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HomeMy Public PortalAboutCAFR 2007.pdfVILLAGE OF KEY B►ISCAYNE, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2007 Prepared by: THE FINANCE DEPARTMENT VILLAGE OF KEY BISCAYNE, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2007 TABLE OF CONTENTS PAGE I. INTRODUCTORY SECTION Letter of Transmittal Village Officials v Certificate of Achievement for Excellence in Financial Reporting vi Organization Chart vii II. FINANCIAL SECTION REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1-2 MANAGEMENT'S DISCUSSION AND ANALYSIS (Required Supplementary Information) 3-10 BASIC FINANCIAL STATEMENTS: Government -Wide Financial Statements: Statement of Net Assets Statement of Activities 11 12 Fund Financial Statements: Governmental Fund Financial Statements: Balance Sheet 13 Statement of Revenues, Expenditures and Changes in Fund Balances 14 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 15 Proprietary Fund Financial Statements: Statement of Net Assets 16 Statement of Revenues, Expenses and Changes in Net Assets 17 Statement of Cash Flows 18 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets 19 Statement of Changes in Fiduciary Net Assets 20 Notes to Basic Financial Statements 21-42 REQUIRED SUPPLEMENTARY INFORMATION (OTHER THAN MD&A) Budgetary Comparison Schedule — General Fund 43 Note to Budgetary Comparison Schedule 44 Schedule of Funding Progress 45 Schedule of Employer Contributions 46 VILLAGE OF KEY BISCAYNE, FLORIDA TABLE OF CONTENTS PAGE M. STATISTICAL SECTION Net Assets by Component — Last Ten Fiscal Years 47 Changes in Net Assets — Last Ten Fiscal Years 48-49 Fund Balances of Governmental Funds — Last Ten Fiscal Years 50 Changes in Fund Balances of Governmental Funds — Last Ten Fiscal Years 51 General Governmental Tax Revenues by Source — Last Ten Fiscal Years 52 Net Assessed Value and Estimated Actual Value of Taxable Property — Last Ten Fiscal Years 53 Property Tax Rates — Direct and Overlapping Governments — Last Ten Fiscal Years 54 Principal Property Taxpayers — Current and Nine Years Ago 55 Property Tax Levies and Collections — Last Ten Fiscal Years 56 Ratios of Outstanding Debt by Type --- Last Ten Fiscal Years 57 Ratios of General Bonded Debt Outstanding — Last Ten Fiscal Years 58 Direct and Overlapping Governmental Activities Debt 59 Pledged Revenue Coverage — Last Ten Fiscal Years 60 Demographic and Economic Statistics — Last Ten Fiscal Years 61 Principal Employers — Current and Nine Years Ago 62 Full -Time Equivalent Village Government Employees by Function — Last Ten Fiscal Years 63 Operating Indicators by Function/Program — Last Ten Fiscal Years 64 Capital Asset Statistics by Function/Program — Last Ten Fiscal Years 65 IV. COMPLIANCE SECTION Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter in Accordance with the Rules of the Auditor General of the State of Florida 66-67 68-69 Schedule of Findings and Responses 70-71 INTRODUCTORY SECTION • ft. VILLAGE OF KEY BISCAYNE l/ti};11�� Village Council Robert L. Vernon, Mayor Jorge E. Mendia, Vice Mayor Michael Davey Enrique Garcia Steve Liedman Thomas Thornton Patricia Weinman Village Manager Genaro "Chill" Iglesias Office of the Village Manager April 15, 2008 To the Honorable Mayor, Members of the Village Council and Citizens of the Village of Key Biscayne: The Government Finance Officers Association (GFOA) recommends that all units of local government publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) in the United States and audited in accordance with auditing standards generally accepted in the United States and in accordance with Government Auditing Standards by a firm of licensed certified public accountants. Pursuant to that recommendation, we hereby issue the comprehensive annual financial report of the Village of Key Biscayne for the fiscal year ended September 30, 2007. This report consists of management's representation concerning the finances of the Village of Key Biscayne. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Village of Key Biscayne has established a comprehensive internal framework that is designed both to protect the Village's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Village of Key Biscayne's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Village of Key Biscayne'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 firm of Rachlin Cohen & Holtz LLP, licensed certified public accountants has audited the Village of Key Biscayne's financial statements. The goal of the independent audit was to provide reasonable assurance that the basic financial statements of the Village of Key Biscayne for the fiscal year ended September 30, 2007 are free of material misstatement. 'l'he independent audit 88 West McIntyre Street • Suite 210 • Key Biscayne, Florida 33149 • (305) 365-5500 • Fax (305) 365-8936 Ni Ir l', Sr.•vri 11•\'I' 1n Pc POW' 1:' I I . OVA ..\ I Fri [.[�\1 N[I.11T1 I'\VIIIO\ \IrVf FIR .V I I'd •IX17F1 rl III mcl!! Ii F.N'P>N !111 F l4 N 1•10..:111: VI u' u' u . keybisca i'n e ,l7.g of VILLAGE OF KEY BISCAYNE involved examining, on a test basis, evidence supporting the amount 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 Village of Key Biscayne's financial statements for the fiscal year ended September 30, 2007, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. GAAP requires 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 Village of Key Biscayne's MD&A can be found immediately following the report of the independent certified public accountants. Profile of the Government The Village of Key Biscayne, incorporated in 1991. is located on the southern most barrier island of the United States, Miami -Dade County, Florida approximately 7.5 miles off the coast of Miami. Florida. The Village of Key Biscayne occupies a land area of 1.25 square miles situated between Crandon Park and Bill Baggs State Recreation Area. The Village serves a population of approximately 11,100. The Village of Key Biscayne receives tax levies on real and personal property located inside its boundaries. The Village of Key Biscayne has operated under the council-manager form of government since incorporation. Policymaking and legislative authority are vested in a governing council consisting of the mayor and six other council members. The Council is responsible among other things. for passing ordinances and resolutions, adopting the annual budget, appointing the Village Manager and Village Clerk. The Village Manager is responsible for carrying out the policies and ordinances of the Council, for overseeing the daily operations of the government, and for appointing the heads of various departments. The Village of Key Biscayne offers a wide range of services, including, police protection, fire and emergency medical service, public works maintenance, a full service building, planning and zoning department, parks and recreation activities, solid waste collection, and a comprehensive storm water management system. Certain services are provided through the County School System and the County Library System through Miami -Dade County. The annual budget serves as a foundation for the Village of Key Biscayne's financial planning and control. All departments of the Village are required to submit requests for appropriations to the Village Manager and these requests are the initiation of developing the proposed budget. The Village Manager then presents this proposed budget to the Council for review. The Council is required to hold public hearings on the proposed budget and to adopt a final budget no later than September 30, the close of the Village's fiscal year. The appropriated budget is prepared by fund and department. No department may legally expend in excess of the amount appropriated for that department within an individual fund. The Village Manager may make transfers of appropriations within a department. Transfers of appropriations between departments or funds require the -II- MISSION STATEMENT "TO PROVIDE A SAFE. QUALITY COMMUNITY ENVIRONMENT FOR ALL ISLANDERS THROUGH RESPONSIBLE GOVERNMENT." VILLAGE OF KEY BISCAYNE approval of the Village Council. The Village Council approves supplemental appropriations. Budget to actual comparisons are provided in this report for the general fund for which an appropriated annual budget has been adopted. The general fund, budget to actual report, is presented in the required supplemental information section of this report. Local Economy The Village of Key Biscayne enjoys a favorable economic environment and local indicators to continued future stability. This exclusive community is comprised of well-educated and involved citizens who take a genuine interest in the social, business, cultural and governing aspects of their Village. The Village is comprised of affluent exclusive residential housing stock and three major shopping centers. There is no industrial area in the community. Long -Term Financial Planning The Village has completed all three phases of its Civic Center Project with the completion of a new Village Hall/ Police Building, a new Fire Station, and most recently, the third phase, the Village Community Center, opened in November 2004. Recent completion of a new bus shelter at Crandon Boulevard and Harbor Drive was the second and largest bus shelter in the Village. Several public works projects have recently been completed yielding new sidewalks, street improvements, park improvements, and a tree replacement program. A capital project has been completed to improve the safety of the major roadway through the Village on Crandon Boulevard. The Village utilizes a comprehensive living projection five years into the future to assess revenue trends and expenditure needs to assure a balanced stable financial program avoiding millage rate increases while addressing the various goals and objectives of the community. Cash Management Policies and Practices The Village's Cash Management strategy emphasizes immediate funds collection and deposit into the appropriate fund utilizing ACH debit or wire transfer methods in over 90% of all funds received. Cash is transferred to a centralized clearing account for all payments at the point of payment. The clearing account maintains a zero balance exclusive of these transfers. Currently, the Village's investment policy follows Chapter 218, Florida Statutes. Cash in any of the fund's operating accounts are swept into an overnight repurchase agreement, properly collateralized in accordance with Chapter 280, Florida statutes. Surplus cash is invested in certificates of deposit with qualified depositories, and with the State Board of Administration. Investment objectives are the preservation of principal, liquidity in accordance with planned cash flows, and return on investment in that order. Risk Management The Village is exposed to various risks of loss related to torts, theft of or damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Village participates in the Florida League of Cities Municipal Insurance Trust for workers' compensation, -lll- MISSION STATEMENT "TO PROVIDE A SAFE, QUALITY COMMUNITY ENVIRONMENT FOR ALL ISLANDERS THROUGH RESPONSIBLE GOVERNMENT" VILLAGE OF KEY BISCAYNE liability and property insurance. Flood insurance is provided by the Florida State Flood Insurance Pool. Pension Benefits The Village of Key Biscayne sponsors a defined contribution 401(a) pension plan with the International City Managers' Association. Retirement Corporation (ICMA). Each full time employee can contribute up to six percent (6%) of his or her pay to the plan; the Village contributes twelve percent (12%). In addition, the Village sponsors a 457 deferred compensation plan in which the employees may contribute on a voluntary basis. A defined benefit pension plan is available to all firefighters and sworn police officers. This plan is under the direction of a separate board of trustees, two of which are police and fire department employees. Complete details of this plan can be found in note 13 of the basic financial statements. Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Village of key Biscayne for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended September 30, 2006. This was the fifteenth consecutive year that the Village received this prestigious award. In order to be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements and are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of all departments of the Village of Key Biscayne. We would like to express our appreciation to all members of all of the departments who assisted and contributed to the preparation of this report. We would also like to express our appreciation to Rachlin LLP, our independent auditors, for their assistance and efforts in helping the Village prepare the CAFR. Appreciation is also extended to the Mayor and the Village Council for their unfailing support for maintaining the highest standards of professionalism in the management of the Village of Key Biscayne's finances. Respectfully submitted, Genaro "Chip" Igle ias Village Manager -iv- Randolph G. White Finance Director MISSION STATEMENT "TO PROVIDE A SAFE, QUALITY COMMUNITY ENVIRONMENT FOR ALL ISLANDERS THROUGH RESPONSIBLE GOVERNMENT.' VILLAGE OF KEY BISCAYNE, FLORIDA VILLAGE OFFICIALS SEPTEMBER 30, 2007 VILLAGE COUNCIL Robert Vernon, Mayor Jorge Mendia, Vice -Mayor Michael Davey Enrique Garcia Steve Leidman Thomas Thornton Patricia Weineman VILLAGE MANAGER Genaro "Chip" Iglesias VILLAGE CLERK Conchita H. Alvarez, CMC VILLAGE ATTORNEY Weiss Serota Helfrnan Pastoriza Cole & Borziske, P.A. FINANCE DIRECTOR Randolph G. White, P.A. VILLAGE AUDITORS Rachlin LLP Accountants R Advisors -v- Certificate of Achievement for Excellence in Financial Reporting Presented to Village of Key Biscayne Florida For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2006 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. eatx President Executive Director VILLAGE OF <EY B SCAYNE ORGANIZATIONAL CHART The Vi (age Manager, who reports directly to the Village Council, manaces the age of Key Biscayne's day--to-day operations. The Village Manager appoints the Five Deportment Heads. Siaecia Master VOTERS(((( ............... OF KEY ............... ............... S €€€ Council Local Planning Agency Police/Fire Retirement Board • mum im , .. FINANCIAL SECTION REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Rachlin wluountants • advisors REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Honorable Mayor, Village Council and Village Manager Village of Key Biscayne, Florida We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the Village of Key Biscayne, Florida (the Village) as of September 30, 2007 and for the fiscal year then ended, which collectively comprise the Village's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Village's management. Our 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 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Village's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the Village of Key Biscayne, Florida as of September 30, 2007 and the respective changes in the financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States. In accordance with Government Auditing Standards, we have also issued a report dated May 21, 2008 on our consideration of the Village's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. -1- Rachlin UP • One Southeast Third Avenue • Tenth Floor • Miami, Florida 33131 • Phone 305.377.4228 • Fax 305.377.8331 • www.radilin.com An Independent Member of Baker Tilly International M IAM I ■ FORT LAUDERDALE ■ WEST PALM R EA CH Honorable Mayor, Village Council and Village Manager Village of Key Biscayne, Florida Page Two Management's Discussion and Analysis and the required supplementary information on pages 3 through 10 and pages 43 through 46, respectively, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States. 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Village of Key Biscayne's basic financial statements. The introductory section and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. 7elU&.�. Lt. f' Miami, Florida May 21, 2008 -2- Rachlin Heuountants afiVI urs MANAGEMENT'S DISCUSSION AND ANALYSIS (MDB&A) Management's Discussion and Analysis As Management of the Village of Key Biscayne, we offer readers of the Village of Key Biscayne's (the Village) financial statements this narrative overview and analysis of the financial activities of the Village of Key Biscayne for the fiscal year ended September 30, 2007. We encourage readers to consider information presented here in conjunction with additional information that we have furnished in our letter of transmittal which can be found on pages i-v of this report. Financial Highlights • The assets of the Village of Key Biscayne exceeded its liabilities at the close of the most recent fiscal year by $43,075,575 (net assets). • The Village's total net assets increased by $6,008,367, this increase is attributable to the increase of property taxes received due to an increase in the assessed taxable values of properties in the Village, increases in revenues from the Key Biscayne Community Center programs and increased code compliance activities. • At the close of the current fiscal year, the Village of Key Biscayne's governmental funds reported an ending fund balance of $10,347,973, an increase of $3,550,788 in comparison with the prior year. The total amount of fund balance is either reserved or designated for spending at the Council's direction. • The Village incurred $4,000,000 of new long-term debt during the current fiscal year. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Village of Key Biscayne's basic financial statements. The Village of Key Biscayne's basic financial statements comprise three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains required supplementary information in addition to the basic financial statements themselves. Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the Village of Key Biscayne's finances, in a manner similar to a private sector business. The statement of net assets presents information on all of the Village of Key Biscayne's assets and liabilities, with a 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 Village of Key Biscayne is improving or deteriorating. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the Village of Key Biscayne that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the Village of Key Biscayne include general government, public safety, public works, building planning & zoning, and parks and recreation. -3- The government -wide financial statements include only the Village of Key Biscayne itself (known as the primary government). The government -wide financial statements can be found on pages 11 and 12 of this 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. The Village of Key Biscayne, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. The Village of Key Biscayne has two fund categories, the governmental funds and the proprietary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statement focus on near -term inflows and outflows of spend able resources as well as on balances of spend able resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for the governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact of the government's near -term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Village of Key Biscayne maintains three governmental funds, the general fund, a special revenue fund and a capital projects fund. The Village of Key Biscayne adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 13 to 15 of this report. Proprietary Funds. The Village maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The Village uses enterprise funds to account for its Stormwater, Solid Waste Collection and Sanitary Sewer Construction operations. The basic proprietary fund financial statements can be found on pages 16-18 of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the Village. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the Village's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 19-20 of this report. Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 21 to 42 of this report. -4- Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information including budgetary comparisons and the Village's progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 43 to 46 of this report. Government -wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the Village's, assets exceeded liabilities by $43,075,575 at the close of the most recent fiscal year. A portion of the Village's assets, $75,920,147 or 84.74 %, reflects its investment in capital assets (e.g., land and equipment). The Village of Key Biscayne uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Our analysis of the financial statements of the Village begins below. The Statement of Net Assets and the Statement of Activities report information about the Village's activities that will help answer questions about the position of the Village. A comparative analysis is provided. Governmental Activities. Governmental activities increased the Village of Key Biscayne fund balances by approximately $3,550,788. This net overall increase was attributable to an increase in property tax revenues due to increased assessed values of Key Biscayne real estate in general and increased code enforcement activities. All other governmental activities increased fund balance as follows: • Property taxes increased by $3,837,741 (25.88 percent) during the year. Most of this increase is the product of a minor number of new units completed and on the tax roll for the first time, along with renovated homes with increased assessed values, and residential and commercial resales. • Most department salaries increased 8 percent due to the Village's salary step program, which in fiscal year 2007 reflected a 5 percent increase in salaries and a 3 percent increase for a cost of living increase. • Debt service remained fairly level compared to the prior year, with a minor addition for interest on new debt. • The amount expended to the Village Attorney increased due to involvement with labor negotiations with the Village's Fire Rescue Department that were unforeseen at budget preparation time. For the most part, increases in expenses closely paralleled inflation and growth in the scope of services. Net Assets A summary of the Village's net assets is presented in Table A -I and a summary of the changes in net assets is presented in Table A-2. -5- Table A - I Summary of Net Assets Current assets Capital assets, net Total assets Current liabilities Noncurrent liabilities Investment in capital assets, net of related debt Restricted Unrestricted Total net assets Governmental Activities Business -type Activities 2007 2006 $13,162,063 S 8,155 986 67,505,258 62,377,577 80,667,321 70,5 33,563 5,002,055 3,561,695 35,527,705 33,009,069 31,422,358 261,813 8,453,390 28,676,266 359,899 4,926,634 2007 2006 $ 510,553 8,414,889 8,925,442 447,508 5,539,920 $ 809,571 8,488,706 9298,277 284,860 5,909,008 2,505,881 2,326,089 432,133 778,320 $40,137,561 $33,962,799 $2,938,014 Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Utility taxes Franchise fees Intergovernmental Investment income and miscellaneous Total revenues Expenses: General government Public safety Parks and recreation Public works Building, zoning and planning Debt service Stonnwate r Solid waste collection Sanitary sewer construction Total expenses Changes in net assets before transfers Transfers Changes in net assets after transfers Net assets, beginning Net assets, ending Total 2007 2006 $13,672,61 6 75,920,147 89,592,763 5,449,563 41,067,625 33,928,239 261,813 8,885,523 $ 8,965,557 70,866,283 79,831,840 3,846,555 38, )18,077 31,002,355 359,899 5,704,954 $ 3,104,409 $ 43,075,575 $ 37,067 208 Table A - 2 Summary of Changes in Net Assets Gaveminental Activities Business -type Activities 2007 2006 2007 2006 Total 2007 2006 $ 3,060,790 $ 3,238,022 $ 1,030,721 $ 1,049,332 $ 4,091,01 1 S 4,287,354 799,493 3,559,753 799,493 3,559,753 18,667,970 14,830,238 2,231,193 2,346,655 1,1 13,194 1,088,929 1,000 265 996,092 641,115 306,339 27,514.029 26,366,028 18,667,979 14,830,238 2,231,193 2,346,655 1,1 13,194 1,088929 1,000,265 996.092 49,086 45,527 690,201 351,866 1,079,307 1,094,859 28,593,336 27,460,887 3,781,396 4,252,037 - 9, )09,449 9,222,766 - - 3,077,624 2,849,434 - 1,589,444 4,004,651 - - 1,447,968 1,547,042 - 1,505,253 1,413,272 - - 693,135 720,158 571246 501,417 9,454 9, )92 3,781,396 4,252,037 9, )09,449 9,222,766 3,077,624 2,849,434 1,589,444 4,004,651 1,447.968 1,547.042 1,505.253 1,413,272 693,135 720,158 571,246 501,417 9,454 9,992 21,311,134 23,289,202 1.273,835 1,231,567 22,584,969 24,520.769 6,202,895 3,076,826 ( 194,528) (136,708) 6,008,367 2.940,118 (28,133) (28,133) 28,133 28,133 - 6,174,762 3,048,693 (166,395) (108,575) 6,008,367 2,940,1 18 33,962,799 30,9 i 4,106 3,104,409 3,212,984 37,067,208 34,127,090 $ 40,137,561 $ 33,962,799 $ 2,938,014 $ 3,104,409 $ 43,075,575 $ 37,067,208 The Village's net assets increased by $6,008,367 during the current fiscal year. This increase represents the results of operations for a full 12 -month period with no capital contributions from outside sources. -6- Business -type Activities Business -type activities decreased the Village's net assets by $166,395. In fiscal 2007, one of the three business -type activities reflected operational profits, The Storrnwater Utility Fund reflected a net loss of $1395.34; due mainly to depreciation expense in the amount of $273919, 6 The Solid Waste Collection Fund reported a net loss of $45,540, due mainly to increased contractual costs. The Sanitary Sewer Construction Fund was dormant awaiting a resumption of construction activity, Govern,m ental Activities Revenues by Sources - Govrernrriental Activities Charges for Services, Operating Grants $3,066,790 , 11% \ and Contributions, investment. $ 799,493 , 3% r- Earnings, 1ntercavernmental, $641,115 , 2% $1.000.265 , 4% 1 .i' Utility Taxes, $2,231,193 , 8% Franchise Fees - $1.113.194,4% Program Expanses Interest on Long Term Debt, $1.505,253 , 7% Building, Zoning and Planning, $1,447,968 . 7% Parks and Recreation, 53,077,624 . 14% Fire., $5,257,789 . 25% Grants, $206,040 1% Ad Valorem Taxes. $118,667,979 , 67% General Government., /.. 53,761,396 , 18% Puh€ic Works, E _589,444 , 7% Police, $4,651.660 , 22% -7- lir siness-hype Activities Revenues- Business Type Activities Stor:nw ter Charges, $509,57` , 49% Solid Waste uh€ar9es, $520,650. 61% Solid $`'rite, $57'':,246 45% Expenses- Business Type Activities Financial Analysis of the Government's Funds Sanitary Sewer, 7 $9,454 , 1% i $tormwa er, $693,135 , ;4% As noted earlier, the Village of Key Biscayne uses fund account ir g to ensure and demonstrate compliance with finance -related legal requirements. Governmental funds, The focus of the Village of Key Biscayne's governmental funds is to provide information on near -term inflows, outflows, and balances of spend able resources. Such information is useful in assessing the Village's financing requirements. At the end of the current fiscal year, fund balance of the general fund was 59,875,416, an increase of 53,001,107 in comparison with the prior year. All of this is either reserved or designated for specific uses: (I) emergencies ($4,000,000), (2) Building Inspection Costs (5275,000), (3) Compensated Absences (5338,539), (4) Law Enforcement Seizures ($261,8 i3), (5) Playing Field Acquisitions .g_ ($416,403), (7) Working Capital Reserves ($1,000,000), (8) Police/Administration Building Reserve ($13,632), (9) Fire Station Building Reserve ($13,632), (10) Community Center Equipment Reserve ($50,000), (11) Fire Vehicles Replacement Reserve ($50,000), (12) Master Plan Initiatives ($1,873,764), (13) Capital Lease ($298,682), (14) Prepaid Items ($198,990), (15) Roadway Improvements ($175,000), (16) Recreation Facilities ($300,000),(17) Police Labor Costs ($90,000), (18) Fire Labor Costs ($155,000) and (19) Capital Improvement Plan ($341,017). The general fund is the chief operating fund of the Village of Key Biscayne. As a measure of the general fund's liquidity, it may be useful to compare total fund balance to total fund expenditures. Total fund balance represents 47.74 percent of total general fund expenditures. A summary of the general fund's condensed balance sheet and statement of revenues, expenditures and changes in fund balance is presented in Table B-1 and B-2 for September 30, 2007 and 2006, is shown as follows: Table B-1 Summary of Condensed Balance Sheet 2007 Total assets S 11,623,098 Total liabilities Reserved or designated fund balance Total liabilities and fund balance S 1,747,682 9,875,416 2006 8,045,610 $ 1,171,300 6,874,310 S 11,623,098 $ 8,045,610 Table B-2 Summary of Condensed Statement of Revenues, Expenditures and Changes in Fund Balances Total revenues Total expenditures Excess of revenues over expenditures 2007 2006 S 26,592,900 $ 25,264,190 20,686,819 22,554,700 $ 5,906,081 $ 2,709,490 The Special Revenue Fund was established to account for the construction and future maintenance of the Village's roadways. Bond revenue is the source of funding for construction of roadways, while the local option gas tax funds maintenance and the transportation surtax funds debt service. At present, the fund shows a negative fund balance which was to be corrected with the Series 2006 Roadway Improvement Revenue Bonds, issued in late December 2006. The remainder of the negative fund balance will be eliminated with receipt of the County bridge toll revenues and State xoxo funds receipts. The Capital Improvement Fund receives an annual budgeted transfer from the general fund to fund capital construction of infrastructure at various locations on the island. All transfers are allocated to specific projects by management and the council during the annual budgeting process. The fund balance increased by $1,533,738 during the current fiscal period. Fund balance is comprised of funds allocated to named projects with varied stages of completion. -9- General Fund Budgetary Highlights There were no supplemental appropriations or budget amendments for the fiscal year ended September 30, 2007. Capital Assets As of September 30, 2007, the Village's capital assets net of accumulated depreciation amounted to $75,920,147. The total increase in capital assets for the fiscal year was as follows: Major capital asset events during the fiscal year included the following: • Continuation of the Village Tree Replacement Program • Completion of drainage improvements on Woodcrest and Buttonwood Drives. • Completion of the Crandon Blvd Improvement. Project, phase two Additional information on the Village's capital assets can be found in Note 7 on pages 31-32 of this report. Debt Administration At September 30, 2007, the Village had bonded debt outstanding of $41,819,708. Of this amount, $5,550,000 represents bonds secured solely by specified revenue sources (Stormwater revenue bonds). The remainder is special obligation bonds that are secured by non -ad Valorem revenues through covenants to budget and appropriate. The Village's total net debt outstanding increased by $4,000,000 due to the additional borrowing required for Crandon Blvd. Phase 3 construction. Additional information on the Village's long-term debt can be found in Note 8 on pages 33-37 of this report. Economic Factors and Next Years Budgets and Rates • The unemployment rate for Miami -Dade County is currently 4.2 percent, which is a decrease from a rate of 4.5 percent a year ago. This compares exactly to the state's average unemployment rate of 4.2 percent but favorable to the national average rate of 4.6 percent. The Village's average rate remained unchanged at 3.2 percent. • The occupancy rate of the Village's retail rentals and hospitality service industry has remained stable for the past several years. • Inflationary trends in the region compare favorably to national indices. All of these factors were considered in preparing the Village of Key Biscayne's budget for the 2008 fiscal year. Requests for Information This financial report is designed to provide a general overview of the Village of Key Biscayne's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Village Manager, 88 West McIntyre Street, Key Biscayne, Florida 33149. -10- BASIC FINANCIAL STATEMENTS VILLAGE OF KEY BISCAYNE, FLORIDA STATEMENT OF NET ASSETS SEPTEMBER 30, 2007 ASSETS Cash and cash equivalents Receivables, net interest receivable Prepaids Internal balances Negative net pension obligation Other assets Restricted assets: Cash and cash equivalents Investments Capital assets not being depreciated Capital assets being depreciated, net Total assets LIABILITIES Accounts payable and accrued liabilities Accrued interest payable Payable to pension plan Unearned revenue Noncurrent liabilities: Due within one year Due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for law enforcement Unrestricted Total net assets Governmental Activities $ 10,100,283 908,228 198,990 1,339,239 137,831 23,537 178,325 275,630 32,545,408 34,959,850 80,667,321 Business - type Activities $1,296,651 533,632 19,509 (1,339,239) 1,089,039 7,325,850 8,925,442 Total $11,396,934 1,441,860 19,509 198,990 137,831 23,537 178,325 275,630 33,634,447 42,285,700 89,592,763 2,025,005 52,260 2,077,265 336,175 336,175 150,113 - 150,113 477,604 26,160 503,764 2,013,158 369,088 2,382,246 35,527,705 5,539,920 41,067,625 40,529,760 5,987,428 46,517,188 31,422,358 2,505,881 33,928,239 261,813 - 261,813 8,453,390 432,133 8,885,523 $ 40,137,561 $2,938,014 $43,075,575 See notes to basic financial statements. -11- VI LLAGE OF KEY BISCAYNE, FLORID A STATEMENT OF ACTIVITIES FISCAL YEAR ENDED SEPTEMBER 30, 2007 Net (Expense) Re ve nue a nd Functions/Programs Governmen tal activities: General govern ment Pu blic works Police Fire Parks an d recreation Buildin g, zon in g and planning In terest on lon g-term debt Total go vern mental activities Busin ess -type activ ities: Stormwater Solid waste Sanitary sewer Total bu sin ess -type activities Total Charges for Expenses Services $ 3,781,396 1,589,444 4,651,660 5,257,789 3,077,624 1,447,968 1,505,253 21,311,134 3,060,790 799,493 Program Revenues Operating Capital Grants and Gra nts a nd Governmental Co ntributions Co ntributio ns Activities $1,389,163 $ 600,985 $ 198,508 21,385 40,144 1,416,707 193,391 693,135 509,571 571,246 520,650 9,454 1,273,835 1,030,221 $ 22,584,969 $4,091,011 $ 799,493 $ Gen eral revenues: Pro perty tax es Franchise fees based on gross receipts Utility tax es Communications services tax Unrestricted intergovern men tal revenue Unrestricted in vestmen t earn ings Tran sfers Total general revenu es Change in net assets N et assets, begin nin g N et assets, en ding See n otes to basic financial statements. -12- Changes in Net Assets B usi ness - type A ctivities $ (1,791,248) $ (1,390,936) (4,630,275) (5,217,645) (1,660,917) (1,254,577) (1,505,253) (17,450,851) (17,450,851) 18,667,979 1,113,194 1,467,392 763,801 1,000,265 641,115 (28,133) 23,625,613 6,174,762 33,962,799 $ 40,137,561 T otal $ (1,791,248) (1,390,936) (4,630,275) (5,217,645) (1,660,917) (1,254,577) (1,505,253) (17,450,851) (183,564) (183,564) (50,596) (50,596) (9,454) (9,454) (243,614) (243,614) (243,614) (17,694,465) 49,086 28,133 77,219 (166,395) 3,104,409 $ 2,938,014 18,667,979 1,113,194 1,467,392 763,801 1,000,265 690,201 23,702,832 6,008,367 37,067,208 $ 43,075,575 VILLAGE OF KEY BISCAYNE, FLORIDA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2007 ASSETS Cash and cash equivalents Receivables, net Due from other funds Prepaid items Restricted cash and cash equivalents Restricted investments Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities Due to other funds Payable to pension plan Deferred revenue Total liabilities Special General Revenue $ 7,165,598 $ - 805,061 103,167 3,135,908 198,990 41,911 136,414 275,630 $11,623,098 $ 239,581 Capital Improvements Total Governmental Funds $ 2,934,685 510,100,283 908,228 450,189 3,586,097 198,990 178,325 275,630 $ 3,384,874 $ 15,247,553 $ 1,119,966 $ 848,574 $ - 1,873,203 150,113 477,604 1,747,683 56,465 $ 2,025,005 373,655 2,246,858 150,113 477,604 2,721,777 430,120 4,899,580 Fund balances: Reserved (Note 11) 9,875,416 - 9,875,416 Unreserved, undesignated reported in: Special revenue fund - (2,482,196) -- (2,482,196) Capital improvements - - 2,954,753 2,954,753 Total fund balances (deficit) 9,875,416 (2,482,196) 2,954,753 10,347,973 Total liabilities and fund balances $11,623,099 $ 239,581 $ 3,384,873 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds A negative net pension obligation (NPO) is not considered to represent a financial asset and therefore is not reported in the governmental funds Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore not reported in the funds Net assets of governmental activities 67,505,258 137,831 (37,853,501) $ 40,137,561 See notes to basic financial statements. -13- VILLAGE OF KEY BISCAYNE, FLORIDA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2007 Revenues: Property taxes Utility taxes Communications services tax Franchise fees Licenses and permits Intergovernmental Charges for services Interest Grants Other income Total revenues Expenditures: Current: General government Fire Police Public works Building, zoning and planning Parks and recreation Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Bonds issued Total other financing sources (uses) Net change in fund balances Fund balances (deficit), beginning Fund balances (deficit), ending Special Capital General Revenue Improvements $18,667,979 $ - $ 1,467,392 763,801 1,113,194 1,298,133 1,000,265 593,453 1,762,657 313,389 136,950 182,016 206,040 50 8,712 26,592,900 730,403 190,728 2,543,134 5,122,699 4,590,962 1,587,460 1,455,193 2,830,020 1,264,676 1,292,675 5,297,014 1,533,830 153,725 263,721 Total Governmental Funds $ 18,667,979 1,467,392 763,801 1,113,194 1,298,133 1,593,718 1,762,657 632,355 206,040 8,762 27,514,031 2,543,134 5,122,699 4,590,962 1,587,460 1,455,193 2,830,020 6,830,844 - 1,418,401 1,556,396 20,686,819 5,714,460 1,533,830 27,935,109 5,906,081 (4,984,057) (1,343,102) (421,078) 1,910,507 (4,815,481) - 4,000,000 - 4,787,347 6,697,854 - (1,910,507) (6,725,988) - 4,000,000 (2,904,974) 4,000,000 2,876,840 3,001,107 (984,057) 1,533,738 6,874,309 (1,498,139) 1,421,015 $ 9,875,416 $ (2,482,196) $ 2,954,753 See notes to basic financial statements. -14- 3,971,866 3,550,788 6,797,185 $ 10,347,973 VILLAGE OF KEY BISCAYtiE, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED SEPTEMBER 30, 2007 Amounts reported for governmental activities in the statement of activities (Page 12) are different because: Net change in fund balances - total governmental funds (Page 14) $ 3,550,788 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 details of the difference are as follows: Capital outlay Depreciation expense Net adjustment The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. The detail of the differences are as follows: Debt payments Revenue bonds issued Net adjustment Some expenses reported in the statement of activities do not require current financial resources and, therefore, are not reported as expenditures in governmental funds. $ 6,224,242 (1,329,350) 1,618,207 (4,000,000) The details of the difference is: Compensated absences 166,254 Accrued interest expense (51,143) Negative net pension obligation (4,236) 4,894,892 (2,381,793) 110,875 Change in net assets of governmental activities (Page 12) $ 6,174,762 See notes to basic financial statements. -15- VILLAGE OF KEY BISCAYNE, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2007 Business -type Activities - Enterprise Funds Solid Stormwater Sanitary Waste Utility Sewer (A Nonmajor System Construction Fund) Totals ASSETS Current assets: Cash and cash equivalents $1,006,570 $ - $ 290,081 $1,296,651 Accounts receivables, net 124,286 - 409,346 533,632 Interest receivable 19,509 - - 19,509 Total current assets 1,150,365 - 699,427 1,849,792 Noncurrent assets: Capital assets not being depreciated Capital assets being depreciated, net Total noncurrent assets Total assets 7,325,850 1,089,039 - 1,089,039 - 7,325,850 7,325,850 1,089,039 - 8,414,889 8,476,215 1,089,039 699,427 10,264,681 LIABILITIES Current liabilities: Accounts payable and accrued liabilities - 4,584 47,676 52,260 Due to other funds 379,306 625,121 334,812 1,339,239 Deferred revenue 26,160 26,160 Current portion of revenue bonds payable 350,000 19,088 -- 369,088 Total current liabilities 729,306 648,793 408,648 1,786,747 Noncurrent liabilities: Revenue bonds 5,200,000 - - 5,200,000 Revolving loan - 339,920 - 339,920 Total noncurrent liabilities 5,200,000 339,920 - 5,539,920 Total liabilities 5,929,306 988,713 408,648 7,326,667 NET ASSETS Invested in capital assets, net of related debt 1,775,850 730,031 - 2,505,881 Unrestricted 771,059 (629,705) 290,779 432,133 Total net assets $ 2,546,909 $ 100,326 $ 290,779 $ 2,938,014 See notes to basic financial statements. -16- VILLAGE OF KEY BISCAYNE, FLORIDA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2007 Operating revenues: Charges for services Operating expenses: General and administrative Depreciation Total operating expenses Operating income (loss) Non -operating revenues (expenses): Interest income Interest expense Total non -operating revenues (expenses) Loss before transfers Transfers in Change in net assets Net assets, beginning Net assets, ending Stormwater Utility System $ 509,571 180,423 273,919 454,342 55,229 44,030 (238,793) (194,763) (139,534) (139,534) 2,686,443 Business -type Activities - Enterprise Funds Solid Sanitary Waste Sewer (A Nonmajor Construction Fund) Totals $ - $ 520,650 $1,030,221 - 571,246 751,669 - 273,919 571,246 1,025,588 (50,596) 4,633 5,056 (9,454) 49,086 (248,247) (9,454) 5,056 (199,161) (9,454) (45,540) (194,528) 28,133 - 28,133 18,679 (45,540) (166,395) 81,647 336,319 3,104,409 $ 2,546,909 $ 100,326 $ 290,779 $ 2,938,014 See notes to basic financial statements. -17- VILLAGE OF KEY BISCAYNE, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FISCAL YEAR ENDED SEPTEMBER 30, 2007 Business -type Activities - Enterprise Funds Solid Stormwater Sanitary Waste Utility Sewer (A Nonmajor System Construction Fundi Totals Cash flows from operating activities: Receipts from customers and users $ 725,190 $ 200,032 $ 537,238 $ 1,462,460 Payments to suppliers (180,423) - (291,957) (472,380) Net cash provided by operating activities 544,767 200,032 245,281 990,080 Cash flows from non -capital financing activities: Transfers from other funds Net cash provided by non -capital financing activities 28,133 28,133 28,133 28,133 Cash flows from capital and related financing activities: Net payments on revolving loan (235,000) (18,609) - (253,609) Payments for construction in progress - (200,102) - (200,102) Interest paid (238,793) (9,454) - (248,247) Net cash used by capital and related financing activities (473,793) (228,165) (701,958) Cash flows from investing activities: Interest received 44,030 Net cash provided by investing activities 44,030 5,056 49,086 5,056 49,086 Net increase in cash and cash equivalents 115,004 - 250,337 365,341 Cash and cash equivalents, beginning 891,566 - 39,744 931,310 Cash and cash equivalents, ending $1,006,570 $ - $ 290,081 $1,296,651 Reconciliation of operating income to net cash provided by operating activities: Operating income (loss) $ 55,229 $ - $ (50,596) $ 4,633 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 273,919 273,919 Changes in operating assets and liabilities: (Increase) decrease in: Accounts receivable 5,096 (94,779) (89,683) Interest receivable (5,394) (5,394) Increase (decrease) in: Accounts payable (8,607) (67) 47,676 39,002 Deferred revenue - - 8,168 8,168 Due to other funds 224,524 200,099 334,812 759,435 Total adjustments 489,538 200,032 295,877 985,447 Net cash provided by operating activities $ 544,767 $ 200,032 $ 245,281 $ 990,080 See notes to basic financial statements. -18- VILLAGE OF KEY BISCAYNE, FLORIDA STATEMENT OF FIDUCIARY NET ASSETS PENSION TRUST FUND SEPTEMBER 30, 2007 ASSETS Contributions receivable: Village (including State) $ 259,233 Employees 37,501 Total contributions receivable 296,734 Investments, at fair value: Money market funds 430,509 Common stocks 3,698,270 Mutual funds 5,843,719 Total investments 9,972,498 Total assets 10,269,232 LIABILITIES AND NET ASSETS Liabilities Net assets held in trust for pension benefits See notes to basic financial statements. -19- $10,269,232 VILLAGE OF KEY BISCAYNE, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS PENSION TRUST FUND FISCAL YEAR ENDED SEPTEMBER 30, 2007 ADDITIONS Contributions: Plan members $ 553,045 Village (including State) 1,075,659 Total contributions 1,628,704 Investment earnings: Net increase in the fair value of investments 1,102,748 Interest and dividends 101,757 Total investments earnings 1,204,505 Total additions 2,833,209 DEDUCTIONS Benefits paid 319,510 Administrative expenses 99,325 Total deductions 418,835 Change in net assets Net assets, beginning Net assets, ending See notes to basic financial statements. -20- 2,414,374 7,854,858 $ 10,269,232 NOTES TO BASIC FINANCIAL STATEMENTS VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL. STATEMENTS SEPTEMBER 30, 2007 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Village of Key Biscayne, Florida (the Village), located in Miami -Dade County, is a political subdivision of the State of Florida. The Village, which was incorporated in 1991, operates under a Council -Manager form of government. In addition to the general government function, the Village provides its residents with public works, public safety (police and fire), parks and recreation, building, zoning and planning functions, sanitation and stormwater management. The Village does not provide educational or hospital facilities; those services are provided by the Miami -Dade County School Board and Miami -Dade County, respectively. The financial statements of the Village have been prepared in conformity with accounting principles generally accepted in the United States (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard -setting body for establishing governmental accounting and financial reporting principles. The more significant of the Village's accounting policies are described below: A. Financial Reporting Entity The financial statements were prepared in accordance with GASB Statements related to The Financial Reporting Entity, which establishes standards for defining and reporting on the financial reporting entity. The definition of the financial reporting entity is based upon the concept that elected officials are accountable to their constituents for their actions. One of the objectives of financial reporting is to provide users of financial statements with a basis for assessing the accountability of the elected officials. The financial reporting entity consists of the Village, organizations for which the Village is financially accountable, and other organizations for which the nature and significance of their relationship with the Village are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The Village is financially accountable for a component unit if it appoints a voting majority of the organization's governing board and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the Village. Based upon the application of these criteria, there were no organizations that met the criteria described above. B. Government -Wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non -fiduciary activities of the Village. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. -21- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government -Wide and Fund Financial Statements (Continued) The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include I) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and 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, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. 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 and fiduciary 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 current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Village considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures 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 fees and other taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Revenues for expenditure driven grants are recognized when the qualifying expenditures are incurred. All other revenue items are considered to be measurable and available only when cash is received by the Village. -22- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The Village reports the following major governmental funds: The General Fund is the Village's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Special Revenue Fund accounts for the revenues received from the transportation surtax and expenditures for related transportation costs. The Capital Improvement Fund accounts for the acquisition or construction of various major capital projects. The Village reports the following major proprietary funds in the basic financial statements: The Stormwater Utility Fund accounts for the construction and maintenance of the Village's sormwater system. The Sanitary Sewer Fund accounts for the development and construction of a municipal sanitary sewer system to the unsewered areas of the community. Additionally, the Village reports the following fund types: The Pension Trust Fund is used to account for the Village's single -employer defined benefit pension plan covering substantially all of its police officers and firefighters. 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. The Village has the option of following subsequent private -sector guidance for their business -type activities and enterprise funds, subject to this same limitation. The Village 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. Exceptions to this general rule are payments-in-Iieu of taxes and other charges between the Village's various utility functions and various other functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 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. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. -23- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Village's stonnwater utility, solid waste services and sanitary sewer construction funds are charges to customers for services. Operating expenses for enterprise funds include the costs of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Village's policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments The Village's cash and cash equivalents include cash on hand, and certificates of deposit with original maturities of three months or less from the date of acquisition and investments with the State Board Investment Pool. The Investment Pool is recorded at its value of the pool shares (2a-7 like pool) which is fair value. All other investments, including pension investments, are recorded at fair value. Fair value is determined by quoted market prices. 2. Receivables and Payables Activity between funds that are representative of Iending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds". Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances". 3. Capital assets Capital assets, which include property, plant and equipment, and infrastructure assets (e.g., utility plant, roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the Village as assets with an initial, individual cost of more than $750 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. All infrastructure assets have been capitalized since inception of the Village. -24- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity (Continued) 3. Capital assets (Continued) The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business -type activities is included as part of the capitalized value of the asset constructed. No such costs were capitalized in 2007. Capital assets of the Village are depreciated using the straight line method over the following estimated useful lives: Assets Years Buildings 25-50 Improvements other than buildings 10-50 Furniture, fixtures and equipment 10 Stormwater utility system 50 4. Compensated absences It is the Village's policy to permit employees to accumulate within certain limits, earned but unused vacation time and sick leave, which will be paid to employees upon separation from Village service. Ail vacation and sick leave pay is accrued when incurred in the government -wide and proprietary fund financial statements. In the governmental funds, a liability is recorded only for vacation and sick leave payouts for employee separations that occurred prior to September 30, 2007 and were subsequently paid with current available financial resources. The general fund typically is used to liquidate the liability for compensated absences. 5. 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, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line amortization method_ The results of using this method do not differ significantly from the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. 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 -25- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity (Continued) 5. Long -Term Obligations (Continued) 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. 6. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets, liabilities, disclosures of contingent liabilities, revenues and expenditures/expenses reported in the financial statements and accompanying notes. These estimates include assessing the collectibility of receivables, the realization of pension obligations and the useful lives of capital assets. Although these estimates as well as all estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. 7. 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 use for a specific purpose. Designations of fund balance, where noted, represent tentative management plans that are subject to change. NOTE 2. 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 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 this $37,853,501 difference are as follows: Bonds payable $35,667,559 Debt issuance cost (23,537) Capital leases payable 415,341 Compensated absences 1,457,963 Accrued interest payable 336,175 $37,853,501 -26- VILLAGE OF KEY BISCAYr , FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 3. DEPOSITS AND INVESTMENTS Deposits In addition to insurance provided by the Federal Depository Insurance Corporation, all deposits are held in banking institutions approved by the State Treasurer of the State of Florida to hold public funds. Under Florida Statutes Chapter 280, Florida Security for Public Deposits Act, the State Treasurer requires all Florida qualified public depositories to deposit with the Treasurer or another banking institution eligible collateral. In the event of a failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses. Accordingly, all amounts reported as deposits are insured or collateralized with securities held by the entity or its agent in the entity's name. Investments The Village is authorized to invest in obligations of the U.S. Treasury, its agencies, instrumentalities and the Local Government Surplus Funds Trust Fund administered by the State Board of Administration. The investments follow the investment rules defined in Florida Statutes Chapter 218.415. The investment policy defined in the statutes attempts to promote, through state assistance, the maximization of net interest earnings on invested surplus funds of local units of governments while limiting the risk to which the funds are exposed. The Local Government Surplus Funds Trust Fund is governed by Ch. 19-7 of the Florida Administrative Code, which identifies the Rules of the State Board of Administration (SBA). These rules provide guidance and establish the general operating procedures for the administration of the Local Government Surplus Funds Trust Fund. Additionally, the Office of the Auditor General performs the operational audit of the activities and investments of the State Board of Administration. The Local Government Surplus Funds Trust Fund is not a registrant with the Securities and Exchange Commission (SEC); however, the Board has adopted operating procedures consistent with the requirements for a 2a-7 fund. See Note 14 for subsequent event relative to the SBA. Investments — Village As of September 30, 2007, the Village had the following investments with its corresponding maturities in its portfolio: Investment Maturities (In Years) Investments Fair Less Value Than 1 Repurchase agreements $ 2,193,473 $ 2,193,473 Interest Rate Risk Interest rate risk refers to the portfolio's exposure to fair value losses arising from increasing interest rates. The Village does not have a formal investment policy that limits investment maturities as a means of managing its exposure to market value losses arising from increasing interest rates. -27- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 3. DEPOSITS AND INVESTMENTS (Continued) Investments — Village (Continued) Credit Risk State law and the Village's investment policy limits investments in bonds, U.S. treasuries and agency obligations, or other evidences of indebtedness to the top ratings issued by nationally recognized statistical rating organizations (NRSRO) of the United States. The Village's repurchase agreements are collateralized by U.S. agency obligations and were all rated AAA under Standard & Poor's ratings and AAA under Moody's ratings. Excess funds are also sent to the Local Government Surplus Funds Trust Fund administered by the SBA. The SBA does not have a rating from a NRSRO. Concentration of Credit Risk As of September 30, 2007, the value of each position held in the Village's portfolio comprised less than 5% of the Village investment assets. Investments — Pension Plan As of September 30, 2007, the Village's Defined Benefit Pension Plan had the following investments with its corresponding maturities in its portfolio: Investment Maturities (In Years) Fair Less Investments Value Than 1 1-5 6-10 10+ Bond mutual funds $ 2,720,242 $ 92,488 $1,719,193 $ 590,293 $ 318,258 Interest Rate Risk Interest rate risk refers to the portfolio's exposure to fair value losses arising from increasing interest rates. The Plan does not have a formal investment policy that limits investment maturities as a means of managing its exposure to market value losses arising from increasing interest rates. Credit Risk State law and the Plan's investment policy limits investments in bonds, stocks, or other evidences of indebtedness issued or guaranteed by a corporation organized under the laws of the United States, any state or organized territory of the United States, or the District of Columbia, provided the corporation is listed on any one or more of the recognized national stock exchanges or on the National Market System of the NASDAQ Stock Market and in the case of bonds only, holds a rating in one of the three highest classifications by a major rating service. The Plan's investment policy limits fixed income investments to a rating no lower than Standard & Poor's BBB or Moody's BAA. -28- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 3. DEPOSITS AND INVESTMENTS (Continued) Investments — Pension Plan (Continued) Credit Risk (Continued) The Plan's bond mutual funds were all rated "A" or better under Standard & Poor's ratings and at least "A" under Moody's ratings. Concentration of Credit Risk The Plan's investment policy prohibits equity and fixed income securities concentrations greater than 5% and 10%, respectively, in any one issuer with the exception of U.S. government or agency issues. As of September 30, 2007, the value of each position held in the Plan's portfolio comprised less than 5% of Plan investment assets_ Risks and Uncertainties The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of plan net assets. The Plan, through its investment advisor, monitors the Plan's investment and the risks associated therewith on a regular basis which the Plan believes minimizes these risks. Plan contributions are made and the actuarial present value of accumulated plan benefits are reported based on certain assumptions pertaining to interest rates, inflation rates and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statements. NOTE 4. RECEIVABLES Receivables as of September 30, 2007 for the Village's individual major funds, nonmajor funds and fiduciary fund in the aggregate, including the allowances for uncollectible accounts, are as follows: Special Storm- Solid Pension General Revenue water Waste Trust Fund Total Customers billed $ - $ - $ 124,286 $ 422,575 $ - $ 546,861 Contributions - - 296,734 296,734 Property taxes 309,967 - - 309,967 Interest 2,700 - - - - 2,700 Intergovernmental 26,013 103,167 - - - 129,180 Other 466,381 - - - 466,381 Gross receivables 805,061 103,167 124,286 422,575 296,734 1,751,823 Less allowance for uncollectibles - - (13,229) - (13,229) Net total receivables $ 805,061 $103,167 $ 124,286 $ 409,346 $ 296,734 $1,738,594 -29- VILLAGE OF KKEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 5. PROPERTY TAXES Property values are assessed on a county -wide basis by the Miami -Dade County Property Appraiser as of January 1, the lien date, of each year and are due the following November 1. Taxable value of property within the Village is certified by the Property Appraiser and the Village levies a tax millage rate upon the taxable value, which will provide revenue required for the fiscal year beginning October 1. Property taxes levied each November 1, by the Village and all other taxing authorities within the County, are centrally billed and collected by Miami -Dade County, with remittances to the Village of their proportionate share of collected taxes. Taxes for the fiscal year beginning October 1 are billed in the month of November, subject to a 1% per month discount for the period November through February, and are due no later than March 31. On April 1, unpaid amounts become delinquent with interest and penalties added thereafter. Beginning June 1, tax certificates representing delinquent taxes with interest and penalties are sold by Miami -Dade County, with remittance to the Village for its share of those receipts. At September 30, 2007, there were no material delinquent taxes. NOTE 6. INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The composition of interfund balances as of September 30, 2007 is as follows: Due from/to other funds: Receivable Fund Payable Fund Amount General Special revenue $1,873,204 Capital improvement 373,656 Stormwater utility 312,086 Sanitary sewer 242,150 Solid Waste 334,812 Capital improvements Stormwater utility 67,219 Sanitary sewer 382,970 $3,586,097 The outstanding balances between funds result mainly from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. Interfund transfers: Transfers In General Capital Sanitary Fund Improvement Sewer Total Transfers out: General fund Capital improvement $ - $ 4,787,347 $ 28,134 $4,815,481 1,910,507 - - 1,910,507 $1,910,507 $ 4,787,347 $28,134 $6,725,988 -30- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 6. INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS Interfund transfers: (Continued) Transfers are used to move unrestricted general fund revenues to finance various capital projects in accordance with budgetary authorizations. NOTE 7. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2007 was as follows: Governmental activities: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Beginning Balance Ending Increases Decreases Balance $21,833,837 $ - $ - $21,833,837 5,191,965 6,307,375 (787,769) 10,711,571 27,025,802 6,307,375 (787,769) 32,545,408 Buildings 23,727,322 - Improvements other than buildings 14,090,674 787,769 Furniture, fixtures and equipment 5,002,098 153,021 Total capital assets, being depreciated 42,820,094 940,790 (3,365) 43,757,519 Less accumulated depreciation for: Buildings Improvements other than buildings Furniture, fixtures and equipment Total accumulated depreciation Total capital assets, being depredated, net Governmental activities capital assets, net Business -type activities: Capital assets, not being depreciated: Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Stormwater utility system Total capital assets, being depreciated Less accumulated depreciation for: Stormwater utility system Total accumulated depreciation Total capital assets, being depreciated, net Business -type activities capital assets, net (1,938,015) (479,555) (2,994,391) (328,047) (2,535,913) (521,748) (7,468,319) (1,329,350) - 23,727,322 - 14,878,443 (3,365) 5,151,754 (2,417,570) (3,322,438) (3,057,661) - (8,797,669) 35,351,775 (388,560) (3,365) 34,959,850 $62,377,577 $5,918,815 $ (791,134) $67,505,258 $ 888,937 $ 200,102 $ 888,937 200,102 10,056,660 10,056,660 (2,456,891) (273,919) (2,456,891) (273,919) 7,599,769 (273,919) - $ 1,089,039 - 1,089,039 $ 8,488,706 $ (73,817) $ 10,056,660 10,056,660 (2,730,810) (2,730,810) 7,325,850 $ 8,414,889 -31- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 7. CAPITAL ASSETS (Continued) Depreciation expense was charged as functions/programs of the primary government as follows: Governmental activities: General government Police Fire Public works Building, zoning and planning Parks Total depreciation expense - governmental activities Business -type activities: Stormwater NOTE 8. LONG-TERM DEBT $ 464,631 329,377 269,969 1,984 9,522 253,867 $ 1,329,350 $ 273,919 The following is a summary of changes in long-term liabilities of the Village for governmental activities for the year ended September 30, 2007: Governmental Activities Bonds payable: Land acquisition and capital improvement revenue bonds, Series 1999 Land acquisition and capital improvement revenue bonds, Series 2000 Capital improvement bonds, Series 2002 Land acquisition and capital improvement revenue bonds, Series 2004 Transportation tax revenue bonds, Series 2005 Transportation tax revenue bonds, Series 2006 Total bonds payable Other liabilities: Capital leases Compensated absences Total other liabilities Governmental activities long-term liabilities Beginning Balance Additions Ending Due Within Reductions Balance One Year $ 8,470,000 $ - $ (430,000) $ 8,040,000 $ 455,000 9,220,000 9,095,960 2,800,000 3,500,000 33,085,960 615,347 1,291,709 1,907,056 $ 34,993,016 - (420,000) 8,800,000 440,000 - (414,676) 8,681,284 435,584 4,000,000 2,800,000 69,929 3,500,000 47,734 (153,725) 3,846,275 204,187 4,000,000 (1,418,401) 35,667,559 1,652,434 193,203 193,203 $ 4,193,203 (200,006) 415,341 214,928 (26,949) 1,457,963 145,796 (226,955) 1,873,304 360,724 $(1,645,356) $37,540,863 $2,013,158 -32- VILLAGE OF KEY BIISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 8. LONG-TERM DEBT (Continued) Land Acquisition and Capital Improvement Revenue Bonds On July 23, 1999, the Village issued $10,000,000 Land Acquisition and Capital Improvement Revenue Bonds, Series 1999, the proceeds of which were used for the acquisition of property and financing of the construction of the Civic Center project. The bonds mature on July 23, 2019. The Village has pledged non -ad valorem revenues to secure payment of the principal and interest on the bonds. The bonds are due in annual principal installments. Interest accrues at 4.715% per annum, Debt service requirements to maturity are as follows: Principal Interest Total Fiscal year ending September 30: 2008 $ 455,000 $ 368,359 $ 823,359 2009 475,000 346,435 821,435 2010 500,000 323,449 823,449 2011 525,000 299,285 824,285 2012 550,000 273,942 823,942 2013-2017 3,205,000 941,603 4,146,603 2018-2019 2,330,000 168,223 2,498,223 $ 8,040,000 $ 2,721,296 $10,761,296 Capital Improvement Revenue Bonds On July 11, 2000, the Village issued a second series of $10,000,000 Capital Improvement Revenue Bonds, Series 2000, the proceeds of which were used for the acquisition of property and financing of the construction of the Civic Center project. The bonds mature on July 11, 2020. The Village has pledged non -ad valorem revenues to secure payment of the principal and interest on the bonds. The bonds are due in annual principal installments. Interest accrues at 5.24% per annum. Debt service requirements to maturity are as follows: Principal Interest Total Fiscal year ending September 30: 2008 $ 440,000 $ 449,592 $ 889,592 2009 465,000 425,881 890,881 2010 490,000 400,860 890,860 2011 515,000 374,529 889,529 2012 540,000 346,888 886,888 2013-2017 3,165,000 1,330,698 4,495,698 2018-2020 3,185,000 280,474 3,465,474 $ 8,800,000 $ 3,608,922 $12,408,922 -33-- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 8. LONG-TERM DEBT (Continued) Capital Improvement Revenue Bonds (Continued) On November 1, 2002, the Village issued Capital Improvement Revenue Bonds, Series 2002 for the purpose of financing a portion of the cost of construction and equipping of a community center including a parking garage and swimming pool. The bonds mature on November 1, 2022. Interest is due quarterly at a rate of 3.95% up to November 1, 2012. From November 1, 2012 to maturity, the interest rate will become a variable rate based on certain indices. Debt service to maturity is as follows: Principal Interest Total Fiscal year ending September 30: 2008 $ 435,584 $ 305,615 $ 741,199 2009 451,434 289,765 741,199 2010 467,860 273,339 741,199 2011 484,883 256,316 741,199 2012 502,526 238,673 741,199 2013-2017 2,800,582 905,413 3,705,995 2018-2022 3,348,547 359,096 3,707,643 2023 189,868 1,648 191,516 $ 8,681,284 $ 2,629,865 $11,311,149 Land Acquisition and Capital Improvement Revenue Bonds On December 12, 2004, the Village issued $2,800,000 of capital improvement and land acquisition revenue bonds, Series 2004 for the purpose of completing the road construction associated with the new administration, fire and community center buildings. The bonds mature on November 1, 2022. The Village has pledged non -ad valorem revenues to secure payment of the principal and interest on the bonds. The bonds are due in quarterly principal installments. Interest accrues at 3.83% per annum. Debt service requirements to maturity are as follows: Principal Interest Total Fiscal year ending September 30: 2008 $ 69,929 $ 26,810 $ 96,739 2009 286,476 100,480 386,956 2010 297,607 89,349 386,956 2011 140,107 80,195 220,302 2012 145,551 74,751 220,302 2013-2015 817,107 284,404 1,101,511 2016-2022 988,669 112,843 1,101,512 2023 54,554 522 55,076 $ 2,800,000 $ 769,354 $ 3,569,354 -34- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 8. LONG-TERM DEBT (Continued) Transportation Tax Revenue Bonds On July 15, 2005, the Village issued Transportation Tax Revenue Bonds, Series 2005, for the purpose of financing a portion of the costs of road improvements within the Village (Crandon Boulevard Improvements - Phase II). The issuance was established similar to bond anticipation notes where the principal amount is the lesser of $3,500,000 or the advances made under the bond. Only the amount advanced becomes an obligation of the Village. During the fiscal year ended September 30, 2006, the Village drew down the remaining $3,450,000. The bonds mature on July 1, 2025 and are due in quarterly principal installments. Interest accrues at 4.09% per annum. Debt service requirements to maturity are as follows: Principal Interest Total Fiscal year ending September 30: 2008 $ 47,734 $ 35,788 $ 83,522 2009 195,867 138,219 334,086 2010 204,001 130,084 334,085 2011 212,474 121,612 334,086 2012 169,602 1I3,313 282,915 2013-2017 864,166 465,107 1,329,273 2018-2022 1,059,155 270,136 1,329,291 2023-2025 747,001 50,591 797,592 $3,500,000 $1,324,850 $4,824,850 Road Improvement Revenue Bonds On December 14, 2006, the Village issued Road Improvement Revenue Bonds, Series 2006, for the purpose of financing a portion of the costs of road improvements within the Village (Crandon Boulevard Improvements - Phase III), financing architectural, engineering, environmental, legal, and other planning costs. The bonds mature on December 1, 2021. The Village has pledged toll revenues and non -ad valorem revenues to secure payment of the principal and interest on the bonds. The bonds are due in quarterly principal installments. Interest accrues at 4.05% per annum. Debt service requirements to maturity are as follows: Principal Interest Total Fiscal year ending September 30: 2008 $ 204,187 $ 152,938 $ 357,125 2009 212,583 144,542 357,125 2010 221,325 135,800 357,125 2011 230,425 126,700 357,125 2012 239,900 117,224 357,124 2013-2017 1,355,836 429,790 1,785,626 2018-2022 1,382,018 124,536 1,506 554 $3,846,274 $1,231,530 $ 5,077,804 -35- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 8. LONG-TERM DEBT (Continued) Capital Leases On June 16, 2003, the Village entered into a Master Lease agreement, with a local financial institution as lessee for financing the acquisition of Village vehicles and equipment for the Fire -Rescue Department with a fair value of $880,963. The amount of the lease obligation is $691,744 and final payment is due on November 15, 2009. Lease payments are due annually. Interest accrues at 2.994% per annum. On December 15, 2004, the Village entered into a Master Lease agreement for financing the acquisition of Village vehicles and equipment for the Police Department with a fair value of $378,413. The amount of the lease obligation is $380,726 and final payment is due on December 15, 2007. Lease payments are due annually. Interest accrues at 3.85% per annum. On January 10, 2005, the Village entered into a Master Lease agreement for financing the acquisition of a Village vehicle and equipment for the Police Department with a fair value of $23,744. The amount of the lease obligation is $23,744 and final payment is due on January 10, 2009. Lease payments are due annually. Interest accrues at 4.20% per annum. The future minimum lease obligations and the net present value of the minimum lease payments as of September 30, 2007 were as follows: Fiscal year ending September 30: 2008 2009 2010 Total minimum lease payments Less amount representing interest Present value of minimum lease payments S 214,928 114,287 109,137 438,352 (23,011) $415,341 The following is a summary of changes in long-term liabilities of the Village for business - type activities for the year ended September 30, 2007: Business -type Activities Bonds and loan payable: Stormwater utility revenue Revolving loan Total bonds and loan payable Business -type activities long-term liabilities Due Beginning Ending Within Balance Additions Reductions Balance One Year bonds $ 5,785,000 377,617 6,162,617 $ - $ (235,000) $ 5,550,000 $ 350,000 - (18,609) 359,008 19,088 - (253,609) 5,909,008 369,088 $ 6,162,617 $ - $ (253,609) $ 5,909,008 $ 369,088 -36- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 8. LONG-TERM DEBT (Continued) Stormwater Utility Revenue Bonds On January 26, 1999, the Village issued $7,200,000 Stormwater Utility Revenue Bonds, Series 1999, the proceeds of which were used to pay the principal of the $7,200,000 Bond Anticipation Notes, Series 1995. The bonds mature on January 26, 2019. The Village has pledged stormwater utility fees to secure payment of the principal and interest on the bonds. The bonds are due in annual principal installments on October P`. Interest accrues at 4.13% per annum. Debt service requirements to maturity are as follows: Principal Interest Total Fiscal year ending September 30: 2008 $ 350,000 $ 229,215 $ 579,215 2009 365,000 214,760 579,760 2010 385,000 199,686 584,686 2011 405,000 183,785 588,785 2012 425,000 167,058 592,058 2013-2017 2,455,000 554,660 3,009,660 2018-2019 1,165,000 72,688 1,237,688 $ 5,550,000 $1,621,852 $ 7,171,852 Revolving Loan In June 1996, the Village entered into a loan agreement in the amount of $887,983 for the financing of the planning and engineering of the proposed sanitary sewer construction project under a State Revolving Fund Loan. The proceeds were received in fiscal year 1998. The Ioan is payable in semi-annual payments over 20 years beginning on April 15, 2003 at an interest rate of 2.56% per annum. The loan matures on October 15, 2022. Principal Interest Total Fiscal year ending September 30: 2008 $ 19,088 $ 9,046 $ 28,134 2009 19,580 8,554 28,134 2010 20,084 8,050 28,134 2011 20,602 7,532 28,134 2012 21,133 7,001 28,134 2013-2017 114,118 26,553 140,671 2018-2022 129,596 11,075 140,671 2023 14,807 178 14,985 $ 359,008 $ 77,989 $ 436,997 -37- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 9. COMMITMENTS AND CONTINGENCIES Construction Commitments As of September 30, 2007, the Village had outstanding construction commitments of $1,857,481 to complete Phase II of the Crandon Boulevard project. Litigation The Village is involved in several lawsuits incidental to its operations, the outcome of which, in the opinion of management and legal counsel, would not have a material adverse effect on the financial condition of the Village. Risk Management The Village is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions and natural disasters for which the Village carries commercial insurance. There was no reduction in insurance coverage from coverages in the prior year and there were no settlements that exceeded insurance coverage for each of the past three years. Grants Contingency Federal and State programs in which the Village participates are subject to audit by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. In the opinion of management, future disallowances of grant expenditures, if any, would not have a material adverse effect on the financial condition of the Village. NOTE 10. DEFICIT FUND BALANCE The Special Revenue Fund has a deficit fund balance of $2,482,196 which is being funded from the General Fund. -38- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 11. RESERVED FUND BALANCES As of September 30, 2007, fund balances in the general fund have been reserved for the following purposes: Emergencies $ 4,000,000 Master Plan initiatives 1,873,764 Working capital 1,000,000 Playing fields 416,403 Capital Improvement Plan 341,017 Compensated absences 338,589 Recreation facilities 300,000 Capital lease 298,680 Building inspections 275,000 Law enforcement seizures 261,813 Prepaids 198,990 Roadway improvements 175,000 Fire Labor 155,000 Police Labor 90,000 Community Center equipment 50,000 Fire vehicle replacements 50,000 Fire Rescue Transport Fees 23,896 Police/Administration building 13,632 Fire Station building 13,632 $9,875,416 NOTE 12. DEFINED CONTRIBUTION PLANS The Village as a single -employer contributes to the Village of Key Biscayne Money Purchase Plans, which are defined contribution plans created in accordance with Internal Revenue Code Section 401(a). Under one Plan, which is available to Village employees, the Village contributes 12% and the employees contribute 6%. Under the second plan, which is available only to sworn or certified police officers and firefighters, the Village contributes 12% and there is no employee contribution. Beginning October 1, 1997, the police officers and firefighters, which elected to participate in the defined benefit pension plan (see Note 13), were no longer eligible to contribute to the 401(a) plan. Employer contributions for the fiscal year ended September 30, 2007 were $421,947 while the employee contributions were $553,045. Amendments to the Plan must be authorized by the Village Council. -39- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 13. DEFINED BENEFIT PENSION PLAN Plan Description Effective October 1, 1997, the Village established a single -employer Public Employee Retirement System (PERS) to provide pension benefits for its police officers and firefighters. The PERS is considered to be part of the Village's financial reporting entity and is included in the Village's financial reports as a pension trust fund. The Plan was created under Village Ordinance 97-21. The latest available actuarial valuation is as of October 1, 2006. The PERS does not issue a stand-alone financial report for the Plan. Under this plan, all full-time police officers and firefighters employed by the Village are eligible to participate. The monthly retirement benefit is equal to 3% of the average final compensation for each year of service. The calculation for the average final compensation is computed as one -twelfth of the average salary of the five highest years within the last ten years of credited service. Credited service is determined by the total number of years employed by the Village since August 1, 1993. Amendments to the Plan must be authorized by the Village Council. Members are vested after 5 years of service. Vested employees may retire at the earlier of age 55 and the completion of five years of credited service or the age of 52 and the completion of 25 years of credited service, or at age 50 with 5 years of service with the benefit discounted 3% for each year under age 55. Administrative costs of the plan are financed through investment earnings. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Benefits and funds are recorded when paid. At October 1, 2006 (date of the latest actuarial valuation), Plan membership consisted of the following: Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them 14 Current employees: Vested 33 Non -vested 31 Total 64 Funding Policy The Village's contribution rate is adjusted each year to an amount equal to the total pension cost for the year, as determined by the most recent actuarial valuation, less the amount of revenue received from the State of Florida pursuant to Chapters 175 and 185 of the Florida Statutes. The Village's contribution rate was 10.74% of covered payroll for the year ended September 30, 2007 which was determined by the October 1, 2005 actuarial valuation. The participant contribution rate which is fixed by ordinance is 10.5%. This funding policy is designed to limit the Village's exposure to contribute to the Plan. State contributions are recognized as a revenue and expenditure in the general fund. -40- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STA t'UMENTS (Continued) NOTE 13. DEFINED BENEFIT PENSION PLAN (Continued) Annual Pension Cost and Net Pension Obligation The annual pension cost and net pension obligation (asset) for the current year was as follows: Annual required contribution $ 773,701 Interest on net pension asset (11,040) Adjustment to annual required contribution 15,276 Annual pension cost 777,937 Contributions made 773,701 Decrease in net pension asset 4,236 Net pension asset, beginning of year (142,067) Net pension asset, end of year $ (137,831) The annual required contribution for the current year was determined as part of the October 1, 2005 actuarial valuation using the entry age normal funding method. This method does not identify and separately amortize unfunded actuarial liabilities. The actuarial assumptions included (a) 8.5% investment rate of return (net of investment related expenses) and (b) projected salary increases of 9.4% to 3.5% variable per year. Both (a) and (b) included an inflation component of 4%. The actuarial value of assets was determined using the difference between actual and expected return recognized over five years. Trend Information Annual Percentage Net Pension Fiscal Year Pension of APC Obligation Ended Cost (APC) Contributed (Asset) 9/30/2005 $ 768,274 99.5% $ (146,088) 9/30/2006 733,878 99.5% (142,067) 9/30/2007 777,937 99.5% (137,831) NOTE 14. SUBSEQUENT EVENT State Board of Administration (SBA) Investment Pool As discussed in Note 3, at September 30, 2007, the Village had $130,954 invested in the State Board of Administration's Local Government Surplus Funds Trust Fund Investment Pool (Pool). On November 29, 2007, the State Board of Administration implemented a temporary freeze on the assets held in the Pool due to an unprecedented amount of withdrawals from the Fund coupled with the absence of market liquidity for certain securities within the Pool. The significant amount of withdrawals followed reports that the Pool held asset -backed commercial paper that was subject to sub prime mortgage risk. On December 4, 2007, based -41- VILLAGE OF KEY BISCAYNE, FLORIDA NOTES TO BASIC FINANCIAL STATEMENTS (Continued) NOTE 14. SUBSEQUENT EVENT (Continued) State Board of f Administration (SBA) Investment Pool (Continued) on recommendations from an outside financial advisor, the State Board of Administration restructured the Pool into two separate pools. Pool A consisted of all money market appropriate assets, which was approximately $12 billion or 86% of Pool assets. Pool B consisted of assets that either defaulted on a payment, paid more slowly than expected, and/or had any significant credit and liquidity risk, which was approximately $2 billion or 14% of Pool assets. At the time of the restructuring, all current pool participants had their existing balances proportionately allocated into Pool A and Pool B. Currently, Pool A participants may withdraw 15% of their balance or $2 million, whichever is greater, without penalty. Withdrawals from Pool A in excess of the above limit are subject to a 2% redemption fee. New investments in Pool A are not subject to the redemption fee or withdrawal restrictions. Future withdrawal provisions from Pool A will be subject to further evaluation based on the maturities of existing investments and the liquidity requirements of the Pool. On December 21, 2007, Standard and Poor's Ratings Services assigned its "AAAM" principal stability fund rating to Pool A. Currently, Pool B participants are prohibited from withdrawing any amount from the Pool and a formal withdrawal policy has not yet been developed. Market valuations of the assets held in Pool B are not readily available. In addition, full realization of the principal value of Pool B assets is not readily determinable. As of January 9, 2008, the Village no longer had any investments in Pool A or B, respectively. Additional information regarding the Local Government Surplus Funds Trust Fund may be obtained from the State Board of Administration. -42- REQUIRED SUPPLEMENTARY INFORMATION VILLAGE OF KEY BISCAYNE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND FISCAL YEAR ENDED SEPTEMBER 30, 2007 Revenues: Property taxes Utility taxes Franchise fees Licenses and permits Intergovernmental Charges for services Grants Interest Other income Total revenues Expenditures: Current: General government: Elected officials Village Clerk Administration Village Attorney Total general government Public safety: Police Fire Total public safety Public works Building, zoning and planning Parks and recreation Debt service: Principal Interest and fiscal charges Total expenditures Excess of revenues over expenditures Other financing uses: Appropriation of prior years' fund balance Transfers in Transfers out Total other financing uses Net change in fund balances Actual Amounts Budgeted Amounts on a GAAP Original Final Basis $18,452,476 $18,452,476 $18,667,979 2,397,099 2,397,099 2,231,193 855,000 855,000 1,113,194 1,054,126 1,054,126 1,298,133 1,028,483 1,028,483 1,000,265 1,515,625 1,515,625 1,762,657 7,500 7,500 206,040 239,247 239,247 313,389 50 25,549,556 25,549,556 26,592,900 458,424 458,424 444,666 415,070 415,070 379,420 1,236,051 1,236,051 1,258,787 (38,220) 383,000 383,000 460,261 (78,000) 2,492,545 2,492,545 2,543,134 (116,220) Prior Year Reserves $ 4,716,391 4,716,391 4,590,962 5,115,576 5,115,576 5,122,699 (7,200) 9,831,967 9,831,967 9,713,661 (7,200) 1,597,881 1,522,196 2,617,180 1,597,881 1,522,196 2,617,180 1,587,460 1,455,193 2,830,020 Actual Variance Amounts with Final on a Budget - Budgetary Positive Basis (Negative) $18,667,979 $ 215,503 2,231,193 (165,906) 1,113,194 258,194 1,298,133 244,007 1,000,265 (28,218) 1,762,657 247,032 206,040 198,540 313,389 74,142 50 50 26,592,900 1,043,344 444,666 13,758 379,420 35,650 1,220,567 15,484 382,261 739 2,426,914 65,631 4,590,962 5,115,499 125,429 77 9,706,461 125,506 1,587,460 1,455,193 2,830,020 10,421 67,003 (212, 840) 1,409,467 1,409,467 1,264,676 1,264,676 144,791 1,290,976 1,290,976 1,292,675 1,292,675 (1,699) 20,762,212 20,762,212 20,686,819 (123,420) 20,563,399 198,813 4,787,344 4,787,344 5,906,081 123,420 - (123,420) 1,910,507 - (4,787,347) (4,787,347) (4,815,481) - (4,787,347) (4,787,347) (2,904,974) (123,420) $ - $ 3,001,107 $ - See note to budgetary comparison schedule. -43- 6,029,501 1,242,157 1,910,507 1,910,507 (4,815,481) (28,134) (2,904,974) 1,882,373 $ 3,124,527 $3,124,530 VILLAGE OF KEY BISCAYNE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTE TO BUDGETARY COMPARISON SCHEDULE FISCAL YEAR ENDED SEPTEMBER 30, 2007 NOTE 1. BUDGETS AND BUDGETARY ACCOUNTING An annual appropriated budget is prepared for the general fund. The Village prepares a budget for its special revenue fund and its capital projects fund, however, these budgets are prepared as project budgets and not as annually appropriated budgets. The Village follows these procedures in establishing the budgetary data reflected in the financial statements: (a) The Village Manager submits to the Council a proposed operating budget for the ensuing fiscal year. The operating budget includes appropriations and the means of financing them with an explanation regarding each expenditure that is not of a routine nature. (b) Public hearings are conducted to obtain taxpayer comments. (c) Prior to October 1, the budget is legally enacted through passage of an ordinance. (d) The Village Council, by motion, may make supplemental appropriations for the year up to the amount of revenues in excess of those estimated. During fiscal year ended September 30, 2007, there were no supplemental appropriations. (e) Formal budgetary integration is employed as a management control device for the general fund. (f) The budget for the general fund is adopted on a basis consistent with generally accepted accounting principles (GAAP), except for certain unbudgeted expenditures of prior year reserves. (g) (h) (i) The Village Manager is authorized to transfer part or all of an encumbered appropriation balance within departments within a fund; however, any revisions that alter the total appropriations of any department or fund must be approved by the Village Council. There were no budget amendments during fiscal year ended September 30, 2007_ The classification detail at which expenditures may not legally exceed appropriations is at the department level. There is no overexpenditure in debt service as the principal and interest are combined in preparation of the Village's budget. There is no overexpenditure subject to the Village's legal requirements in the parks and recreation department as the Village Council allows for up to $250,000 of overexpenditure without considering this a violation of the budget. -44- VILLAGE OF KEY BISCAYNE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION PENSION TRUST FUND SCHEDULE OF FUNDING PROGRESS Actuarial Accrued UAAL Actuarial Liability Unfunded As % of Actual Value of (AAL) - AAL Funded Covered Covered Valuation Assets Entry Age (UAAL) Ration Payroll Payroll Date I) (11) (b) - (a) (a) / (b) () (b - a) / c 10/1/01 $1,824,306 $4,394,237 $2,569,931 41.5% $3,732,996 68.8% 10/1/02 2,360,957 5,430,198 3,069,241 43.5% 3,984,900 77.0% 10/1/03 3,309,812 6,678,603 3,368,791 49.6% 4,278,629 78.7% 10/1/04 4,400,914 8,021,413 3,620,499 54.9% 4,960,542 73.0% 10/1/05 5,703,772 9,379,732 3,675,960 60.8% 5,320,018 69.1% 10/1/06 7,255,221 10,782,826 3,527,605 67.3% 5,355,088 65.9% -45- VILLAGE OF KEY BISCAYNE, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION PENSION TRUST FUND SCHEDULE OF EMPLOYER CONTRIBUTIONS Year Annual Ended Required Percentage September 30, Contribution Contributed 2002 $ 377,777 88% 2003 465,562 100% 2004 515,437 100% 2005 764,420 100% 2006 729,857 100% 2007 773,701 100% The information presented in the required supplemental schedule was determined as part of the actuarial valuation at the date indicated. Valuation date 10/1/05 Actuarial cost method Entry age normal Amortization method Level percent of pay, closed Remaining amortization 30 years Asset valuation method 5 year Smoothed Market value Actuarial assumptions: Investment rate of return* 8.5% per year compounded annually, net of investment related expenses Projected salary increases* 9.4% to 3.5% variable Cost of living adjustments N/A *Includes inflation at 4% -46- STATISTICAL SECTION STATISTICAL SECTION This part of the Village of Key Biscayne's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Village's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the Village's 47-51 financial performance and well-being have changed over time. These schedules include: Revenue Capacity These schedules contain information to help the reader assess the Village's most significant local revenue source, the property tax. 52-56 Debt Capacity These schedules present information to help the reader assess the affordability of the Village's 57-60 current levels of outstanding debt and the Village's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the 61-63 environment within which the Village's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the 64-65 information in the Village's financial report relates to the services the Village provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. VILLAGE OF KEY BISCAYNE, FLORIDA NET ASSETS BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year Governmental activities: Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets Business -type activities: Invested in capital assets, net of related debt Restricted Unrestricted Total business -type activities net assets Total government: Invested in capital assets, net of related debt Restricted Unrestricted Total government net assets 2003 2004 2005 2006 2007 $ 23,889,001 $ 26,149,714 $26,284,600 $28,676,266 $31,422,358 171,680 283,180 326,826 359,899 4,161,688 2,809,659 4,302,680 4,926,634 28,222,369 29,242,553 30,914,106 33,962,799 40,137,561 261,813 8,453,390 2,024,755 1,768,078 1,388,975 1,254,664 3,413,730 3,022,742 25,913,756 171,680 5,550,663 1,931,844 1,281,141 3,212,985 2,326,089 2,505,881 778,320 432,133 3,104,409 2,938,014 27,917,792 31;002,355 33,928,239 283,180 359,899 261,813 4,064,323 5,583,821 5,704,954 8,885,523 $ 31,636,099 $ 32,265,295 $34,127,091 $37,067,208 $43,075,575 28,216,444 326,826 Note: The Village implemented GASB Statement No. 34 for the fiscal year ended September 30, 2003. -47- VILLAGE OF KEY BISCAYNE, FLORIDA CHANGES Th[ NET ASSETS LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year Expenses: Governmental activities: General government Fire Police Building, zoning and planning Public works Parks and recreation interest on long-term debt Total governmental activities Business -type activities: Stormwater system Solid waste collection Sanitary sewer Total business -type activities Total government expenses Program revenues: Governmental activities: Charges far services: General government Police Fire Parks and recreation Building, zoning and planning Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business -type activities: Charges for services: Stormwater system Solid waste collection Total business -type activities program revenues Total program revenues 2003 2004 2005 5 5,691,379 S 3,614,636 S 2,914,734 4,821,645 4,738,402 4,867,525 4,787,090 4,311,449 4,373,145 1,252,012 1,220,180 1,235,175 963,676 1,103,940 2,189,673 826,695 1,013,741 2,614,785 1,064,028 1,487,245 1,305,383 19,406,525 17,489,593 19,500,420 2006 $ 4,252,037 4,947,149 4,275,617 1,547,042 4,004,651 2,849,434 1,413,272 2007 S 3,781,396 5,257,789 4,651,660 1,447,968 1,589,444 3,077,624 1,505,253 23,289,202 21,311,134 634,361 971,081 454,963 720,158 693,135 273,076 259,173 466,162 501,417 571,246 6,288 15,732 10,261 9,993 9,454 913,725 1,245,986 931,386 1,231,568 1,273,835 5 20,320,250 S 18,735,579 5 20,431,806 5 24,520,770 $ 22,584,969 5 1,034,247 5 961,100 5 1,257,895 5 1,466,186 5 1,389,163 110,215 197,244 212,121 4 0, 719 21,385 5,805 6,505 7,120 50,392 40,144 29,752 35,787 1,287,806 1,512,923 1,416,707 117,705 86,455 1.42,550 167,802 193,391 99,830 - 650,679 3,559,753 799,493 421,085 524,736 517,643 - 1,818,639 1,811,827 4,075,814 6,797,775 3,860,283 531,164 520,729 518,812 517,365 509,571 313,492 284,900 533,632 531,967 520,650 844,656 805,629 1,052,444 1,049,332 1,030,221 S 2,663,295 5 2,617,456 5 5,128,258 5 7,847,107 5 4,890,504 (Continued) -48- VILLAGE OF KEY BISCAYNE, FLORIDA CHANGES IN NET ASSETS {Continued) LAST TEN FISCAL, YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year Net (expense) revenue: Governmental activities Business -type activities Total net expense General revenues: Governmental activities: Taxes: Property taxes Utility taxes Franchise fees Communications services tax Intergovernmental Investment earnings Miscellaneous Transfers Total governmental activities Business -type activities: Investment earnings Transfers Total business -type activities Total general revenues Change in net assets: Governmental activities Business -type activities Total change in net assets 2003 2004 2005 2006 2007 $ (17,587,886) $ (15,677,766) $ (15,424,606) S (16,491,427) $ (17,450,851) (69,069) (440,357) 121,058 (182,236) (243,614) $ (17,656,955) $ (16,118,123) $ (15,303,548) $ (16,673,653) 111_7_±94. :_416.5_) $ 11,317,161 2,251,876 611,502 776,869 82,286 200,561 (9,737) S 12,770,711 2,219,118 677,203 821,883 110,562 126,607 (28,134) 15,230,518 16,697,950 $ 13,360,251 $ 1,488,002 705,810 746,400 978,304 255,611 281,657 (28,135) 14,830,238 $ 18,667,979 1,549,601 1,467,392 1,088,929 1,113,194 797,054 763,801 996,092 1,000,265 306,339 641,115 {28,133) (28,133) 17,787,900 19,540,120 23,625,613 22,163 21,235 41,050 9,737 28,134 28,135 31,900 49,369 69,185 $ 15,262,418 $ 16,747,319 $ 17,857,085 45,527 28,133 73,660 $ 19,613,780 49,086 28,133 77,219 $ 23,702,832 S (2,357,368) S 1,020,184 $ 2,363,294 $ 3,048,693 $ (37,169) (390,988) 190,243 (108,576) S (2,394,537) S 629,196 $ 2,553,537 $ 2,940,117 $ 6,008,367 6,174,762 (166,395) Note: The Village implemented GASB Statement No. 34 for the fiscal year ended September 30, 2003. -49- VILLAGE OF KEY BISCAYNE, FLORIDA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Fiscal Year General fund: Reserved Unreserved Total general fund All other governmental funds: Reserved Unreserved, reported in: 2003 2004 2005 2006 2007 $2,967,382 $4,677,188 $5,754,277 $6,874,310 $ 9,875,416 1,000,177 275,000 3,967,559 4,952,188 5,754,277 6,874,310 Special revenue fund 198,563 Capital projects funds 905,611 Total all other governmental funds 1,104,174 Total governmental funds $5,071,733 513,862 (638,221) (1,496,749) (489,979) 881,595 1,421,014 23,883 243,374 (75,735) $4,976,071 $5,997,651 $6,798,575 9,875,416 (2,482,196) 2,954,753 472,557 $10,347,973 Note: The Village implemented GASB Statement No. 34 for the fiscal year ended September 30, 2003. -50- VILLAGE OF KEY BISCAYNE, FLORIDA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2003 2004 2005 2006 2007 Revenues: Ad valorem taxes $ 11,317,161 $ 12,770,711 $ 13,360,251 $14,830,238 $ 18,667,979 Franchise fees 611,502 677,203 1,452,210 1,885,983 1,113,194 Utility taxes 2,251,876 2,219,118 1,488,002 1,549,601 2,231,193 Licenses and permits 970,001 961,100 1,040,130 1,196,853 1,298,133 Intergovernmental revenue 999,391 1,031,805 1,495,947 1,756,083 1,593,718 Charges for services 327,723 325,651 1,867,362 2,041,169 1,762,657 Grants 99,830 - 650,679 2,799,762 206,040 Investment income 82,286 110,562 255,611 306,339 632,355 Miscellaneous 399,124 441,761 281,657 8,762 Total revenues 17,058,894 18,537,911 21,891,849 26,366,028 27,514,031 Expenditures: Current: General government 1,829,501 1,712,899 2,136,375 2,239,052 2,543,134 Fire 4,046,269 4,462,601 4,749,407 5,117,176 5,122,699 Police 4,305,474 4,113,946 4,605,148 4,388,362 4,590,962 Public works 963,247 1,098,250 2,183,774 4,002,609 1,587,460 Building, planning and zoning 1,245,119 1,212,290 1,238,376 1,544,696 1,455,193 Parks and recreation 782,065 952,261 2,193,633 2,634,887 2,830,020 Capital outlay 5,108,330 10,664,348 4,527,998 6,432,271 6,830,844 Debt service: Principal retirement 1,415,000 1,583,924 1,161,298 1,214,646 1,418,401 Interest and other fiscal charges 1,064,028 1,135,384 1,300,596 1,413,272 1,556,396 Total expenditures 20,759,033 26,935,903 24,096,605 28,986,971 27,935,109 Deficiency of revenues over expenditures (3,700,139) (8,397,992) (2,204,756) (2,620,943) (421,078) Other financing sources (uses): Transfers in 938,652 819,251 1,245,653 1,731,583 6,697,854 Transfers out (948,389) (847,385) (1,273,788) (1,759,716) (6,725,988) Bonds issued 1,657,090 8,330,462 2,850,000 3,450,000 4,000,000 Capital lease proceeds 404,471 Total other financing sources (uses) 1,647,353 8,302,328 3,226,336 3,421,867 3,971,866 Net change in fund balances $ (2,052,786) $ (95,664) $ 1,021,580 $ 800,924 $ 3,550,788 Debt service as a percentage of non -capital expenditures 11.94% 10.10% 10.22% 9.07% 10.65% Note: The Village implemented GASB Statement No. 34 for the fiscal year ended September 30, 2003. -51- VILLAGE OF KEY BBISCAYNE, FLORIDA GENERAL GO VE RNMENTAL TAX RE VE NUES BY SOU RCE LAST TEN FISCAL YE ARS (MODIFIED ACCRU AL B ASIS OF ACCOUNTI NG) Fiscal Ad Valorem Year Ta xes 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 $ 6,963,900 7,012,714 7,799,633 8,737,608 9,569,030 11,317,161 12,770,711 13,360,125 14,830,238 18,667,979 Franchise Taxes $ 709,067 740,031 729,998 738,513 639,072 611,502 677,203 705,810 1,088,929 1,113,194 Utility Taxes $1,514,697 1,621,473 1,723,902 1,772,208 2,258,931 2,251,876 2,219,118 2,234,402 1,549,601 1,467,392 Source: Village of Key Biscayne Finance Department. *Includes half -cent sales tax and state revenue sharing. Inter- governmental* $ 843,812 807,924 889,704 930,169 971,136 999,391 1,031,805 1,140,599 1,756,083 1,593,718 Communications Services Tax** 904,475 825,739 770,637 746,400 797,054 763,801 Total $10,031,476 10,182,142 11,143,237 12,178,498 14,342,644 16,005,669 17,469,474 18,187,336 20,021,905 23,606,084 **Communication s services tax became effective October 1, 2001, replaci ng utility ta xes and franchise fees on telephone and cable TV. -52- VILLAGE OF KEY BISCAYNE, FLORIDA NET ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Fiscal Year Ended September 30, 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Real Property Residential Property $1,941,484,664 2,137,666,293 2,394,282,542 2,618,160,883 3,128,872,469 3,506,812,044 3,713,841,630 4,115,175,292 5,421,393,923 6,173,257,097 Commercial Property $ 62,523,036 67,704,896 75,832,533 82,923,284 99,098,715 111,068,946 117,626,058 130,346,736 166,638,240 294,540,559 Total Total Net Direct Persona! Assessed Tax Property Value Rate $24,166,508 $2,028,174,208 3.606 27,086,715 2,232,457,904 3.606 28,934,086 2,499,049,161 3.606 30,749,478 2,731,833,645 3.606 31,948,797 3,259,919,981 3.606 43,233,556 3,661,114,546 3.606 43,867,688 3,875,335,376 3.606 41,852,920 4,287,374,948 3.606 47,020,078 5,635,052,241 3.606 46,315,146 6,514,112,802 3.450 Note: Property in the Village is reassessed each year. Property is assessed at actual value, therefore, the assessed values are equal to actual value. Tax rates are per $1,000 of assessed value. Source: Miami -Dade County Property Appraiser's Office. -53- VILLAGE OF KEY BISCAYNE, FLORIDA PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Village of Key Biscayne Overlapping Rates (1) Miami -Dade County Miami -Dade Schools Florida South Total Debt Total Debt Total Inland Florida Direct and Fiscal Tax Roll General Debt Total Operating Service County Operating Service School Navigation Water Overlapping Year Year Operations Service Village Millage Millage Millage Millage Millage Millage District Management Other Rates 1998 1997 3.606 - 3.606 6.023 0.929 6.952 9.356 1.106 10.462 0.050 0.597 0.416 22.083 1999 1998 3.606 3.606 6.023 0.837 6.860 9.182 0.978 10.160 0.047 0.597 0.434 21.704 2000 1999 3.606 3.606 5.809 0.816 6.625 8.654 0.990 9.644 0.044 0.597 0.421 20.937 2001 2000 3.606 3.606 5.751 0.652 6.403 8.702 0.915 9.617 0.041 0.597 0.451 20.715 2002 2001 3.606 3.606 5.713 0.552 6.265 8.528 0.848 9.376 0.039 0.697 0.451 20.434 2003 2002 3.606 - 3.606 5.889 0.390 6.279 8.482 0.770 9.252 0.039 0.697 0.451 20.324 2004 2003 3.606 3.606 5.969 0.285 6.254 8.418 0.682 9.100 0.039 0.597 1.086 20.682 2005 2004 3.606 3.606 5.935 0.285 6.220 8.090 0.597 8.687 0.039 0.597 1.030 20.179 2006 2005 3.606 3.606 5.835 0.285 6.120 7.947 0.491 8.438 0.039 0.597 1.014 19.814 2007 2006 3.450 3.450 5.615 0.285 5.900 7.691 0.414 8.105 0.039 0.597 1.008 19.099 Note: All millage rates are based on $1 for every $1,000 of assessed value. Sources: Village of Key Biscayne Finance Department and Miami -Dade County Property Appraiser's Office. (1) Overlapping rates are those of local and county governments that apply to property owners within the Village of Key Biscayne. Not all overlapping rates apply to all Village of Key Biscayne property owners (i.e. the rates for special districts apply only to the proportion of the government's property owners whose property is located within the geographic boundaries of the special district). -54- VILLAGE OF KEY BISCAYNE, FLORIDA PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO 2007 Taxpayer Sonesta Beach Resort United Real Estate Ventures GB Hotel Partners LTD 260 Cape Florida LLC Ocean Club Community Assoc. Claudio & Yvonne Alvarez Aurelio & Berta Fernandez Garfla Investments Roger & Susana Khouri CSM Key Biscayne Equities LLC Net Assessed Value $ 44,568,400 42,064,691 34,700,000 12,663,250 12,500,000 9,202,584 7,813,741 7,361,525 6,979,000 6,43 8,569 $ 184,291,760 Percent of Total Village Net Assessed Rank Value 039% 2 0.75% 3 0.62% 4 0.22% 5 0.22% 6 0.16% 7 0.14% 8 0.13% 9 0.12% 10 0.00% 3.15% Source: Tax roll provided by Miami -Dade County Property Appraisers Office. 1998 Taxpayer Ocean Club Key Biscayne Sonesta Beach Hotel GB Hotel Partners LTD Key Biscayne Shopping Center Grand Bay Tower Association Florida Power & Light Red Dragon Sands, Ltd. Bellsouth Telecommunications, Inc. Fininvest Investment, et al (Key Colony) Valley Forge, Ltd. -55- Net Assessed Value S 53,074,332 30,905,066 16,842,465 9,320,894 8,660,416 5,623,841 4,977,558 4,447,716 4,163,139 2,889,623 $ 140,905,050 Percent of Total Village Net Assessed Rank Value 1 2.38% 2 1.38% 3 0.75% 4 0.42% 5 0.39% 6 0.25% 7 0.22% 8 0.20% 9 0.19% 10 0.13% 6.31% VILLAGE OF KEY BISCAYNE, FLORIDA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Fiscal Year Ended September 30, 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total Taxes Levied for Fiscal Year $ 7,222,995 7,313,596 8,050,243 9,011,571 9,850,992 11,755,271 13,201,979 13,974,460 15,461,356 19,423,659 Collected within the Fiscal Year of the Levy Amount $ 6,948,521 7,012,714 7,799,633 8,73 8,608 9,515,138 11,317,160 12,869,711 13,360,251 14,83 0,238 18,667,979 Percent of Levy 96.20% 95.89% 96.89% 96.97% 96.59% 96.27% 97.48% 95.60% 95.92% 96.11% Collections in Subsequent Year's 10,423 10,519 11,699 13,108 14,273 16,976 19,305 20,040 22,245 28,002 Total Collections to Date Percent Amount of Levy $6,958,944 96.34% 7,023,233 96.03% 7,811,332 97.03% 8,751,716 97.12% 9,529,411 96.74% 11,334,136 96.42% 12,889,016 97.63% 13,3 80,291 95.75% 14,852,483 96.06% 18,695,981 96.25% Source: Village of Key Biscayne Finance Department and Miami -Dade County Tax Collector's Office. -56- VILLAGE OF KEY BISCAYNE, FLORIDA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities Business -Type Activities Fiscal Year General Percent of Ended Obligation Revenue Loans Revenue Personal Per September 30, Bonds Bonds Payable Bonds Total Income (1) Capita (1) 1997 $ $7,675,000 $ $ $7,675,000 0.00% $ 1998 - 6,850,000 6,850,000 0.00% 1999 - 22,290,000 7,200,000 29,490,000 0.00% - 2000 21,220,000 7,065,000 28,285,000 0.00% 2,742 2001 30,120,000 6,940,000 37,060,000 0.00% 3,592 2002 - 29,935,000 6,810,000 36,745,000 0.00% 3,562 2003 29,271,000 6,625,000 35,896,000 0.00% 3,479 2004 - 29,164,892 6,430,000 35,594,892 0.00% 3,450 2005 - 30,850,606 6,010,000 36,860,606 0.00% 3,573 2006 33,085,960 5,785,000 38,870,960 0.00% 3,768 2007 31,695,102 5,200,000 36,895,102 0.00% 3,576 Note: Details regarding the Village's outstanding debt can be found in the notes to the financial statements. (1) See the Schedule of Demographic and Economic Statistics on page 61 for personal income and population data. -57- VILLAGE OF KEY BISCAYNE, FLORIDA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS The Village has never had general obligation debt. VILLAGE OF KEY BISCAYNE, FLORIDA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT SEPTEMBER 30, 2007 2007 Government Unit Direct: Village of Key Biscayne Overlapping debt: Miami -Dade County Miami -Dade County School Board Subtotal, Overlapping Debt Village of Key Biscayne Direct Debt Total Direct and Overlapping Debt Net Debt Outstanding $ 36,895,102 507,316,000 560,574,000 Percentage Applicable to the Village of Key Biscayne (1) 100.00% 2.98% 2.98% Amount Applicable to the Village of Key Biscayne $ 36,895,102 15,118,017 16,705,105 31,823,122 36,895,102 $ 68,718,224 Sources: Data provided by the Miami -Dade County Finance Department and the Miami -Dade County School Board. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Village. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the Village of Key Biscayne. This process recognizes that, when considering the Village's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. (1) For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Value that is within the Village's boundaries and dividing it by the County's and School Board's total taxable assessed value. This approach was also used for the other debt. -59-- VILLAGE OF KEY BISCAYNE, FLORIDA PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Fiscal Year Non -- Ended Ad Valorem Debt Service September 30., Revenues Principal Interest Coverage 1998 $4,697,973 $ 855,000 $ 277,825 4.15 1999 5,364,921 895,000 241,329 4.72 2000 5,324,756 935,000 595,767 3.48 2001 5,777,408 975,000 631,875 3.60 2002 5,426,424 1,015,000 1,420,845 2.23 2003 5,315,452 1,415,000 590,737 2.65 2004 5,305,171 1,583,924 1,107,696 1.97 2005 7,879,761 1,161,298 1,300,596 3.20 2006 10,433,952 1,350,001 1,351,729 3.86 2007 7,924,921 1,283,285 1,302,200 3.07 Source: Village of Key Biscayne Finance Department -60- VILLAGE OF KEY BISCAYNE, FLORIDA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Personal Income (Amounts Per Capita Expressed in Personal Unemployment Year Population (1) Thousands) (2) Income (3) Rate (4) 1998 - $ - $ - 6.7% 1999 _ - 5.9% 2000 10,317 - 86,599 5.6% 2001 10,317 - 86,599 5.7% 2002 10,317 - 86,599 7.4% 2003 10,317 - 86,599 7.3% 2004 10,317 - 86,599 5.0% 2005 10,317 - 89,400 3.9% 2006 10,317 - 89,400 3.8% 2007 10,317 89,400 3.8% Sources: (1) United States Census Bureau, 2000 Census data. Prior to 2000, data not available. (2) Information not available. (3) Years 2000-2004, U.S. Census 2000, Year 2005 City Data.com. (4) U.S. Department of Labor. Rates are for Miami -Dade County. Note: Population is based on surveys conducted during the last quarter of the calendar year. Personal income information is a total for the year. Unemployment rate information is an adjusted yearly average. -61- VILLAGE OF KEY BISCAYNE, FLORIDA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2007 1998 Employer Percentage of Percentage of Total Village Total Village Employees (1) Rank Employment Employees Rank Employment Ritz Carlton Key Biscayne 1,500 1 not known Sonesta Beach Resort 1,500 2 not known Winn Dixie Stores, Inc. 250 3 not known Village of Key Biscayne 100 4 not known All remaining employers are of an extremely small number Information not available Total 3,350 Notes: (1) All amounts are estimated for timely inclusion in report. Requests for information received no response. -62- VILLAGE OF KEY BISCAYNE, FLORIDA FULL-TIME EQUIVALENT VILLAGE GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Number of employees: General government Public safety Building, planning & zoning Public works Parks and recreation Total number of employees 8 8 7 7 7 5 6 7 6 6 70 71 72 72 72 74 76 79 79 79 8 10 16 16 16 12 12 13 13 14 2 2 3 3 3 5 5 5 5 4 2 3 4 3 4 4 4 6 6 7 90 94 102 101 102 100 103 110 109 110 Source: Village of Key Biscayne Finance Department. -63- VILLAGE OF KEY BISCAYNE, FLORIDA OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Public safety: Police: Police personnel and officers 37 38 40 40 40 40 41 40 40 40 Police calls for service 21,982 20,846 21,127 20,659 21,127 20,660 19,004 16,510 13,006 35,412 Parking violations 703 901 789 639 789 639 628 682 801 996 Traffic violations 1,779 2,737 2,875 2,433 2,875 2,433 3,035 1,397 1,468 1,104 Fire: Fire personnel 33 33 33 33 33 34 35 39 39 39 Fire incidents 760 868 1,051 485 1,050 1,114 1,148 1,403 1,103 998 Fire inspections performed 2,250 197 565 470 476 840 307 332 269 220 Planning and development: Business permits issued 3,457 2,851 2,408 1,803 2,313 2,581 3,061 3,045 3,000 3,504 Occupational licenses issued 409 576 598 625 729 668 428 433 475 914 Culture and recreation: Number of building users - 1,250 1,600 1,400 1,400 Solid waste: Residential accounts 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 Sources: Various Village Departments. Note: Indicators are not available for the general government function. -64- VILLAGE OF KEY BISCAYNE, FLORIDA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 General government: Number of general government buildings 1 1 1 1 1 1 1 1 1 1 Public safety: Police: Police stations 1 1 1 1 1 1 1 1 1 1 Patrol units 3 3 3 3 3 3 3 3 3 3 Fire: Fire stations 1 1 1 1 1 1 1 1 1 1 Transportation: Miles of streets 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 Number of street lights 250 250 250 250 300 300 300 300 300 300 Number of traffic signals 4 4 4 4 4 4 4 4 4 4 Culture and recreation: Parks Parks acreage Community center Swimming pools Sources: Various Village Departments. 3 3 3 3 3 3 3 3 3 3 9 9 9 9 9 9 9 9 9 9 -65- - - COMPLIANCE SECTION Rachlin accountants • advisors Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Honorable Mayor, Village Council and Village Manager Village of Key Biscayne, Florida We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the Village of Key Biscayne, Florida (the Village) as of and for the fiscal year ended September 30, 2007, and have issued our report thereon dated May 21, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Village's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Village's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Village's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Village's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Village's financial statements that is more than inconsequential will not be prevented or detected by the Village's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Village's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. -66- Rachlin LLP + One Southeast Third Avenue • Tenth Floor • Miami, Florida 33131 ■ Phone 305.377.4228 • Fax 305.377.8331 • www.rachlin.com An Independent Member of Baker Tilly International M I A M I • F O R T LAUDE RDALE • WEST PALM REACH Honorable Mayor, Village Council and Village Manager Village of Key Biscayne, Florida Page Two Compliance and Other Matters As part of obtaining reasonable assurance about whether the Village's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. However, we noted an other matter that we have reported to management in the accompanying schedule of findings and responses. This report is intended solely for the information and use of the Mayor, Village Council, Village Manager and regulatory agencies, and is not intended to be and should not be used by anyone other than these specified parties. Miami, Florida May 21, 2008 -b7- Rachlin accountants . advisors Rachlin accountants • advi of s Management Letter in Accordance with the Rules of the Auditor General of the State of Florida Honorable Mayor, Village Council and Village Manager Village of Key Biscayne, Florida We have audited the financial statements of the Village of Key Biscayne, Florida (the Village) as of and for the fiscal year ended September 30, 2007, and have issued our report thereon dated May 21, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters. Disclosures in that report, which is dated May 21, 2008, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and, unless otherwise required to be reported in the report on compliance and internal controls this letter is required to include the following information. • Section 10.554(1)(1)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address significant findings and recommendations made in the preceding annual financial audit report. Corrective actions have been taken to address significant findings and recommendations made in the preceding annual financial audit report, except as noted in the schedule of findings and responses. • Section 10.554(1)(i)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section 218.415, Florida Statutes, regarding the investment of public funds. In connection with our audit, we determined that the Village complied with Section 218.415, Florida Statutes. • Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management, accounting procedures, and internal controls. In connection with our audit, recommendations accompany this report in the schedule of findings and responses. • Section 10.554(1){i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts and grant agreements or abuse that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. • Section 10.554(1)(i)5., Rules of the Auditor General, requires, based on professional judgment, the reporting of the following matters that arc inconsequential to the financial statements, considering both quantitative and qualitative factors: (1) violations of laws, rules, regulations, and contractual provisions or abuse that have occurred, or were likely to have occurred, and would have an immaterial -68- Rachlin LLP vi One Southeast Third Avenue • Tenth Floor • Miami, Florida 33131 • Phone 305.377.4228 • Fax 305.377.8331 • www.rachlin.com An Independent Member of Baker Tilly International M IAM I FORT LAUDERDALE I WEST PALM BEACH Honorable Mayor, Village Council and Village Manager Village of Key Biscayne, Florida Page Two effect on the financial statements; (2) improper expenditures or illegal acts that would have an immaterial effect on the financial statements; and (3) control deficiencies that are not significant deficiencies, including, but not limited to; (a) improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements); (b) failures to properly record financial transactions; and (c) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of, the auditor. In connection with our audit, we did not have any such findings. ■ Section I0.554(1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. Village of Key Biscayne was incorporated by the Laws of Florida, Act of 1955. There are no component units related to the Village. ■ Section 10.554(1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the Village did not meet any of the conditions described in Section 218.503(1), Florida Statutes. ■ Section 10.554(1)(i)7.b., Rules of the Auditor General, requires that we determine whether the annual financial report for the Village for the fiscal year ended September 30, 2007, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2007. In connection with our audit, we determined that these two reports were in agreement. ■ Sections 10.554(1)(i)7.c. and 10.556(7), Rules of the Auditor General, require that we apply financial condition assessment procedures. In connection with our audit, we applied financial condition assessment procedures. It is management's responsibility to monitor the entity's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. The assessment was done as of the fiscal year end. There were no findings that identified deteriorating financial conditions. This management letter is intended solely for the information of the Honorable Mayor, Village Council, Village Manager and the Auditor General of the State of Florida and is not intended to be and should not be used by anyone other than these specified parties. e t 4.,:• Li -19 Miami, Florida May 21, 2008 -69- Rachlin accountants. advisors VILLAGE OF KEY BISCAYNE, FLORIDA SCHEDULE OF FINDINGS AND RESPONSES FISCAL YEAR ENDED SEPTEMBER 30, 2007 PRIOR YEAR FINDING NOT IMPLEMENTED Control Deficiency 06-01 Village Credit Cards Condition When performing a test over the process of the Village personnel and their use of Village issued credit cards, we noted in various instances that there was no support attached or in adequate support attached to the credit card statement identifying the business purpose of the transaction. In those instances, sign offs of responsible officials were noted on the credit card statement. This is a repeat comment from the prior year. Subsequent to the reporting of this matter in the prior year's audit, we were provided a written policy prepared by the Village, however, we noted during our audit for the fiscal year ended September 30, 2007, that the credit card policy was not properly communicated to Village personnel. Criteria The Village has the responsibility to safeguard their assets from loss or misuse. Cause Lack of adequate internal controls over credit card practices stemming from lack of a written policy communicated to Village personnel. Effect Inadequately supported transactions of expenses paid with the Village credit cards. Recommendation We recommend that the Village communicate written policies and procedures for the proper safeguarding and usage of the Village credit cards. Examples of what the written policy may include are as follows: adequate oversight and internal controls should include safeguarding the actual credit card; ensuring only authorized personnel have access to the credit card; sufficient documentation of all credit cards purchases should be maintained in the form of invoices andlor receipts and in the rare instance where a receipt is lost or cannot be obtained, s sign off by a responsible Village official; monthly credit cards statements should be reconciled to the receipts on hand by a person other than the individual who are authorized to use the credit card and documentation should support a valid business purpose; payments should be remitted to the credit card vendor in a timely fashion to avoid late fees and charges. Views of Responsible Officials and Planned Corrective Actions The Village has adopted a written credit policy approved by the Village Manager. It states that all purchases shall be accompanied by complete receipt documentation. The monthly statements are not paid until 100% compliance with this provision is accomplished. At times credit privileges are suspended until payment is received. There is no exception to this policy. -70- VILLAGE OF KEY BISCAYNE, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) CURRENT YEAR FINDINGS AND RECOMMENDATIONS None. NEW PRONOUNCEMENT Governmental Accounting Standards Board Statement No. 45 — Accounting and Financial Reporting by Employers for Post -Employment Benefits Other than Pensions The GASB has issued Statement No. 45, "Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions," which provides guidance on all aspects of OPEB reporting by employers. The requirements of this statement are effective for fiscal periods beginning after December 15, 2006, for governments with annual revenues of $100 million or more; for fiscal periods beginning after December 15, 2007, for governments with total annual revenues of S10 million or more but less than $100 million; and for fiscal periods beginning after December 15, 2008, for governments with total annual revenues of less than $10 million. The Village will he required to implement this pronouncement for the fiscal year ended September 30, 2009. Recommendation The contents of this statement are highly complex and will require significant lead time to implement on the respective implementation date. We would suggest that the Village obtain a thorough understanding of the requirements and initiate planning for implementation in a prudent manner. -71-