633 1,438 5,086 5,098 4,137 4,132 72% 72% 73% 73% 2,412 2,007 2,033 1,946 233,654 248,205 260,869 250,682 56,192 48,838 39,603 (3) 50,187 180,737 177,270 179,366 176,719 606,639 (7) (8) 660,627 697,013 696,954 9.23 (7) 10.31 10.97 11.30 1,317,622 1,178,439 1,397,254 1,264,837 2,963,770 2,449,372 2,701,738 2,787,834 2 (6) 8 9 11 4,404 (6) 14,694 9,485 5,474 5,499 (6) 10,480 8,738 12,969 121,809 (6) 156,141 179,703 151,706 1,455 2,040 1,795 1,556 Source: City records (1) Unavailable data is reflected as "-" on the report. (2) Excludes traffic violations (3) Course closed from July 1st to September 15th, 2006 for renovations. (4) Cubic feet (5) Method of calculation was changed by Police Department (6) Overlay was moved into the 2008-2009 Budget Year because Public Works was assessing program options. (7) Library closed from March 20th to April 19th, 2008 in order to move to new location. (8) Loan period changed from 2 weeks to 3 weeks. 108 Table 16 2004 2003 2002 2001 2000 1999 47 59 27,210,050 14,309,787 310 292 53,937,035 47,548,847 43 46 34,989,928 18,124,797 277 348 40,133,683 53,605,960 66 21 54,733,881 29,047,456 351 299 45,817,144 47,601,097 3,764 4,141 4,214 4,710 6,191 6,278 3,312 3,363 3,461 3,014 3,043 3,023 21,317 28,729 26,638 20,405 28,455 21,210 116,877 118,427 118,992 115,946 115,635 109,663 37% 39% 38% 39% 36% 38% 6,992 6,824 5,665 5,505 5,124 4,392 1,696 1,682 1,672 1,843 1,981 1,626 5,296 5,142 3,993 3,662 3,143 2,766 72% 74% 74% 75% 74% - 1,020 1,169 521 331 76 - 213,285 228,992 266,655 250,406 260,500 239,420 52,176 50,368 50,663 44,000 53,906 52,184 170,849 162,020 148,238 135,756 119,956 115,084 723,206 731,499 671,955 521,989 430,420 384,694 11.97 8.47 11.46 9.08 7.62 7.01 1,131,712 1,190,464 1,165,894 1,205,488 1,237,752 1,373,302 2,400,668 2,976,738 2,576,385 2,927,130 3,025,134 3,348,262 8 8 6 6 7 11 1,779 4,471 2,142 1,201 - - 15,282 11,322 12,632 27,934 17,206 13,230 231,462 210,232 166,131 144,182 126,405 207,919 2,389 3,331 1,280 2,376 2,019 1,136 109 CITY OF NORTH RICHLAND HILLS, TEXAS Capital Asset Statistics by Function/Program Last Ten Fiscal Years (unaudited) 2008 Fiscal Year Table 17 2005 Public safety Police Stations 1 1 1 Fire Stations 4 4 4 Fire hydrants 2,119 2,077 1,900 Culture and recreation Parks and recreation Parks 32 32 31 Park acreage 706 706 (1) 741 Playgrounds 20 20 21 Trails -miles 20 20 15 Golf Courses 1 1 1 Recreations centers 1 1 1 Athletic fields 53 53 (1) 59 Senior centers 2 2 2 Library Libraries 1 1 1 Public works Water mains -miles 356 354 342 Water connections 20,282 20,516 19,784 Wastewater lines -miles 245 244 234 Wastewater connections 19,053 19,350 18,618 Storm drain -miles 138 137 135 Streets -miles 234 232 227 Street lights 2,518 2,513 2,431 (2) Source: City records Unavailable data is reflected as "-" on the report. (1) Subtracted Thomas Acres (BISD property no lon ger maintaining) (2) Oncor performed acity-wide audit of streetlights in 2006. Subsequent years' counts are based on Oncor billings. 1 4 1, 850 27 720 17 12 1 1 58 2 1 341 19,356 233 18,257 133 225 2,062 110 Table 17 2004 1 4 1,840 25 720 18 11 1 1 57 2 1 341 18,977 233 17,898 133 221 2,023 2003 2002 2001 1 1 1 4 4 4 1,830 1,775 1,700 24 18 18 701 675 675 18 13 13 7 6 6 1 1 1 1 1 1 57 47 47 2 2 2 1 1 1 334 325 319 18,611 18,329 18,091 229 224 219 17,588 17,020 16,654 131 129 129 214 212 211 2,012 2,100 2,070 2000 111 1 4 1,677 18 667 13 6 1 1 47 2 1 315 18,048 233 17,158 127 208 2,030 1999 1 4 1, 649 16 667 13 4 1 1 42 2 1 291 18,220 233 16,426 126 207 2,030 CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. G.0 Subject: EXECUTIVE SESSION ITEMS CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. G.1 Subject: Action on Any Item Discussed in Executive Session Listed on Work Session Agenda r' CITY OF NORTH RICHLAND HILLS Department: Economic Development Presented by: Vickie Loftice Council Meeting Date: 03-09-2009 Agenda No. B.2 Subject: Authorize the City Manager to Execute a Contract for the Acquisition of 10.4 acres of Land, Amend the Capital Projects Budget and Approve Reimbursement. Resolution No: 2009-009 In planning for future long range needs of municipal facilities staff has been researching available property that will support future development of facilities. With this in mind, staff has identified property in the central east section of the city for proposed land acquisition. It is requested that a new capital project for land acquisition be approved in the 2008/09 Capital Projects Budget for the acquisition of 10.4 acres. The property includes two adjacent parcels of land area containing approximately 10.4 acres located at 8917 and 9025 Hawk Ave. Parcel 1 contains a 1,860 square foot single family residence that is used for an office and Parcel 2 contains three industrial buildings that were constructed in 1959. In the remote chance that the property is not used for municipal facilities or purposes, it can be sold for other purposes or placed for unique development. The project will be funded through the Gas Development Fund, however to keep financing options open, including the possibility of selling Certificates of Obligation, a Reimbursement Resolution is included. Recommendation: To Authorize the City Manager to: 1) Execute a Contract for the Acquisition of 10.4 acres of land at 8917 and 9025 Hawk Ave. in the Amount of $1,750,000 to be paid from the Gas Development Fund; and 2) Amend the 2008/09 Capital Improvement Project Budget in the like amount; and 3) Approve Reimbursement Resolution No. 2009-009 __ ~ Municipal~Facilty Capital Projects ~ ~ ~~ Department Project Title Project Number Economic Develo ment Strate is Land Ac uisition ED0901 Project Description In planning for future long range needs for municipal facilities, property in the central east section of the city has been identified for acquisition. Justification The property identified includes two adjacent parcels of land containing 10.4 acres located at 8917 and 9025 Hawk Avenue. Parcel 1 contains a 1,860 square foot single family residence that is currently used for office space. Parcel 2 contains three industrial buildings, constructed in 1959. This property has been identified for acquisition for future development of municipal facilities or other purposes. In the event the property is not utilized by the City, the property will be sold for other purposes or placed for unique development. Funding is available from the Gas Development Fund. Project Schedule Beginning Date Ending Date BudgetHistory Professional Services Original Budget $ 1,750,000 En ineerin /Desi n Land/ROW Ac uisition 2/1/2009 4/1/2009 Construction Other Total Project 2/1/2009 4/1/2009 Total Project Costs $ 1,750,000 Sources of Funds To Date 2008=09 Revised 2009-10 Estimated 2010"to -Completion Total Amount ,, General Obli ation Bonds $ - $ - $ - $ $ - Certificate of Obli ation - - - - - Federal/State Grants - - - - - Reserves - - - Sales Tax - - - - - Other - 1,750,000 - - 1,750,000 Total Fundin $ - $ 1,750,000 $ - $ - $ 1,750,000 Total Pro ect Costs <" Professional Services $ - $ - $ - $ - $ - En ineerin /Desi n - - - - Land/ROW Ac uisition - 1,750,000 - - 1,750,000 Construction - - - - - Other - - - - - Total Costs $ - $ 1,750,000 $ - $ - $ 1,750,000 Impact on Operating Budget Annual mowing maintenance of undeveloped property. Estimated Annual 2008-09 2009-10 2010-11 201.1=12 2012-13 Operating Impact $ _ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 NF~H RESOLUTION NO. 2009-009 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF NORTH RICHLAND HILLS, TEXAS: SECTION 1. THAT the City of North Richland Hills, Texas (the "Issuer") intends to issue debt for land for municipal purposes, and, further intends to make certain capital expenditures with the proceeds of such debt; WHEREAS, under Treas. Reg. § 1.150-2 (the "Regulation"), to fund such reimbursements with the proceeds of tax-exempt obligations the Issuer must declare its expectation to make such reimbursement; and WHEREAS, the Issuer desires to preserve its ability to reimburse the capital expenditures with the proceeds of tax-exempt obligations. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF NORTH RICHLAND HILLS, TEXAS, THAT the Issuer reasonably expects to reimburse capital expenditures with respect to the Projects with proceeds of debt hereafter to be issued by the Issuer, and that this resolution shall constitute a declaration of official intent under the Regulation. The maximum principal amount of obligations expected to be issued for the Projects is $1,750,000. PASSED AND APPROVED this the 9th day of March, 2009. By: ATTEST: Patricia Hutson, City Secretary CITY OF NORTH RICHLAND HILLS Oscar Trevino, Mayor APPROVED AS TO FORM AND LEGALITY: George A. Staples, City Attorney APPROVED AS TO CONTENT: Larry Koonce, Director of Finance CITY OF NORTH RICHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. H.0 Subject: INFORMATION AND REPORTS INFORMAL REPORT TO MAYOR AND CITY COUNCIL No. IR 2009-025 Date: March 9,2009 Subject: ISO Update The purpose of this report is to provide the Mayor and Council with an update of the status of the City's ISO Classification. The Insurance Services Office (ISO) conducted a review of North Richland Hills' fire suppression and control resources back on August 20, 2008. The goal of this review was to update the City's Property Protection Classification (PPC). The PPC is one of the considerations used by insurance companies to calculate fire insurance premiums for properties located in the City. Fire insurance costs for both residential and commercial properties may be impacted by the PPC. The City of North Richland Hills current PPC rating is a "4" on a scale of one to ten, with a "1" being the highest or best. The field inspector for the ISO uses the ISO's fire suppression rating schedule and looks at three general areas of the City's fire protection resources during his evaluation. Those areas include: 1. Receiving and handling fire alarms 2. Fire Department 3. Water supply Additionally, in the State of Texas, the Texas addendum is applied. This addendum provides for additional credits for fire prevention related activities. During the visit by the ISO field inspector, Mr. Michael Pietsch, the City's consultant, represented the City in presenting the data requested. The Fire Department's Command Staff, Water Superintendent Alan Knapp and Emergency Management Coordinator Sean Hughes were instrumental in providing the requested data from the Fire Department, Water Department and Communications/Dispatch Center. On February 11, 2009, the City received a letter from the Deputy State Fire Marshal/PPC Oversight Officer approving the ISO recommended PPC for the City of a "2", with an effective date of July 1, 2009. It is my pleasure to present the results of this long term endeavor to you today. The Citizens and Property Owners in our City will all benefit from this new PPC as a result of your commitment to providing them with excellent fire suppression and control resources! Respectfully Submitted, Andrew A. Jones, Jr. Fire Chief ISSUED BY THE CITY MANAGER NORTH RICHLAND HILLS, TEXAS CITY OF NORTH R/CHLAND HILLS Department: City Secretary Presented by: Mayor Pro Tem Scott Turnage Subject: Announcements -Mayor Pro Tem Turnage Announcements Council Meeting Date: 3-9-2009 Agenda No. H.2 Join us at the North Richland Hills Public Library at 7 p.m. on Thursday, March 19th and learn how to use the Texas Smartscape program to design and care for your landscape. The Texas Smartscape program will provide you with the tools you need just in time for Spring planting. Admission is free and those in attendance can register to win a free rain barrel. For more information, please call the Library at 817-427-6814. The City of North Richland Hills invites local businesses to compete and have fun in the 2009 Companies in Action. The Companies in Action Softball Tournament is scheduled for Saturday, March 21st. For registration information, please contact the Parks & Recreation Department at 817-427-6600. The North Richland Hills Fire Department is accepting applications for the 2009 Citizens Fire Academy. The Citizens Fire Academy meets on Thursday from 6:30 p.m. to 9:30 p.m. for nine consecutive weeks starting on March 26th. This program includes training in CPR and First Aid, which enables residents to be better prepared to respond to emergency situations in their homes and neighborhoods. Participants also get hands on experience in basic firefighting techniques, technical rescue, hazardous materials and more. To register or get additional information about the Citizens Fire Academy, please call 817-427-6900. Kudos Korner Every Council Meeting, we spotlight our employees for the great things they do. Officer Keith Bauman, Police Department A card was received from an elementary school teacher thanking Officer Bauman for a great job he did teaching D.A.R.E. at their school. The kids learned a lot and enjoyed his stories, and the teachers appreciate his hard work. CITY OF NORTH R/CHLAND HILLS Department: City Secretary Council Meeting Date: 3-9-2009 Presented by: Agenda No. H.3 Subject: Adjournment