Other Auditor Reports 12/31/2006

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Vow During 2006, the City Council approved a policy to return SAC plus interest to all affected property owners. Those property owners that have access to City sewer service may retum the refund to the City provided they connect by December 31, 2007. The City will pay the SAC charge for those property owners. Any such property owner not connected by the end of 2007 shall be refunded the unused SAC plus interest after December 31, 2007. The SAC liability will be entirely abated by December 31, 2007. Area and Unit Charge Fund On January 11, 1988, the City Council approved Resolution 1 -88, which established the Area and Unit Charge Fund for the City. The purpose of this fund is to collect various area and unit charges to be used to meet debt payments. Before October 1 of each year, the City estimates the required transfer needed to meet debt payments for the subsequent year. In December, these estimated amounts are transferred to the various debt funds. We recommend that the City continue to closely monitor actual versus projected area and unit assessment collections to assure that debt payment requirements will be met. Designations of balances required for debt service is necessary to define discretionary construction balances available to the City. The financing plan for the following bond issues have pledged area and unit charges for the repayment of debt service: • Improvement and Utility Bonds of 2004A • Improvement Refunding Bonds of 1999A (Paid off in full during 2006) • Water Revenue Bonds of 1999B • Water Revenue Bonds of 1996B The Improvement and Utility Bonds of 2004A have future debt service requirements (principal and interest) totaling $1,633,469. During 2006, a transfer of $359,680 was made to the Improvement Refunding Bonds of 1999A debt service fund. _ The Water Revenue Bonds of 1999B and 1996B have future debt service requirements totaling $230,971 and $2,272,716 (principal and interest), respectively. The City annually transfers amounts from the Area and Unit Charge Fund to the Water Fund sufficient to help cover the debt services of these bonds. During 2006, a transfer of $299,725 was made to the Water Fund. It is the City's intention to repay the Water Revenue Bonds of 1999B and 1996B with revenues of the Water Fund. If revenues are not sufficient to meet the debt requirements, funds will be transferred from the Area and Unit Charge Fund. MEM MEM In addition to the transfers above, the Area and Unit Charge Fund transferred $121,000 to the Improvement Refunding Bonds of 2003A Fund and $333,265 to the Improvement Bonds of 1998A for debt service requirements. DEBT SERVICE FUNDS Debt service funds are a type of governmental fund used to account for the accumulation of resources for the payment of principal and interest on general obligation debt (other than enterprise fund debt). Debt service funds may have one or a combination of revenue sources pledged to retire debt including property taxes, tax increments, special assessments and area and unit charges. (9)