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04-23 RESOLUTION NO. 04-23 A RESOLUTION PROVIDING FOR THE SALE OF NOT TO EXCEED $15,500,000 STORMW A TER SYSTEM REVENUE BONDS, SERIES 2004; SETTING FORTH THE FORM OF THE NOTICE OF BOND SALE AND SUMMARY NOTICE OF BOND SALE RELATING TO THE SALE OF SUCH BONDS; DIRECTING PUBLICATION OF THE SUMMARY NOTICE OF SALE RELATING TO SUCH BONDS; PROVIDING FOR THE OPENING OF BIDS RELATING TO THE SALE OF THE BONDS; SETTING FORTH THE OFFICIAL NOTICE OF SALE AND BID FORMS; PROVIDING THAT SUCH BONDS SHALL BE ISSUED IN FULL BOOK ENTRY FORM; APPROVING THE FORM OF A PRELIMINARY OFFICIAL STATEMENT; PROVIDING FOR COMPLIANCE WITH A CONTINUING DISCLOSURE CERTIFICATE; DESIGNATING A REGISTRAR AND PAYING AGENT; AUTHORIZING THE PURCHASE OF A FINANCIAL GUARANTY INSURANCE POLICY; PROVIDING CERTAIN OTHER MATTERS IN CONNECTION THEREWITH; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, on July 18, 2002, the City Council of the City of Clearwater, Florida (the "City" or the "Issuer") enacted Ordinance No. 6931-02, amending Ordinance No. 6378-99 (collectively, the "Bond Ordinance") to provide for the issuance of City's Stormwater System Revenue Bonds, Series [to be determined], in one or more series from time to time payable from Parity Pledged Revenues (as defined therein); and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CLEARWATER, FLORIDA, as follows: SECTION 1. AUTHORIZATION OF BONDS AND SERIES DESIGNATION. That portion of the Stormwater System Revenue Bonds, Series 2004 authorized by the Bond Ordinance being offered pursuant to this resolution is hereby designated as the not to exceed $15,500,000 City of Clearwater, Florida, Stormwater System Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), which Series 2004 Bonds are hereby authorized to be issued. The proceeds of the Series 2004 Bonds shall be used to pay (i) a portion of the costs of the Series 2004 Project (as hereinafter identified), (ii) the costs of issuing the Series 2004 Bonds, (iii) the premium on the bond insurance policy, and (iv) to make a deposit to the Reserve Fund. The proceeds of the Series 2004 Bonds not required to pay the amounts described in clauses (ii) through (iv) in the immediately preceding sentence shall be deposited into the subaccount in the Construction Fund (created by the Bond Ordinance) for the Series 2004 Project approved in the this Resolution. SECTION 2, PUBLIC SALE. There is hereby authorized to be sold pursuant to a public sale not to exceed $15,500,000 City of Clearwater, Florida, Stormwater System Revenue Bonds, Series 2004. SECTION 3. SALE OF SERIES 2004 BONDS; REDEMPTION AND MATURITY PROVISIONS, The Finance Director is hereby directed to arrange for the sale of the Series 2004 Resolution 04-23 Bonds utilizing the electronic bid process of PARITY through the publication of the Summary Notice of Sale of the Bonds in The Bond Buyer, on such date as shall be deemed by the Finance Director to be in the best interest of the Issuer and such publications to be not less than ten (10) calendar days prior to the date of sale as required by Section 218.385(1), Florida Statutes; and to publish such Notice in such other newspapers on such dates as may be deemed appropriate by the Finance Director. The Series 2004 Bonds shall be subject to optional redemption and shall bear maturities and sinking fund amortizations as shall be subsequently determined by the Finance Director, upon advice of the City's financial advisor and based on market conditions existing at the time, prior to the publication of the Summary Notice of Bond Sale hereinafter approved. Proposals for purchase of the Series 2004 Bonds will be received electronically via PARITY as provided in the Official Notice of Sale, from the time that the Notice of Bond Sale is published until 11:00 a.m., Clearwater, Florida time, on such date and time as may be established by the Finance Director of the City or her designee, and if such date is subject to change, communicated through Thompson Municipal Market Monitor (TM3) not less than twenty-four (24) hours prior to the time bids are to be received for the purchase of the City of Clearwater, Florida, Stormwater System Revenue Bonds, Series 2004; provided that if the internet is not working on the designated bid date, the bid date shall be automatically changed to the next business day, and the City will communicate a confirmation of this change in bid date through Thompson Municipal Market Monitor (TM3), all as provided in the Notice of Sale (the "Bid Date"). SECTION 4. CREATION OF ACCOUNT IN THE CONSTRUCTION FUND AND USE OF FUNDS. There is hereby created with the Construction Fund a separate account, namely, the Series 2004 Project Account. Moneys held in the Series 2004 Project Account shall be used to pay the costs of issuing and delivering the Series 2004 Bonds and the costs of the Series 2004 Project. SECTION 5. DISPOSITION OF PROCEEDS OF SERIES 2004 BONDS. The proceeds from the sale of the Series 2004 Bonds shall be deposited as follows: (a) An amount equal to the accrued interest on the Series 2004 Bonds shall be deposited into the Interest Account in the Bond Service Fund; (b) An amount determined by the Finance Director to be necessary to pay the costs of issuing the Series 2004 Bonds, including the premium due to the Bond Insurer shall be used to pay such costs; (c) An amount determined by the Finance Director to be necessary to increase the amount in the Reserve Fund so that the amount on deposit therein equals the Reserve Requirement; and (d) The remaining proceeds of the Series 2004 Bonds shall be deposited into the Series 2004 Project Account of the Construction Fund. 2 Resolution 04-23 SECTION 6. APPROVAL OF FORMS. The Notice of Bond Sale and Summary Notice of Sale of the Bonds to be submitted for purchase of the Series 2004 Bonds shall be in substantially the forms annexed hereto, as Exhibits A and B, respectively, together with such changes as shall be deemed necessary or desirable by the Finance Director depending on the bidding method selected in accordance with Section 3 hereof, incorporated herein by reference. The form of the Official Bid Form shall be provided by the internet auction website selected by the Finance Director, and shall be reasonably satisfactory to the Finance Director. SECTION 7. BOOK ENTRY ONLY BONDS. It is in the best interest of the City and the residents and inhabitants thereof that the Series 2004 Bonds be issued utilizing a pure book-entry system of registration. In furtherance thereof, the City has previously executed and delivered a Blanket Letter of Representations with the Depository Trust Company. For so long as the Series 2004 Bonds remain in such book entry only system of registration, in the event of a conflict between the provisions of the Bond Ordinance and of the Blanket Letter of Representations, the terms and provisions of the Blanket Letter of Representations shall prevail. SECTION 8. PRELIMINARY OFFICIAL STATEMENT AND OFFICIAL STATEMENT. The City Manager and Finance Director are authorized and directed to cause a Preliminary Official Statement to be prepared in substantially the form attached hereto as Exhibit C, with such changes, insertions and omissions as shall be approved by the City Manager and Finance Director, containing a copy of the attached Notice of Bond Sale and to furnish a copy of such Preliminary Official Statement to interested bidders. The City Manager and Finance Director are authorized to deem final the Preliminary Official Statement prepared pursuant to this Section for purposes of Rule 15c2- 12 (the "Rule") of the Securities and Exchange Commission. Upon the award of the Series 2004 Bonds to the successful bidder, the City shall also make available a reasonable number of copies of the Preliminary Official Statement to such bidder, who may mail such Preliminary Official Statements to prospective purchasers at the bidder's expense. Following the award of the Series 2004 Bonds, the City Manager and the Finance Director shall cause to be prepared a final Official Statement dated as of the Bid Date, reflecting such changes in the Preliminary Official Statement as may be necessary to reflect the purchaser's bid. The Mayor and City Manager are hereby authorized to execute and delivery such final Official Statement, with such changes, insertions and omissions as may be approved by such officers. SECTION 9. CONTINUING DISCLOSURE. The City hereby covenants and agrees that, in order to provide for compliance by the City with the secondary market disclosure requirements of the Rule, that it will comply with and carry out all of the provisions of that certain Continuing Disclosure Certificate in substantially the form attached hereto as Exhibit D, to be executed by the City and dated the date of issuance and delivery of the Series 2004 Bonds, as it may be amended from time to time in accordance with the terms thereof (the "Continuing Disclosure Certificate"). Notwithstanding any other provision of this Resolution, failure of the City to comply with such Continuing Disclosure Certificate shall not be considered an event of default; however, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this 3 Resolution 04-23 Section. SECTION 10. REGISTRAR AND PAYING AGENT. Wachovia Bank, National Association, through its designated office in Jacksonville, Florida, is hereby appointed as Registrar and Paying Agent for the Series 2004 Bonds. SECTION 11. FINANCIAL GUARANTY INSURANCE POLICIES. Pursuant to the Bond Ordinance, Ambac Assurance Corporation ("Ambac") has been selected to provide its Financial Guaranty Insurance Policy (the "Policy") as the Bond Insurance Policy (as defined in the Bond Ordinance) as additional security for payment of principal and interest on the Series 2004 Bonds. Selection of Ambac as the Bond Insurer (as defined in the Bond Ordinance) is hereby ratified and confirmed and payment for such Bond Insurance Policy from proceeds of the Series 2004 Bonds is hereby authorized. The Issuer hereby accepts the terms, conditions and agreements relating to the Bond Insurance Policy in accordance with the Financial Guaranty Insurance Commitment attached hereto as Exhibit E and incorporated herein. A statement of insurance is hereby authorized to be printed on or attached to the Series 2004 Bonds for the benefit and information of the holders of the Series 2004 Bonds. For so long as the Bond Insurance Policy is applicable to the Series 2004 Bonds, the additional provisions set forth on Exhibit "F" attached hereto shall be applicable to the Series 2004 Bonds. In addition to the covenants and agreements of the Issuer previously contained in the Bond Resolution regarding the rights of the Bond Insurer which are incorporated herein, the Issuer hereby covenants and agrees for the benefit of the Bond Insurer and the holders of the Series 2004 Bonds while the Bond Insurance Policy insuring the Series 2004 Bonds is in full force and effect, to provide the Bond Insurer with copies of any notices to be given to any party pursuant to the Bond Resolution or this Resolution, and to provide prior notice to the Bond Insurer of any amendments to the Bond Resolution or this Resolution. (a) Any notice that is required to be given to a holder of the Bonds or to the Paying Agent pursuant to the Bond Ordinance shall also be provided to the Bond Insurer. All notices required to be given to the Bond Insurer under the Resolution shall be in writing and shall be sent by registered or certified mail addressed to Ambac Assurance Corporation, One State Street Plaza, New York, New York 10004 Attention: Surveillance Department. (b) The Insurer shall receive notice of any amendments to the Bond Ordinance or this Resolution prior to the adoption of such amendments by the City. (c) The City shall provide copies of all amendments to the Bond Ordinance or this Resolution which required the consent of the Bond Insurer to Standard & Poors. SECTION 12. AWARD OF BIDS. The Finance Director is hereby authorized to accept the bids for the Series 2004 Bonds. The City Manager and the Finance Director are hereby authorized to award the sale of the Series 2004 Bonds on their determination of the best bid submitted in 4 Resolution 04-23 accordance with the terms of the Notice of Bond Sale provided for herein so long as the true interest cost rate shall not exceed 6.0% On the Series 2004 Bonds. The City Manager and the Finance Director are hereby authorized to award the sale of the Series 2004 Bonds as set forth above or to reject all bids for the Series 2004 Bonds. Such award shall be final. SECTION 13. PRIOR RESOLUTIONS. To the extent the provisions of this Resolution are inconsistent with the provisions of prior resolutions regarding the Series 2004 Project or the Series 2004 Bonds, provisions of this Resolution shall control and supercede the inconsistent provisions of such Resolutions. SECTION 14. EFFECTIVE DATE. This resolution shall take effect immediately upon adoption. PASSED AND ADOPTED this 5thday of August ,2004. CITY OF CLEARWATER, FLORIDA Approved as to form: Attest: 11~ Pamela K. Akin City Attorney Cy t ia E. G&i-deau City lerk 5 Resolution 04-23 EXHIBIT A FORM OF OFFICIAL NOTICE OF BOND SALE $14,350,000* CITY OF CLEARWATER, FLORIDA STORMW A TER SYSTEM REVENUE BONDS, SERIES 2004 NOTICE IS HEREBY GIVEN that electronic (as explained below) proposals will be received electronically via PARITY in the manner described below, until 11 :00 a.m., Clearwater Florida Time, on August 18, 2004. Bids must be submitted electronically via PARITY in accordance with this Notice of Bond Sale, until 11:00 a.m., Clearwater, Florida Time, but no bid will be received after the time for receiving bids specified above. To the extent any instructions or directions set forth in PARITY conflict with this Notice of Bond Sale, the terms of this Notice of Bond Sale shall control. For further information about PARITY, potential bidders may contact the financial advisor to the City, RBC Dain Rauscher, 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701 Attn: Kevin M. Conitz, telephone (727) 895-8853, or Parity at 40 West 23rd Street, New York, NY 10010, telephone (212) 404-8102. In the event of a malfunction in the electronic bidding process, the bid date will automatically change to the next business day as confirmed in a communication through Thompson Municipal Market Monitor (TM3). Form of Series 2004 Bonds The Series 2004 Bonds will be issued in book entry only form, without coupons, in denominations of $5,000 or any integral multiples thereof, and shall be dated August 15, 2004. Principal of the Series 2004 Bonds shall be paid to the registered owners at the designated corporate trust office of Wachovia Bank, National Association (the "Paying Agent" and "Registrar"), upon presentment and surrender of the Series 2004 Bonds. Interest on the Series 2004 Bonds shall be paid to the registered owners as shown on the registration books maintained by the Registrar, by check or draft mailed to each such owner's address as shown on the registration books maintained by the Registrar as of the fifteenth (15th) day of the calendar month preceding such interest payment date. Interest will be payable each May 1 and November 1, commencing November 1, 2004. Interest will be calculated on the basis of a 360-day year of twelve 30-day months. For so long as The Depository Trust Company, New York, New York, or its nominee, Cede & Co. (collectively, "DTC") is the registered owner of the Series 2004 Bonds, payments of principal of, redemption premium, if any, and interest on the Series 2004 Bonds will be made directly to DTC. Disbursements of such payments to the DTC participants is the responsibility of DTC and further disbursement of such payments from the DTC participants to the beneficial owners of the Series 2004 Bonds is the responsibility of the DTC participants. A-I Initially one bond will be issued for each maturity of the Series 2004 Bonds in the aggregate principal amount of each such maturity and registered in the name of DTC. DTC, an automated clearing house for securities transactions, will act as securities depository for the Series 2004 Bonds. Purchases of the Series 2004 Bonds will be made in book-entry-only form (without certification). It shall be the responsibility of the Successful Bidder (as hereinafter defined) for the Series 2004 Bonds to furnish to DTC an underwriters' questionnaire and to the City the CUSIP numbers of the Series 2004 Bonds not less than seven (7) days prior to the Closing Date (as hereinafter defined). Maturity Schedule The Series 2004 Bonds will mature on November 1 of the following years in the following principal amounts: Series 2004 Bonds* Principal Principal Principal Maturity Amount Maturity Amount Maturity Amount 11/01/2005 $ 305,000 11/01/2014 $ 390,000 11/01/2023 $ 570,000 11/01/2006 310,000 11/01/2015 410,000 11/01/2024 595,000 11/01/2007 315,000 11/01/2016 420,000 11/01/2025 625,000 11/01/2008 330,000 11/01/2017 435,000 11/01/2026 650,000 11/01/2009 330,000 11/01/2018 455,000 11/01/2027 685,000 11/01/2010 345,000 11/01/2019 475,000 11/01/2028 710,000 11/01/2011 355,000 11/01/2020 495,000 11/01/2029 750,000 11/01/2012 365,000 11/01/2021 520,000 11/01/2030 825,000 11/01/2013 380,000 11/01/2022 540,000 11/01/2031 860,000 11/01/2032 905,000 *Preliminary, subject to change Mandatory Redemption Provisions If the Successful Bidder designates any Series 2004 Bonds as term bonds as described under "Designation of Term Bonds," the following mandatory redemption provisions shall apply with respect to such designated term bonds: The Series 2004 Bonds maturing on November 1, 20_ will be subject to mandatory redemption prior to maturity, selected by lot, or in such manner as the Registrar may deem appropriate, at a redemption price equal to the principal amount thereof on the redemption date, on November 1,20---, and each November 1 thereafter, from amounts deposited in the Redemption Account in the Bond Service Fund established by the Ordinance, in the following years and amounts as follows: A-2 Year Amortization Installment Year Amortization Installment Optional Redemption Provisions The Series 2004 Bonds maturing on or before November 1, 2014 are not callable prior to their maturity dates. The Series 2004 Bonds maturing after November 1, 2014 are subject to optional redemption by the City, on and after November 1, 2014 as a whole, or in part, at any time, at the redemption prices (expressed as percentages of principal amount) set forth below, together with accrued interest to the date of redemption. Redemption Period Price November 1, 2014 and thereafter 100% Adjustment of Principal Amount After final computation of the bids, to achieve desired debt service levels, the City reserves the right either to increase or decrease any Principal Amount of the Series 2004 Bonds (or any Amortization Installment in the case of a Term Bond) shown on the schedule of Principal Amounts set forth above (the "Maturity Schedule"), by an amount not to exceed five percent (5%) of the stated amount of each such Principal Amount on the Maturity Schedule and correspondingly adjust the issue size, all calculations to be rounded to the nearest $5,000. In the event of any such adjustment in the Series 2004 Bonds, no rebidding or recalculation of the bid submitted with respect to such Series 2004 Bonds will be required or permitted. If necessary, the total purchase price of the Series 2004 Bonds will be increased or decreased in direct proportion to the ratio that the adjustment bears to the aggregate principal amount of the Series 2004 Bonds specified herein; and the Series 2004 Bonds of each maturity, as adjusted, will bear interest at the same rate and must have the same initial reoffering yields as specified in the bid of the Successful Bidder. However, the award will be made to the bidder whose bid produces the lowest true interest cost, calculated as specified below, solely on the basis of the bid for the Series 2004 Bonds offered pursuant to the Bid Maturity Schedule of the relevant series of Series 2004 Bonds, without taking into account any adjustment in the amount of Series 2004 Bonds set forth in the Bid Maturity Schedule. Designation of Tenn Bonds Bidders may specify that the annual Principal Amounts of the Series 2004 Bonds coming due in any two or more consecutive years may be combined to form one or more maturities of Series A-3 2004 Term Bonds scheduled to mature in the last of such years with the preceding annual Principal Amounts for such years constituting mandatory Amortization Installments of Series 2004 Bonds to be selected by lot and redeemed at a price of par plus accrued interest in accordance with the Resolution. Basis of Award Proposals must be unconditional and only for all the Series 2004 Bonds. The purchase price bid for the Series 2004 Bonds may include a discount (including underwriters' discount and original issue discount) not to exceed two percent (2.0%) of the principal amount of the Series 2004 Bonds and shall specify how much of the discount is original issue discount. The purchase price bid may also include an original issue premium (including underwriter's discount and original issue premium) not to exceed two percent (2.0%) of the principal amount of the Series 2004 Bonds and shall specify how much of such purchase price is original issue premium. The Series 2004 Bonds will be insured by Ambac Assurance Corporation and the City will pay the bond insurance premium from Bond proceeds. The purchase price bid for the Series 2004 Bonds will not deduct the insurance premium. Only the final bid submitted by any bidder through Parity will be considered. The City reserves the right to determine the Successful Bidder for the Series 2004 Bonds, to reject any or all bids and to waive any irregularity or informality in any bid. The Series 2004 Bonds will be awarded to the bidder (herein referred to as the "Successful Bidder" as to the Series 2004 Bonds) offering such interest rate or rates and purchase price which will produce the lowest true interest cost to the City over the life of the Series 2004 Bonds. True interest cost for the Series 2004 Bonds (expressed as an annual interest rate) will be that annual interest rate being twice that factor of discount rate, compounded semiannually, which when applied against each semiannual debt service payment (interest, or principal and interest, as due) for the Series 2004 Bonds will equate the sum of such discounted semiannual payments to the bid price (inclusive of accrued interest). Such semiannual debt service payments begin on November 1, 2004. The true interest cost shall be calculated from September 1, 2004, the expected closing date of the Series 2004 Bonds (the "Closing Date") and shall be based upon the principal amounts of each serial maturity set forth in this Notice of Bond Sale and the bid price set forth in the Proposal for the Series 2004 Bonds submitted in accordance with the Notice of Bond Sale. In case of a tie, the City may select the Successful Bidder by lot. It is requested that each Proposal for the Series 2004 Bonds be accompanied by a computation of such true interest cost to the City under the term of the Proposal for Bonds, but such computation is not to be considered as part of the Proposal for Bonds. Interest Rates Permitted The Series 2004 Bonds shall bear interest expressed in multiples of one-eighth (1/8) or one- twentieth (1/20) of one percent. No difference greater than 4% will be permitted between the highest and lowest rates of coupon interest specified. Should an interest rate be specified which results in annual interest payments not being equally divisible between the semiannual payments in cents the first semiannual payment will, be reduced to the next lower cent and the second semiannual payment will be raised to the next higher cent. A-4 It shall not be necessary that all Series 2004 Bonds bear the same rate of interest, provided that all Series 2004 Bonds maturing on the same date shall bear the same rate of interest. A rate of interest based upon the use of split or supplemental interest payments or a zero rate of interest will not be considered. Paying Agent and Registrar The Paying Agent and Registrar for the Series 2004 Bonds is Wachovia Bank, National Association through its designated office in Jacksonville, Florida. Security Principal of and interest on the Series 2004 Bonds to be issued pursuant to Ordinance No. 6931-02, as supplemented, and all required sinking fund, reserve and other payments shall be payable solely from the Net Revenues of the City's Stormwater System, together with the earnings thereon derived from the investment thereof in the Funds and Accounts established in the Ordinance and as more fully described in the Preliminary Official Statement. The Series 2004 Bonds do not constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation, and no Bondholder shall ever have the right to require or compel the exercise of the ad valorem taxing power of the City or taxation of any real or personal property therein for the payment of the principal of and interest on the Series 2004 Bonds or the making of any debt service fund, reserve or other payments provided for in the Resolution. Purpose Pursuant to the Ordinance, the Series 2004 Bonds are being issued to pay a portion of the costs of the Projects, the costs of issuing the Series 2004 Bonds and to purchase a Financial Guaranty Insurance Policy and to make a deposit to the Debt Service Reserve Fund. Issuance of Series 2004 Bonds The Series 2004 Bonds will be issued and sold by the City of Clearwater, Florida, a municipal corporation organized and existing under the laws of the State of Florida. The Series 2004 Bonds are being issued pursuant to Ordinance No. 6378-99 enacted by the City on April 15, 1999, as supplemented by Ordinance No, 6931-02, enacted by the City on July 18, 2002, as further amended and supplemented by Resolution No. 04-23, enacted by the City on August 5, 2004, as further supplemented (collectively, the "Bond Ordinance") by the City of Clearwater, Florida (the "City") and pursuant to the provisions of Chapter 166, Florida Statutes, and other applicable provisions of law. A-5 Financial Guaranty Insurance Policy A commitment to issue a Financial Guaranty Insurance Policy guaranteeing payment of principal and interest on the Series 2004 Bonds has been obtained from Ambac Assurance Corporation. Proposals Proposals for the Series 2004 Bonds are desired on forms which will be furnished by PARITY, on behalf of the City, and be submitted electronically via PARITY. All bidders must submit a "Good Faith Deposit" in the amount of $100,000 (the "Deposit") in the form of a financial surety bond of Financial Security Assurance, Inc. (the "Financial Surety Bond"). Such Financial Surety Bond must be submitted to the City prior to the sale. The Financial Surety Bond must identify theBidder whose Deposit is guaranteed by such Financial Surety Bond. The successful bidder is required to submit its good faith deposit by wire transfer not later thanll:00 a.m. eastern time, on the next business day following the award, as instructed by the City's Financial Advisor. If such deposit is not received by that time, the City shall make a claim under the Financial Surety Bond to satisfy the good faith deposit requirement. The wire of the successful bidder or proceeds of a claim under the Financial Surety Bond, as applicable, will be deposited by the City in an interest-bearing account and be retained and applied towards the purchase price of the Series 2004 Bonds pending full performance by the successful bidder, or will be forfeited to the City and applied as full liquidated damages upon failure of the successful bidder to take up and pay for the Series 2004 Bonds. Any interest earned on the good faith deposit will be retained by and inure to the benefit of the City. If the Series 2004 Bonds are not delivered to the successful bidder within 30 calendar days from the date of sale, without fault upon the part of the successful bidder, such successful bidder shall not thereafter be obligated to take delivery of and pay for the Series 2004 Bonds and the good faith deposit amount will be promptly paid to the successful bidder or Financial Security Assurance, Inc., as applicable. Delivery and Payment It is anticipated that the Series 2004 Bonds in book entry only form will be available for delivery on September 1, 2004, in New York, New York, at The Depository Trust Company, or some other date and place to be mutually agreed upon by the Successful Bidder and the City against the payment of the purchase price therefor including accrued interest calculated on a 360-day year basis, less the amount of the good faith deposit, in immediately available Federal Reserve funds without cost to the City. Closing Documents The City will furnish to the Successful Bidder upon delivery of the Series 2004 Bonds the following closing documents in a form satisfactory to Bond Counsel: (1) signature and no-litigation A-6 certificate; (2) federal tax certificate; (3) certificate regarding information in the Official Statement; and (4) seller's receipt as to payment. A copy of the transcript of the proceedings authorizing the Series 2004 Bonds will be delivered to the Successful Bidder of the Series 2004 Bonds upon request. Copies of the form of such closing papers and certificates may be obtained from the City. Information Statement Section 218.38(1)(b)1, Florida Statutes requires that the City file, within 120 days after delivery of the Series 2004 Bonds, an information statement with the Division of Bond Finance of the State of Florida (the "Division") containing the following information: (a) the name and address of the managing underwriter, if any, connected with the Series 2004 Bonds; (b) the name and address of any attorney or financial consultant who advised the City with respect to the Series 2004 Bonds; and (c) any fee, bonus, or gratuity paid, in connection with the bond issue, by an underwriter or financial consultant to any person not regularly employed or engaged by such underwriter or consultant and (d) any other fee paid by the City with respect to the Series 2004 Bonds, including any fee paid to attorneys or financial consultants. The Successful Bidder will be required to deliver to the City at or prior to the time of delivery of the Series 2004 Bonds, a statement signed by an authorized officer containing the same information mentioned in (a) and (c) above. The Successful Bidder shall also be required, at or prior to the delivery of the Series 2004 Bonds, to furnish the City with such information concerning the initial prices at which a substantial amount of the Series 2004 Bonds of each maturity were sold to the public as the City shall reasonably request. Pursuant to Section 218.385(2) and (3) of the Florida Statutes, as amended, a truth-in- bonding statement will be required from each bidder as to the Series 2004 Bonds as part of their bid in the following form: "The City of Clearwater, Florida, is proposing to issue $[14,350,000] original aggregate principal amount of Stormwater System Revenue Bonds, Series 2004, for the purpose of paying (i) a portion of the costs of the Projects, (ii) the costs of issuing the Series 2004 Bonds, (iii) the premium on the Bond Insurance Policy, if any and (iv) the premium for the debt service reserve fund insurance or to make a deposit to the Reserve Fund, all as further described in Ordinance No. 6931-02. The final maturity date of the Series 2004 Bonds is November 1, 2032, and the Series 2004 Bonds are expected to be repaid over a period of twenty eight (28) years. At a forecasted average interest rate of _ % per annum, total interest paid over the life of the Series 2004 Bonds will be $ . The source of repayment or security for this proposal is the City's Stormwater System Net Revenues (as defined in the Ordinance) and moneys and investments held in the funds created under the said Ordinance. Authorizing the Series 2004 Bonds will result in $ not being available to finance the other capital projects of the City. This truth-in- bonding statement prepared pursuant to Section 218.385(2) and (3) of the Florida Statutes, as amended, is for informational purposes only and shall not affect or control the actual terms and conditions of the Series 2004 Bonds." A-7 Legal Opinion The Successful Bidder will be furnished, without cost, with the approving opinion of Bryant Miller & Olive P.A., Tallahassee, Florida, to the effect that based on existing law, and assuming compliance by the City with certain covenants and requirements of the Internal Revenue Code of 1986, as amended (the "Code"), regarding use, expenditures, investment of proceeds and the timely payment of certain investment earnings to the United States Treasury, the interest on the Series 2004 Bonds is not includable in the gross income of individuals, however, interest on the Series 2004 Bonds will be included in the calculation of the alternative minimum tax liabilities of corporations. The Code contains other provisions that could result in tax consequences, upon which Bond Counsel renders no opinion, as a result of ownership of the Series 2004 Bonds or the inclusion in certain computations (including, without limitation, those related to the corporate alternative minimum tax and environmental tax) of interest that is excluded from gross income. Official Statement The Preliminary Official Statement, copies of which may be obtained as described below, is in a form "deemed final" by the City for purposes of SEC Rule 15c2-12(b)(1) (except for certain permitted omissions as described in such rule) but is subject to revision, amendment and completion in a final Official Statement. Upon the sale of the Series 2004 Bonds, the City will publish a final Official Statement in substantially the same form as the Preliminary Official Statement. Copies of the final Official Statement will be provided, at the City's expense, on a timely basis in such quantities as may be necessary for the Successful Bidder's regulatory compliance. It is not the intention or the expectation of the City to print the name(s) of the Successful Bidder as to the Series 2004 Bonds on the cover of the Official Statement. Continuing Disclosure The City has covenanted to provide ongoing disclosure in accordance with Rule 15c2-12 of the Securities and Exchange Commission. See "Appendix 0 -- Form of Continuing Disclosure Certificate" attached to the Preliminary Official Statement. CUSIP Number It is anticipated that CUSIP identification numbers will be printed on the Series 2004 Bonds, but neither the failure to print such number on any Series 2004 Bonds nor any error with respect thereto shall constitute cause for failure or refusal by the Successful Bidder to accept delivery of and pay for the Series 2004 Bonds in accordance with its agreement to purchase the Series 2004 Bonds. All expenses in relation to the printing of CUSIP numbers on the Series 2004 Bonds shall be paid for by the City; provided, however, that the CUSIP Service Bureau charge for the assignment of said number shall be the responsibility of and shall be paid for by the Successful Bidder. A-8 Copies of Documents Copies of the Preliminary Official Statement, this Official Notice of Bond Sale and the Official Bid Form and further information which may be desired, may be obtained from the City's Financial Advisor, RBC Dain Rauscher Inc., 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin M. Conitz, telephone (727) 895-8853. Amendment and Notices Amendments hereto and notices, if any, pertaining to this offering shall be made through Thompson Municipal Market Monitor (TM3) or similar information distribution service. CITY OF CLEARWATER, FLORIDA /s/ Brian 1. Aungst Mayor A-9 EXHIBIT B FORM OF SUMMARY NOTICE OF SALE $14,350,000* CITY OF CLEARWATER, FLORIDA Stormwater System Revenue Bonds Series 2004 NOTICE IS HEREBY GIVEN, that bids will be received by the City Manager and the Finance Director of the City of Clearwater, Florida, electronically through PARITY, subject to the provisions of the Official Notice of Bond Sale. Sale Date: August 18, 2004 Time: 11:00 a.m., Clearwater, Florida Time Bonds Dated: August 15, 2004 Maturities: Payable November 1 in the years and amounts as follows: Series 2004 Bonds* Principal Principal Principal Maturity Amount Maturity Amount Maturity Amount 11/01/2005 $ 305,000 11/01/2014 $ 390,000 11/01/2023 $ 570,000 11/01/2006 310,000 11/01/2015 410,000 11/01/2024 595,000 11/01/2007 315,000 11/01/2016 420,000 11/01/2025 625,000 11/01/2008 330,000 11/01/2017 435,000 11/01/2026 650,000 11/01/2009 330,000 11/01/2018 455,000 11/01/2027 685,000 11/01/2010 345,000 11/01/2019 475,000 11/01/2028 710,000 11/01/2011 355,000 11/01/2020 495,000 11/01/2029 750,000 11/01/2012 365,000 11/01/2021 520,000 11/01/2030 825,000 11/01/2013 380,000 11/01/2022 540,000 11/01/2031 860,000 11/01/2032 905,000 *Preliminary, subject to change B-1 Interest Payment Dates: Payable May 1 and November 1, commencing November 1, 2004. Legal Opinion: Bryant Miller & Olive P.A., Tallahassee, Florida For copies of the Official Notice of Bond Sale and the Preliminary Official Statement of the City of Clearwater, Florida, please contact the City's Financial Advisor, RBC Dain Rauscher Inc., 100 Second A venue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin M. Conitz, telephone (727) 895-8853. The Proposed Form is to be provided by PARITY. B-1 EXHIBIT C FORM OF PRELIMINARY OFFICIAL STATEMENT C-l EXHIBIT 0 CONTINUING DISCLOSURE CERTIFICATE D-l EXHIBIT E COMMITMENTS FOR FINANCIAL GUARANTY INSURANCE POLICY E-l EXHIBIT F FINANCIAL GUARANTY POLICY ADDITIONAL PROVISIONS Additional Covenants with Bond Insurer Defmitions The following definitions shall be applicable to this Resolution: "Ambac Assurance" shall mean Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company. "Financial Guaranty Insurance Policy"' shall mean the financial guaranty insurance policyissued by Ambac Assurance insuring the payment when due of the principal of and interest on the Series 2004 Bonds as provided therein. Covenants Regarding Ambac Assurance Consent Rights ~ ConsentofAmbac~urance Any provision of the Bond Resolution or this Resolution (collectively, the "Series 2004 Authorizing Documents") expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. Ambac Assurance reserves the right to charge the Issuer a fee for any consent or amendment to the Financing Documents while the Financial Guaranty Insurance Policy is outstanding. B. Consent of Ambac ~urance in Addition to Holder Consent Unless otherwise provided in the Series 2004 Authorizing Documents and so long as there is not event of default occuning or continuing under the Financial Guarantee Insurance Policy or the Reserve Surety and no insolvency of Ambac Assurance, Ambac Assurance's consent shall be required in addition to Holder consent, when required, for the following purposes: (i) execution and delivery of any supplemental Ordinance or Resolution which seeks to amend the Series 2004 Authorizing Documents as such apply to the Series 2004 Bonds and (ii) initiation or approval of any action not described above which requires Holder consent. C. Consent of Ambac ~urance in the Event of Insolvency Any reorganization or liquidation plan with respect to the Issuer must be acceptable to Ambac Assurance. In the event of any reorganization or liquidation, Ambac Assurance shall have the right to vote on behalf of all Holders who hold Ambac Assurance-insured Series 2004 Bonds absent the insolvency of Ambac Assurance or a default by Ambac Assurance under the applicable Financial Guaranty Insurance Policy insuring such Series 2004 Bonds. D. Consent of Ambac Assurance Upon Default Anything in the Series 2004 Authorizing Docwnents to the contrary notwithstanding, upon the occurrence and continuance of an event of default as defined herein, so long as Ambac Assurance is not insolvent and absent a default under the Financial Guaranty Insurance Policy or Reserve Surety, Ambac Assurance shall be entitled to control and direct the E-2 enforcement of all rights and remedies granted to the Holders under the Series 2004 Authorizing Documents. Notices/Information To Be Given To Ambac Assurance Notices to be sent to the attention of the SURVEILLANCE DEPARTMENT: A. While the Financial Guaranty Insurance Policy is in effect, the Issuer shall finnish to Ambac Assurance, upon request, the following: (a) a copy of any financial statement, audit and/or annual report of the Issuer such additional information it may reasonably request. Upon request, such information shall be delivered at the Issuer's expense to the attention of the Surveillance Department, unless otherwise indicated. B. a copy of any notice to be given to the registered owners of the Series 2004 Bonds, including, without limitation, notice of any redemption of or defeasance of Series 2004 Bonds, and any certificate rendered pursuant to the Series 2004 Authorizing Document relating to the security for the Series 2004 Bonds. C. To the extent that the Issuer has entered into a continuing disclosure agreement with respect to the Series 2004 Bonds, Ambac Assurance shall be included as party to be notified. Notices to be sent to the attention of the GENERAL COUNSEL OFFICE: A. The Issuer shall notify Ambac Assurance of any failure of the Issuer to provide relevant notices, certificates, etc. B. Notwithstanding any other provision of the Series 2004 Authorizing Document, the Issuer shall irrnnediatelynotifY Ambac Assurance if at anytime there are insufficient moneys to make any payments of principal and/or interest as required and irrnnediately upon the occWTence of any event of default hereunder. Other Information to be 2iven to Ambac Assurance: The Issuer will pennit Ambac Assurance to discuss the affairs, finances and accounts of the Issuer or any information Ambac Assurance may reasonably request regarding the security for the Series 2004 Bonds with appropriate officers of the Issuer. The Issuer will pennit Ambac Assurance to have access to and to make copies of all books and records relating to the Series 2004 Bonds at any reasonable time. Payment Procedure Pursuant to the Financial Guaranty Insurance Policy As long as the Financial Guaranty Insurance Policy for the Series 2004 Bonds insurance shall be in full force and effect, the Issuer and any Paying Agent agree to comply with the following provisions: (a) At least one (1) day prior to all Interest Payment Dates the Paying Agent will determine whether there will be sufficient :funds in the Funds and Accounts to pay the principal of or interest on the Series 2004 Bonds on such futerest Payment Date. If the Paying Agent determines that there will be insufficient :funds in such Funds or Accounts, or Paying Agent, if any, shall so notifY Ambac Assurance. Such notice shall specify the amount of the anticipated deficiency, the Series 2004 Bonds to E-3 which such deficiency is applicable and whether such Series 2004 Bonds will be deficient as to principal or interest, or both. If the Paying Agent has not so notified Ambac Assurance at least one (1) day prior to an mterest Payment Date, Ambac Assurance will make payments of principal or interest due on the Series 2004 Bonds on or before the first (1 st) day next following the date on which Ambac Assurance shall have received notice of nonpayment from the Paying Agent. (b) the Paying Agent shall, after giving notice to Ambac Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac Assurance's direction, to The Bank of New York, in New York, New York, as insurance trustee for Ambac Assurance or any successor insurance trustee (the ''Insurance Trustee'), the registration books of the Issuer and all records relating to the Funds and Accounts maintained under the Series 2004 Authorizing Docmnent. (c) the Paying Agent shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Series 2004 Bonds entitled to receive principal or interest payments from Ambac Assurance under the tenns of the Financial Guaranty Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Series 2004 Bonds entitled to receive full orpartial interest payments from Ambac Assurance and (ii) to payprincipal upon Series 2004 Bonds surrendered to the Insurance Trustee by the registered owners of Series 2004 Bonds entitled to receive full or partial principal payments from Ambac Assurance. (d) the Paying Agent shall, at the time it provides notice to Ambac Assurance pursuant to (a) above, notify registered owners of Series 2004 Bonds entitled to receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of Holder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from Ambac Assurance, they must surrender their Series 2004 Bonds (along with an appropriate instnunent of assignment in form satisfactory to the Insurance Trustee to pemrit ownership of such Series 2004 Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the Paying Agent and (iv) that should they be entitled to receive partial payment of principal from Ambac Assurance, they must surrender their Series 2004 Bonds for payment thereon:first to the Paying Agent who shall note on such Series 2004 Bonds the portion of the principal paid by the Paying Agent and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) in the event that the Paying Agent has notice that any payment of principal of or interest on the Series 2004 Bonds which has become Due for Payment and which is made to a Holder by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Paying Agent shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the E-4 Paying Agent shall furnish to Ambac Assurance its records evidencing the payments of principal of and interest on the Series 2004 Bonds which have been made by the Paying Agent and subsequently recovered from registered owners and the dates on which such payments were made. (f) in addition to those rights granted Ambac Assurance under the Series 2004 Authorizing Document, Ambac Assurance shall, to the extent it makes payment of principal of or interest on Series 2004 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the tenus of the Financial Guaranty Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Paying Agent shall note Ambac Assurance's rights as subrogee on the registration books of the Issuer maintained by the Paying Agent upon receipt from Ambac Assurance of proof of the payment of interest thereon to the registered owners of the Series 2004 Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Paying Agent . shall note Ambac Assurance's rights as subrogee on the registration books of the Issuer maintained by the Paying Agent upon surrender of the Series 2004 Bonds by the registered owners thereof together with proof of the payment of principal thereof Interested Parties A. Ambac As Third Party Beneficiary. To the extent that the Series 2004 Authorizing Document confers upon or gives or grants to Ambac anyright, remedy or claim under or by reason of the Series 2004 Authorizing Document, Ambac is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right remedy or claim conferred, given or granted hereunder. B. Parties Interested Herein. Nothing in the Series 2004 Authorizing Document expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Issuer, the Trustee, Ambac Assurnnce, the Paying Agent, if any, and the registered owners of the Series 2004 Bonds, any right, remedy or claim under or by reason of the Series 2004 Authorizing Document or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in the Series 2004 Authorizing Document contained by and on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, the Trustee, Ambac Assurance, the E-S EXHIBIT B FORM OF SUMMARY NOTICE OF SALE $14,350,000* CITY OF CLEARWATER, FLORIDA Stormwater System Revenue Bonds Series 2004 NOTICE IS HEREBY GIVEN, that bids will be received by the City Manager and the Finance Director of the City of Clearwater, Florida, electronically through PARITY, subject to the provisions of the Official Notice of Bond Sale. Sale Date: August 18, 2004 Time: 11:00 a.m., Clearwater, Florida Time Bonds Dated: August 15, 2004 Maturities: Payable November 1 in the years and amounts as follows: Series 2004 Bonds* Principal Principal Principal Maturity Amount Maturity Amount Maturity Amount 11/01/2005 305,000 11/01/2014 390,000 11/01/2023 570,000 11/01/2006 310,000 11/01/2015 410,000 11/01/2024 595,000 11/01/2007 315,000 11/01/2016 420,000 11/01/2025 625,000 11/01/2008 330,000 11/01/2017 435,000 11/01/2026 650,000 11/01/2009 330,000 11/01/2018 455,000 11/01/2027 685,000 11/01/2010 345,000 11/01/2019 475,000 11/01/2028 710,000 11/01/2011 355,000 11/01/2020 495,000 11/01/2029 750,000 11/01/2012 365,000 11/01/2021 520,000 11/01/2030 825,000 11/01/2013 380,000 11/01/2022 540,000 11/01/2031 860,000 11/01/2032 905,000 *Preliminary, subject to change B-1 Interest Payment Dates: Payable May 1 and November 1, commencing November 1, 2004. Legal Opinion: Bryant Miller & Olive P.A., Tallahassee, Florida F or copies of the Official Notice of Bond Sale and the Preliminary Official Statement of the City of Clearwater, Florida, please contact the City's Financial Advisor, RBC Dain Rauscher Inc., 100 Second A venue South, Suite 800, St. Petersburg, Florida 33701, Attn: Kevin M. Conitz, telephone (727) 895-8853. The Proposed Form is to be provided by PARITY. B-1 EXHIBIT C FORM OF PRELIMINARY OFFICIAL STATEMENT C-l NEW ISSUE - FULL BOOK-ENTRY Ratings: Moody's: "Aaa" (Insured) "A3" (Underlying) S&P: "AAA" (Insured) "A" (Underlying) Fitch: "AAA""(Insured) "A" (Underlying) (see "RATINGS" herein) In the opinion of Bond Counsel, assuming continuing compliance by the City with various covenants in the Series 2004 Ordinance, under existing statutes, regulations and judicial decisions, the interest on the Series 2004 Bonds will be excluded from gross income for federal income tax purposes to the owners thereof. The Series 2004 Bonds are, under existing laws and regulations, also exempt from intangible taxes imposed pursuant to Chapter 199, Florida Statutes. See 'Tax Exemption" herein for a description of alternative minimum tax treatment and certain other tax consequences to owners of the Series 2004 Bonds. $14,350,000* CITY OF CLEARWATER, FLORIDA Stormwater System Revenue Bonds Series 2004 Dated: August 15, 2004 Due: November 1, as shown on the inside cover page The Stormwater System Revenue Bonds, Series 2004 (the "Series 2004 Bonds") of the City of Clearwater, Florida (the "City") are being issued in fully registered form and, when initially issued, will be registered to Cede & Co., as nominee of The Depository Trust Company, New York, New York. (paying Agent] is acting as the Paying Agent and Bond Registrar for the Series 2004 Bonds. The Series 2004 Bonds will be purchased in book-enby form only, in the denomination of $5,000 or any integral multiple thereof. There will be no physical delivery of bond certificates to individual Bondholders. Interest on the Series 2004 Bonds will be payable semi-annually beginning on November 1, 2004 and on each May 1 and November 1 thereafter. Principal of and premium, if any, on the Series 2004 Bonds will be payable at maturity or upon redemption prior to maturity. The Series 2004 Bonds are subject to redemption prior to maturity as described herein. The Series 2004 Bonds are being issued pursuant to the authority of and in full compliance with the charter ofthe City, the Constitution and the laws of the State of Florida, particularly Chapter 166, Part II, Florida Statutes, and other applicable provisions oflaw, and Ordinance No~ 6378-99 enacted by the City on April 15, 1999, as amended and supplemented by Ordinance No. 6931-02, enacted by the City on July 18, 2002, as further amended and supplemented (the "Ordinance") for the purpose of (i) paying the costs of capital improvements (as more particularly described herein under the caption "THE SERIES 2004 PROJECT") to the City's stormwater management system (as more particularly described herein, the "System"); (ii) making a deposit to the subaccount established in the Reserve Fund for the Series 2004 Bonds in the amount of the Reserve Requirement for the Series 2004 Bonds; and (iii) paying certain costs of issuance of the Series 2004 Bonds, including the financial guaranty insurance premium. The Series 2004 Bonds and the interest thereon are payable solely from the Pledged Revenues, which consist of Net Revenues derived from the operation ofthe System and with respect to each Series of Bonds, the moneys on deposit in the various funds and accounts created pursuant to the Ordinance allocable to such Series of Bonds, with the exception of the Rebate Fund. The Ordinance permits the issuance of Additional Parity Obligations payable from the Net Revenues upon the conditions described herein under the caption "SECURITY FOR THE SERIES 2004 BONDS. Additional Parity Obligations." Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the "Financial Guaranty Insurance Policy") relating to the Series 2004 Bonds effective as of the date of issuance of the Series 2004 Bonds. For a discussion of the terms and provisions of such policy, including the limitations thereof, see "MUNICIPAL BOND INSURANCE" herein. [INSURER LOGO] MATURITY SCHEDULE (See enclosed Notice of Sale) (Accrued interest to be added) ELECTRONIC BIDS FOR THE SERIES 2004 BONDS WILL BE ACCEPTED IN ACCORDANCE WITH THE OFFICIAL NOTICE OF SALE. The Series 2004 Bonds are offered when, as and if issued and accepted by the Underwriter subject to the approval of legality by Bryant Miller & Olive, P.A, Tallahassee, Florida, Bond Counsel. Certain other legal matters will be passed upon for the City by Pamela K. Akin, Esquire, City Attorney, and by Nabors, Giblin & Nickerson, P.A, Tampa, Florida, Disclosure Counsel to the City. RBC Dain Rauscher Inc., St. Petersburg, Florida, is serving as Financial Advisor to the City. It is expected that the Series 2004 Bonds, in definitive book-entry form, will be available for delivery through DTC in New York, New York on or about September 1, 2004. August ,2004 * Preliminary, subject to change CITY OF CLEARWATER, FLORIDA ELECTED OFFICIALS MAYOR - COUNCILMAN Brian J. Aungst, Sr. VICE MAYOR - COUNCILMAN Frank Hibbard COUNCIL Hoyt Hamilton Carlen Petersen Bill Jonson APPOINTED OFFICIALS William B. Horne, II, City Manager Pamela K. Akin, Esq., City Attorney Margaret L. Simmons, CPA, Finance Director BOND COUNSEL Bryant Miller & Olive, P.A. Tallahassee, Florida FINANCIAL ADVISOR RBC Dain Rauscher Inc. St. Petersburg, Florida REGISTRAR AND PAYING AGENT Wachovia Bank, National Association Jacksonville, Florida No dealer, broker, salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement, in connection with the offering of the Series 2004 Bonds described herein, and if given or made, such information or representations must not be relied upon as having been authorized by the City or the Underwriter. This Official Statement does not constitute an offer to sell the Series 2004 Bonds or a solicitation of an offer to buy nor shall there be any sale of the Series 2004 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the City and by other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation or contract, by the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery ofthe Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. IN CONNECTION WITH THE OFFERING, THE UNDERWRITERMA Y OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2004 BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The Series 2004 Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, nor has the Ordinance been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualific~tion of the Series 2004 Bonds in accordance with applicable provisions of the securities laws of the States, if any, in which the Series 2004 Bonds have been registered or qualified and the exemption from registration or qualification in certain other states cannot be regarded as a recommendation thereof. Neither these States nor any of their agencies have passed upon the merits of the Series 2004 Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. TABLE OF CONTENTS Page INTRODUCTORY STATEMENT..... ............................................................................ 1 THE SERIES 2004 PROJECTS.................... ........ ............. ............................ ............... 4 DESCRIPTION OF THE SERIES 2004 BONDS ......................................................... 5 General.......................... ...................................................................................... 5 Optional Redemption. ... .............................. ................ .................... ....................6 Mandatory Redemption ........ ..................... .................... ................. ...... .............. 7 Notice of Redemption....... ...... ............... ... ...... .... ............. ....... ............................. 8 Book-Entry Only System.......... ....... .............. ............. ............... ......................... 8 SECURITY FOR THE SERIES 2004 BONDS ........................................................... 11 Series 2004 Bonds Not a Debt of the City........................................................ 14 Outstanding Parity Obligations. ........... .......... ..... ........ ...... ..... .... .......... ....... .... 14 MUNICIPAL BOND INSURANCE ............................................................................15 DEBT SERVICE REQUIREMENTS ....................... ....... .......... ..... ...................... ....... 19 SOURCES AND USES OF FUNDS............................................................................ 20 THE STORMWATER MANAGEMENT SySTEM..................................................... 21 FINANCIAL STATEMENTS... .......... ...................... ...... ........... ................ ............ ...... 24 INVESTMENT POLICY OF THE CITy..................................................................... 25 LEGALITY FOR INVESTMENT .,. ....... ..... .......... ..... .... ........... ... .... ............................ 25 TAX EXEMPTION........................................ ............ ... ..... ,...... ...................... ...... ........26 RATINGS ... ... ....... ................. ..... ..... .... ............ ...... .... ... .... .............. ..... ... ... .............. .....27 LIT I GA TION..................................................................... 0 0......................................... 28 ADVISORS AND CONSULTANTS .................................,..........................................29 CONTINUING DISCLOSURE...... .......... ......... ........ ....... ............... ............. ................ 30 ENFORCEABILITY OF REMEDIES .......... .............. ................... ........ ..... .......... .......30 CERTAIN LEGAL MATTERS ................... ........ ............ ....... ..... ............... ..................31 DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS................ 31 FINANCIAL ADVISOR. ... ......... ......... ..................... ....... ..... ..... .......................... ... ...... 32 MISCELLANEOUS .0.................. .... ...... .... .................. ...................... ...... ............ ......... 32 Appendices: Appendix A Appendix B General Description of the City and Selected Statistics Excerpts from the City's Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2003 Conformed Copy of Amended Ordinance Form of Continuing Disclosure Certificate Form of Bond Counsel Opinion Form of Municipal Bond Insurance Policy Appendix C Appendix D Appendix E Appendix F OFFI CIAL STATEMENT $14,350,000* CITY OF CLEARWATER, FLORIDA STORMWATER REVENUE BONDS, SERIES 2004 INTRODUCTORY STATEMENT The purpose of this Official Statement, which includes the cover page and the Appendices, is to provide information concerning the City of Clearwater, Florida (the "City") and the City's $14,350,000* Stormwater System Revenue Bonds, Series 2004 (the "Series 2004 Bonds"). The Series 2004 Bonds are issued pursuant to the authority of and in full compliance with (a) the charter of the City, (b) the Constitution and the laws of the State of Florida, particularly Chapter 166, Part II, Florida Statutes, and other applicable provisions oflaw, and (c) Ordinance No. 6378-99 enacted by the City on April 15, 1999 (the "Ordinance"), as amended by Ordinance No. 6931-02, enacted by the City on July 18, 2002, as supplemented. The Series 2004 Bonds are being issued for the purpose of (i) paying the costs of capital improvements (as more particularly described herein under the caption "THE SERIES 2004 PROJECTS," the "Series 2004 Projects") to the City's stormwater management system (as more particularly described herein, the "System"); (ii) making a deposit to the subaccount established in the Reserve Fund for the Series 2004 Bonds in the amount of the Reserve Requirement attributable to the Series 2004 Bonds; and (iii) paying certain costs of issuance of the Series 2004 Bonds, including the financial guaranty insurance premium. The Series 2004 Bonds and the interest thereon are payable solely from the Pledged Revenues, which are comprised of Net Revenues derived from the operation ofthe System and with respect to such Series of Bonds, the moneys on deposit in the various funds and accounts created pursuant to the Ordinance allocable to each Series of Bonds, with the exception of the Rebate Fund. The Series 2004 Bonds are the third Series of Bonds issued which are payable from Net Revenues of the System. The City has previously issued $7,500,000 of its Stormwater System Revenue Bonds, Series, 1999 (the "Series 1999 Bonds"), which are currently Outstanding in the aggregate principal amount of $7,020,000 and $24,685,000 of its Stormwater System Revenue Bonds, Series 2002 (the "Series 2002 Bonds"), which are currently Outstanding in the aggregate principal amount of $24,245,000, both of which Series rank on a parity with the Series 2004 Bonds as to the pledge ofthe Net Revenues. The scheduled payment of principal of and interest on the Series 2004 Bonds will be insured by a financial guaranty insurance policy to be issued simultaneously with the delivery of the Bonds by AMBAC Indemnity ("AMBAC"), as 1 described herein. For a discussion of the terms and provisions of such policy, including the limitations thereof, see "MUNICIPAL BOND INSURANCE" herein. Neither the Series 2004 Bonds nor the interest thereon constitute a general obligation or indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation. No owner or owners of any Series 2004 Bonds shall ever have the right to compel the exercise of the ad valorem taxing power of the City, or any other taxing power in any form on any real or personal property of the City, to pay the Series 2004 Bonds or the interest thereon. The City shall not be obligated to pay the Series 2004 Bonds or any interest thereon except from the Pledged Revenues, in the manner provided in the Ordinance referred to herein. A Reserve Fund has been established for the benefit of the Series 2004 Bonds. From the proceeds of the Series 2004 Bonds, the City will make a deposit into a subaccount in the the Reserve Fund established for the Series 2004 Bonds equal to the Reserve Fund Requirement applicable to the Series 2004 Bonds, which is equal to the lesser of (i) the Maximum Bond Service Requirement for the Series 2004 Bonds, (ii) 125% of the Average Annual Bond Service Requirement of the Series 2004 Bonds, or (iii) the largest amount as shall not adversely affect the exclusion of interest on the Series 2004 Bonds from gross income for Federal income tax purposes (see "SECURITY FOR THE Series 2004 Bonds - Reserve Account"). . The City covenants in the Ordinance to fix, establish and maintain such rates, and collect such fees, rentals and other charges for the services and facilities of the System (as herein defined) which will always provide Net Revenues in each year sufficient to pay one hundred fifteen percent (115%) ofthe Bond Service Requirement becoming due in such year on the Outstanding Bonds. The City may issue Additional Parity Obligations, payable on a parity from the Net Revenues with the Series 2004 Bonds, for the purpose of refunding a part of the Outstanding Bonds, or financing the cost of extensions, additions and improvements to the System and for the acquisition and construction of, and extensions and improvements to stormwater management systems which are to be consolidated with the System and operated as a single combined utility, provided that, among other requirements, certain earnings tests relating historical Net Revenues to the Maximum Bond Service Requirement of all Bonds Outstanding after the issuance of such Additional Parity Obligations can be met. Such historical Net Revenues may be adjusted by the Consulting Engineer as provided in the Ordinance. Definitions of certain words and terms having initial capitals used herein and in the Ordinance (as defined below in "Authority For Issuance") are contained in the "Conformed Copy of Amended Ordinance" in Appendix C hereto. 2 The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is directed to all such documents for full and complete statements of all matters of fact relating to the Series 2004 Bonds, the security for the payment of the Series 2004 Bonds, and the rights and obligations of holders thereof. The information contained in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the holders of the Series 2004 Bonds. 3 THE SERIES 2004 PROJECTS The City has identified a need for approximately $66.3 million in capital projects for the stormwater system from 2004 through 2009, calling for funding from bond proceeds in 2004 of approximately $13,164,580 in projects, in 2006 of approximately $7,223,302 in projects and in 2008 of approximately $10,542,926 in projects. The following is a list ofthe Series 2004 Projects anticipated to be financed from the Series 2004 Bonds: Storm Pipe System Improvements Prospect Lake Park Kapok Flood Resolution Myrtle Avenue Drainage Improvements Storm System Expansion Lake Bellevue Stormwater Improvements Alligator Creek Drainage Improvements $2,000,000 200,000 1,640,000 6,512,140 607,440 1,000,000 1.205.000 Total $13,164,580 4 DESCRIPTION OF THE SERIES 2004 BONDS General The Series 2004 Bonds will be dated August 15, 2004. The Series 2004 Bonds will bear interest at the rates and mature on November 1 in the amounts and at the times set forth on the cover page of this Official Statement. The Series 2004 Bonds are to be issued as fully registered bonds in denominations of $5,000 or integral multiples thereof. Interest on the Series 2004 Bonds will be payable semiannually on May 1 and November 1 of each year, commencing November 1, 2004, by check or draft mailed to the registered owners, at their addresses as they appear on the registration books of the City maintained by the Bond Registrar, as of the 15th day (whether or not a business day) of the month preceding the interest payment date (the "Record Date"). Owners of$1,000,000 or more in aggregate principal amount of Series 2004 Bonds may receive interest by wire transfer, at the Owner's expense, to a bank account designated in writing by the Owner not later than the Record Date. Principal of, and premium if any, are payable at maturity, or upon redemption prior to maturity, upon presentation and surrender thereof at the corporate trust office of the Paying Agent. Wachovia Bank, National Association, Jacksonville, Florida, is acting as Paying Agent and Bond Registrar for the Series 2004 Bonds. The Series 2004 Bonds will be initially issued in the form of a single fully registered Bond for each maturity ofthe Series 2004 Bonds. Upon initial issuance, the ownership of each such Series 2004 Bonds will be registered in the registration books kept by the Bond Registrar, in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). While held in book-entry form, all payments of principal, interest and premium, if any, on the Series 2004 Bonds will be made to DTC or the DTC Nominee as the sole registered owner of the Series 2004 Bonds and payments to Beneficial Owners will be the responsibility of DTC and the DTC Participants as described below. See "Book-Entry Only System." With respect to Series 2004 Bonds registered in the name of Cede & Co., as nominee ofDTC, neither the City, nor the Paying Agent will have any responsibility or obligation to any DTC Participant or to any indirect DTC Participant. See "Book-Entry Only System" for the definition of "DTC Participant." Without limiting the immediately preceding sentence, neither the City nor the Bond Registrar and the Paying Agent will have any responsibility or obligation with respect to: (i) the accuracy of the records of DTC or any DTC Participant with respect to any ownership interest in 5 the Series 2004 Bonds; (ii) the delivery to any DTC Participant or any other person other than a registered owner, as shown in the registration books kept by the Bond Registrar, of any notice with respect to the Series 2004 Bonds, including any notice of redemption; or (iii) the payment to any DTC Participant or any other person, other than a registered owner, as shown in the registration books kept by the Bond Registrar, of any amount with respect to principal of, premium, if any, or interest on the Series 2004 Bonds. The City, the Bond Registrar and the Paying Agent may treat and consider the person in whose name each Series 2004 Bonds is registered in the registration books kept by the Bond Registrar as the holder and absolute owner of such Bond for the purpose of payment of principal of, premium, if any, and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, andfor all other purposes whatsoever. The Paying Agent will pay all principal of, premium, if any, and interest on the Series 2004 Bonds only to or upon the order of the respective registered owners, as shown in the registration books kept by the Bond Registrar, or their respective attorneys duly authorized in writing, as provided in the Ordinance, and all such payments will be valid and effectual to satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, and interest on the Series 2004 Bonds to the extent of the sums so paid. No person other than a registered owner, as shown in the registration books kept by the Bond Registrar, will receive a certificated Bond evidencing the obligation of the City to make payments of principal of, premium, if any, and interest on the Series 2004 Bonds pursuant to the provisions of the Ordinance. Optional Redemption The Series 2004 Bonds maturing on or before November 1, 2014 are not callable prior to their maturity dates. The Series 2004 Bonds maturing after November 1, 2014 are subject to optional redemption by the City, on and after November 1, 2014, as a whole or in part at any time thereafter, from the maturities selected by the City, and by lot within a maturity ifless than an entire maturity is redeemed, at the redemption prices (expressed as percentages of principal amount) set forth below, together with accrued interest to the date of redemption: Redemption Period November 1, 2014 and thereafter Price 100 6 Mandatory Redemption If the Successful Bidder designates any Series 2004 Bonds as term bonds as described under "Designation of Term Bonds" in the Notice of Sale, the following mandatory redemption provisions will apply with respect to such designated term bonds: The Series 2004 Bonds maturing on November 1, will be subject to mandatory redemption prior to maturity, by lot, in such manner as the Registrar may deem appropriate, at a redemption price equal to the principal amount thereof plus interest accrued to the redemption date, on November 1, , and on each November 1 thereafter, in the following principal amounts in the years specified: Year Amortization Installment Year Amortization Installment As long as the book-entry-only system is used for determining beneficial ownership of the Series 2004 Bonds, notice of redemption will only be sent to Cede & Co. Cede & Co. will be responsible for notifying the DTC Participants, who will in turn be responsible for notifying the Beneficial Owners (as such terms are described below under the heading "Book-Entry Only System"). Any failure of Cede & Co. to notify any DTC Participant, or of any DTC Participant to notify the Beneficial Owner of any such notice, will not affect the validity of the redemption of the Series 2004 Bonds. 7 Notice of Redemption Not less than 30 days prior to the expected redemption date, notice of such redemption shall be filed with the Paying Agent and shall be mailed, postage prepaid to all registered owners of the Series 2004 Bonds to be redeemed at their addresses as they appear on the registration books. Failure to give such notice by mailing to any registered owner, or any defect therein, shall not affect the validity of any proceeding for the redemption of other Series 2004 Bonds. Interest shall cease to accrue on any Series 2004 Bonds duly called for prior redemption, after the redemption date, if payment thereof has been duly provided. Book-Entry Only System The Series 2004 Bonds will be available in book-entry form only, in denominations of $5,000 or any integral multiple thereof. Purchasers of the Series 2004 Bonds will not receive certificates representing their interests in the Series 2004 Bonds purchased. The Underwriter is to confirm original issuance purchases with statements containing certain terms of the Series 2004 Bonds purchased. The following information regarding The Depository Trust Company, New York, New York ("DTC") and the book-entry only system of registration has been obtained by the City from DTC. No representation is made by the City as to its accuracy or correctness. The Series 2004 Bonds will be held by DTC as securities depository. The ownership of one fully registered Series 2004 Bonds for each maturity, as set forth on the cover page hereof, will be registered in the name of Cede & Co., as nominee for DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member ofthe Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17Aofthe Securities Exchange Act of 1934, as amended. DTC was created to hold securities of its participants ("DTC Participants") and to facilitate the settlement of securities transactions among DTC Participants in such securities through electronic computerized book-entry changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of which own DTC either directly or through their representatives. Access to the DTC system is also 8 available to other entities such as security brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a DTC Participant. Purchases of the Series 2004 Bonds may be made by or through brokers and dealers who are, or act through, DTC Participants. Such DTC Participants and the persons for whom they acquire interests in the Series 2004 Bonds as nominees will not receive certificated bonds, but each DTC Participant will receive a credit balance in the records of DTC in the amount of such DTC Participant's interest in the Series 2004 Bonds, which will be confirmed in accordance with DTC's standard procedures. The ownership interest of the actual purchaser of each Bond (the "Beneficial Owner") will be recorded in the records of the DTC Participant. DTC Participants are required to provide Beneficial Owners with a written confirmation of their purchase containing details of the acquired Series 2004 Bonds. Transfers of ownership interests in the Series 2004 Bonds will be accomplished by book entry made by DTC and by the DTC Participants who act on behalf of the Beneficial Owners. The Paying Agent will make payments of principal of, redemption premium, if any, and interest on the Series 2004 Bonds to DTC or its nominee, Cede & Co., as registered owner ofthe Series 2004 Bonds. The current practice ofDTC is to credit the accounts of the DTC Participants immediately upon receipt of moneys in accordance with their respective holdings as shown on the records ofDTC. Payments by DTC Participants to Beneficial Owners will be in accordance with standing instructions and customary practices such as those which are now in effect for municipal securities held by DTC Participants in bearer form or registered in "street name" for the accounts of customers, and will be the responsibility ofDTC Participants and not the responsibility of DTC, the Paying Agent or the City subject to any statutory or regulatory requirements as may be in effect from time to time. The Bond Registrar, the Paying Agent and the City will send any notice of redemption or other notice only to DTC, Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify the Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the Series 2004 Bonds called for redemption or of any other action premised on such notice. Redemption of portions of any maturity of the Series 2004 Bonds will reduce the outstanding principal amount of such maturity held by DTC. In such event, DTC may implement, through its book-entry system, a redemption of Series 2004 Bonds held for the account of DTC Participants in accordance with its own rules or other agreements with DTC Participants, and then DTC Participants may implement a redemption of Series 2004 Bonds for the Beneficial Owners. NEITHER THE CITY NOR THE BOND REGISTRAR OR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC 9 PARTICIPANTS OR THE PERSONS FOR WHOM DTC PARTICIPANTS ACT AS NOMINEES WITH RESPECT TO THE SERIES 2004 BONDS OR THE PROVIDING OF NOTICE OR PAYMENT TO DTC PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF SERIES 2004 BONDS FOR REDEMPTION. In the event of an insolvency of DTC, if DTC has insufficient securities in the fungible bulk of securities in its custody (e.g., due to theft or loss) to satisfy the claims ofDTC Participants with respect to deposited securities and is unable by application of (i) cash deposits and securities pledged to DTC to protect DTC against losses and liabilities; (ii) the proceeds of insurance maintained by DTC and/or DTC Participants; or (iii) other resources, to obtain securities necessary to eliminate the insufficiency, DTC Participants may not be able to obtain all of their deposited securities. The City, the Bond Registrar and the Paying Agent cannot give any assurances that DTC, DTC Participants or others will distribute payments of principal of, premium, if any, and interest on the Series 2004 Bonds paid to DTC or its nominee, or any redemption or other notices to the Beneficial Owners or that they will do so on a timely basis or that DTC will serve or act in a manner described in this Official Statement. DTC may determine to discontinue providing its services with respect to the Series 2004 Bonds at any time by giving notice to the City and discharging its responsibilities with respect thereto under applicable law. In addition, the City may determine to discontinue the use of book-entry transfers through DTC (or any successor securities depository). Under such circumstances, the City and the Bond Registrar will authenticate and deliver certificated Series 2004 Bonds. In the event that the book-entry only system is discontinued, the following provisions will govern the transfer and exchange of Series 2004 Bonds. The Series 2004 Bonds will be exchanged for an equal aggregate principal amount of corresponding bonds in other authorized denominations and of the same series and maturity, upon surrender thereof at the principal corporate trust office of the Bond Registrar. The transfer of any Series 2004 Bonds will be registered on the books maintained by the Bond Registrar for such purpose only upon the surrender thereof to the Bond Registrar with a duly executed written instrument of transfer in form and with guaranty of signatures satisfactory to the Bond Registrar, containing written instructions as to the details of transfer of such Series 2004 Bonds, along with the social security number or federal employer identification number of such transferee. The City and the Bond Registrar may charge the registered owners a sum sufficient to reimburse them for any expenses incurred in making any exchange or transfer after the first such exchange or transfer following the delivery ofthe Series 2004 Bonds. The Bond Registrar or the City may also require payment from the registered owners or 10 their transferees, as the case may be, of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Such charges and expenses shall be paid before any such new Series 2004 Bonds shall be delivered. Neither the City nor the Bond Registrar shall be required to register the transfer or exchange of any Series 2004 Bonds during the period commencing on the fifteenth day (whether or not a business day) ofthe month next preceding an interest payment date and ending on such interest payment date or, in the case of any proposed redemption of a Series 2004 Bonds, after such Series 2004 Bonds or any portion thereof has been selected for redemption. SECURITY FOR THE SERIES 2004 BONDS Net Revenues. The principal of and premium, if any, and interest on the Series 2004 Bonds are payable solely from and secured by an irrevocable first lien upon and pledge of the Net Revenues (as hereinafter defined) derived and collected by the City from the operation of the stormwater management system of the City (the "System"). "Net Revenues" are defined by the Ordinance to include all income or earnings, including any income from the investment of funds, derived by the City from the operation of the System after deduction of current expenses, either paid or accrued, for the operation, maintenance and repair of the System, but not including reserves for renewals and replacements, for extraordinary repairs or any allowance for depreciation. The Series 2004 Bonds do not constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation. The principal of and interest on the Series 2004 Bonds and all required reserve and other payments shall be made solely from the Net Revenues. The City shall never be required to levy ad valorem taxes on any property therein to pay the principal of and interest on the Series 2004 Bonds or to make any of the required debt service, reserve or other payments, and any failure to pay the Series 2004 Bonds shall not give rise to a lien upon any property of or in the City, except the Net Revenues. Rate Covenant. In the Ordinance, the City has covenanted to fix, establish, revise from time to time whenever necessary, maintain and collect always such fees, rates, rentals and other charges for the use of the products, services and facilities of the System which will always provide Net Revenues in each year sufficient to pay one hundred fifteen percent (115%) of the Bond Service Requirement coming due in such year on the Outstanding Bonds. Such rates, fees, rentals or other charges may not be reduced so as to render them insufficient to provide revenues for the purposes provided therefor by the Ordinance. 11 Reserve Fund. The Ordinance creates a separate account in the Reserve Fund to be funded, or into which there shall be deposited a reserve fund surety policy providing coverage, in an amount equal to the Reserve Requirement applicable to each Series of Bonds issued pursuant to the Ordinance. The "Reserve Requirement" will be funded from the proceeds of the Series 2004 Bonds in an amount equal to the lesser of (i) the Maximum Bond Service Requirement for the Series 2004 Bonds, (ii) 125% of the Average Annual Bond Service Requirement of the Series 2004 Bonds, or (iii) the largest amount as shall not adversely affect the exclusion of interest on the Series 2004 Bonds from gross income for Federal income tax purposes. Additional Parity Obligations. Additional Parity Obligations, payable on a parity from the Net Revenues with the Series 2004 Bonds, may be issued for the purpose of refunding a part of the outstanding Bonds or financing the cost of extensions, additions and improvements to the System and for the acquisition and construction of, and extensions, additions and improvements to stormwater management systems which are to be consolidated with the System and operated as a single combined utility. Additional Parity Obligations, other than for refunding purposes, will be issued only upon compliance with all ofthe conditions set forth in the Ordinance, including the following: (1) There shall have been obtained and filed with the Clerk a certificate of the Finance Director stating: (a) that the books and records of the City relative to the System and the Net Revenues have been reviewed by an independent certified public accountant; and (b) the amount of the Net Revenues derived for any consecutive twelve (12) months out ofthe preceding twenty-four (24) months preceding the date of issuance ofthe proposed Additional Parity Obligations as adjusted pursuant to paragraphs 2, 3, 4 and/or 5 below, is equal to not less than 120% of the Maximum Bond Service. Requirement becoming due in any Fiscal Year thereafter on (i) all Bonds issued under the Ordinance, if any, then Outstanding, and (ii) on the Additional Parity Obligations with respect to which such certificate is made. (2) Upon recommendation of the Consulting Engineers, the Net Revenues certified pursuant to paragraph 1 (b) above may be adjusted by including: (a) 100% of the additional Net Revenues which in the opinion of the Consulting Engineer would have been derived by the City from rate increases adopted before the Additional Parity Obligations are issued, if such rate increases had been implemented during the test period described in paragraph 1(b) above, and (b) 100% of the additional Net Revenues estimated by the Consulting Engineer to be derived during the first full twelve month period after the facilities of the System are extended, enlarged, improved or added to with the proceeds of the Additional Parity Obligations with respect to which such certificate is made. 12 (3) Upon recommendation of the Consulting Engineers if the Additional Parity Obligations are to be issued for the purpose of acquiring an existing stormwater system and/or any other utility system, the Net Revenues certified pursuant to paragraph l(b) above may be adjusted by including: 80% ofthe additional estimated Net Revenues which in the written opinion ofthe Consulting Engineers will be derived from the acquired facility during the first full 12-month period after the issuance of such Additional Parity Obligations (the Consulting Engineers' report shall be based on the actual operating revenues ofthe acquired utility for a recent 12-month period adjusted to reflect the City's ownership and the City's rate structure in effect with respect to the System at the time of the issuance of the Additional Parity Obligations). (4) Upon recommendation ofthe Consulting Engineer, ifthe City shall have entered into a contract, which contract shall be for a duration of not less than the final maturity of the proposed Additional Parity Obligations, with any public body, whereby the City shall have agreed to furnish any services creating Gross Revenues, then the Net Revenues certified pursuant to paragraph 1(b) above may be increased (to the extent such amounts were not otherwise reflected in such Net Revenues) by the minimum amount which the public body shall guarantee to pay in anyone year for the furnishing of services by the City, after deducting from such payment the estimated Cost of Operation and Maintenance attributable in such year to such services. (5) Upon recommendations ofthe Consulting Engineers, ifthere is an estimated increase in Net Revenues to be received by the City as a result of additions, extensions or improvements to the System during the period of three (3) years following the completion of such additions, extensions or improvements financed with the proceeds of Bonds or Additional Parity Obligations, then the Net Revenues certified pursuant to paragraph 1(b) above shall be increased by fifty percent (50%) of the average annual additional Net Revenues calculated for such three year period. (6) The City need not comply with the provisions of paragraph 1 above if and to the extent the Bonds to be issued are refunding bonds, and if the City shall cause to be delivered a certificate of the Finance Director setting forth the Bond Service Requirements (i) for the Bonds then Outstanding and (ii) for all Series of Bonds to be immediately Outstanding thereafter and stating that the Bond Service Requirements in any particular year pursuant to (ii) above is not greater than the Bond Service Requirements in the corresponding year set forth pursuant to (i) above. (7) The City need not comply with the provisions of paragraph 1 above if and to the extent the Bonds to be issued are for the purpose of providing any necessary additional funds required for completion of any improvements to the System ("Completion Bonds") if originally financed with the proceeds of Bonds; provided that such Completion Bonds for which the City need not comply with the provision of such 13 paragraph (1) above may not exceed 10% of the total principal amount of Bonds estimated to be required for such improvements to the System at the time of issuance of the initial Series of Bonds to finance such improvements. (8) The City shall not be in default in the carrying out of any of the obligation,s assumed under this Ordinance and no event of default shall have occurred under thia. Ordinance and shall be continuing, and all payments required by this Ordinance to be made into the funds and accounts established hereunder shall have been made to the full extent required. (9) The ordinance or resolution authorizing the issuance of the Additional Parity Obligations shall recite that all of the covenants contained herein will be applicable to such Additional Parity Obligations. See Appendix C, "Conformed Copy of Amended Ordinance." Series 2004 Bonds Not a Debt of the City The Series 2004 Bonds shall not constitute a general obligation or indebtedness ofthe City within the meaning of any constitutional, statutory or charter provision or limitation, and no Bondholder shall ever have the right to compel the exercise of the ad valorem taxing power of the City or taxation in any form of real or personal property therein for the payment of the principal of and interest on the Series 2004 Bonds or to compel the City to pay such principal and interest from any other funds of the City except the Pledged Revenues. The Series 2004 Bonds shall not constitute a lien upon any property of or in the City, but shall constitute a lien only on the Pledged Revenues all in the manner provided in the Ordinance. Outstanding Parity Obligations The City has previously issued $7,500,000 of its Stormwater System Revenue Bonds, Series, 1999 (the "Series 1999 Bonds"), which are currently Outstanding in the aggregate principal amount of $7,020,000 and $24,685,000 of its Stormwater System Revenue Bonds, Series 2002 (the "Series 2002 Bonds"), which are currently Outstanding in the aggregate principal amount of $24,245,000, both of which Series rank on a parity with the Series 2004 Bonds as to the pledge of the Net Revenues, As set forth under the caption "THE SERIES 2004 PROJECTS," it is anticipated that the 14 City will issue Additional Parity Obligations in 2006, 2008, 2010, 2012 and 2014 to fund additional capital improvements to the storm water system, MUNICIPAL BOND INSURANCE Payment Pursuant to Financial Guaranty Insurance Policy Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the "Financial Guaranty Insurance Policy") relating to the Series 2004 Bonds effective as of the date of issuance of the Series 2004 Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The Bank of New York, in New York, New York or any successor thereto (the "Insurance Trustee") that portion of the principal of and interest on the Series 2004 Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which Ambac Assurance shall have received notice of Nonpayment from the Trustee/Paying Agent/Bond Registrar. The insurance will extend for the term of the Series 2004 Bonds and, once issued, cannot be canceled by Ambac Assurance. The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the Series 2004 Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding Series 2004 Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding Series 2004 Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the Series 2004 Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. In the event the Paying Agent has notice that any payment of principal of or interest on a Series 2004 Bond which has become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available. The Financial Guaranty Insurance Policy does not insure any risk other than 15 Nonpayment, as defined in the Policy. Specifically, the Financial Guaranty Insurance Policy does not cover: 1. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity. 2. payment of any redemption, prepayment or acceleration premium. 3. nonpayment of principal or interest caused by the insolvency or negligence of any Trustee, Paying Agent or Bond Registrar, if any. If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires surrender of Series 2004 Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such Series 2004 Bonds to be registered in the name of Ambac Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty Insurance Policy requires proof of Holder entitlement to interest payments and an appropriate assignment of the Holder's right to payment to Ambac Assurance. Upon paymentofthe insurance benefits, Ambac Assurance will become the owner of the Series 2004 Bond, appurtenant coupon, if any, or right to payment of principal or interest on such Series 2004 Bond and will be fully subrogated to the surrendering Holder's rights to payment. The insurance provided by the Financial Guaranty Insurance Policy is not covered by the Florida Insurance Guaranty Association. Ambac Assurance Corporation Ambac Assurance Corporation ("Ambac Assurance") is a Wisconsin-domiciled stock insurance corporation regulated by the Office ofthe Commissioner ofInsurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, with admitted assets of approximately $7,670,000,000 (unaudited) and statutory capital of approximately $4,683,000,000 (unaudited) as of March 31,2004. Statutory capital consists of Ambac Assurance's policyholders' surplus and statutory contingency reserve. Standard & Poor's Credit Markets Services, a Division of The McGraw-Hill Companies, Moody's Investors Service and Fitch Ratings have each assigned a triple-A financial strength rating to Ambac Assurance. Ambac Assurance has obtained a ruling from the Internal Revenue Service to the 16 effect that the insuring of an [obligation] by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such [obligation] and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in its financial guaranty insurance policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the Obligor of the Series 2004 Bonds. Ambac Assurance makes no representation regarding the Series 2004 Bonds or the advisability of investing in the Series 2004 Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official Statement other than the information supplied by Ambac Assurance and presented under this caption "MUNICIPAL BOND INSURANCE." Available Information The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company"), is subject to the informational requirements ofthe Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"), These reports, proxy statements and other information can be read and copied at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains an internet site at htto://www.sec.!!ovthat contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005. Copies of Ambac Assurance's financial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Ambac Assurance's administrative offices and its telephone number are One State Street Plaza, 19th Floor, New York, New York 10004 and (212) 668-0340. Incorporation of Certain Documents by Reference The following documents filed by the Company with the SEC (File No. 1-10777) are incorporated by reference in this Official Statement: 1. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and filed on March 15, 2004; 17 2. The Company's Current Report on Form 8-K dated April 21, 2004 and fIled on April 22, 2004; and 3. The Company's Quarterly Report on Form lO-Q for the fiscal quarterly period ended March 31, 2004 and filed on May 10, 2004. All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above in "Available Information". 18 Fiscal Year Ending 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 DEBT SERVICE REQUIREMENTS Parity Bonds Debt Service 2,014,698.76 2,001,325.01 1,996,773.76 1,996,485.01 1,995,332.51 1,993,303.76 1,999,888.13 1,999,294.38 2,001,553.76 2,006,731.26 2,004,666.26 2,009,842.51 2,007,451.89 2,012,576.89 2,019,536.26 2,018,392.51 2,019,405.01 2,027,136.26 2,026,045.63 2,030,788.75 2,031,616.25 2,034,071.25 2,033,011.25 2,043,056.25 2,043,945.00 2,050,558.75 2,052,537.50 1,554,562.50 1,562,231.25 1.566.337.50 59,153,155.81 Series 2004 Bonds Principal Series 2004 Bonds Interest 19 Series 2004 Bonds Total SOURCES AND USES OF FUNDS SOURCES OF FUNDS Par Amount of Bonds Accrued Interest Less: Net Original Issue Discount Less: Underwriter's Discount TOTAL SOURCES USES OF FUNDS Deposit to Debt Service Fund Deposit to Debt Service Reserve Fund Costs of Issuance (1) Deposit to Project Construction Fund TOTAL USES (1) Includes costs of issuance and financial guaranty insurance premium. 20 THE STORMWATER MANAGEMENT SYSTEM Physical Description The City of Clearwater was created in 1923 by Chapter 9710, Special Laws of Florida, with all governmental, corporate and proprietary powers to enable it to conduct municipal government, perform municipal functions and render municipal services, and to exercise any power for municipal purposes except where expressly prohibited by law. A major municipal function ofthe City of Clearwater is the efficient, economic, and safe operation of the City stormwater infrastructure for the health, safety, and general welfare of the public. The management of stormwater in the City was established in 1991 as a city utility enterprise in accordance with Florida Statutes and funded by a stormwater utility fee for stormwater management service, levied against all developed property within the City to provide planning, design, construction, operation, maintenance, regulation, surveying, and inspection of the stormwater management facilities within the City. Those services provide system management for approximately 120 miles of storm sewers, 9 square miles of open water, and more than 14,400 structures (e.g. culverts, flumes, weirs, catch basins, etc.) to manage drainage for the City, having a population of approximately 108,000 permanent residents and 20,000 winter residents. Management The City has a Council-Manager form of municipal government. The Mayor- Councilmember and Councilmembers are elected by the City voters on an at-large basis. All have voting power at Council meetings which are chaired by the Mayor- Councilmember. The City Council appoints the City Manager and the City Manager is responsible for appointing all officers and employees in the administrative service of the City, including the Public Works Administrator. Public Works Administration is administered by the Public Works Administrator who reports to the City Manager through the Assistant City Manager. The stormwater system is one of seven utilities (Water, Sewer, Reclaimed Water, Gas, Solid Waste, Recycling, and Stormwater) billed on a consolidated basis by the Clearwater Utility Customer Service Department. Mahshid D. Arasteh, P.E. serves as the Public Works Administrator. She received her Bachelor of Science Degree in Civil and Urban Engineering from the University of Pennsylvania in 1980 and her Masters of Science Degree in Civil and Urban Engineering, Mechanical Engineering and Applied Mechanics in 1982. She is a 21 member ofthe Florida Engineering Society and the Institute of Traffic Engineers, and has been a registered Professional Engineer in the state of Florida since 1987. Michael D. Quillen, P.E. serves as the Director of the Engineering Department and reports to the Public Works Administrator. He received his Bachelor of Science Degree in Civil Engineering from Purdue University in 1977. He is a member of the Florida Engineering Society and has been a registered Professional Engineer in the state of Florida since 1983. Gary A. Johnson, C.G.C., serves as the Public Service Director. He received his Bachelor of Building Construction degree in 1977 from the University of Florida and in 1979, obtained his General Contractor License from the State of Florida, He continues to serve on the Pinellas County Public Works Academy Board of Trustees, a position he has held since 1989. Rates, Fees and Charges The City uses a measurement of one equivalent residential unit or ERU as the basis for the stormwater management utility fee. The rate per ERU was unchanged from the inception of the utility on January 1, 1991 until 1998 when annual increases were adopted for five fiscal years beginning October 1, 1998. In November, 2001, additional increases were adopted including a change to the increase previously adopted to be effective on October 1, 2002. The monthly rates at inception and as adopted in 1998, 2001 and 2004 and are: 22 Effective Date Rate Per ERU January 1, 1991 $3.00 October 1, 1998 4.00 October 1, 1999 4.17 October 1, 2000 4.35 October 1, 2001 4.54 January 1, 2002 6.13 October 1, 2002 7.16 October 1, 2003 8.01 October 1, 2004 8.65 October 1, 2005 9.35 October 1, 2006 9.63 October 1, 2007 9.92 October 1, 2008 10.22 Single-family homes, multifamily units, condominium units, apartments and mobile homes are rated as one ERU per dwelling unit. Nonresidential property is charged at the rate of 1,830 square feet of impervious area per ERU. 23 Historical Net Revenues 2000 2001 2002 2003 GroSs Revenues $4,938,338 $5,323,293 $6,846,086 $8,660,373 Expenses 3.183.260 3,608.281 3.957.577 4.727.187 Net Revenues Available for Debt Service $1,755,078 $1,715,012 $2,888,509 $3,933,186 Projected Maximum Annual Debt Service (1) $2,960,000 $2,960,000 $2,960,000 $2,960,000 (1) Actual debt service on the Series 1999 Bonds and Series 2002 Bonds and assumes 28 year level debt service amortization with a par amount of$14,350,000* and a true interest cost of 4.84% for the Series 2004 Bonds. Note: The periods shown are periods during which Bonds have been Outstanding. With little undeveloped property in the City and no rate increase from the Utility's inception in 1991 until 1999, revenues remained flat while expenses such as personnel services, professional fees, interfund charges and repairs and maintenance have increased significantly. Rate increases of 33.3% for 1999 and 4.3% for each subsequent year through 2003 were approved in August, 1998. In November, 2001, to fund significant increases in the storm water system capital improvement program, rate increases to $6.13 effective January 1, 2002, to $7.16, effective October 1, 2002, to $8.01, effective October 1, 2003, to $8.65, effective October 1, 2004 and to $9.35, effective October 1, 2005 were approved. To provide funding to continue the capital improvement program and provide for increased maintenance and asset management, rates were increased in August, 2004, by 3% per year to $9.63, effective October 1, 2006, $9.92, effective October 1, 2007 and $10.22, effective October 1, 2008. FINANCIAL STATEMENTS The combined financial statements and Stormwater enterprise fund financial statements of the City at September 30, 2003 and for the Fiscal Year then ended, appended hereto as Appendix B, have been excerpted from the financial statements contained in the City's Comprehensive Annual Financial Reports for the Fiscal Year ending September 30,2003. 24 INVESTMENT POLICY OF THE CITY Pursuant to the requirements of Section 218.45, Florida Statutes, the City adopted a written investment policy which applies to all funds held by or for the benefit of the City Council (except for proceeds of bond issues which are deposited in escrow and debt service funds and governed by their bond documents) and funds of Constitutional Officers and other component units of the City. The objectives of the investment policy, listed in order in order of importance, are: 1. Safety of principal 2. Provision of sufficient liquidity 3. Optimization of return within the constraints of safety and liquidity The investment policy limits the securities eligible for inclusion in the City's portfolio. The City will attempt to maintain a weighted average maturity of its investments at or below three years; however, the average maturity of investments may not exceed four years. To enhance safety, the investment policy requires the diversification of the portfolio to reduce the risk of loss resulting from over-concentration of assets in a specific class of security. The investment policy also requires the preparation of periodic reports for the City Council of all outstanding securities by class or type, book value, income earned and market value as of the report date. Notwithstanding the foregoing, moneys held in the funds and accounts established under the Ordinance may be invested only in Permitted Investments, as described in the Ordinance. LEGALITY FOR INVESTMENT The Series 2004 Bonds constitute legal investments in the State of Florida for state, county, municipal and all other public funds and for banks, savings banks, insurance companies, executors, administrators, trustees and all other fiduciaries, and also constitute securities eligible as collateral security for all state, county, municipal and other public funds. 25 TAX EXEMPTION Federal Income Tax Matters The Internal Revenue Code of 1986, as amended (the "Code") establishes certain requirements which must be met subsequent to the issuance and delivery ofthe Bonds in order that interest on the Bonds be and remain excluded from gross income for purposes offederal income taxation. Non-compliance may cause interest on the Bonds to be included in federal gross income retroactive to the date of issuance of the Bonds regardless of the date on which such non-compliance occurs or is ascertained. These requirements include, but are not limited to, provisions which prescribe yield and other limits within which the proceeds ofthe Bonds and the other amounts are to be invested and require that certain investment earnings on the foregoing must be rebated on a periodic basis to the Treasury Department of the United States. The County has covenanted in the Resolution to comply with such requirements in order to maintain the exclusion from federal gross income of the interest on the Bonds. In the opinion of Bond Counsel, assuming compliance with the aforementioned covenants, under existing laws, regulations, judicial decisions and rulings, interest on the Bonds is excluded from gross income of the holders thereof for purposes of federal income taxation. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals or corporations; however, interest on the Bonds may be subject to the alternative minimum tax when any Bond is held by a corporation. The alternative minimum taxable income of a corporation must be increased by 75% ofthe excess of such corporation's adjusted current earnings over its alternative minimum taxable income (before this adjustment and the alternative tax net operating loss deduction). "Adjusted Current Earnings" will include interest on the Bonds. Except as described above, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of Bonds. Prospective purchasers of Bonds should be aware that the ownership of Bonds may result in collateral federal income tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry Bonds, (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by 15% of certain items, including interest on the Bonds, (iii) the inclusion of interest on the Bonds in earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (iv) the inclusion of interest on Bonds in passive income subject to federal income taxation of certain S corporations with Subchapter C earnings and profits at the close ofthe taxable year, and (v) the inclusion of interest on the Bonds in "modified adjusted gross income" by recipients of certain Social Security and Railroad Retirement 26 benefits for purposes of determining whether such benefits are included in gross income for federal income tax purposes. PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE BONDS AND THE RECEIPT OR ACCRUAL OF THE INTEREST THEREON MAY HAVE ADVERSE FEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL AND CORPORATE REGISTERED OWNERS. PROSPECTIVE REGISTERED OWNERS SHOULD CONSULT WITH THEIR TAX SPECIALISTS FOR INFORMATION IN THAT REGARD, During recent years legislative proposals have been introduced in Congress, and in some cases enacted that altered certain federal tax consequences resulting from the ownership of obligations that are similar to the Bonds. In some cases these proposals have contained provisions that altered these consequences on a retroactive basis. Such alteration of federal tax consequences may have affected the market value of obligations similar to the Bonds. From time to time, legislative proposals are pending which could have an effect on both the federal tax consequences resulting from ownership of Bonds and their market value. No assurance can be given that legislative proposals will not be introduced or enacted that would or might apply to, or .have an adverse effect upon, the Bonds. Florida Tax Matters On the date of delivery of the Bonds, Bond Counsel will issue an opinion to the effect that under existing statutes, regulations and judicial decisions, the Bonds and the income therefrom are exempt from taxation under the laws of the State of Florida, except as to Florida estate taxes imposed by Chapter 198, Florida Statutes, as amended, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. RATINGS Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") and Fitch IBCA, Inc. ("Fitch") would be expected to issue their ratings of "Aaa," "AAA" and "AAA," respectively, with respect to the Series 2004 Bonds, based on the issuance of the Policy by AMBAC. In addition, Moody's, S&P and Fitch have assigned underlying ratings to the Series 2004 Bonds of "A3," "A" and "A," respectively, without regard to the Policy. The ratings reflect the view of Moody's, S&P and Fitch and any explanation of the significance of such ratings may be obtained only from Moody's, S&P and Fitch. There is no assurance that such ratings will remain in effect for any given period of time or that such ratings may not be lowered or withdrawn entirely by the rating agencies, if in their opinion or 27 judgment, circumstances so warrant. Any downward revision or withdrawal of the ratings may have an adverse effect on the market price and marketability ofthe Series 2004 Bonds. LITIGATION Except as described below, in the opinion of the City Attorney there is no litigation now pending or threatened (i) to restrain or enjoin the issuance or sale of the Series 2004 Bonds or (ii) questioning or affecting the validity of the Series 2004 Bonds, the Ordinance or the pledge ofthe Net Revenues by the City or the proceedings for the authorization, sale, execution or delivery of the Series 2004 Bonds. The City is involved in certain litigation and disputes incidental to its operations, Upon the basis of information presently available, the City Attorney believes that there are substantial defenses to such litigation and disputes and that, in any event, any ultimate liability, in excess of applicable insurance coverage, resulting therefrom will not materially adversely affect the financial position or results of operations of the City. The Pinellas County School Board and St. Petersburg College, as the only public educational institutions in the City, filed suit against the City in the Circuit Court of Pinellas County seeking a declaration that, as public educational institutions, they are statutorily exempted from payment ofthe stormwater utility fees. The City settled the litigation with St. Petersburg College by paying $100,000 and agreeing not to assess the storm water fees against it until there is a final appellate court opinion or Florida Supreme Court opinion determining that the fees are a utility user fee. The City has not collected stormwater utility fees from the Pinellas County School Board for over three years; however, the School Board has demanded refunds of Stormwater utility fees paid prior to that time. The Circuit Court of Pinellas County found in favor of the Pinellas County School Board and was awarded a judgment in the amount of $343,663.49. The City intends to appeal the judgment. Any damages ultimately awarded would be payable from Net Revenues and it is not possible at this time to predict the exact amount of such potential damages; however, the City is of the opinion that the payment of any such damages would not have a material adverse effect on the operation ofthe System or the payment of Debt Service on the Series 2004 Bonds. The issues raised in the suit do not pose a general challenge to the validity of the stormwater utility fees or the collection thereof, which issues were validated as described below, but only challenge the applicability of such fees under certain circumstances to plaintiffs as public educational institutions. 28 ADVISORS AND CONSULTANTS The City has retained advisors and consultants in connection with the issuance of the Series 2004 Bonds. These advisors and consultants are compensated from a portion of the proceeds of the Series 2004 Bonds, identified as "Costs of Issuance" under the heading "ESTIMATED SOURCES AND USES OF FUNDS" herein; and such compensation, is, in some instances, contingent upon the issuance ofthe Bonds and the receipt of the proceeds thereof. Financial Advisor. The City has retained RBC Dain Rauscher Inc., St. Petersburg, Florida (the "Financial Advisor"), as the City's financial advisor. The fees of the Financial Advisor will be paid from proceeds of the Series 2004 Bonds and such payment is contingent upon the issuance of the Series 2004 Bonds. Bond Counsel. Bryant Miller & Olive, P.A., Tallahassee, Florida represents the City as Bond Counsel. The fees of Bond Counsel will be paid from proceeds of the Series 2004 Bonds, and such payment is contingent upon the issuance of the Series 2004 Bonds. Disclosure Counsel. Nabors, Giblin & Nickerson, P.A., Tampa, Florida represents the City as Disclosure Counsel. The fees of Disclosure Counsel will be paid from proceeds of the Series 2004 Bonds, and such payment is contingent upon the issuance of the Series 2004 Bonds. 29 CONTINUING DISCLOSURE The City has covenanted for the benefit of the holders and beneficial owners of the Series..2004 Bonds to provide certain financial information and operating data relating to the City by not later than June 30 in each year commencing June 30, 2005 (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material. The Annual Report will be filed by the City with each Nationally Recognized Municipal Securities Information Repository ("NRMSIR"), and with the State of Florida Repository, if and when created. The notices of material events will be filed by the City with the NRMSIR and with the State of Florida Repository, if and when created. The form of Continuing Disclosure Certificate containing the specific nature of the information to be contained in the Annual Report or the notices of material events appears in "APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE." These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). The City has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events. ENFORCEABILITY OF REMEDIES The remedies available to the registered owners ofthe Series 2004 Bonds upon an event of default under the Ordinance are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title II of the United States Code, the remedies specified by the federal bankruptcy code, the Ordinance and the Series 2004 Bonds may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2004 Bonds (including Bond Counsel's approving opinion) will be qualified, as to the enforceability ofthe various legal instruments, by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors enacted before or after such delivery. 30 CERTAIN LEGAL MATTERS Certain legal matters in connection with the issuance of the Series 2004 Bonds are subject to the approval of Bryant Miller & Olive, P .A., Tallahassee, Florida, Bond Counsel, whose approving opinion will be available at the time of delivery ofthe Series 2004 Bonds and will be printed on such Bonds. The proposed form of Bond Counsel opinion is attached hereto as Appendix E and reference is made to such form of opinion for the complete text thereof. Certain legal matters will be passed upon for the City by Pamela K. Akin, Esquire, City Attorney and by Nabors, Giblin & Nickerson, P.A., Tampa, Florida, disclosure counsel to the City. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Section 517.051, Florida Statutes, and the regulations promulgated thereunder (the "Disclosure Act") require that the City make a full and fair disclosure of any bonds or other debt obligations that it has issued or guaranteed and that are or have been in default as to principal or interest at any time after December 31, 1975 (including bonds or other debt obligations for which it has served only as a conduit issuer such as industrial development or private activity bonds issued on behalf of private businesses). The Cityis not, and has not since December 31, 1975, been in default as to principal and interest on bonds or other debt obligations for which ad valorem or non-ad valorem revenues of the City are pledged. The City hereby makes the following disclosure regarding a default on an issue of industrial development bonds not related to any direct indebtedness ofthe City, as it is aware of a prior default in 1990 with respect to an issue of industrial revenue bonds for which the City served only as a conduit issuer. The City was not liable to pay the principal of or interest on such bonds except from payments made to it by the private company on whose behalf such bonds were issued and no funds of the City were used to pay such bonds or the interest thereon. Although the City is not aware of any other defaults with respect to bonds or other debt obligations as to which it has served only as a conduit issuer, it has not undertaken an independent review or investigation of such bonds or other debt obligations. 31 FINANCIAL ADVISOR The Financial Advisor for the City is RBC Dain Rauscher Inc., with offices located at 100 Second Avenue South, Suite 800, St. Petersburg, Florida 33701-4386. MISCELLANEOUS The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is directed to all such documents for full and complete statements of all matters of fact relating to the Series 2004 Bonds, the security for the payment of the Series 2004 Bonds, and the rights and obligations of holders thereof. The information contained in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations offact, and no representation is made that any ofthe estimates will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the holders ofthe Series 2004 Bonds. The execution and delivery of this Official Statement by its Mayor and its City Manager has been duly authorized by the City Council. CITY OF CLEARWATER, FLORIDA Brian J. Aungst, Sr., Mayor William B. Horne, II, City Manager 32 APPENDIX A GENERAL DESCRIPTION OF THE CITY AND SELECTED STATISTICS APPENDIX A GENERAL INFORMATION RELATING TO THE CITY OF CLEARWATER, FLORIDA Location The City of Clearwater (the "City"), the county seat of Pinellas County (the fifth most populous county in Florida), is geographically located in the middle of the west coast of Florida on the Gulf of Mexico. It is situated approximately 22 miles west of Tampa and 16 miles north of St. Petersburg. Standing on the highest coastal elevation of the State, the City limits comprise approximately 26.66 square miles of land and 8.61 square miles of waterways and lakes. Clearwater Beach, a corporate part of the City, is a beach community connected to the mainland by Memorial Causeway, a four-lane, toll-free drive stretching almost two miles across the Intracoastal Waterway, Business on Clearwater Beach is mainly tourist oriented, with hotels, motels and gift shops. Many fine homes, apartments and condominiums offer pleasant, semi-tropical island accommodations to permanent residents and winter and summer visitors. History The area now known as Clearwater was first explored in 1528 by Panfile de Narvaez, a Spanish explorer who encountered a large tribe of Indians, which his army drove out. The Indians recaptured their territory and held it until the Seminole Wars of 1835-42. The Indians who inhabited this area are said to have called it "Pocotopaug," meaning "clear water," for the many springs of clear, fresh water that bubbled along the shore and even below the waterline at low tide. Settlers began moving into the area around the time of the Seminole Wars. After the wars ended, the territory was opened by the Federal government for homesteading under the Armed Occupation Act. The first land title was granted in 1842. The early settlement, named "Clear Water Harbor," was incorporated in 1897. "Clear Water" later became one word and "Harbor" was dropped in 1906 when Pinellas County was created by an act of the State Legislature. In May 1911, Clearwater became the County Seat and Clearwater was chartered as a municipality on May 27, 1915. Government and Administration Clearwater has a council-city manager form of government. Four council members and a mayor are elected at large to serve overlapping three-year terms. They appoint the A-I city manager and the city attorney, All other administrative and professional positions are appointed by the city manager in accordance with the City's Civil Service System. The City has approximately 1,851 employees, covered by the City's Civil Service law relating to recruitment, promotion, evaluation and discipline based on merit principles. Four employee unions represent the City's civil labor force: two units of the Fraternal Order of Police; two of the International Association of Fire Fighters; and one from the Communications Workers of America. Transportation Pinellas County and Clearwater are served by three major causeways and bridges over Tampa Bay, by U,S, 19 and 1-275 to the north and south, by 1-4 and U.S. 60 to the east. State Roads 590 and 686 also afford access to the City, Tampa International Airport, located approximately seventeen miles from downtown Clearwater, provides air travel access with approximately 260 national and international flights daily. Limousine and taxi service to and from the airport is available from Clearwater and throughout Pinellas County. St. Petersburg/Clearwater International Airport, approximately ten miles from downtown Clearwater, offers regularly scheduled passenger service and charter and special group flights, on a more limited basis to both domestic and foreign destinations, particularly to Canada, Mexico, and Central and South America. The Executive Airpark, which is slightly over a mile from the downtown business section, provides service and maintenance for private plane owners, The airport has one 3,000 foot hard-surface runway and facilities for visiting and locally based planes. The Port of Tampa (22 miles to the east) is the closest deep water port. The port is serviced by a variety of steamship agents and operators. The United States Coast Guard maintains an air station at the St. Petersburg/Clearwater International Airport, and a search and sea rescue cutter station on Clearwater Harbor opposite Sand Key. Gulf Coast Motor Lines provides service daily between Clearwater, St. Petersburg and Tampa and makes connections with Greyhound and Trailways Bus Lines in Tampa. Scenic tours are available via Gray Line out of Clearwater and St. Petersburg, and both Gray Line and Gulf Coast have buses for charter. Pinellas Suncoast Transit System maintains 54 routes in 19 municipalities in Pinellas County. Utilities, Public Service and Community Facilities The City owns and operates its own water and wastewater collection systems. Water is obtained from 17 deep wells owned and operated by the City (approximately 20- 25%) and from wholesale purchases from the Pinellas County Water System A-2 (approximately 75-80%). Total daily average is approximately 29 million gallons per day. The wastewater collection program provides for the transmission of wastewater through the City's underground sewer mains, collectors and interceptor lines and for the maintenance, repair and replacement of 363 . miles of sanitary sewer lines. The Department of Public Works maintains 304 miles of paved streets, 10.5 miles of unpaved streets, approximately 147 miles of storm sewer mains, and approximately 559 miles of water mains. Electric power is provided by Progress Energy and telephone service is provided by Verizon of Florida, Inc. Bright House Networks and Knology provide cable television service under franchises with the City. Local editions of the daily St. Petersburg Times and The Tampa Tribune, plus weekly newspapers from adjacent Dunedin, Largo, Seminole and Clearwater Beach are widely distributed. The Clearwater Public Library System consists of a main library and four branches which are spread evenly throughout the community for easy access. The City offers over 42 acres of public beach front, 1,130 acres of parks, 31 playgrounds, numerous athletic courts and fields, five swimming pools, a 6,917 seat baseball and softball stadium, golf course, civic and recreational centers, 7.4 miles of recreational paths, boat ramps and a 209 slip yacht basin and marina. The Philadelphia Phillies conduct spring training at the municipal baseball stadium and have a long-term contract for farm club training on Clearwater's specially constructed facilities during the Winter Instructional League Program. Clearwater is the home of the Clearwater Bombers, a national amateur fastpitch softball team, Tourism The State of Florida reported 75.6 million tourists came to Florida during the year 2003, exceeding the previous record set in 2002 by nearly 2.5%, The estimated number of domestic visitors to the State in 2003 totaled 69.6 million, an increase of 2,5% over 2002, while the number of Canadian visitors surged nearly 6% to just under 1.7 million for the year. The lone decrease was a slight drop in the number of overseas visitors to Florida, which was 1.1 percent to 4.4 million. Tourism is a $5.2 billion industry annually to the County. Pinellas County is ranked seventh of the top ten destinations in Florida and generated approximately 5 million overnight guests and 7.5 million day visitors in 2003. Clearwater's Fun 'N Sun Festival each spring attracts thousands of visitors. Education The Pinellas County School District is the seventh largest in the State and operates a total of 144 schools comprising elementary through high school, exceptional, alternative and vocational schools within the County and serves more than 113,000 A-3 students. During the 2003-2004 school year, Pinellas County Schools expects enrollment of more than 16,295 compared to 17,047 during the 2002-2003 school year with students attending 82 elementary, 24 middle and 16 high schools along with five exceptional education centers, four alternative schools, four partnership schools and three charter schools. The district also operates three community schools, three adult education/learning centers, two technical education centers and one secondary vocational center. Private schools and academies are also located within or near the City limits. In addition, St. Petersburg College has a Clearwater campus. Eckerd College in St. Petersburg, Beacon College in Largo, Stetson University College of Law in Gulfport, the University of South Florida and the University of Tampa in Tampa offer nearby college and post-graduate education. Industry, Commerce and Labor Light, clean industry is encouraged in Clearwater. In 1957, the City of Clearwater developed a 100 acre industrial park adjacent to the Clearwater Airpark (Executive Airport) and to the CSX Transportation Company. There is also a privately owned, 35 acre industrial park. Large industries located near Clearwater include Honeywell, General Electric, UNISYS, Concept and Hercules Defense Electronics Systems, Inc, During the 1999 fiscal year IMRglobal Corp, ("IMR") occupied its new world headquarters in downtown Clearwater, Pension Plan The Employees' Pension Plan and the Fireman's Pension Plan are self- administered by the City, City contributions for fiscal year ending 2003 were $4,649,642 to the Employees' Plan and $1,211,210 to the Fireman's Plan, and were in accordance with actuarially determined funding requirements. In addition, supplemental pensions exist for certified Police Officers and Firefighters, funded solely from excise taxes on certain insurance premiums covering property in Clearwater, collected by the State and remitted to the City. Both plans require benefits to be adjusted to equal funds assets provided by the defined contributions. [Remainder of page intentionally left blank] A-4 Demographic Information Last Ten Fiscal Years (a) (b) (c) (d) (e) Permanent Per Capita Median School Unemployment Year Population Income Age Enrollment Rate (%) 1994 100,604 22,148 42.9 10,043 5.5% 1995 101,162 23,412 42.2 10,284 4.8 1996 101,867 23,768 42.1 11,906 4.2 1997 102,472 25,111 43.3 15,264 3.7 1998 102,874 26,287 43.6 13,714 2,9 1999 104,281 27,704 43.9 14,551 3.0 2000 104,454 29,041 44.2 15,978 2.7 2001 108,787 29,818 43.0 16,293 2.7 2002 109,231 31,406 43.0 17,047 3.9 2003 109,719 32,408 43.9 16,295 4.9 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30,2003. (a) University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (b) Data is for Pinellas County. Source is the University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. ( c) University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (d) Pinellas County School District. (e) University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003, as of December 31 of the current fiscal year. NOTE: Data is for an unspecified point in each year, not specifically September 30. A-5 Property Values and Construction Last Ten Fiscal Years Commercial Construction Residential Construction Number Number Total Assessed Fiscal of of Property Value Year Permits Value Permits Value (a) 1994 1,077 $ 66,558,783 4,662 $21,151,330 $5,572,851,512 1995 1,391 120,116,220 5832 27,199,318 5,641,202,905 1996 1,860 43,299,453 6527 32,039,292 5,733,193,387 1997 1,762 94,445,784 6605 36,259,408 5,884,592,007 1998 1,392 52,983,592 7253 50,906,470 6,049,571,226 1999 1,821 90,77,005 5624 37,677,855 6,349,561,534 2000 2,667 177,569,812 5485 30,376,636 6,555,350,175 2001 2,312 164,701,145 5512 34,182,620 7,108,110,272 2002 2,196 108,939,096 5448 37,498,719 7,858,986,677 2003 1,834 193,901,304 6084 54,304,855 8,556,134,526 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30, 2003. (a) Pinellas County Property Appraiser, values listed are for years of collections. A-6 Assessed and Estimated Actual Property Valuations Last Ten Fiscal Years Assessed Valuations (a) Percentages Assessed Values to Yearly Increases Tax Collection Non-Exempt Personal Other Total Total Total Estimated Year Year Real Estate Property Property(b) Taxable Exempt(c) All Market Taxable Total 1993 1994 $3,789,902,836 $390,841,880 $ 569,338 $4,181,314,054 $1,391,537,458 $5,572,851,512 100.0% (0.2)% 1.2% 1994 1995 3,782,134,930 403,392,150 580,731 4,186,107,811 1,455,095,094 5,641,202,905 100.0 0.1 1.2 1995 1996 3,820,217,710 431,622,230 592,909 4,252,432,849 1,480,760,538 5,733,193,387 100.0 1.6 1.6 1996 1997 3,918,747,480 457,182,870 628,698 4,376,559,048 1,508,032,959 5,884,592,007 100.0 2.9 2.6 1997 1998 3,999,483,300 493,752,640 1,026,819 4,494,262,759 1,555,308,467 6,049,571,226 100.0 2.7 2.8 1998 1999 4,153,719,690 537,808,800 870,404 4,692,398,894 1,657,162,640 6,349,561,534 100.0 4.4 5.0 > 1999 2000 4,353,493,520 549,051,160 934,183 4,903,478,863 1,751,871,312 6,655,350,175 100.0 4.5 4.8 I -....l 2000 2001 4,657,074,110 550,845,380 867,947 5,208,787,437 1,899,322,835 7,108,110,272 100.0 6.2 6.8 2001 2002 5,130,069,970 557,588,870 767,087 5,688,425,927 2,170,560,750 7,858,986,677 100.0 9.2 10.6 2002 2003 5,580,157,650 524,125,950 794,789 6,105,078,389 2,451,056,137 8,556,134,526 100.0 7.3 8.9 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30, 2003. (a) Pinellas County Property Appraiser. (b) Railroad and Telegraph Companies. (c) Includes governmental, educational, qualified religious, literary, scientific, and health care properties and special exemptions for individual property owners. Qualified property owners are entitled to a $25,000 Homestead Exemption based on residency requirement Property Tax Rates - All Direct and Overlapping Governments Last Ten Fiscal Years Downtown County Emergency Fiscal Develop- School Transit Medical Year City mente a) Board County District Services Other Total 1994 5.1158 1.0000 9.0820 5.4290 0.6697 0.8500 1.1820 23.3285 1995 5.1158 1.0000 9.3590 5.5850 0.6697 0.8720 1.4221 24.0236 1996 5.1158 1.0000 9.3290 5.5140 0.6697 0.8060 1.6308 24.0653 1997 5.1158 1.0000 9.1760 5.5100 0.6697 0.7520 1.6561 23.8796 1998 5.1158 1.0000 9.1330 5.5380 0.6697 0.7410 1.6561 23.8536 1999 5.1158 1.0000 9.11 00 5.5380 0.6501 0.7130 1.6561 23.7830 2000 5.5032 1.0000 8.6660 5.8540 0.6501 0.6470 1.6572 23.9775 > I 2001 5.5032 1.0000 8.4330 6.0040 0.6501 0.7470 1.6562 23.9935 1,0 2002 5.5032 1.0000 8.4870 6.1410 0.6501 0.6600 1.6562 24.0975 2003 5.7530 1.0000 8.4490 6.1410 0.6319 0.6600 1.6562(b) 24.2911 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2003; Pinellas County Property Appraiser. PTOperty Tax Rates: Expressed as mills per $1,000 of taxable value. (a) A separate taxing district established by referendum which affects only downtown pTOperties. (b) "Other" includes Pinellas County Planning Council (0.0225); Juvenile Welfare Board (0.8117); SW Florida Water Management District (OA220); Pinellas Anclote River Basin (OAOOO). City of Clearwater, Florida Principal Taxpayers* September 30, 2003 Percentage to Total Assessed Assessed Taxpayers Type of Business Value* Value Bellwether Prop. LP Ltd. Shopping Center $ 91,974,300 1.65% California State Teachers Apartment Complex 27,600,000 0.49 Taylor, John S. III Landowner 27,401,700 0.49 Weingarten Nostat Inc. Shopping Center 24,939,600 0.45 Sand Key Association Ltd. Hotel 24,000,000 0.43 Clearwater Land Co. Adult Congregate Facility 23,848,700 0.43 St. Joe Co. Office Building 23,549,300 0.42 Northwood Plaza Shopping Center 22,309,100 0.40 ZOM Bayside Arbors Ltd. Apartment Complex 19,268,000 0.35 Furnary, Stephen J. Apartment Complex 19,200,000 0.34 Subtotal 304,090,700 5.45 All Others 5,276,066,950 94.55 Total $5,580,157,650 100.00% * Based on non-exempt real property assessed taxable values. Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2003; Pinellas County Property Appraiser, 2002 tax rolls for 2003 collections. A-lO City of Clearwater, Florida Ratio of Net General Bonded Debt to Taxable Assessed Value and Net Bonded Debt Per Capita Last Ten Fiscal Years Ration of Net Net Taxable Net General General Assessed General Bonded Debt Bonded Fiscal Value Bonded To Assessed Debt Year Population (000)(1 ) Debt Value Per Capita 1993 100,768 $4,188,105 348,478 0.008% 3.46 1994 100,604 4,181,314 242,700 0.006 2.41 1995 101,162 4,186,108 133,597 0.003 1.32 1996 101,867 4,252,433 21,598 0.001 0.21 1997 102,472 4,376,559 165,000 0.004 1.61 1998 102,874 4,494,262 33,750 0.001 0.33 1999 104,281 4,692,398 n/a 0.00 2000 104,454 4,903,478 n/a 0.00 2001 108,787 5,208,787 n/a 0.00 2002 109,231 5,688,426 n/a 0.00 2003 109,719 6,105,078 n/a 0.00 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002. (1) Values listed are for year of collections. [Remainder of page intentionally left blank] A-ll City of Clearwater, Florida Computation of Legal Debt Margin September 30, 2003 Assessed Valuation of Non-Exempt Real Estate(a) ..................................... $5,580,157,650 Times: Twenty Percent Limitation per City Charter....................................x .20 Equals Legal Indebtedness Limitation ...... ............. ......... ................... .......... $1 J 16.031.530 Debt Subject to Indebtedness Limitation: Revenue Bonds: 1996A Gas System Revenue Bonds 1997 Gas System Revenue Bonds 1998 Gas System Revenue Bonds 1993 Water and Sewer Revenue Bonds 1998 Water and Sewer Revenue Bonds 2002 Water and Sewer Revenue Bonds 1999 Storm water System Revenue Bonds 2002 Stormwater System Revenue Bonds 2001 Infrastructure Sales Tax Revenue Bonds 2001 Improvement Revenue Refunding Bonds 2002 Spring Training Revenue Bonds Notes, Mortgages and Contracts Totals Legal Indebtedness Margin Gross Debt Less Sinking Fund Assets Net Debt Subject to Limitation 8,262,083 11,826,250 7,857,083 4,509,000 50,363,726 54,411,865 7,030,833 24,281,667 36,953,333 9,899,690 14,376,667 13.746.259 $243.518.456 $872.513.074 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002. (a) Valuation listed is from 2002 tax year for 2003 collections. $8,270,000 11,870,000 7,860,000 14,005,000 51,924,771 58,680,000 7,150,000 24,685,000 41,345,000 11,005,000 14,645,000 13.746.259 $265.186.030 7,917 43,750 2,917 9,496,000 1,561,045 4,268,135 119,167 403,333 4,391,667 1,105,310 268,333 o $21.667.574 A-12 City of Clearwater, Florida Computation of Direct and Overlapping Debt September 30, 2003 Net General Obligation Debt Governmental Unit Outstanding Percent Amount City of Clearwater $ 100.0% $ Pinellas County School Board $66,895,235 13.6% $9,097,752 (a) Applicable Net Debt Percentage is based on ratio of City to County Taxable values for 2003 collections ($5,580,157,650/ $41,167,093,480 = 13.6%). A-13 APPENDIX B EXCERPTS FROM THE CITY'S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003 earwatet; Florida ~ @rtacatf~ ~n&d c$Y~JoJ POOJ COMPREHENSIVE FINANCIAL ANNUAL REPORT BRIAN AUNGST May 0 r - Co m m I s s Ion e r WHITNEY GRAY Vice Mayor-Commissioner HOYT HAMILTON Commissioner FRANK HIBBARD Commissioner BILL JONSON Commissioner BILL HORNE City Manager MARGARET L, SIMMONS, CPA Finance Director Prepared by: City of Clearwater Finance Department (,,''Ilirl, ,"...V,L"..'--:..... .II~ ~,".~.,,~.~.....-_ "f...."., !!!!!--'..t-- ~C:il...\ JJ ~ '!1: ~ ~~~ _<i ':.~\ >-"::"'-'~- ':.~'>- '.. ",~~ -.::rlf,~_'.....~~I" '--,,~r~~...," City of Clearwater, Florida Comprehensive Annual Financial Report For the Fiscal Year Ended September 30,2003 TABLE OF CONTENTS INTRODUCTORY SECTION: Page Title Page and List of Elected and Appointed Officials....................................................................................... i Letter of Transmittal..... ..... ...... .......... ....... ................ .................. ........... ......... ....... ........... ......... ...... ... .... ...... ..... vii Certificate of Achievement for Excellence in Financial Reporting.................................................................... xi Organizational Chart........................................................................................................................... ............. .xii FINANCIAL SECTION: Independent Auditor's Report .................. ........ ................ ............ ....... ................. ............ ....... ........... ......... ....... 1 Management's Discussion and Analysis... ....... .................. .......... ........ .......... ....... .......... .......... ....... ........ ......... 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets ......................... ......... .................. .................. ................. .......... ...................... 16 Statement of Activities .................. ......... .................... ......... ........ .......... ........ ........... ............... ....... ... ..... 17 Fund Financial Statements: Balance Sheet - Governmental Funds................................................................................................. 18 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets........... 19 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds......20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ....................................................................... 21 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual- General Fund ...................................................................................................22 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual- Special Development Fund .............................. ......... ........ ............................... 23 Statement of Net Assets - Proprietary Funds ......................................................................................24 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds .............28 Statement of Cash Flows - Proprietary Funds.....................................................................................32 Statement of Fiduciary Net Assets _ Fiduciary Funds ......................................................................... 36 Statement of Changes in Fiduciary Net Assets - Fiduciary Funds....................................................... 37 Notes to Financial Statements ...... .......................................... ... ................. ......... ........ ... ......... ..... ........... ....38 Required Supplementary Information - Pension Trust Funds: Schedules of Funding Progress............ .............................. ............. ............. .... ... .......... ........ ......... ............70 Schedules of Employer Contributions... ................. ........ ......... ........... ........ .... ........ ....... ...... ............ ......... ...71 Notes to Schedules of Required Pension Supplementary Information...................................................... 72 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds....................................................;.............. 76 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds ........................................ ................. ... ........... ......................... ......... .... 78 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual- Community Redevelopment Agency Special Revenue Fund ..............,............... 81 Combining Statement of Net Assets - Nonmajor Enterprise Funds ......................................................... 84 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Nonmajor Enterprise Funds ............................................... ... ........ ............... ............. ................ ....... ......85 Combining Statement of Cash Flows - Nonmajor Enterprise Funds ......................................................... 86 Combining Statement of Net Assets - Internal Service Funds .................................................................. 90 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Internal Service Funds.......... ................................................................................................................. 91 Combining Statement of Cash Flows -Intemal Service Funds ................................................................92 Hi City of Clearwater, Florida Comprehensive Annual Financial Report For the Fiscal Year Ended September 30, 2003 TABLE OF CONTENTS (Continued) Combining Statement of Fiduciary Net Assets ...........................................................................................96 Combining Statement of Changes in Fiduciary Net Assets .......................................................................97 Statement of Changes in Assets and Liabilities - Treasurer's Escrow Agency Fund ............................... 98 Capital Assets Used in the Operation of Governmental Funds: Comparative Schedules by Source ....................................................................................................101 Schedule by Function and Activity ...........................................,..........................................................102 Schedule of Changes by Function and Activity .................................................................................. 1 03 Supplementary Information: Continuing Disclosure - Gas System Revenue Bonds, Series 1996A, 1997A&B, and 1998.......,..........106 Continuing Disclosure - Water & Sewer Revenue Bonds, Series 1993, 1998, and 2002......................110 Continuing Disclosure - Stormwater Revenue Bonds, Series 1999 and 2002 .......................................113 Continuing Disclosure - Infrastructure Sales Tax Revenue Bonds, Series 2001 ...................................114 Continuing Disclosure - Improvement Revenue Refunding Bonds, Series 2001 ...................................114 Fire Services Program .........................,....................................................................................................115 STATISTICAL SECTION: Table I General Governmental Expenditures by Function - Last Ten Fiscal years......................................... 118 Table II General Revenues by Source - Last Ten Fiscal Years ........................................................................ 120 Table III Property Tax Levies and Collections - Last Ten Fiscal Years ............................................................. 122 Table IV Assessed and Estimated Property Valuations Last Ten Fiscal Years ................................................. 124 Table V Property Tax Rates - All Direct and Overlapping Govemments - Last Ten Fiscal Years ..................................................................................................................................126 Table VI Principal Taxpayers .. ...... ........... ............... .......... .......... ........ .......... ....... ..................... ................. ......... 128 Table VII Ratio of Net General Bonded Debt to Taxable Assessed Value and Net Bonded Debt Per Capita - Last Ten Fiscal Years .......................................................................................129 Table VIII Ratio of Annual General Debt Service to Expenditures - General Bonded Debt, General Revenue Certificates, and Mortgages and Notes - Last Ten Fiscal Years ..............................".........................................................................130 Table IX Computation of Legal Debt Margin ....................................................................................................... 131 Table X Computation of Direct and Overlapping Debt....................................................................................... 131 Table XI Revenue Bond Coverage: Water and Sewer Revenue Bonds Coverages ........................................................................................... 132 Gas Revenue Bonds Coverages .................................................................................................................133 Stormwater Revenue Bonds Coverages ............ ......... ........ .................. ....... .......... .................. .......... ......... 134 Infrastructure Sales Tax Revenue Bonds Coverages .................................................................................134 Spring Training Facility Revenue Bonds Coverages ................................................................................... 135 Improvement Revenue Refunding Bonds Coverages................................................................................. 135 Table XII Property Values and Construction - Last Ten Fiscal years................................................................. 136 Table XIII Demographic Statistics - Last Ten Fiscal Years .................................................................................. 137 Table XIV Miscellaneous Facts................. ........... ....... ........ .............. ..... .......... .......... ............................ ....... ......... 138 SINGLE AUDIT I GRANTS COMPLIANCE SECTION: Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Governmental Auditing Standards ............................141 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 .................................................................. 143 Schedule of Expenditures of Federal Awards and State Financial Assistance for the Year Ended September 30, 2003 ...............................................................................................................................146 Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance....................................... 150 Schedule of Findings and Questioned Costs for the Year Ended September 30, 2003.......................................151 Management Letter as Required by Rules of the Auditor General............,........................................................... 153 Management Advisory Comments ..... ........... ....... ......... ........... ....... .................. ......;..... ...... ................................... 155 v March 29, 2004 The Honorable Mayor, Councilmembers, and Citizens of the City of Clearwater: The City of Clearwater Charter (Section 2.01 (c)3), Florida Statutes, and various covenants relating to debt and pension obligations of the City require an annual audit of the City's financial statements of all funds of the City by a firm of licensed certified public accountants. These statements must be presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards. Pursuant to these requirements we hereby issue the comprehensive annual financial report of the City of Clearwater for the fiscal year ended September 30, 2003. This report consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Grant Thornton, LLP, a firm of licensed certified public accountants, has audited the City's financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended September 30,2003, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor conCluded that there was a reasonable basis for rendering an unqualified opinion that the City's financial statements for the fiscal year ended September 30, 2003, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of the report. The independent audit of the financial statements of the City was part of a broader, federally mandated "Single Audif' designed to meet the special needs of federal and state grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal and state awards. These reports are in the Single Audit section of this report. vii 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 the MD&A and should be read in conjunction with it. The City's MD&A can be found immediately following the report of the independent auditors. Profile of the City of Clearwater, Florida Clearwater is located on the Pinellas Peninsula midway on Florida's west coast. It is directly located on the Gulf of Mexico, 20 miles west of Tampa and 20 miles north of St. Petersburg. Clearwater is the county seat of Pinellas County and one of the largest cities in the Tampa Bay area. The Clearwater area offers a semitropical climate and 28 miles of beautiful beaches. Consequently, tourism is an important component of the economy. However, Clearwater also enjoys a diversity of manufacturing, service industries, high-tech companies, and a significant retirement population. The City provides municipal services of police and fire protection; construction and maintenance of streets, bridges, sidewalks, storm drainage, public parks, and recreation facilities; planning, zoning, subdivision, and building code regulation and enforcement; redevelopment of commercial and residential neighborhoods; supervised recreation programs; public libraries; water supply and distribution; waste water collection, treatment, and disposal; natural gas distribution; solid waste collection and recycling; stormwater management; marina, airpark, convention center, and public fishing pier operations; and operation of the city-wide parking system. The annual budget serves as the foundation for the City's financial planning and control. Per City Code of Ordinances, the City Manager is required to provide to the City Council an operating budget for the ensuing fiscal year, a capital improvement budget, and a five-year capital improvement program, along with an accompanying budget message no later than 60 days prior to the end of the fiscal year. The Council is required to hold public hearings on the budget and to adopt a final operating budget and capital improvement budget no later than September 30, the close to the City's fiscal year. The appropriated budget is prepared by fund and by department within fund. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economy The Tampa Bay metropolitan area continues to resist national trends, with housing and job markets stronger than most of the nation. The Tampa Bay region has an employed labor force of approximately .1.2 million, which is anticipated to grow at a rate of between 2 percent and 3 percent each year for the next several years. The unemployment rate for September 2003 was at 4.5 percent versus a national average of 6.1 percent. Business development interest in the City's downtown and beach areas has increased significantly in recent years as property valuation increases reflect. We are also beginning to see renewed interest in the City's markets for multi-family and residential housing. Long-term Financial Planning The volume and scope of projects either completed or begun during fiscal 2003 is unprecedented in Clearwater's history and is expected to benefit the community for many years to come. viii Three major projects - the new Memorial Causeway Bridge, Main Library, and Community Sports Complex - were all nearing completion at fiscal year-end. The new Memorial Causeway Bridge will be .a fixed, high-span "signature piece" bridge to replace the current drawbridge. Expected completion of the bridge is fiscal 2004. The new 90,OOO-square-foot main library, overlooking the Intracoastal Waterway in downtown Clearwater, is destined to become a focal point of downtown redevelopment. Expected completion is also fiscal 2004. The Community Sports Complex includes a new Spring Training facility for the Philadelphia Phillies major league baseball organization and construction was completed prior to the 2004 Spring Training season opener. Several projects also were completed in the North Greenwood community during fiscal 2003. These included a new recreation and aquatics center, branch library, and Martin Luther King, Jr. Avenue corridor enhancements. Additionally, two new fire stations were opened; comprehensive plans were adopted to spur redevelopment of the downtown, downtown waterfront, and beach; redevelopment of the Clearwater Mall was nearing completion; and a state-of-the-art reverse osmosis water treatment plant was completed. Cash Management Policies and Practices As more completely described in Note I - D - 1 of the notes to the financial statements, the City employs a consolidated cash pool to facilitate short-term investment of liquid assets for all City funds. The City believes that a conservative investment philosophy best serves the residents of Clearwater, and that the return of the investment principal is more important than the return on the principal. However, the City attempts to maximize the return, while maintaining a conservative philosophy, via accurate cash flow forecasting and competitive selection of investments. The cash pool earned an average rate of return of 3.32% on its investments during fiscal year 2003. Current year investment income includes depreciation in the fair value of investments that will not be realized if the government holds the investments to maturity as intended. Risk Management The City is self-insured within certain parameters for losses arising from claims for general liability, auto liability, police professional liability, public officials' liability, property damage, and workers' compensation. The transactions relating to the self-insurance program are accounted for in the Central Insurance Fund, and are reported as an Internal Service Fund. The City is not self-insured with respect to major medical coverage. Management believes that the amounts showing as claims payable and the unreserved retained earnings are adequate to cover all reasonable projected losses arising from events occurring on or prior to September 30, 2003. Additional information on the City's risk management activity can be found in Note IV - A of the notes to the financial statements. Pension and Other Postemployment Benefits The Employees' Pension Plan and the Firemen's Pension Plan are single-employer defined benefit pension plans that are self-administered by the City. Each year, independent actuaries engaged by the pension plans calculate the amount of the minimum required contributions that the City must make to each of the plans to ensure that the plans will be able to fully meet their obligations to retired employees on a timely basis. City contributions for the year were in accordance with actuarially determined funding requirements. In addition, supplemental pensions exist for certified Police Officers and Firefighters under the provisions of Florida Statutes Sections 175 and 185. These plans are funded solely from excise taxes on certain insurance premiums covering property in Clearwater. The excise taxes are collected by the state and remitted to the City. Both plans require benefits to be adjusted to equal fund assets provided by the defined contributions. Additional information on the City's pension plans can be found in Note IV - E of the notes to the financial statements. ix Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for it's comprehensive annual financial report (CAFR) for the fiscal year ended September 30, 2002. This was the twenty-fourth consecutive year that the City 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 we are submitting it to the GFOA to determine its eligibility for another certificate. In addition, the City received the GFOA's Distinguished Budget Presentation Award for the fiscal year 2003 Budget document, the seventeenth consecutive year that this award has been received. In order to qualify, the City's Budget document was judged to be proficient in several categories including as a policy document, a financial plan, an operations guide, and a communications device. We wish to thank the many members of the Citywide Annual Financial Reporting (CAFR) team, which is composed of individuals in the Finance Department and other financial staff throughout the City, for their professionalism and dedication in producing this report. In addition, we thank the Graphic Communications Division for the professional printing of this report. Sincere appreciation is also extended to the City's external auditors, Grant Thornton, LLP, for their advice and assistance in the preparation of this report. Finally, we would like to thank the City Council for their interest, continued support, and leadership in planning and conducting the financial operations of the City in a progressive and responsible manner. Sincerely, ~8.~~ William B. Horne, II City Manager Lm.PV~~.r c:( ~ Margaret L. Simmons, CPA Finance Director x Certificate of Achievement for Excellence in Financial Reporting Presented to City of Clearwater, Florida For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2002 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 fmancial reporting. ~ President ~/~ Executive Director xi City Audit Fire Department lC ... ... Police Department Solid Waste / General Services . CITY OF CLEARWATER ORGANIZATIONAL CHART City Commission City Attorney's Office City Manager Assistant City Manager Assistant City Manager I CRA Executive Director Office of Management & Budget Customer Service Official Records & Legislative Services Gas System Finance Library Equity Services Marine & Aviation Human Parks & Resources Recreation Infonnation Public Technology CommunicatioDS Planning Public Works Engineering Administration Public Services Public Utilities Development & Neighborhood Services Economic Development & Housing Services Grant Thornton ~ Accountants and Business Advisors Reoort of Indeoendent Certified Public Accountants Honorable Mayor-Commissioner, City Commissioners and City Manager City of Clearwater, 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 City of Clearwater, Florida (the City), as of and for the year ended September 30, 2003, which collectively comprise the City's basic financial statements as listed in the table of contents. We have also audited the financial statements of each of the City's nonmajor governmental, nonmajor enterprise, internal service and fiduciary funds presented as supplementary information in the accompanying combining and individual fund financial statements as of and for the year ended September 30, 2003, as listed in the table of contents. These financial statements are the responsibility of the City'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 of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type \ ctivities, each major fund, and the aggregate remaining fund information of the City of Clearwater, FlorlJa as of September 30, 2003, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principl~s generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each nonmajor governmental, nonmajor enterprise, internal service, and fiduciary fund of the City of Clearwater, Florida as of September 30, 2003, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 16, 2004 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Suite 3850 101 E. Kennedy Blvd Tampa, FL 33602-5152 T 813.229.7201 F 813.223.3015 W www.grantthornton.com 1 Grant Thornton llP US Member 01 Grant Thornton International The Management's Discussion and Analysis and the pension plan required supplementary information on pages 3 through 14 and pages 70 through 72 are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. 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 City'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. The accompanying schedule of federal and state financial assistance for the year ended September 30, 2003 is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Section 215.97, Florida Statutes and Chapter 10.550 rules of the Auditor General, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. ~~LLfJ Tampa, Florida January 16, 2004 2 Management's Discussion and Analysis Management's Discussion and Analysis provides the reader with a narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2003. Management's Discussion and Analysis (MD & A) should be read in conjunction with the City's Transmittal Letter, which begins on page vii of this report. Financial Highlights The City's assets exceeded its liabilities at the close of fiscal year 2003 by $449.6 million (net assets). Of this amount, $153.4 million (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. The City's total net assets increased by $38.8 million (or 9.4%) during fiscal 2003. The governmental net assets increased by $27.7 million (or 14.4%) while the business-type net assets increased by $11.1 million (or 5.1 %). A significant factor in the increase in governmental net assets was current year grants and donations of approximately $8.8 million as detailed in the Government-wide Financial Analysis that follows. The $11.1 million increase in business-type net assets is primarily due to contributions and grants from other governments and developers of $9.4 million, along with rate increases for water & sewer, stormwater, and gas utilities, as discussed in the following analysis of business-type activities, partially offset by a $2.6 million increase in interest expense for new water & sewer and stormwater bond issues during fiscal 2002. At September 30, 2003, the City's governmental funds reported combined ending fund balances of $87.7 million, a decrease of $15.1 million (or 14.7%) in comparison with the prior year. Of this amount, $49.6 million (or 56.5%) is available for spending at the government's discretion (unreserved fund balance). The decrease of $15.1 million in governmental fund balances is primarily due to current year capital outlay expenditures for major construction projects, including $9.4 million for the community sports complex and $9.7 million for the new main library. At September 30,2003, unreserved fund balance for the General Fund was $12.1 million, or 14.0% of total general fund expenditures. Total actual revenues for the General Fund approximated final budgeted revenues while total actual expenditures were less than budgeted expenditures by $1.3 million, for a combined savings of $1.3 million. Overview of the Financial Statements This discussion and analysis (MD&A) is intended to serve as an introduction to the City of Clearwater's basic financial statements. The City's basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide financial statements are the statement of net assets and the statement of activities. These statements report information about the City as a whole using accounting methods similar to those used by private- sector businesses. Emphasis is placed on the net assets of governmental activities and business-type activities, and the change in net assets. Governmental activities are principally supported by taxes and intergovernmental revenues. Governmental activities include most of the City's basic services, including police, fire, public works, parks and recreation, and general administration. Business-type activities are intended to recover all or a significant portion of their costs through user fees and charges. The City's water and sewer system, stormwater system, gas system, solid waste, recycling, marine, aviation, convention center, and parking system operations are reported as business- type activities. . The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator as to whether the financial position of the City is improving or deteriorating. Net assets are reported in three major categories: 1) invested in capital assets, net of related debt; 2) restricted; and 3) unrestricted. 3 . The statement of activities presents information showing how the City's net assets changed as a result of the year's activities. All changes in net assets are recorded in the period in which the underlying event takes place, which may differ from the period in which cash is received or disbursed. The Statement of Activities displays the expense of the City's various programs net of related revenues, as well as a separate presentation of revenues available for general purposes. The government-wide financial statements include not only the City of Clearwater itself (known as the primary governmen~, but also the legally separate Downtown Development Board (DDB). The DDB, though legally separate, is included as a discretely presented component unit because it was created by City ordinance and the City is thereby able to impose its will on the organization. In addition it is the opinion of the City's management that exclusion of the DDB from the City's financial statements would cause the financial statements to be incomplete. The Clearwater Redevelopment Agency (CRA), though also legally separate, is reported as part of the primary government due to the City Commission serving as the CRA's governing board, or as a blended component unit. 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 fund financial statements provide detailed information about the City's major funds - not the City as a whole. Fund accounting helps to ensure and demonstrate compliance with finance-related legal requirements. Based on restrictions on the use of monies, the City has established many funds that account for the multitude of services provided to residents. These fund financial statements focus on the City's most significant funds: governmental, proprietary, and fiduciary. Governmental funds Governmental funds are used to report most of the City's basic services. These funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. The funds focus on the inflows and outflows of current resources and the balances of spendable 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 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 City maintains twelve individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General, Special Development, and Capital Improvement funds, which are considered to be major funds. Data from the other nine governmental funds are combined into a single aggregated columnar presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements in the supplementary information section of this report. The City adopts annual appropriated budgets for the General, Special Development, and Community Redevelopment Agency funds. A budgetary comparison statement has been provided for these funds to demonstrate budgetary compliance. 4 Proprietary funds The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the fiscal activities related to water and sewer, gas, solid waste and stormwater utilities, along with recycling, marine, aviation, parking system, and convention center operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for the City's building maintenance, custodial services, self-insurance program, risk management program, employee group insurance, vehicle acquisition and maintenance, and various support activities including data processing, legal, telecommunications, postal, and printing service,s. All of the City's internal service funds predominantly benefit governmental activities and consequently have been aggregated and included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Water and Sewer Utility, Gas Utility, Solid Waste Utility, and Stormwater Utility enterprise funds, which are considered to be majorfunds of the City. The remaining four non-major enterprise funds are combined into a single aggregated presentation in the proprietary fund financial statements. Similarly, governmental activity internal service funds are aggregated into a single presentation, as are business-type activity internal service funds. Individual fund data for the non-major enterprise funds and the internal service funds is provided in the form of combining statements in the supplementary information section of this report. Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of the fiduciary funds are not available to support the City's own programs. The accounting used for fiduciary funds is similar to proprietary funds. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential for a full understanding of the information provided in the government-wide and fund financial statements. The notes also present certain required supplementary information concerning the City's progress in funding its obligation to provide pension benefits to its employees. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's progress in funding its obligation to provide pension benefits to its employees, The combining statements referred to earlier in connection with non-major governmental funds, non-major enterprise funds, and internal service funds, are presented immediately following the required supplementary information. Government-Wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $450.5 million at the close of the fiscal year ended September 30, 2003. The City reports positive balances in all three categories of net assets, both for the government as a whole as well as for its separate governmental and business-type activities, for both the current year and the prior year, as indicated in the following table: 5 City of Clearwater - Net Assets Primary Government Governmental Activities Business-type Activities Total 2003 2002 2003 2002 2003 2002 $ 183,987,172 $ 190,130,502 $ 138,060,189 $ 145,407,013 $ 322,047,361 $ 335,537,515 181,581,235 145,766,043 288,869,651 272,405,002 470,450,886 418,171,045 365,568,407 335,896,545 426,929,840 417,812,015 792,498,247 753,708,560 47,623,005 52,771,504 11,072,082 9,672,629 58,695,087 62,444,133 14,476,646 10,075,522 8,557,403 7,730,461 23,034,049 17,805,983 83,916,133 81,185,447 177,294,521 181,501,022 261,210,654 262,686,469 146,015,784 144,032,473 196,924,006 198,904,112 342,939,790 342,936,585 103,014,874 60,969,830 105,824,224 86,678,577 208,839,098 147,648,407 53,938,944 63,794,806 33,412,704 38,382,264 87,351,648 102,177,070 62,598,805 67,099,436 90,768,906 93,847,062 153,367,711 160,946,498 $ 219,552,623 $ 191,864,072 $ 230,005,834 $ 218,907,903 $ 449,558,457 $ 410,771,975 Component Unit Clearwater Downtown Development Board 2003 2002 Assets Current and other assets Capital assets Total assets liabilities Current and other liabilities Long-term debt outstanding: Due within one year Due in more than one year Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Assets Current and other assets $ Total assets Liabilities Current and other liabilities Long-term debt outstanding: Due within one year Due in more than one year T otalliabilities Net assets: Unrestricted Total net assets $ 409,479 $ 349,061 409,479 349,061 207,445 206,289 7,848 7,848 78,483 86,331 293,776 300,468 115,703 48,593 115,703 $ 48,593 A large portion of the City's net assets (46.5%) reflects its investment in capital assets (e.g., land, land improvements, buildings, and equipment), less any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens, and consequently these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves will not be used to liquidate these liabilities. An additional portion of the City's net assets (19.4%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($153.4 million) may be used to meet the government's ongoing obligations to citizens and creditors. There was a $42.0 million increase in invested in capital assets, net of related debt for governmental activities, due to a $35.8 million increase in governmental activities net capital assets, along with a decrease in related debt. The increase of $35.8 million was primarily due to: construction in progress expenditures for a new spring training community sports complex and a new main library; a donated recreation complex (Long Center); and a donated land parcel as described in the Capital Assets discussion on page 12 of this report. Similarly invested in capital assets, net of related debt for business-type activities increased by $19.1 million due to a $16.5 million increase in business-type activities net capital assets and a reduction in related debt. The increase in net capital assets was due to various utility system asset additions as detailed in the Capital Assets discussion on page 12 of this report. Changes in Net Assets The following tables reflect the changes in net assets for the years ended September 30, 2003, and September 30, 2002, for both the City and its discretely presented component unit: 6 City of Clearwater, Florida - Changes in Net Assets Primary Government Govermental Activities Business-type Activities Totals 2003 2002 2003 2002 2003 2002 Revenues Program revenues: Charges for services $ 23,822,887 $ 22,832,952 $104,931,876 $ 98,504,808 $128,754,763 $121,337,760 Operating grants and contributions 8,266,931 6,111,789 14,699 8,281,630 6,111,789 Capital grants and contributions 5,206,733 9,787,351 9,406,042 4,300,651 14,612,775 14,088,002 General revenues: Property taxes 33,927,390 30,322,411 33,927,390 30,322,411 Sales taxes 14,528,873 14,663,969 14,528,873 14,663,969 Franchise fees and utility taxes 24,521 ,066 25,359,362 24,521,066 25,359,362 Other taxes 3,974,357 4,294,408 3,974,357 4,294,408 Other 2,355,095 5,184,077 2,147,878 3,083,160 4,502,973 8,267,237 Total revenues 116,603,332 118,556,319 116,500,495 105,888,619 233,103,827 224,444,938 Expenses General Government 11,353,210 11,646,741 11 ,353,210 11,646,741 Public Safety 47,428,586 45,135,649 47,428,586 45,135,649 Physical Environment 2,270,918 2,886,504 2,270,918 2,886,504 Transportation 8,878,325 10,120,224 8,878,325 10,120,224 Economic Environment 4,288,244 3,230,524 4,288,244 3,230,524 Human Services 571,088 555,395 571,088 555,395 . Culture and Recreation 22,093,943 22,230,715 22,093,943 22,230,715 Interest on Long-term Debt 3,283,732 2,962,849 3,283,732 2,962,849 Water and Sewer Utility 40,825,196 37,470,508 40,825,196 37,470,508 Gas Utility 26,638,165 23,573,611 26,638,165 23,573,611 Solid Waste Utility 14,231,764 14,397,892 14,231,764 14,397,892 Stormwater Utility 7,021,639 5,458,556 7,021,639 5,458,556 Other 11,242,581 11,057,400 11,242,581 11,057,400 Total expenses 100,168,046 98,768,601 99,959,345 91,957,967 200,127,391 190,726,568 Increase in net assets before transfers 16,435,286 19,787,718 16,541,150 13,930,652 32,976.436 33,718,370 Special item - donated recreation como lex 5,810,046 5,810,046 Transfers 5,443,219 938,688 (5,443,219) (938,688) Increase in net assets 27,688,551 20,726,406 11,097,931 12,991 ,964 38,786,482 33,718,370 Net assets - beginning 191,864,072 171,137,666 218,907,903 205,915,939 410,771,975 377,053,605 Net assets - ending $ 219,552,623 $191,864,072 $ 230,005,834 $ 21 8,907,903 $ 449,558,457 $410,771,975 Component Unit Clearwater Downtown Development Board 2003 2002 Revenues Program revenues: Operating grants and contributions $ General revenues: Property taxes Other Total revenues Expenses Downtown Development Board Total expenses Increase in net assets Net assets - beginning Net assets - ending $ 65.189 $ 63,716 205,218 7,299 277,706 172,045 7,488 243,249 210,596 210.596 67,110 48,593 115,703 191,277 191,277 51,972 (3,379) 48,593 $ The City's net assets increased $38.8 million during fiscal 2003 versus $33.7 million for fiscal 2002. Approximately 37% of this increase represents the degree to which increases in ongoing revenues have outstripped similar increases in ongoing expenses. Approximately 35% is attributable to one-time capital grants and donations, while the remainder is due to rate increases, increases in operating grants, and investment earnings, decreased by increases in interest expense on long term debt. 7 Governmental Activities Governmental activities net assets increased by $27.7 million from $191.9 million as of September 30. 2002, to $219.6 million as of September 30, 2003. This increase due to governmental activities accounted for 71 % of the total increase in net assets for the City. Key elements of this increase are as follows: . An 11.9% increase in property tax revenues from $30.3 million to $33.9 million, due to a 7.3% increase in taxable assessed values, as well as a 4.5% current year increase in the City millage rate. . A current year contribution of $3 million from the Florida Department of Transportation towards construction of the new Memorial Causeway Bridge. During fiscal 2002 a $5 million contribution was received from Pinellas County towards construction of the new bridge. . Current year receipt of title to a donated recreation complex, the Long Center, in the amount of $5.8 million, reflected as a special item on the Statement of Activities. The cost of all Governmental activities this year was $100.2 million. However, as shown on the Statement of Activities, the amount that the City's taxpayers ultimately financed for these activities through taxes was only $62.9 million because some of the cost was paid for by those who directly benefited from the programs ($23.8 million) or by other governments and organizations that subsidized certain programs with grants and contributions ($13.5 million). . Expenses . Revenues Expenses and Program Revenues - Governmental Activities For the Year Ended September 30, 2003 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 .JlJ~ ~~ fO~ ~~' ~'7J' !:-~ 0" .r. '1,,0 .Ii ~~ ~" 00 q\$ <<,~ fO"'~ .,# 00~ qot::-~ ~rJ:' fO~ r::-'7J' !:-~ ~o '1,,0 ~ ~" "" 'fJ <<; o~ " <<,cP 0"" .~~ ~" .~ ~v <:;>0 Ib~ <,,0 ~ #' ~ .b Q;-~ !:-ct .'>.\$ ~' ",0 -.,;' 1,,0 !:- ~\$ ~ 0 ,.~ 0<;; v 0" ,~ 8 Revenues by Sources - Governmental Activities For the Year Ended September 30, 2003 Property taxes 30% Sales taxes 12% Capital grants and contributions 4% Franchise fees and utility taxes 22% Operating grants and contributions 7% Charges for services 20% Business-type Activities Net assets for business-type activities increased from $218,907,903 to $230,005,834. This increase totaled $11.1 million, reflecting a 5.1 % increase in business-type activities net assets and 28% of the total increase in net assets for the City. This increase was $1.9 million less than the fiscal year 2002 increase in net assets of $13.0 million. Total revenues increased by $10.8 million, or 10.2% versus the prior year. The increase resulted from a $6.4 million increase in charges for services, primarily due to stormwater system and water and sewer system rate increases; in addition to increased gas system sales, due to a 11 % increase in customer accounts, as well as favorable market conditions related to a cold winter and relatively high gas prices, Also contributing to the $10.8 million increase in revenues was a $5.1 million increase in capital grants and contributions, primarily due to capital grants received for storm water and water and sewer system improvements. These increases were partially offset by a $0.9 million decrease in investment earnings due to a significant decline in interest rates. Total expenses increased by $8.0 million from $92,0 million in fiscal 2002 to $100.0 million for fiscal 2003. Significant factors contributing to this $8.0 million increase were increases in interest expense for the water and sewer utility system ($2.6 million) and the stormwater utility system ($0.8 million) due to fiscal 2002 revenue bond issues. Additionally, gas utility purchases for resale increased by $2.9 million over fiscal 2002 partially due to increased sales as well as increases in prices for gas purchased for resale. Also contributing to the increase in expenses was an increase in water and sewer system repairs and maintenance expense of $1.4 million versus fiscal 2002. 9 $50,000,000 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Expenses and Program Revenue - Business-type Activities For the Year Ended September 30, 2003 Water and Sewer Utility Gas Utility Solid Waste Utility Stormwater Utility Other Revenues by Source - Business-type Activities For the Year Ended September 30, 2003 Charges for services 90% Capital grants and contributions 8% 10 . Expenses . Revenues J l I I I ! i ___J Financial Analysis of the City's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. The City reports the General Fund, Special Development Fund, and Capital Improvement Fund as major governmental funds. The City's governmental funds for the year ended September 30, 2003, reflect a combined fund balance of $87.7 million versus $102.8 million for the prior year, a decrease of $15.1 million. A total of $49.6 million, or 56%, of this represents unreserved fund balance, which is available for spending at the government's discretion. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1) to liquidate construction contracts and purchase orders of the prior period ($17.2 mil/ion); 2) to pay debt service ($6.5 million); 3) for advances due from other funds ($2.0 million); or 4) for specific program purposes per grant restrictions and related loan agreements ($12.5 million). The General Fund is the chief operating fund of the City. At September 30, 2003, unreserved fund balance of the General Fund totaled $12.1 million, with the remainder of the $14.7 million in fund balance reserved to indicate it has already been committed for purchase orders of the prior period ($0.6 million) and for advances due from other funds ($2.0 million). As a measure of the general fund's liquidity it is useful to compare unreserved fund balance to total fund expenditures. Unreserved fund balance represents 14.0% of total general fund expenditures (GAAP basis before transfers) for the current fiscal year. The fund balance of the City's General Fund increased by $1.0 million during the current fiscal year. This increase was the composite result of total actual expenditures less than budgeted expenditures by $1.3 million, partially offset by a $0.2 million excess of actual operating transfers out versus budgeted. The expenditure "savings" were spread across numerous departments. The fund balance of the Special Development Fund increased from $6.9 million to $10.5 million during the current fiscal year. Key factors in the increase included the return of $1.5 million of excess funding provided to the ''Town Lake" stormwater retention pond project and $0.5 mil/ion of excess funding provided to the Community Sports Complex Development project. The remainder of the $3.6 million increase was primarily attributable to decreased funding of capital projects versus the previous year. Current year transfers to capital projects totaled $12.6 million versus $15.2 million for fiscal 2002. The Capital Improvement Fund has a total fund balance of approximately $34.5 million. The fund had a minimal current year decrease in fund balance of $64,914. The fund balances for Other (non-major) Governmental Funds decreased from $45.7 million to $28.1 million during the current fiscal year. This was primarily due to capital outlay expenditures for the community sports complex ($9.4 million) and the new main library ($9.7 million). Proprietary Funds The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The City reports the Water and Sewer Utility Fund, the Gas Utility Fund, the Solid Waste Utility Fund, and the Stormwater Utility fund as major funds. The Water and Sewer Utility Fund realized a $1.5 million increase in net assets versus a $2.4 million increase for the prior year. Operating revenues increased 3.9% over the previous year, partially offset by a 3.3% increase in operating 11 expenses. A rate increase effective October 1, 2002 contributed to the increase in operating revenues. Operating income of $4.5 million was negated by $6.2 million in interest expense on long term debt, partially offset by $1.0 million in investment earnings. The net loss before contributions and transfers of ($0.6) million was offset by $3.9 million in capital grants and contributions that must be used for capital purposes. Finally, transfers out of $1.7 million resulted in a net increase in net assets of $1.5 million. The Gas Utility Fund realized a $2.4 million increase in net assets versus a $2.6 million increase for the prior year. Operating revenues increased by 12.2% over the prior year. However the increase in operating revenues was entirely offset by a 14.7% increase in operating expenses versus the prior year, including a 26.8% increase in purchases for resale. The Solid Waste Utility Fund realized a $1.2 million increase in net assets versus a $1.5 million increase for the prior year. Operating revenues decreased by 0.8% while operating expenses increased by 1.8%. The Stormwater Utility Fund realized an increase in net assets of approximately $4.6 million. Operating revenues increased by 25.2%, primarily due to rate increases of approximately 35.0% effective January 1, 2002, and 16.8% effective October 1, 2002. The increase in operating revenues was partially offset by a 17% increase in operating expenses. Unrestricted net assets and changes in net assets of the proprietary funds for fiscal years 2003 and 2002: Fund Water and Sewer Utility Gas Utility Solid Waste Utility Stormwater Utility Other funds Totals Unrestricted Net Assets 2003 2002 $ 25,347,874 $ 19,788,491 8,664,372 9,498,817 10,025,860 6,426,639 7,376,541 7,888,733 12,439,195 10,873,333 $ .63,853,842 $ 54,476,013 Change in Net Assets 2003 2002 $ 1,536,839 $ 2,401,311 2,405,321 2,623,123 1,244,130 1,517,507 4,590,723 4,066,075 1,175,890 2,352,206 $ 10,952,903 $ 12,960,222 General Fund Budgetary Highlights Differences between the original budget for General Fund expenditures and the final amended budget were relatively minor ($311,600 decrease). Key elements of this decrease are as follows: . $400,690 decrease in non-departmental budgeted expenditures, due to the distribution of union contractual salary increases and defined contribution pension increases that were originally budgeted at the non- departmental level, partially offset by various related departmental increases. . $118,180 decrease in planning department budgeted expenditures, due to a planned annexation program in the amount of $60,180 that was not implemented, and an additional $65,000 of operating savings that was transferred to the Special Programs special revenue fund to fund a special program project "Special Planning Design and Evaluation". Total actual revenues for the General Fund exceeded final budgeted revenues by $14,016 and total actual expenditures were less than budgeted expenditures by $1.3 million. The budget savings occurred over numerous expenditure categories. Capital Asset and Debt Administration Capital Assets Capital assets include land, buildings and building improvements, improvements other than buildings, and machinery and equipment. Capital assets also include infrastructure assets added since October 1, 2001. Infrastructure assets acquired prior to fiscal 2002 will be added when the City retroactively implements the infrastructure portion of the new 12 financial reporting model in fiscal 2006. The infrastructure asset category includes long-lived capital assets, typically stationary in nature, such as roads, sidewalks, and bridges. At September 30, 2003, the City had investments in capital assets totaling $470,450,886 (net of accumulated depreciation). City of Clearwater, Florida - Capital Assets' Governmental Activities Business-type Activities Total 2003 2002 2003 2002 2003 2002 Land $ 45,288,886 $ 41,609,748 $ 26,013,359 $ 19,181,869 $ 71,302,245 $ 60,791,617 Buildings 39,432,666 29,039,587 16,089,369 14,566,372 55,522,035 43,605,959 Improvements Other than 36,742,325 37,783,839 198,633,462 188,195,941 Buildings 235,375,787 225,979,780 Machinery and 27,505,002 24,705,847 3,842,388 3,255,711 Eauipment 31,347,390 27,961,558 Infrastructure 2,171,728 1,076,247 2,171,728 1,076,247 Construction in progress 30,440,628 11 ,550,775 44,291 ,073 47,205,107 74,731,701 58,755,882 Total $ 181,581,235 $ 145,766,043 $ 288,869,651 $ 272,405,000 $ 470,450,886 $ 418,171,043 . Net of accumulated depreciation Net capital assets for the City's governmental activities increased from $145.8 million to $181.6 million, reflecting an increase of $35.8 million for the current fiscal year. Key components of this increase include: · A total of $11.6 million in construction in progress expenditures towards construction of a new community sports complex to include a spring training stadium for the Philadelphia Phillies major league baseball organization. · Expenditures of $9.4 million towards construction of a new main library, currently classified as construction in progress. · An increase of $5.8 million in buildings due to the fiscal 2003 receipt of the donated Long Center recreation complex to be owned and operated by the City. · An increase of $1.9 in land representing the acquisition of 4.34 acres of land previously known as Bayview Park. Net capital assets for the City's business-type activities increased by $16.5 million from $272.4 million to $288.9 million during the current fiscal year. Included in this increase were water and sewer system improvements and buildings in the amounts of $10.8 million and $2.2 million, respectively, primarily due to planned system improvements funded from the Water and Sewer Revenue Bonds, Series 2002. These improvements include expansion of the reclaimed water program; continued renewal and replacement as needed of the water, wastewater collection, and water pollution control systems; and upgrading of the water pollution control system to meet regulatory requirements. Also contributing to the increase in net capital assets for business-type activities were land additions for the stormwater system, including the purchase of the Kapok Mobile Home Park land in the amount of $3.5 million and the transfer of land from governmental activities in the amount of $1.3 million for the ''Town Lake" stormwater retention pond. Additional information on the City's capital assets can be found in Note III (C) on pages 47-48 of this report. Long-term debt The City's total long-term debt decreased by $7.7 million, from $291.9 million to $284.2 million, or a decrease of 2.7% for the current fiscal year. Key factors in this decrease included: · Revenue bond principal debt service payments in the amount of $11.9 million per debt service schedules, partially offset by a $2.5 million capital appreciation increase in the Water and Sewer Refunding Revenue Banas, Series 1998 (capital appreciation bonds in the amount of $43.6 million). · An increase of $1.5 million in claims payable due to a $1.7 million increase in actuarial reserves for workers compensation claims, partially offset by a $0.2 million decrease in actuarial reserves for general liability and automobile liability claims. 13 The City's bonded debt as of September 30, 2003, consists entirely of revenue bonds (secured solely by specified revenue sources) with no general obligation debt or special assessment debt outstanding. Governmental activities revenue bonds totaled $67.4 million while business-type activities totaled $182.4 million. All revenue bond issues of the City have received an insured rating of either AAA by Standard & Poor's or Fitch, or Aaa by Moody's. The City's Charter limits legal indebtedness to twenty percent of the assessed valuation of non-exempt real estate. The current debt limitation is in excess of $1.0 billion, which is significantly in excess of the City's legal indebtedness at September 30, 2003. Additional information on the City's long-term debt can be found in Note III (F) on pages 53-56 of this report. Economic Factors And Year 2004 Budgets and Rates Factors considered in preparing the City of Clearwater's budget for fiscal year 2004 included: . The unemployment rate for the Tampa Bay metropolitan area for September 2003 was 4.5%, an increase of 0.1 % from the 4.4% rate for September 2002. The national rate for September 2003 was 6.1 % versus 5.6% for September 2002. . Total taxable assessed values for the City of Clearwater increased 9.6% for fiscal 2004. . Health insurance costs for City employees are budgeted to increase 23% over the fiscal 2003 budget, resulting in a $1.3 million cost increase for the General Fund. . Property and liability insurance costs are budgeted to increase by 27%, or $1.1 million Citywide. . Budgeted Water and Sewer utility revenues for 2004 reflect a 7% rate increase effective October 1, 2003, while fiscal 2004 budgeted Stormwater utility revenues reflect a 12% rate increase effective October 1, 2003. Contacting the City's Financial Management This financial report is designed to provide a general overview of the City's finances for all those with an interest in its finances and to show the City's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to The City of Clearwater, Finance Department, 100 S. Myrtle Avenue, Clearwater, Florida 33756-5520. 14 Basic Financial Statements 15 City of Clearwater, Florida Statement of Net Assets September 30, 2003 Primary Government Component Unit Clearwater Downtown Governmental Business-type Development Activities Activities Total Board ASSETS Cash and cash equivalents $ 133,476,038 $ 27,828,580 $ 161,304,618 $ 204,972 Restricted cash and investments 13,940,625 13,940,625 Investments 1,475,635 1,475,635 Total receivables (net) 49,012,877 8,726,352 57,739,229 204,507 Internal balances (26,137,910) 13,599,875 (12,538,035) Due from other governments 4,922,172 446,962 5,369,134 Prepaid items 623,851 3,999 627,850 Inventories 236,489 969,825 1,206,314 Deferred charges 553,953 1,419,826 1,973,779 Net pension asset 19,824,067 6,008,467 25,832,534 Restricted assets: Cash and cash equivalents 51,052,722 51,052,722 Investments 9,530 9,530 Internal balances 12,538,035 12,538,035 Due from other governments 1,515,391 1,515,391 Capital assets: Land 45,288,886 26,013,359 71,302,245 Buildings 39,432,666 16,089,369 55,522,035 Improvements other than buildings 36,742,325 198,633,462 235,375,787 Machinery and equipment 27,505,002 3,842,388 31,347,390 Infrastructure 2,171,728 2,171,728 Construction in progress 30,440,628 44,291 ,073 74,731,701 Total assets 365,568,407 426,929,840 792,498,247 409,479 LIABILITIES Accounts payable and other current liabilities 5,381,768 2,343,559 7,725,327 2,938 Accrued liabilities 1,590,982 500,051 2,091,033 Accrued interest payable 729,033 68,649 797,682 Due to other governments 1,136,340 135,000 1,271,340 Deposits 3,160 134,532 137,692 Deferred revenue and liens 38,781,722 4,194 38,785,916 204,507 Payable from restricted assets: Construction contracts payable 1,945,459 1,945,459 Accrued interest payable 1,886,637 1,886,637 Customers deposits 4,054,001 4,054,001 Non-current liabilities due within one year: Compensated absences 625,283 137,280 762,563 Loans and leases payable 4,108,085 595,302 4,703,387 7,848 Revenue bonds payable 6,065,178 7,824,821 13,889,999 Claims payable 3,678,100 3,678,100 Long-term debt and liabilities: Compensated absences 5,690,700 1,249,391 6,940,091 Loans and leases payable 7,563,332 1,479,541 9,042,873 78,483 Revenue bonds payable 61,383,719 174,565,589 235,949,308 Claims payable 9,278,382 9,278,382 Total liabilities 146,015,784 196,924,006 342,939,790 293,776 NET ASSETS Invested in capital assets, net of related debt 103,014,874 105,824,224 208,839,098 Restricted for: Capital projects 14,720,927 4,296,878 19,017,805 Debt service 6,467,996 9,855,408 16,323,404 Renewal and replacement 13,251,951 13,251,951 Employees' pension benefits 19,824,067 6,008,467 25,832,534 Other purposes 12,925,954 12,925,954 Unrestricted 62,598,805 90,768,906 153,367,711 115,703 Total net assets $ 219,552,623 $ 230,005,834 $ 449,558,457 $ 115,703 The notes to the financial statements are an integral part of this statement. 16 City of Clearwater,Florida Statement of Activities For the Year Ended September 30, 2003 Component Unit Program Revenues Net (Expense) Revenue and Changes in Net Assets Clearwater Operating Primary Government Dowtown Charges for Grants and Capital Grants & Govemmental Business-Type Development Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Board Primary government: Governmental activities: General govemment $ 11,353,210 $ 12,267,821 $ 72,500 $ $ 987,111 $ $ 987,111 $ Public safety 47,428,586 7,959,872 1,700,797 (37,767,917) (37,767,917) Physical environment 2,270,918 180,375 142,085 795,419 (1,153,039) (1,153,039) Transportation 8,878,325 126,230 48,120 3,807,447 (4,896,528) (4,896,528) Economic environment 4,288,244 91,352 3,937,295 (259,597) (259,597) Human services 571,088 6,236 (564,852) (564,852) Culture and recreation 22,093,943 3,191,001 2,366,134 603,867 (15,932,941) (15,932,941) Interest on long-term debt 3,283,732 (3,283,732) (3,283,732) Total govemmental activities 100,168,046 23,822,887 8,266,931 5,206,733 (62,871 ,495) (62,871 ,495) Business-type activities: Water & Sewer Utility 40,825,196 39,207,442 3,912,704 2,294,950 2,294,950 Gas Utility 26,638,165 30,063,888 3,425,723 3,425,723 ....... Solid Waste Utility 14,231,764 15,959,824 14,699 1,742,759 1,742,759 Stormwater Utility 7,021,639 8,485,567 4,925,142 6,389,070 6,389,070 Other 11 ,242,581 11,215,155 568,196 540,770 540, no Total business-type activities 99,959,345 104,931,876 14,699 9,406,042 14,393,272 14,393,272 Total primary government $ 200,127,391 $ 128,754,763 $ 8,281,630 $ 14,612,n5 (62,871,495) 14,393,272 (48,478,223) Component unit: Downtown Development Board $ 210,596 $ $ 65,189 $ (145,407) Total component unit $ 210,596 $ $ 65,189 $ (145,407) General revenues: Taxes: Property taxes 33,927,390 33,927,390 205,218 Sales taxes 14,528,873 14,528,873 Franchise fees 7,139,648 7,139,648 Utility taxes 10,362,861 10,362,861 Communications services taxes 7,018,557 7,018,557 Other taxes 3,974,357 3,974,357 Interest and investment earnings 2,188,391 2,147,878 4,336,269 6,036 Miscellaneous 166,704 166,704 1,263 Special item - gain on donated recreation complex 5,810,046 5,810,046 Transfers 5,443,219 (5,443;219) Total general revenues, special items, and transfers 90,560,046 (3,295,341 ) 87,264,705 212,517 Change in net assets 27,688,551 11,097,931 38,786,482 67,110 Net assets-beginning 191,864,072 218,907,903 410,n1,975 48,593 Net assets-ending $ 219,552,623 $ 230,005,834 $ 449,558,457 $ 115,703 The notes to the financial statements are an integral part of this statement. City of Clearwater, Florida Balance Sheet Governmental Funds September 30, 2003 Special Capital Other Totals General Development Improvement Governmental Governmental Fund Fund Fund Funds Funds ASSETS Cash on hand and in banks $ 21,475 $ $ $ 100 $ 21,575 Equity in pooled cash and investments 10,563,006 8,369,379 67,989,184 19,137,352 106,058,921 Receivabl'!'s (net where applicable, of allowances for estimated uncollectible amounts): Accounts and contracts 281,393 281 ,393 Mortgages, notes and other loans 7,500 9,696,154 9,703,654 Improvement liens 35,880 35,880 Rehabilitation advances 69,014 69,014 Property taxes 34,978,151 2,234,781 37,212,932 Other 1 ,448,617 259,728 1 ,708,345 Due from other funds 2,088 2,088 Due from other funds (deficit in pooled cash) 750,675 750,675 Due from other governmental entitles 2,224,350 2,278,610 419,212 4,922,172 Investments 1,475,635 1,475,635 Land held for resale 998,342 998,342 Inventories, at cost 15,998 15,998 Advances to other funds 2,000,000 2,000,000 Total assets $ 51,532,990 $ 12,890,270 $ 68,777,827 $ 32,055,537 $ 165,256,624 LIABILITIES Accounts and contracts payable $ 134,666 $ $ 2,255,739 $ 2,230,896 $ 4,621,301 Accrued payroll 1 ,398,853 15,421 1,414,274 Due to other funds 24,925 31,968,548 120,402 32,113,875 Due to other funds (deficit in pooled cash) 679,092 679,092 Due to other governmental entities 6,099 193,179 215 199,493 Deposits 3,160 3,160 Construction escrows 510,372 510,372 Deferred revenue 35,247,346 2,234,781 87,289 37,569,416 Deferred assessment liens 35,880 35,880 Advances from other funds 24,925 361,204 386,129 Total liabilities 36,839,974 2,427,960 34,260,167 4,004,891 77,532,992 FUND BALANCES Reserved for: Encumbrances 618,417 14,520,675 2,021,592 17,160,684 Debt service requirements 6,467,996 6,467,996 Advances and notes 2,000,000 7,500 9,506,257 11,513,757 Grant programs 3,030,431 3,030,431 Unreserved, reported in: General fund 12,074,599 12,074,599 Special revenue funds 10,454,810 4,744,343 15,199,153 Debt service funds 30,434 30,434 Capital projects funds 19,996,985 2,249,593 22,246,578 Total fund balances 14,693,016 10,462,310 34,517,660 28,050,646 87,723,632 Total liabilities and fund balances $ 51,532,990 $ 12,890,270 $ 68,777,827 $ 32,055,537 $ 165,256,624 The notes to the financial statements are an integral part of this statement. 18 City of Clearwater, Florida Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets September 30, 2003 Total fund balances of governmental funds Capital assets used in governmental activities are not financial resources, therefore, are not reported in the funds. The cost of the assets was $264,143,147, and the accumulated depreciation is $82,561,912. Total capital assets for governmental activities Less: Land included in governmental funds as "Land Held for Resale" The net pension asset related to governmental activities does not represent financial resources and is not reported in the funds. Accrued general long-term debt interest expenses are not financial uses and, therefore, are not reported in the funds. Accrued arbitrage rebate payable expenses are not financial uses and, therefore, are not reported in the funds. Special assessment liens receivable are not financial resources in the current period and, therefore, are reported as deferred revenues in the funds. The assets and liabilities of the internal service funds (funds used to charge the costs of certain activities to individual funds) are included in the governmental activities in the statement of net assets. Net assets of internal service funds Less: Capital assets included in total governmental capital assets above Less: Net pension asset included in total governmental net pension asset above Add: Capital lease purchases payable included in total governmental below Add: Compensated absences included in total governmental below Add: Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Interest revenues are not recognized in the current period because the resources are not available, therefore, are not reported in the funds. Long-term liabilities, including bonds payable, are not due and payable in the current period and accordingly are not reported in the funds. Long-term liabilities at year-end consist of: Bonds payable Less: Deferred charge on refunding (to be amortized as interest expense) Less: Deferred charge for issuance costs (to be amortized over life of debt) Less: Issuance discount (to be amortized as interest expense) Add: Issuance premium (to be amortized as a reduction of interest expense) Capital lease purchases payable Compensated absences Total net assets of governmental activities The notes to the financial statements are an integral part of this statement. 19 $ 181,581,235 (998,342) 28,776,208 (17,324,285) (2,092,892) 8,431,658 501,006 (358,979) (66,914,826) 386,595 553,952 46,321 (966,985) (11,671,416) (6,315,985) $ 87,723,632 180,582,893 19,824,067 (729,033) (936,847) 35,880 17,932,716 1,659 (84,882,344) $ 219,552,623 City of Clearwater, Florida Statement of Revenues, Expenditures, and Changes In Fund Balances Governmental Funds For the Year Ended September 30, 2003 Special Capital Other Total General Development Improvement Governmental Governmental Fund Fund Fund Funds Funds REVENUES Taxes: Property taxes $ 31,890,991 $ 2,036,399 $ $ $ 33,927,390 Franchise fees 7,139,648 7,139,648 Utility taxes 10,362,861 10,362,861 Licenses, permits, and fees 3,852,704 985,503 4,838,207 Intergovernmental: Sales tax 5,867,258 8,661,615 14,528,873 Communications services tax 7,018,557 7,018,557 Other intergovernmental 8,809,392 1,281,729 824,675 9,137,215 20,053,011 Charges for services 9,999,606 471,755 10,471,361 Fines and forfeitures 1 ,493,228 584,405 2,077,633 Interest income 539,066 720,600 95,619 953,557 2,308,842 Miscellaneous 651,235 401,679 2,044,644 3,097,558 Total revenues 87,624,546 13,685,846 1.321,973 13,191 ,576 115,823,941 EXPENDITURES Current: General government 10,195,640 344,549 45,833 10,586,022 Public safety 46,077,098 95,642 1,988,784 48,161,524 Physical environment 2,130,815 15,118 143,317 2,289,250 Transportation 6,100,511 572,363 6,672,874 Economic environment 1,764,219 49,710 2,493,394 4,307,323 Human services 449,179 127,128 576,307 Culture and recreation 19.298,976 1,181,141 1,771,484 22,251,601 Debt service: Principal 6,921,305 6,921,305 Interest & fiscal charges 3,142,184 3,142,184 Bond issuance costs 4,335 4,335 Capital outlay 12,431 ,203 19,840,504 32,271 ,707 Total expenditures 86,016,438 14,689,726 36,478,268 137,184,432 Excess (deficiency) of revenues over I (under) expenditures 1 ,608,108 13,685,846 (13,367,753) (23,286,692) (21 ,360,491) OTHER FINANCING SOURCES (USES) Transfers in 5,000,086 2,488,401 13,998,386 7,754,600 29,241,473 Transfers out (7,618,557) (12,595,171 ) (1,346,993) (3,025,587) (24,586,308) Sale of capital assets 925,000 925,000 Long term debt issued 651,446 651 ,446 Total other financing sources (uses) (2,618,471 ) (10,106,770) 13,302,839 5,654,013 6,231 ,611 Net change in fund balances (1,010,363) 3,579,076 (64,914) (17,632,679) (15,128,880) Fund balances - beginning 15,703,379 6,883,234 34,582,574 45,683,325 102,852,512 Fund balances - ending $ 14,693,016 $ 10,462,310 $ 34,517,660 $ 28,050,646 $ 87,723,632 The notes to the financial statements are an integral part of this statement. 20 City of Clearwater, Florida Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended September 30, 2003 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures while govemmental activities report depreciation expense to allocate those costs over the life of the assets. This is the amount by which capital outlays exceeded depreciation in the current period. Expenditures for capital assets Less current year depreciation In the Statement of Activities the loss on disposition of capital assets is reported. The loss is not a use of current resources and thus is not reported in the funds. Loan proceeds provide current financial resources to govemmental funds; however issuing debt increases long-term liabilities in the Statement of Net Assets. In the current year these amounts are: Capital lease proceeds Some expenditures and other financing sources (uses) of the govemmental funds are deferred and amortized in relation to the related debt in the Statement of Activities: Issuance costs for revenue bonds issued during prior year Repayment of long term debt principal is an expenditure in the governmental funds, however the repayment reduces long-term liabilities in the Statement of Net Assets. Current year amounts are: Revenue bond principal payments Capital lease principal payments Net pension asset is not a current financial resources and consequently is not reported in the funds. However it is an asset in the Statement of Net Assets. Current year change In the net pension asset Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the govemmental funds. Current year change in compensated absences Amortization of deferred charge on refunding Amortization of issuance costs Amortization of bond discounts and premiums Current year change in accrued arbitrage rebate payable Current year change in accrued interest expense Special assessment revenues are deferred until collected in the governmental funds. The revenues collected in the current year were prior year revenues in the Statement of Activities. Current year change In interest revenues that will not be collected for several months after the fiscal year and are not accrued in the governmental funds. The net revenues of internal service funds (funds used to charge the costs of certain activities to individual funds) for govemmental activities are reported in the Statement of Activities but not in the governmental funds. Total net assets of governmental activities The notes to the financial statements are an integral part of this statement. 21 $ 40,921,178 (6,317,134) 5,596,132 1,325,173 (92,435) (27,587) (95,283) 184,465 (936,847) 15,738 $ (15,128,880) 34,604,044 (619,731) (651,446) 4,335 6,921,305 2,999,964 (951,949) (50,921 ) (10,339) 572,169 $ 27,688,551 City of Clearwater, Florida Statement of Revenues, Expenditures, and Changes In Fund Balances. Budget and Actual (Non-GAAP Budgetary Basis) General Fund For the Year Ended September 30, 2003 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) REVENUES Taxes: Property taxes $ 31,385,360 $ 31,881,700 $ 31,890,991 $ 9,291 Franchise fees 6,891,660 7,066,660 7,139,648 72,988 Utility taxes 9,958,970 10,365,070 10,362,861 (2,209) Licenses, permits, and fees 3,282,610 3,637,610 3,852,704 215,094 Intergovernmental: Sales tax 5,850,000 5,826,000 5,867,258 41,258 Communications services tax 8,123,940 7,058,940 7,018,557 (40,383) Other intergovernmental 9,108,270 8,667,000 8,809,392 142,392 Charges for services 10,275,930 9,932,270 9,999,606 67,336 Fines and forfeitures 1,574,130 1,509,290 1 ,493,228 (16,062) Interest income 869,900 869,900 539,066 (330,834) Miscellaneous 867.550 796.090 651.235 (144.855\ Total revenues 88,188,320 87,610,530 87,624,546 14,016 EXPENDITURES Current: General government City Commission 263,850 263,850 236,454 27,396 City Manager's Office 698,720 707,140 674,135 33,005 City Attorney's Office 1,354,850 1,411,790 1,397,318 14,472 Official Records & Legislative Services 1,109,170 1,115,650 1,017,588 98,062 Public Communications 890,600 893,320 786,203 107,117 Finance 1,942,630 1,892,300 1,816,354 75,946 Human Resources 1,212,310 1 ,216,540 1,167,626 48,914 Non-Departmental 2,215,560 1,814,870 1 ,576,239 238,631 Public Works Administration 79,469 80,143 78,800 1,343 Planning 1,158,920 1,040,740 1,017,659 23,081 City Auditor's Office 128,790 128,790 128,068 722 Office of Management & Budget 284,970 284,970 280,951 4,019 Total general government 11 ,339,839 10,850,103 10,177,395 672,708 Public safety Police 28,069,480 28,106,180 28,113,728 (7,548) Fire 15,078,030 15,023,850 14,932,909 90,941 Development & Neighborhood Services 2,782,963 2,857,975 2,822,192 35,783 Total public safety 45,930,473 45,988,005 45,868,829 119,176 Physical environment Public Works Administration 2,145,678 2,163,854 2,127,615 36,239 Total physical environment 2,145,678 2,163,854 2,127,615 36,239 Transportation Public Works Administration 6,143,063 6,195,103 6,091 ,350 103,753 Total transportation 6,143,063 6,195,103 6,091,350 103,753 Economic environment Economic Development 1,537,180 1,617,960 1,544,691 73,269 Development & Neighborhood Services 192,857 198,055 195,576 2,479 Total economic environment 1,730,037 1,816,015 1,740,267 75,748 Human services Equity Services 482,650 485,580 446,679 38,901 Total human services 482,650 485,580 446,679 38,901 Culture and recreation Parks and Recreation 14,941,850 14,897,270 14,648,907 248,363 Library 4,033,620 4,113,930 4,040,605 73,325 Marine & Aviation 486,280 412,030 473,601 J61,571 ) Total culture and recreation 19,461,750 19,423,230 19,163,113 60,117 Total expenditures (budgetary basis) 87,233,490 86,921 ,890 85,615,248 1,306,642 Excess of revenues over expenditures (budgetary basis) 954,830 688,640 2,009,298 1 ,320,658 OTHER FINANCING SOURCES (USES) Transfers in 4,440,370 5,000,810 5,000,086 (724) Transfers out (6,003,100) (7 ,809,450) (1,618,557) 190,893 Total other financing sources (uses) (budgetary basis) (1 ,562,730) (2,808,640) (2,618,471 ) 190,169 Excess (deficiency) of revenues and other financing sources . (607,900) over expenditures and other financing uses (budgetary basis) (2,120,000) (609,173) 1,510,827 Encumbered purchase orders, beginning of year (1,019,607) (1,019,607) Encumbered purchase orders, end of year 618,417 618,417 Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses (GAAP basis) (607,900) (2,120,000) (1,010,363) 1,109,637 Fund balances - beginning 15,703,379 15,703,379 15,703,379 Fund balances - ending $ 15,095,479 $ 13,583,379 $ 14,693,016 $ 1,109,637 The notes to the financial statements are an integral part of this statement. 22 City of Clearwater, Florida Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual (GAAP Basis) Special Development Fund For the Year Ended September 30, 2003 The notes to the financial statements are an integral part of this statement. 23 Noncurrent assets: Restricted: Equity in pooled cash and investments Due from other funds Investments Due from other governmental entities Interest receivable Deferred charges Advances to other funds Net pension asset Capital assets: Land and other nondepreciable assets Capital assets, net of accumulated depreciation Total noncurrent assets Total assets ASSETS Current assets: Cash on hand and in banks Equity in pooled cash and investments Accounts and contracts receivable: Billed Unbilled charges estimated Less: Allowance for uncollectable accounts Total receivables, net Due from other funds Due from other governmental entities Inventories, at cost Prepaid expenses and other assets Total current assets. unrestricted Current assets - restricted: Restricted equity in pooled cash and investments Investments Total current assets - restricted Total current assets City of Clearwater, Florida Statement of Net Assets Proprietary Funds September 30, 2003 Water and Sewer Utility $ 400 $ 11,901,971 2,382,150 1,221,500 3,603,650 (257,404) 3,346,246 2,517,801 446,962 502,014 3,999 18,719,393 10,193,625 10,193,625 28,913,018 38,219,391 5,037,015 1,515,391 817,828 2,312,588 41,997,231 146,493,651 236,393,095 265,306,113 The notes to the financial statements are an integral part of this statement. 24 Gas Utility 700 $ 2,058,963 1,129,498 1,143,900 2,273,398 (68,668) 2,204,730 5,257,284 448,793 9,970,470 1,491,578 1,491,578 11,462,048 300,001 291,577 1,269,244 351,034 35,848,407 38,060,263 49,522,311 Business-type Enterprise Solid Waste Utility 200 7,523,840 928,740 600,001 1,528,741 (38,478) 1,490,263 1,873,231 10,887,534 797,013 797,013 11,684,547 1,335,768 1,041,913 2,456,505 4,834,186 16,518,733 Activities Funds Governmental Activities - Stormwater Other Internal Service Utility Funds Total Funds $ $ 23,067 $ 24,367 $ 1,900 2,707,506 3,683,516 27,875,796 27,322,059 485,772 346,620 5,272,780 755,000 119,823 3,840,224 1,240,772 466,443 9,113,004 (19,239) (2,863) (386,652) 1,221 ,533 463,580 8,726,352 3,126,561 5,409,960 18,184,837 1,895,803 446,962 19,018 969,825 220,491 3,999 618,058 7,055,600 9,599,141 56,232.138 30,058,311 1,441 ,456 16,817 13,940,489 136 136 1,441,456 16,953 13,940,625 8,497,056 9,616,094 70,172,763 30,058,311 12,533,466 51,052,858 1,020 7,500,000 12,538,035 9,394 9,394 1,515,391 5,793 309,938 483 1,419,826 4,012,876 473,297 617,570 6,008,467 2,092,892 24,867,598 2,046,656 70,304,432 696,681 18,500,296 15,266,360 218,565,219 16,627,604 56,685,615 25,440,463 361,413,622 23,435,846 65,182,671 35,056,557 431,586,385 53,494,157 (Continued) 25 City of Clearwater, Florida Statement of Net Assets (Continued) Proprietary Funds September 30, 2003 LIABILITIES Current liabilities: Accounts and contracts payable Accrued payroll Accrued interest payable Due to other funds Due to other funds - deficit in pooled cash Due to other governmental entities Deposits Deferred revenue and liens Current portion of long-term liabilities: Compensated absences Revenue bonds Notes, loan pool agreement and acquisition contracts Claims payable Total current liabilities (payable from current assets) Current liabilities (payable from restricted assets): Construction contracts payable Accrued interest payable Current portion of long-term liabilities, revenue bonds Customer deposits Total current liabilities payable from restricted assets Total current liabilities Noncurrent liabilities: Compensated absences Revenue bonds (net of unamortized discounts and deferred amount on refunding) Notes, loan pool agreement and acquisition contracts Advances from other funds Claims payable Total non-current liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted for: Revenue bond debt service and sinking fund requirements Revenue bond renewal and replacement requirements Water and sewer impact fees Employees' pension benefits Unrestricted Total net assets Business-type Enterprise Water and Sewer Utility 747,329 184,291 40,691 135,000 $ 43,621 1,095,833 134,169 2,380,934 1,632,874 1,141,182 5,479,167 1,940,402 10,193,625 12,574,559 397,005 117,780,070 325,966 118,503,041 131,077,600 79,473,208 9,846,014 12,951,951 4,296,878 2,312,588 25,347,874 134,228,513 $ Gas Utility 922,921 100,153 27,958 30,655 600,417 1,682,104 120,410 54,583 1,316,585 1,491,578 3,173,682 278,995 25,910,212 26,189,207 29,362,889 9,925,806 300,000 1,269,244 8,664,372 20,159,422 $ Adjustment to reflect the consolidation of intemal service fund activities related to enterprise funds Net assets of business-type activities The notes to the financial statements are an integral part of this statement. 26 Solid Waste Utility 369,282 106,903 82,474 36,355 50,719 645,733 18,268 797,014 815,282 1,461,015 330,865 99,068 742,263 1,172,196 2,633,211 2,523,894 1,335,768 10,025,860 13,885,522 Activities Funds Governmental Activities - Stormwater Other Internal Service Utility Funds Total Funds 38,517 265,510 2,343,559 250,095 40,101 68,603 500,051 176,708 68,649 59,602 142,076 364,812 71 ,583 71,583 135,000 134,532 134,532 4,194 4,194 1,212,306 13,573 13,076 137,280 49,599 47,500 8,274 1,752,024 198,071 212,343 595,302 2,703,946 3,678,100 337,762 837,717 5,884,250 8,435,566 312,585 1,945,459 606,371 406 1,886,637 522,500 16,547 6,072,797 4,054,001 1 ,441 ,456 16,953 13,958,894 1,779,218 854,670 19,843,144 8,435,566 123,531 118,995 1,249,391 451,407 30,821,534 53,773 174,565,589 496,854 557,653 1,479,541 5,727,712 4,059,602 4,801,865 824,882 9,278,382 31,441,919 4,790,023 182,096,386 16,282,383 33,221,137 5,644,693 201,939,530 24,717,949 24,111,696 16.345.705 132.380,309 8,892,627 9,394 9,855,408 13,251,951 4,296,878 473,297 617,570 6,008,467 2,092,892 7,376,541 12,439,195 63,853,842 17,790,689 $ 31,961,534 $ 29,411,864 229,646,855 $ 28,776,208 358.979 $ 230,005,834 27 City of Clearwater, Florida Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended September 30, 2003 Operating revenues: Sales to customers Service charges to customers User charges to customers Billings to departments Rentals Total operating revenues Business-type Enterprise Water and Sewer Gas Solid Waste Utility Utility Utility $ 38,639,890 $ 28,226,159 $ 15,696,878 485,228 1,534,805 96,645 39,125,118 29,760,964 15,793,523 7,283,595 4,053,181 4,428,453 6,103,150 13,494,849 149 1,840,133 128,982 330,421 690,357 492,089 2,655,739 1,591,969 74,587 60,635 4,893,497 4,972,309 1,427,298 225,112 5,113,190 1,861,820 1,143,710 1,760,814 206,474 10,073 570,771 5,230 127,429 140,344 53,496 4,295 241,670 140,775 140,810 4,054,401 239,493 66,472 58,826 4,103 352,817 110,668 36,289 406,250 319,100 135,430 1,764,641 44,759 68,541 19,833 6,988,140 3,623,928 471,736 34,582,843 25,156,734 14,209,452 4,542,275 4,604,230 1,584,071 Operating expenses: Personal services Purchases for resale Operating materials and supplies Transportation Utility service Dumping charges Depreciation Interfund administrative charges Other current charges: Professional fees Advertising Communications Printing and binding Insurance Repairs and maintenance Rentals Miscellaneous Data processing charges Taxes Provision for estimated uncolleclable accounts Total other current charges Total operating expenses Operating income (loss) The notes to the financial statements are an integral part of this statement. 28 29 (Continued) City of Clearwater, Florida Statement of Revenues, Expenses, and Changes in Fund Net Assets (Continued) Proprietary Funds For the Year Ended September 30, 2003 Business-type Enterprise Water and Sewer Gas Solid Waste Utility Utility Utility Nonoperating revenues (expenses): Earnings on investments 1,035,821 307,861 238,889 Interest expense (6,166,544) (1,413,358) (54,180) Amortization of bond discount and issue costs (77 ,336) (121,986) Gain (loss) on exchange of assets (45,857) (832) Other 82,324 302,924 181,000 Total nonoperating revenue (expenses) (5,171,592) (925,391) 365,709 Income before contributions and transfers (629,317) 3,678,839 1,949,780 Capital grants and contributions 3,912,704 Transfers in 880 Transfers out (1,746,548) (1,274,398) (705,650) 2,166,156 (1,273,518) (705,650) Changes In net assets 1,536,839 2,405,321 1,244,130 Total net assets - beginning 132,691,674 17,754,101 12,641,392 Total net assets - ending $ 134,228,513 $ 20,159,422 $ 13,885,522 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net assets of business-type activities (page 17) The notes to the financial statements are an integral part of this statement. 30 Activities Funds Governmental Activities - Stormwater Other Internal Service Utility Funds Total Funds 174,806 390,501 2,147,878 845,052 (1,227,527) (162,176) (9,023,785) (314,164) (17,360) (991) (217,673) (29,991) (9,708) (86,388) 79,578 31,395 217,118 814,761 238,599 (1,068,677) 434,744 (6,365,207) 849,065 1,611,787 378,991 6,990,080 (138,579) 4,925,142 568,196 9,406,042 67,722 625,050 625,930 788,054 (1,946,206) (396,347) (6,069,149) 2,978,936 796,899 3,962,823 855,776 4,590,723 1,175,890 10,952,903 717,197 27,370,811 28,235,974 28,059,011 $ 31,961,534 $ 29,411,864 $ 28,776,208 145,028 $ 11,097,931 31 City of Clearwater, Florida Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2003 Business-type Enterprise Water and Sewer Gas Solid Waste Utility Utility Utility CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 38,926,767 $ 29,711,982 $ 15,752,879 Cash received from other funds Cash payments to suppliers (14,342,310) (16,468,694) (5,392,147) Cash payments to employees (7,747,777) (4,583,105) (4,636,724) Cash payments to other funds (6,992,323) (3,057,141) (4,129,185) Other revenues 82,324 302,924 166,301 Net cash provided by operating activities 9,926,681 5,905,966 1,761,124 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds 880 Transfers to other funds (1,746,548) (1,274,398) (705,650) Grant revenue 14,699 Receipt of cash on loans to/from other funds 476,508 Payment of cash on loans to/from other funds (1,470,236) (269,833) Net cash provided (used) by non capital financing activities (3,216,784) (797,010) (960,784) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on debt (5,542,468) (630,000) (39,371) Interest paid (2,334,747) (1,422,331 ) (58,295) Acquisition of fixed assets (16,644,212) (2,920,125) (221,822) Sale of fixed assets Proceeds from issuance of debt 97,555 102,961 Payment of bond issue costs 85,959 Capital contributed by: Other governmental entities 3,804,317 Property owners 5,024 Developers 103,363 Net cash used by capital and related financing activities (20,425,209) (4,972,456) (216,527) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 1,257,017 307,861 238,889 Proceeds from investment sales & maturities 2,916,713 Net cash provided by investing activities 4,173,730 307,861 238,889 Net increase (decrease) in cash and cash equivalents (9,541,582) 444,361 822,702 Cash and cash equivalents at beginning of year 69,856,969 3,406,881 7,498,351 Cash and cash equivalents at end of year $ 60,315,387 $ 3,851,242 $ 8,321,053 Cash and cash equivalents classified as: Cash on hand and in banks $ 400 $ 700 $ 200 Equity in pooled cash and investments 11,901,971 2,058,963 7,523,840 Restricted equity in pooled cash and investments 48,413,016 1,791,579 797,013 Total cash and cash equivalents $ 60,315,387 $ 3,851,242 $ 8,321,053 The notes to the financial statements are an integral part of this statement. 32 625,050 625,930 848,054 (1,946,207) (396,347) (6,069,150) 14,699 30,310 71,583 578,401 1,374,666 (621,278) (1,798,650) (4,159,997) (1,500,327) (2,537,175) (1,498,364) (9,010,117) 722,393 (299,369) (164,255) (6,675,463) (2,621,292) (1,129,960) (162,295) (5,107,628) (314,164) (7,239,289) (1,043,322) (28,068,770) (4,418,099) 242,462 215,898 333,456 749,870 2,727,228 119,418 205,377 4,905,737 562,796 9,272,850 19,406 24,430 103,363 (3,408,159) (473,620) (29,495,971) (4,383,865) 547,039 390,501 2,741,307 845,052 2,916,713 547,039 390,501 5,658,020 845,052 (1,815,584) (677,696) (10,767,799) 2,138,428 18,498,012 4,400,652 103,660,865 25,185,531 $ 16,682,428 $ 3,722,956 $ 92,893,066 $ 27,323,959 $ $ 23,067 $ 24,367 $ 1,900 2,707,506 3,683,516 27,875,796 27,322,059 13,974,922 16,373 64,992,903 $ 16,682,428 $ 3,722,956 $ 92,893,066 $ 27,323,959 (Continued) 33 City of Clearwater, Florida Statement of Cash Flows (Continued) Proprietary Funds For the Year Ended September 30, 2003 Reconciliation of operating Income (loss) to net cash provided by operating activities: Operating income (loss) $ Adjustments to reconcile operating Income (loss) to net cash provided by operating activities: Other revenue from nonoperating section of income statement Depreciation Non-cash land rental expense Provision for uncollectible accounts Capitalized labor and interest Construction In process reclassified as expense Change in assets and liabilities: (Increase) in accounts receivable (Increase) in amount due from other governments (Increase) decrease in inventory Decrease in prepaid expenses Increase (decrease) in accounts and contracts payable Increase in deposits payable (Decrease) In deferred revenue (Increase) in net pension asset Increase in accrued payroll Total adjustments Net cash provided by operating activities $ Noncash investing, capital and financing activities: Gain (loss) on exchange of assets $ Asset contributions from general government $ Asset contributions to general government $ Contributed assets per radio lease agreement $ Amortization of bond issue costs $ Amortization of discount on bond issuance $ Amortization of deferred loss on defeasance of debt $ Increase in net pension asset $ Business-type Enterprise Water and Sewer Utility Gas Utility Solid Waste Utility 4,542,275 $ 4,604,230 $ 1,584,071 82,324 302,924 166,301 4,972,309 1,427,298 225,112 44,759 68,541 (1,335) (112,528) (391,389) 891,011 (235,233) (196,448) (52,169) (14,865) 31,507 46,808 892 47,104 90,340 14,722 51,747 147,466 32,693 (391,281 ) (224,592) (222,398) 16,660 30,788 14,127 5,384,406 1,301,736 177,053 9,926,681 $ 5,905,966 $ 1,761,124 (45,857) $ (832) $ $ $ $ $ $ $ (78,446) $ (20,310) $ (52,848) $ (25,849) $ (225,048) $ (75,827) $ 391 ,281 $ 224,592 $ 222,398 The notes to the financial statements are an integral part of this statement. 34 Activities Funds Governmental Activities - Internal Service Funds Stormwater Utility Other Funds Total $ 2,680,464 $ (55,753) $ 13,355,287 $ (987,644) 31 ,396 217,118 800,063 238,599 1,046,521 1,245,245 8,916,485 3,644,365 103,498 103,498 13,236 (917) 124,284 (503,917) 220,000 1,111,011 (305,566) (40,458) (829,874) (14,865) 7,390 85,705 (34,916) 892 921,027 (42,898) (478,613) (369,345) 1,473,063 8,493 240,399 (11,198) (11,198) (85,976) (106,155) (1,030,402) (356,186) 25,534 15,137 102,246 56,540 902,247 959,540 8,724,982 5,942,492 $ 3,582,711 $ 903,787 $ 22,080,269 $ 4,954,848 $ (29,991 ) $ (9,708) $ (86,388) $ 86,568 $ $ 5.400 $ 5,400 $ 7,722 $ $ $ $ (6,990) $ $ $ $ 1,101,825 $ (17,360) $ (257) $ (116,373) $ $ (25,172) $ (728) $ (104,597) $ $ $ (965) $ (301,840) $ $ 85,976 $ 106,155 $ 1,030,402 $ 356,186 35 City of Clearwater, Florida Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2003 Pension Trust Agency Funds Fund ASSETS Cash on hand and in banks $ 18,084 $ Equity in pooled cash and investments 8,949,488 219,776 Managed investment accounts 451,144,256 Securities lending collateral 27,627,316 Interest and dividends receivable 695,309 Securities lending earnings receivable 4,312 Accounts receivable 86,986 Total assets 488,525,751 219,776 LIABILITIES Accounts payable 433,831 Obligations under securities lending 27,627,316 Deposits: Property owners 21,944 Developers 10,708 Total deposits 32,652 Other miscellaneous payables: Special purpose funds 7,559 Other 179,565 Total miscellaneous payables 187,124 Total liabilities 28,061,147 219,776 NET ASSETS Held in trust for pension benefits and other purposes 460,464,604 Total net assets $ 460,464,604 $ The notes to the financial statements are an integral part of this statement. 36 City of Clearwater, Florida Statement of Changes In Fiduciary Net Assets Fiduciary Funds For the Year Ended September 30, 2003 The notes to the financial statements are an integral part of this statement. 37 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Note I - Summary of Significant Accounting Policies The City of Clearwater, Florida (the City) was incorporated in 1923 per Chapter 9710, Special Laws of Florida, as amended. The City is a Florida municipal corporation governed by a five member City Commission including a mayor- commissioner. The City has an estimated population of 109,700 and is located in the four-county Tampa-St. Petersburg-Clearwater Metropolitan Statistical Area (MSA), which has an estimated population of 2,535,000. The financial statements of the City of Clearwater, Florida reporting entity (City) have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. Pronouncements of the Financial Accounting Standards Board (FASB) issued after November 30, 1989, are not applied in the preparation of the financial statements of the proprietary fund types in accordance with GASB Statement Number 20. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting standards which, along with subsequent GASB pronouncements (Statements and Interpretations) constitutes GAAP for governmental units. The City's more significant accounting policies are described below. In June 1999, the GASB unanimously approved uBasic Financial Statements and Management Discussion and Analysis for State and Local Governments" (Statement #34). This statement results in the most significant change in governmental financial reporting in over twenty years and is scheduled for a phased implementation (based on the size of the government) starting with fiscal years ending 2002. As part of this Statement, there are new reporting requirements for governments' infrastructure (roads, bridges, etc). The requirements permit an optional four-year delay for retroactive implementation of the infrastructure reporting requirements to fiscal 2006. The City elected to implement the basic model in fiscal year 2002 and to defer implementation of the retroactive infrastructure reporting to fiscal year 2006. A. Financial Reporting Entity In evaluating the City as a reporting entity, management has included in the accompanying financial statements the City of Clearwater (the primary government) and its component units, entities for which the government is considered to be financially accountable. The City has adhered to the standards set forth in GASB Statement No. 14 in reporting the primary government (including blended component units), discretely presented component units, the reporting entity, and related organizations. Blended Component Units - Component units that meet the criteria for blended presentation in accordance with GASB Statement Number 14 are reported in a manner similar to that of the primary government itself. Accordingly, throughout this report, data presented for the primary government includes data of the following blended component unit. The Clearwater Redevelopment Agency (CRA), created by authority of Florida Statute Chapter 163, Part III, and City of Clearwater Resolution 81-68, although it is legally separate, is reported as if it were part of the City (blended component unit) due to the City Commission serving as the governing board of the CRA. Separate financial statements for the CRA are not available. However financial statements for the CRA are included in the City's comprehensive annual financial report as a governmental special revenue fund. Discretely Presented Component Units - Component units that meet the criteria for discrete presentation in accordance with GASB Statement Number 14 are presented in a separate component units column in the government-wide financial statements in order to clearly distinguish the balances and transactions of the component unit from those of the primary government. The discretely presented component unit listed below is reported separately in the financial statements and in the related notes and required supplementary information. The Clearwater Downtown Development Board (DDB) was created by authority of Florida Statutes 70-635 and 77-637, and City Ordinance 5347-93, but is legally separate from the City and governed by a separate board. The DDB was created by City ordinance and the City is thereby able to impose its will on the organization. Additionally the exclusion of the DDB's activities from the City's financial statements would, in the opinion of the City's management, cause the financial statements to be incomplete. Consequently the DDB is reported in a separate column in the government- wide financial statements as a discretely presented component unit of the financial reporting entity, in accordance with GASB Statement No. 14. The DDB's financial statements have been incorporated into the City's comprehensive annual financial report as a governmental discretely presented component unit. Separate financial statements for the DDS can be obtained from the City's Finance Department located at 100 S. Myrtle Avenue, Clearwater, Florida. 38 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 B. Basic Financial Statements Under the New Financial Reporting Model The City's Basic Financial Statements contain three components: government-wide financial statements, fund financial statements, and notes to the financial statements. 1. Government-wide financial statements. The government-wide financial statements report information on all of the nonfiduciary activities of the primary government and its component units using the accrual basis of accounting, which is similar to the accounting used by private-sector businesses. 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. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. The statement of net assets presents information on all of the assets and liabilities of the City. The difference between assets and Iiabi.lities is reported as net assets. Changes in net assets may serve as an indicator of whether the financial position of the City is improving or deteriorating. 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 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. The operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital- specific grants. Taxes and other items not properly included among program revenues are reported instead as general revenues. All revenues and expenses are reported as soon as the underlying transaction has occurred, regardless of when cash is received or paid. 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 quasi-external charges between enterprise funds and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 2. Fund financial statements. 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. The fund financial statements are, in substance, very similar to the financial statements presented in the previous financial reporting model. A new emphasis is on the major funds in either the governmental or business-type categories. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Non-major funds (by category) are summarized into a single column. The City reports the following major governmental funds: The General Fund is the government'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 Development fund is a special revenue fund used to account for impact fees, property taxes for road improvements, local option gas taxes, infrastructure taxes, and other revenues which are restricted legally or by City Commission policy to be used for specific capital improvement projects. The Capital Improvement Fund is used to provide combined accounting presentation for all City capital improvement projects except those financed from proprietary funds or bond proceeds where bond ordinance provisions require the segregation of bond proceeds in separate funds. 39 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 The City reports the following major proprietary funds: The Water and Sewer Utility enterprise fund is used to account for the financing, construction, operation, and maintenance of the water and sewer services of the City from charges made to users of the service. The Gas Utility enterprise fund is used to account for the financing, construction, operation, and maintenance of the gas service of the City from charges made to the users of the service. The Solid Waste Utility enterprise fund is used to account for the financing, construction, operation, and maintenance of the solid waste service of the City from charges made to the users of the service. The Stormwater Utility enterprise fund is used to account for the financing, construction, operation, and maintenance of the stormwater management system of the City from charges assessed against each developed property. 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 the proprietary fund's principal ongoing operations. Operating expenses for proprietary funds include the cost of sales and service, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Additionally, the City reports the following fund types: Internal service funds account for fleet management, information technology, telephone, graphics, employee relations, facilities management, radio communications, insurance, and risk management services provided to other City departments on a cost reimbursement basis. The Garage, Administrative Services, General Services, and Central Insurance funds primarily benefit governmental funds and are consequently included as governmental activities. Pension trust funds account for the financial operation and condition of the Employees' Pension Plan, the Firemen's Relief and Pension Plan, the Police Supplemental Pension Plan, and the Firefighters Supplemental Pension Plan. The Treasurer's Escrow Agency Fund accounts for the receipt, custody, and expenditure of monies held temporarily in an agency capacity for other parties. The pension trust funds and the agency fund are fiduciary funds used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not included in the government-wide financial statements because the resources of these funds are not available to support the City's own programs. 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. The agency fund included within the fiduciary fund financial statements also uses the accrual basis of accounting but does not have a measurement focus. 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 City considers revenues to be available if they are collected within 90 days of the end of the current fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered susceptible to accrual and so have been recognized as revenues of the current fiscal period for the governmental funds; All other revenue items are considered to be measurable and available only when cash is received by the City. 40 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 D. Assets, Liabilities, and Net Assets or Equity 1. Deposits, pooled cash, and investments Investments with original maturities of three months or less are considered to meet the definition of cash equivalents. The majority of the investments in which the City's funds have equity are held by the City's consolidated pool of cash and investments. The City utilizes the consolidated cash pool to account for cash and investments of all City funds other than those that are required by ordinance to be physically segregated. The consolidated cash pool concept allows each participating fund to benefit from the economies of scale and improved yield that are inherent to a larger investment pool. Formal accounting records detail the individual equities of the participating funds. The cash pool utilizes a single checking account for all City receipts and disbursements. Since fund equities in this cash management pool have the general characteristics of demand deposits in that additional funds may be deposited at any time and also funds may be withdrawn at any time without prior notice or penalty, each fund's equity account is considered a cash equivalent regardless of the maturities of investments held by the pool. All individual fund cash equity in a deficit (overdraft) position with respect to the consolidated cash pool is reclassified at year-end to short-term interfund payables to the Capital Improvement Fund. The Capital Improvement Fund is the fund selected by management to reflect the offsetting interfund receivables in such cases. The City has an agreement with its depository bank to provide that all excess cash is swept daily and automatically into an overnight money market account which pays interest at 14 basis points (0.14%) less than the daily federal funds rate (1.00% at September 30, 2003), with no requirement for a minimum compensating balance. This account is collateralized through the State of Florida Public Deposits Program. Under City Charter and the current Investment Policy, adopted by the City Commission on September 7, 1995, consolidated cash pool investments are limited to the following: United States Government Securities, Certificates of Deposit in Local Banks, Repurchase Agreements, Savings Account in Local Banks, Federal Government Agency Securities, Municipal Bonds (other than City of Clearwater issues), State of Florida Bonds, and Municipal Bonds issued by counties in Florida. The City utilizes a very conservative investment philosophy when it invests its pooled cash funds in that the return of the principal is more important than the return on the principal. The City does not actively trade its portfolio and generally holds investments until maturity. Through the use of a laddered approach to maturities and by timing maturities to cash needs, the City does not anticipate selling investments to meet cash flow requirements. Under the City's Investment Policy, a performance measure standard has been established. The performance measure chosen is a weighted average of: the overnight interest rate; and three month, six month, one year, and three year Treasury rates respectively. For the fiscal year ended September 30, 2003, the performance measure weighted average was 1.39%. The actual pooled cash earnings performance, before bank charges, was 3.32%. Investments being held outside of the consolidated cash pool include escrowed debt service investments and employee retirement investments. Permissible escrowed debt service investments are specifically defined in each individual debt instrument, but generally follow the same limitations which apply to consolidated cash pool investments. The City maintains four different employee retirement programs, and each one has its own list of permitted investments. Generally, each plan allows the same type of investments as the consolidated cash pool, but additionally allows some portion of its assets to be invested in stocks, bonds, and notes of corporations listed on one or more of the recognized national stock exchanges. 2. Receivables and payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e. the current portion of interfund loans) or "advances to/from other funds" (i.e. the non-current portion of interfund loans). All other outstanding balances between funds are reported 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". 41 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All trade and property tax receivables are shown net of an allowance for uncollectibles. Trade accounts receivable less than 60 days are included in the trade accounts receivable allowance for uncollectibles at the five-year average loss experience rate of 5.04%. Trade accounts receivable in excess of 60 days are reserved at 40%. The property tax receivable allowance for uncollectibles is 10% of the current year portion of the receivable, and 30%, 50%, 70%, 90%, and 95% for the receivable portions attributable to the prior five years respectively (fiscal 2002 thru 1998), and 100% of the receivable attributable to fiscal years 1997 and prior. Property tax revenue is recognized in the fiscal year for which the taxes are levied, provided the availability test is met, in conformance with NCGA Interpretation No.3. Property taxes for the following fiscal year are levied by commission action in September of each year. This levy is apportioned to property owners based on the previous January 1 assessed values. Tax bills are mailed out on or about November 1, and the collection period runs from November 1 through March 31. On April 1 , unpaid property taxes are considered delinquent and become a lien. Tax certificates are sold in June for real property with delinquent taxes. Since taxes are not collected prior to November 1, the City does not record revenue for advance collections. Uncollected taxes receivable at year-end are recorded, with an appropriate allowance for estimated uncollectible amounts. The net amount deemed to be collectible but not current (not expected to be collected within sixty days after the close of the fiscal year) is shown as deferred revenue in the appropriate fund. Additionally, taxes assessed for the following fiscal year are recorded as a receivable and as deferred revenue in accordance with Governmental Accounting Standards Board Statement No. 33. All delinquent property taxes, except those levied specifically for the restricted purposes of financing activities accounted for in the Special Development Fund, are recorded in the General Fund. Property tax revenues are recognized in the General Fund and the required transfers to the appropriate debt service or pension fund are recorded as operating transfers from the General Fund. The City is permitted by State law to levy ten mills without referendum. Additional millage not subject to the ten mill limitation is authorized if approved by referendum. The tax rate of 5.7530 mills for the year ended September 30, 2003, was an increase from the September 30, 2002, rate of 5.5032 mills. 3. Inventories and prepaid items Inventories of proprietary funds are stated at cost and valued on the first-in first-out (FIFO) basis. In governmental funds, the majority of inventory items are accounted for under the purchases method, which provides that expenditures are recognized when the inventory item is purchased. The only governmental fund inventory that is accounted for under the consumption method is the General Fund inventory of items for resale at the fishing pier. Under the consumption method, the expenditure is recognized when the inventory item is sold (or consumed). Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Restricted assets Certain resources of the City's enterprise funds are classified as restricted assets. Restricted assets include: Water and Sewer improvement charges restricted by the authorizing ordinances to the construction of additions and improvements to the water and sewer systems; and assets of the Water & Sewer Utility, Gas Utility, Stormwater Utility, and Parking System funds restricted under the provisions of authorizing ordinances for revenue bonds to the payment of future revenue bond debt service, system construction, and renewals and replacements. 5. Capital assets Capital assets, which include property, plant, equipment, and certain infrastructure assets, (e.g. roads, bridges, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. However infrastructure assets are only reported for the current fIScal year. The City has chosen to defer implementation of retroactive infrastructure reporting to fiscal year 2005/2006 per the implementation 42 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 of GASB Statement #34. Capital assets are defined by the City as assets with an initial individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of five years. Individual assets that cost less than $5,000, but that operate as part of a network system, will be capitalized in the aggregate, using the group method, if the estimated average useful life of the individual asset is five years or more. Additionally, higher thresholds for capitalization apply to the following categories: land improvements, $50,000; buildings, building improvements, and utility systems, $100,000; and infrastructure, $500,000. Capital 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. 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 assets constructed. The total interest expense incurred by business-type activities during the current fiscal year was $8,361,416. Of this amount, ($660,128), $87,065, and ($89,306) were included as part of the cost of capital assets under construction in connection with water & sewer, gas, and stormwater system projects, respectively. Property, plant, and equipment of the primary government, as well as the component units, as applicable, are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings & building improvements Public domain infrastructure Utility system infrastructure Land improvements 'Machinery & equipment Vehicles 1 0-40 20-40 25-40 5-50 5-33 5-10 6. Compensated absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Generally employees may accumulate vacation time not exceeding 360 hours and sick leave not exceeding 1,560 hours. Upon retirement from City service a qualified employee is paid for all vacation time not exceeding 360 hours and one-half of accumulated unused sick leave not exceeding 1,560 hours (Le. maximum pay-out of 780 hours). The City accrues for all earned but unused vacation pay up to the "cap" of 360 hours, and the portion of unused sick leave estimated to be payable upon retirement. The current portion of compensated absences is the amount estimated to be used in the following year. For governmental activities, compensated absences are liquidated by the governmental funds where the employee vacation and sick leave are earned. 7. 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 method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 8. 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 represent tentative management plans that are subject to change. 43 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Note" - Stewardship, Compliance, and Accountability A. Budgets and budgetary accounting Annual budgets are legally adopted for the General Fund, Special Development Special Revenue Fund, and the Community Redevelopment Agency Special Revenue fund. The City of Clearwater observed the following procedures in establishing the budgets for the General Fund and Special Development Fund, as reflected in the financial statements: On June 14, 2002, the City Manager submitted to the Clearwater City Commission proposed budgets for the fiscal year commencing October 1, 2002 and ending September 30, 2003. Public Hearings were held on September 5, 2002, and September 19, 2002, at the Clearwater Commission Chambers to obtain citizen comments. On September 19, 2002, official budgets were legally adopted by Ordinance No. 7012-02. Subsequent quarterly budget amendments were adopted on April 3, 2003, (Ordinance 7097-03) and July 17, 2003 (Ordinance 7149-03). The final amended budget was adopted October 2, 2003 (Ordinance 7171-03). The budget for the Special Development Fund is adopted on a basis consistent with GAAP, and appropriations lapse at year-end. Appropriations for open encumbered purchase orders at year-end in the General Fund do not lapse, but rather continue until liquidated or otherwise cancelled by City Commission action. On the General Fund budgetary comparison statements, actual expenditures have been adjusted to include end-of-year encumbrances and to exclude beginning-of-year encumbrances to provide for a meaningful comparison. Except for the treatment of encumbrances and certain transactions relating to interfund loans, the General Fund Budget is adopted on a basis consistent with GAAP, and all non-encumbered appropriations lapse at year-end. The level of budgetary control established by the legislative body, the level on which expenditures may not legally exceed appropriations, is the individual fund. In accordance with provisions of Ordinance 5025-90 and with Section 2.519(4) of the Clearwater Code, the City Manager may transfer part or all of any unencumbered appropriation balance among programs within an operating fund, provided such action does not result in the discontinuance of a program. Such transfers must be included in the next budget review presented to the City Commission. Upon detailed written request by the City Manager, the City Commission may by ordinance transfer part or all of any unencumbered appropriation balance from one fund to another. As established by administrative policy, department directors may transfer money from one operating code to another within a program without a formal written amendment. Formal requests for budget amendments from department directors are required for transfers in capital expenditures, transfers, and reserves. Thus, certain object classifications within departmental and/or program budget appropriations are subject to administratively imposed controls, in addition to the legal controls imposed by City Commission action described above. The Community Redevelopment Agency Fund annual budget is adopted by the trustees of that agency in accordance with state law. The current year budget was officially adopted on June 18, 2002. The budget is adopted on a basis consistent with GAAP, the level of budgetary control is the total fund, and appropriations lapse at year-end. Budget amounts presented in the accompanying financial statements reflect all amendments adopted by the City Commission and the governing boards of component units. All amendments were adopted in conformance with legal requirements. Individual amendments, as well as the net effects of all amendments during the fiscal year, were not material in relation to the original appropriations for the governmental funds in the aggregate. The Clearwater City Commission also adopts budgets for the Enterprise Funds, all Internal Service Funds, the Capital Projects Funds, the Special Programs Fund, and the Local Housing Assistance Trust Fund. Budgetary comparisons for the Enterprise and Internal Service funds are not required by NCGA Statement No. 1 for the general purpose financial statements and are not included in this report. Budgets for the Capital Projects Funds, the Special Programs Fund, and the Local Housing Assistance Trust Fund are adopted on a multi-year completed program basis, where budgetary appropriations do not lapse at year-end, but may extend across two or more fiscal years. A comparison of annual results with these budgets would not be meaningful and is therefore not included in this report. All City Commission adopted budgets are integrated into the formal accounting system to allow for monthly comparison of projected and actual experience in all funds for which budgets are adopted. The annual budget for the Clearwater Downtown Development Soard (DDS), a discretely presented component unit of the City, is adopted by the members of the DDB's board in accordance with state law. The current year budget was officially adopted on September 10, 2002. Separate financial statements for the DDS can be obtained from the City's Finance Department located at 100 S. Myrtle Avenue, Clearwater, Florida. 44 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 B. Reclassification of prior year balances Effective October 1, 2002, the City reclassified the Garage and Administrative Services internal service funds from business-type activities to governmental activities for government-wide reporting. This resulted in the reclassification of $12,621,515 in net assets from business-type activities to governmental activities as of October 1, 2002. Note III - Detailed Notes on All Funds A. Deposits and investments Investments with original maturities of three months or less are considered to meet the definition of cash equivalents. The majority of the investments in which the City's proprietary funds have equity are held by the City's consolidated pool of cash and investments. Since fund equities in this cash management pool have the general characteristics of demand deposits in that additional funds may be deposited at any time and also funds may be withdrawn at any time without prior notice or penalty, each fund's equity account is considered a cash-equivalent regardless of the maturities of investments held by the pool. Funds with deficit (overdraft) positions within the consolidated pool report the deficits as interfund payables to the City's Capital Improvement Fund. Governmental Accounting Standards Board (GASB) Statement Number 3 requires certain disclosures for deposits and investments, including management's determination of custodial credit risk, defined as follows: For deposits, the bank balance must be categorized as follows: Category 1: Insured or collateralized with securities held by the City or its agent in the City's name. Category 2: Collateralized with securities held by the pledging financial institution's trust department or agent in the City's name. Category 3: Uncollateralized. For investments other than deposits, the following categories apply: Category 1: Insured or registered, or held by the City or its agent in the City's name. Category 2: Uninsured and unregistered, held by the counterparty's (purchasing agent's) trust department or agent in the City's name. Category 3: Uninsured and unregistered, held by the counterparty, its trust department, or agent, but not in the City's name. As described above, the City's depository banking agreement provides for the investment of all excess cash daily into a collateralized repurchase agreement, whereby all deposits deemed to be collected are automatically deposited. City deposits consist of relatively small cash balances held by Debt Service Trustees and Employee Retirement Custodians. The bank balances equal the carrying amount for these deposits, and management's classification of custodial credit risk is indicated in the table below. Because these amounts are part of the trustee's and custodian's composite account, they are classified along with investments on the balance sheet. Managed mutual funds and securities lending collateral are not susceptible to classification by risk category and are disclosed but not categorized pursuant to GASB Statement 3. Management has classified all other investments into Category 1. The carrying value for all investments is fair value in accordance with GASB Statement 31. 45 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Summary of deposits and investments, including management's assessment of custodial credit risk, follows: Investment Fair Deposit Credit Credit Value Risk Category Risk Category I. Cash On Hand and In Banks $ 47,842 1 II. Consolidated Cash Pool and Component Unit Deposits and Investments: Cash in Banks 5,605,849 U.S. Treasury Notes and Bills 26,005,830 1 U.S. Agency Securities 199,192,689 1 Money Market Mutual Funds 6,000,000 n/a Accrued Interest on Investments 1,778,215 n/a Less Outstanding Checks at 9/30/03 (2,958,224) n/a total Cash Pool and Component Unit Equity * 235,624,359 (includes Fiduciary funds cash pool assets) III. Construction and Debt Service Deposits and Investments: Money Market Mutual Funds 610,450 n/a Corporate Bonds 874,715 1 1,485,165 IV. Employee Retirement Deposits and Investments: Money Market Accounts 7,120,068 1 Domestic Equity Securities 183,470,317 1 Government Bonds 40,287,718 1 Agency Bonds 280,340 1 Domestic Corporate Bonds 22,119,183 1 Mortgage Backed Bonds 3,725,883 1 Asset Backed Bonds 4,872,389 1 International Equity Mutual Funds 35,926,545 n/a Stock Mutual Funds 44,790,954 n/a Fixed Income Mutual Funds 108,568,943 n/a Securities Lending Collateral 27,627,316 n/a Total Employee Retirement Investments 478,789,656 Total Deposits and Investments, All Funds $ 715,947,022 * At September 30, 2003, the carrying amount of the primary government's deposits totaled $2,442,655 and the bank balance was $5,399,993. The carrying amount of the component unit's deposits totaled $204,972, while the bank balance was $205,856. Total bank balance for primary government and the discretely presented component unit was $5,605,849. B. Receivables Receivables as of year end for the City's individual major funds and non major, internal service, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are segregated on the fund financial statements. The Mortgages, Notes, and Other Loans amount of $9,703,654 reported on the Governmental Funds balance sheet includes $9,506,257 of long-term loans receivable that are not expected to be collected in the next year. 46 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 C. Capital assets Capital asset activity for the year ended September 30, 2003 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital assets, not being depreciated: Land $ 41,609,748 $ 3,679,328 $ 190 $ 45,288,886 Construction in progress 11,550,775 25,031,143 6,141,290 30,440,628 Total capital assets, not being depreciated 53,160,523 28,710,471 6,141,480 75,729,514 Capital assets, being depreciated: Buildings 41,126,144 11 ,958,952 394,008 52,691,088 Improvements other than buildings 53,170,708 2,106,951 201,003 55,076,656 Machinery and equipment 72,519,291 8,776,646 2,875,587 78,420,350 Infrastructure 1,076,247 1,149,293 2,225,540 Total capital assets, being depreciated 167,892,390 23,991,842 3,470,598 188,413,634 Less accumulated depreciation for: Buildings (12,086,557) (189,647) (13,258,422) Improvements other than buildings (15,386,869) (116,653) (18,334,331 ) Machinery and equipment (47,813,444) (2,380,156) (50,915,348) Infrastructure (53,812~ Total accumulated depreciation (75,286,870) (2,686,456) (82,561,9'13 Total capital assets, being depreciated, net 92,605,520 784,142 105,851,721 Governmental activities capital assets, net $ 145,766,043 $ 42,740,814 $ 6,925,622 $ 181,581,235 Beginning Ending Balance Increases Decreases Balance Business-type activities: Capital assets, not being depreciated: Land $ 19,181,869 $ 6,831,490 $ $ 26,013,359 Construction in progress 47,205,107 17,618,870 20,532,904 44,291,073 Total capital assets, not being depreciated 66,386,976 24,450,360 20,532,904 70,304,432 Capital assets, being depreciated: Buildings 20,425,340 2,290,235 22,715,575 Improvements other than buildings 293,385,180 18,027,743 311,412,923 ' Machinery and equipment 5,932,440 1,171,452 450,202 6,653,690 Total capital assets, being depreciated 319,742,960 21,489,430 450,202 340,782,188 Less accumulated depreciation for: Buildings (5,858,968) (767,238) Improvements other than buildings (105,189,239) (7,590,222) Machinery and equipment (2,676,729) (559,025) (424,452) Total accumulated depreciation (113,724,936) (8,916,485) (424,452) Total capital assets, being depreciated, net 206,018,024 12,572,945 25,750 Business-type activities capital assets, net $ 272,405,000 $ 37,023,305 $20,558,654 $ 288,869,651 47 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Depreciation expense was charged to functions I programs of the primary government as follows: Governmental activities: General government Public safety Physical environment Transportation, including depreciation of general infrastructure assets Culture and recreation Capital assets held by the government's governmental internal service funds are charged to the various functions based on their usage of the assets Total depreciation expense - governmental activities Business-type activities: Water and sewer utility Gas utility Solid waste utility Stormwater utility Other Total depreciation expense - business-type activities Construction commitments At September 30, 2003, material outstanding construction commitments were as follows: ~ Reclaimed water distribution system Community sports complex Community sports complex New main library New main library Sanitary coli. & transmission renewal & rep!. Northwest fire station Various street resurfacings Pelican Walk parking garage Kapok flood resolution Water supply and treatment New Citywide financial system Clearwater Mall fire station Sewer system pump station replacement Garden Av. & S Beach pkg garage ctr/ eqmt Airpark improvements Manhole and gravity line repairs North Greenwood corridor enhancements Total Construction Commitments .EYJ1g Water & Sewer Utility enterprise fund Capital Improvement construction fund Community Sports Complex bond construction fund Sales Tax Revenue bond construction fund Capital Improvement construction fund Water & Sewer Utility enterprise fund Capital Improvement construction fund Capital Improvement construction fund Parking System enterprise fund Stormwater Utility enterprise fund Water & Sewer Utility enterprise fund Administrative Services intemal service fund Capital Improvement construction fund Water & Sewer Utility enterprise fund Parking System enterprise fund Marine & Aviation enterprise fund Water & Sewer Utility enterprise fund Capital Improvement construction fund 48 $ 849,864 1,250,342 42,106 2,639,587 1,535,235 3,644,365 $ 9,961 ,499 $ 4,972,309 1,427,298 225,112 1,046,521 1,245,245 8,916,485 $ Construction Commitments Outstanding $ 7,430,679 5,893,623 1,706,502 1 ,258,459 1,242,227 1,937,718 1,749,000 1,663,297 1,400,000 1,023,038 821,486 720,000 625,144 615,141 590,654 580,609 533,326 522.466 $ 30.313 369 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 D. Interfund receivables, payables, and transfers 1. Interfund balances As discussed in Note III-A, individual fund deficits in the consolidated cash pool have been reclassified as of September 30, 2003, as interfund loans from the Capital Improvement Fund, which was selected by management for this purpose. This reclassification results in a corresponding reduction in the cash equity in the Capital Improvement Fund, offset by an increase in interfund receivables. The amounts of the reclassified cash pool deficits, as well as other individual fund interfund payable and receivable balances (current), at September 30, 2003, were as follows: Due from Other Funds Deficit in Other Pooled Cash Receivables $ $ Fund General Fund Special Revenue Fund: Community Redevelopment Agency Debt Service Fund: Spring Training Facility Revenue Bonds Capital Project Fund: Capital Improvement Enterprise Funds: Water and Sewer Utility Gas Utility Solid Waste Utility Recycling Utility Stormwater Utility Marine and Aviation Parking System Harborview Center Internal Service Funds:. Garage Administrative Services General Services Central Insurance Due to Other Funds Deficit in Other Pooled Cash Payables $ $ 24,925 419,695 259,397 120,402 750,675 2,088 7,554,816 5,257,284 1,873,231 1,087,539 3,127,581 1,143,773 10,653,239 25,409 1,050,696 194,980 650,127 750,675 $ 32,620,763 31,968,548 $ 82,474 59,602 71 ,583 2,088 362,724 $ 750,675 $ 32,620,763 Individual interfund advances (long-term) at September 30, 2003, follow: Advances to Other Funds 2,000,000 General Fund Special Revenue Fund: Community Redevelopment Agency Enterprise Funds: Solid Waste Utility Marine and Aviation Parking System Internal Service Funds: Administrative Services Central Insurance $ Advances from Other Funds $ 24,925 Fund 361 ,204 742,263 59,602 4,000,000 824,882 $ 4,012,876 6,012,876 $ 6,012,876 49 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Descriptions of long-term interfund loans as of September 30. 2003: An interfund loan at the cash pool interest rate from the Central Insurance Fund to the Community Redevelopment Agency Fund for the purchase of a land parcel for resale to a developer. The initial loan amount was $1,171,328 and commenced during the fiscal year ended September 30, 2000. The loan is to be repaid when the development project is completed. An internal twenty year loan from the Central Insurance Fund to the Solid Waste Utility Fund for. the construction of administrative, container maintenance, and truck wash facilities, in addition to a paved yard for use by all cost centers of the Solid Waste Fund. The loan provides for 20 annual payments of $82,474 together with interest at the cash-pool rate, due on September 30 of each year, commencing September 30, 1994. The cost of the construction was $1,686,759. An internal five-year construction loan in the amount of $298,011 from the Central Insurance Fund to the Marine and Aviation Fund for construction of two aircraft T-hangars and one corporate hangar at Clearwater Airpark. The loan provides for payments due on September 30 of each year, bearing interest at the cash-pool interest rate and commencing September 30, 2001. Internal loans of $2,000,000 each from the General Fund and the Central Insurance Fund, at the cash-pool interest rate, to the Parking Fund to fund a contingency reserve per the terms of a development agreement. The Parking Fund is contributing an additional $2,000,000 to fund a total contingency of $6,000,000 for the repurchase of a land parcel if the proposed development does not occur by March 2006. The loans commenced September 30, 2002. An internal five-year loan from the Central Insurance Fund to the Administrative Services Fund for the purchase and installation of a new Utility Customer Service system. The loan provides for five annual payments of $300,000 plus interest at the cash-pool rate, due on September 30 of each year. The loan commenced September 30, 1999 with the first annual principal payment due September 30, 2000. An internal ten-year loan from the Central Insurance Fund to the Administrative Services Fund for the purchase and installation of fiber optic cable and termination equipment. The loan provides for ten annual payments of $91,653.50 plus interest at the cash-pool rate, due on September 30 of each year. The loan commenced September 30,2003 with the first annual principal payment due September 30, 2004. 50 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 2. Interfund transfers 'nterfund transfers for the year ended September 30, 2003, consisted of the following: Transfers to General Fund from: Capital Improvements Fund $ 253,396 Water & Sewer Utility Enterprise Fund 1,600,410 Gas Utility Enterprise Fund 1,271,980 Solid Waste Utility Enterprise Fund 705,650 Stormwater Utility Enterprise Fund 226,880 Nonmajor governmental funds 715,350 Nonmajor enterprise funds 226,420 Total 5,000,086 Transfers to Special Development Fund from: Capital Improvements Fund 988,401 Stormwater Utility Enterprise Fund 1,500,000 Total 2,488,401 Transfers to Capital Improvements Fund from: General Fund 3.313,998 Special Development Fund 8,665,850 Nonmajor governmental funds 2,018,538 Total 13,998,386 Transfers to Nonmajor governmental funds from: General Fund 3,413,194 Special Development Fund 3,929,321 Capital Improvements Fund 67,968 Gas Utility Enterprise Fund 2,418 Nonmajor governmental funds 291,699 Nonmajor enterprise funds 50,000 Total 7,754,600 Transfers to Gas Utility Enterprise Fund from: General Fund 880 Total 880 Transfers to Nonmajor enterprise funds from: General Fund 625,050 Total 625,050 Transfers to internal service funds from: General Fund 265,435 Capital Improvements Fund 37,228 Water & Sewer Utility Enterprise Fund 146,138 Stormwater Utility Enterprise Fund 219,326 Nonmajor enterprise funds 119,927 Total 788,054 Total interfund transfers $ 30,655,457 Transfers are primarily used to 1) transfer revenues that have been collected in the required fund per state law to the funds and activities that state law allows for expenditures; 2) transfer of "payment in lieu of taxes" contributions from the utility funds to the General Fund; 3) transfer funding from governmental funds to debt service and capital improvements funds; and 4) transfer matching funds from the General Fund to various grant programs. 51 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 E. Leases The City purchases various equipment for governmental and business-type activities under lease purchase financing agreements. The equipment is purchased with cash and subsequently provided as collateral via a "lease purchase" financing arrangement, typically for a five-year term. Obligations under these lease purchase agreements are recorded at the present value of their future minimum lease payments as of date of inception. Purchase of the assets is recorded as a cash outflow and the subsequent receipt of the financing proceeds is recorded as "proceeds from issuance of debf' for Statement of Cash Flows reporting. Capitalized equipment subject to lease purchase financing as of September 30, 2003: Governmental Activities Business-type Activities Equipment Less: Accumulated Depreciation Total $ 20,581,648 (7,980,698) $ 12,600,950 $ 3,066,721 (957,513) $ 2,109,208 The future minimum lease payments under capital lease purchase agreements are as follows as of September 30, 2003: Governmental Business-type Year Ending Sept. 30 Activities Activities 2004 $ 4,465,094 $ 660,299 2005 3,668,291 630,857 2006 2,384,968 461,656 2007 1,180,477 267,254 2008 604,457 158,326 2009 70,016 39,581 12,373,303 2,217,973 Deduction of the amount of imputed interest necessary to reduce net minirrum lease payments to present value (701,887) (143.130) $ 11,671,416 $ 2,074,843 The City also leases personal computers under a three-year operating lease that is cancelable on an annual basis. Lease payments for fiscal year ended September 30, 2003, totaled $246,634. 52 F. Long-term debt 1. Revenue Bonds City of Clearwater, Florida Notes to the. Financial Statements September 30, 2003 $46,445,000 Infrastructure Sales Tax Revenue Bonds, Series 2001, with $5,270,000 of principal due December 1, 2003, to $6,620,000 due December 1, 2009; interest at 4.00% to 5.00%. $11,470,000 Improvement Revenue Refunding Bonds, Series 2001, due in annual installments of $360,000 due February 1, 2004, to $820,000 due February 1, 2026; interest at 3.00% to 5.25%. $80,174 of the bonds outstanding as of September 30, 2003, are reported in the Parking System Enterprise Fund per the financing of parking system assets. Please reference the revenue bonds for business-type activities below. $14,810,000 Spring Training Facility Revenue Bonds, Series 2002, due in annual installments of $460,000 due March 1, 2004, to $470,000 due March 1, 2031, with a maximum principal of $845,000 due March 1, 2021; interest at 2.00% to 5.38%. Total revenue bonds for governmental activities $53,445,000 Water and Sewer Refunding Revenue Bonds, Series 1993; serial bonds due in annual installments of $5,715,000 due December 1, 2003 and $5,370,000 due December 1, 2004, interest at 5.00% to 5.10%; 5.50% term bonds in the amount of $1,160,000 due December 1, 2011; and 5.625% term bonds in the amount of $1,760,000 due December 1, 2018. $43,642,690 Water and Sewer Refunding Revenue Bonds, Series 1998, capital appreciation bonds with total maturity amount of $81,785,000; due in annual installments from December 1, 2004 to December 1, 2018; ranging from $460,000 to $5,875,000; with interest at 4.20% to 5.22%. The balance outstanding as of September 30, 2003, includes capital appreciation bond accreted interest of $11 ,177,081. $58,680,000 Water and Sewer Revenue Bonds, Series 2002; serial bonds due in annual installments of $860,000 due December 1, 2003, to $2,420,000 due December 1, 2024, interest at 3.25% to 5.00%; 5.00% term bonds in the amount of $11 ,050,000 due December 1, 2028; and 5.00% term bonds in the amount of $13,665,000 due December 1 , 2032. $8,815,000 Gas System Revenue Bonds, Series 1996A; serial bonds due in annual installments of $95,000 due September 1, 2004, to $270,000 due September 1, 2014, interest at 5.00% to 5.75%; 5.75% term bonds in the amounts of $905,000 and $1,460,000 maturing on September 1, 2017 and September 1, 2021, respectively; and 5.80% term bonds in the amount of $4,465,000 maturing on September 1, 2026. $14,605,000 Gas System Revenue Bonds and Gas System Revenue Refunding Bonds, Series 1997 A & Series 1997B; serial bonds due in annual installments of $525,000 due September 1, 2004, to $785,000 due September 1, 2013, interest at 4.25% to 5.00%; 5.25% term bonds in the amount of $790,000 maturing September 1, 2017; and 5.30% term bonds in the amount of $4,560,000 maturing September 1, 2027. $8,020,000 Gas System Revenue Refunding Bonds, Series 1998; serial bonds due in annual installments of $35,000 due September 1, 2004, to $50,000 due September 1, 2012, interest at 4.00% to 4.60%; additional serial bond annual installments ranging from $620,000 to $755,000 from September 1, 2015 to September 1, 2019, interest at 4.75% to 4.90%; 4.70% term bonds in the amount of $645,000 maturing September 1,2014; and 5.00% term bonds in the amount of $3,410,000 maturing on September 1, 2023. $7,500,000 Stormwater System Revenue Bonds, Series 1999, with $130,000 of principal due November 1, 2003, to $490,000 due November 1. 2029. interest at 4.25% to 5.75%. 53 $ 41,345,000 10,924,826 14.645.000 66.914.826 14,005,000 54,819,771 58,680,000 8,270,000 11,870,000 7,860,000 7,150,000 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 $24,685,000 Stormwater Revenue Bonds, Series 2002; serial bonds due in annual installments of $440,000 due November 1, 2003, to $965,000 due November 1, 2023, interest at 3.00% to 4.75%; and 4.75% term bonds in the amounts of $3,205,000, $5,115,000, and $2,985,000, due November 1, 2026, 2030, and 2032, respectively. $11,470,000 Improvement Revenue Refunding Bonds, Series 2001, due in annual installments of $360,000 due February 1, 2002, to $820,000 due February 1, 2026, interest at 3.00% to 5.25%. A total of $11,255,958 of the bonds has been allocated to the general government activities per above while the following amount has been allocated to the Parking System Enterprise Fund. Total revenue bonds for business-type activities Total revenue bonds 24,685,000 80.174 187.419.945 $254.334.771 2. Restrictive covenants and collateral requirements The Infrastructure Sales Tax Revenue Bonds are limited obligations of the City payable solely from and secured by a lien upon and a pledge of the City's share of the proceeds derived by Pinellas County from the levy and collection of the one-cent discretionary infrastructure sales tax pursuant to Section 212.055(2), Florida Statutes, as amended (the Sales Tax Revenues) and, until applied in accordance with the provisions of the Ordinance, all moneys, including investments thereof, in the funds and accounts established by the Ordinance, other than the Rebate Fund (collectively the "Pledged Revenues"). The pledge of the Sales Tax Revenues does not constitute a lien upon any property of the City. The covenants of the ordinance authorizing the bonds include, among other things, an obligation of the City to do all things necessary on its part to continue the levy and collection of the Sales Tax Revenues at the maximum rate permitted by and in compliance with Chapter 166, Part II, Florida Statutes, as amended, Chapter 212, Part I, Florida Statutes, as amended, and other applicable provisions of law (the "Act"), and any successor provision of the law. The City further covenants to proceed diligently to perform legally and effectively all steps required on its part in the levy and collection of the Sales Tax Revenues and shall exercise all legally available remedies to enforce such collections now or hereafter available under State law. The Improvement Revenue Refunding Bonds are limited obligations of the City payable solely from and secured by a lien upon and a pledge of the Public Service Tax as authorized by Section 166.231, Florida Statutes, as amended. The pledge of the Public Service Tax does not constitute a lien upon any property of the City. The covenants of the ordinance authorizing the bonds include, among other things, an obligation of the City to do all things necessary on its part to continue the levy and collection of the Public Service Tax at the rate permitted by and in compliance with Section 166.231, Florida Statutes, and Article III, Chapter 44, Code of Ordinances of the Issuer, and any successor provision of law. The Public Service tax is a revenue of the General Fund. The Spring Training Facility Revenue Bonds are special, limited obligations of the City, payable solely from and secured by a lien upon and pledge of the (i) payments received by the City from the State of Florida pursuant to Section 212.20, Florida Statutes (State Payments); and (ii) payments received by the City from Pinellas County, Florida pursuant to the Interlocal Agreement dated December 1, 2000 (County payments). The pledge of the State Payments and County Payments does not constitute a lien upon any property of the City. Furthermore, neither the City, Pine lias County, the State of Florida, nor any political subdivision thereof has pledged its faith or credit or taxing power to the payment of the bonds. The Water and Sewer Refunding Revenue Bonds, Series 1993 and Series 1998, and the Water and Sewer Revenue Bonds, Series 2002, are limited obligations of the City payable solely from and secured by a lien upon and pledge of the net revenues of the City's water and sewer system (System). The pledge of the System's net revenues does not constitute a lien upon any property of the City. The covenants of the ordinances authorizing the bonds include, among other things, an obligation of the City to fix and maintain such rates, and collect such fees, rentals and other charges for the services and facilities of the System and revise the same from time to time whenever necessary which will provide gross revenues in each fiscal year sufficient to pay the cost of operation and maintenance of the system; one hundred fifteen percent (115%) of the bond service requirement becoming due in such fiscal year on the outstanding bonds; plus one hundred percent (100%) of all reserve and other payments required to be made pursuant to the ordinances authorizing the bonds. The City further covenants that such rates, fees, rentals and other charges will not be reduced so as to render them insufficient to provide gross revenues for such purpose. 54 The Gas System Revenue Bonds, Series 1996A; Gas System Revenue Bonds Series 1997 A; Gas System Revenue Refunding Bonds, Series 1997B; and Gas System Revenue Refunding Bonds, Series 1998; are limited obligations of the City payable solely from and secured by a lien upon and pledge of the net revenues of the City's gas system (System). The pledge of the System's net revenues does not constitute a lien upon any property of the City. The covenants of the ordinances authorizing the bonds include, among other things, an obligation of the City to fix, establish, revise from time to time whenever necessary, maintain and collect always, such fees, rates, rentals and other charges for the use of the product, services and facilities of the System which will always provide revenues in each year sufficient to pay, and out of such funds pay, 100% of the cost of operations and maintenance of the system in such year and all reserve and other payments provided for in the ordinances authorizing the bonds, along with one hundred twenty five percent (125%) of the bond service requirement due in such year on all outstanding bonds. The Stormwater System Revenue Bonds, Series 1999; and the Stormwater Revenue Bonds, Series 2002; are limited obligations of the City payable solely from and secured by a lien upon and pledge of the net revenues of the City's stormwater management system (System). The pledge of the System's net revenues does not constitute a lien upon any property of the City. The covenants of the ordinances authorizing the bonds include, among other things, an obligation of the City to fix, revise from time to time whenever necessary, and maintain and collect always such fees, rates, rentals and other charges for use of the products, services, and facilities which will always provide net revenues in each year sufficient to pay one hundred fifteen percent (115%) of the bond service requirement becoming due in such fiscal year on the outstanding bonds. The City further covenants that such rates, fees, rentals and other charges will not be reduced so as to render them insufficient to provide revenues for such purpose. Annual debt service requirements to maturity for revenue bonds are as follows: Revenue Bonds Governmental Activities Business-type Activities Principal Interest Principal Interest $ 6,065,179 $ 2,796,166 $ 5,185,012 $ 8,798,192 6,273,477 2,534,986 5,400,129 8,546,648 6,491,170 2,235,993 5,661,286 8,242,209 6,685,000 1,945,793 5,908,385 8,019,911 6,935,000 1,674,198 6,064,869 7,787,207 17,575,000 5,231,712 34,892,056 34,709,873 5,590,000 3,694,071 44,038,018 25,508,757 5,925,000 2,173,099 29,010,190 16,200,679 4,030,000 845,203 26,735,000 9,724,785 1,345,000 110,859 24,525,000 3,080,978 $ 66,914,826 $ 23,242,080 $187,419,945 $130,619,239 Year Ending September 30 2004 2005 2006 2007 2008 2009-2013 2014-2018 2019-2023 2024-2028 2029-2033 Totals City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 3. Advance refunding of bonds In prior fiscal years, the City entered into various advance-refunding transactions related to certain of its bonded debt. A portion of the proceeds of the refunding bond issues was placed in trust and used to purchase securities of the United States Government and related agencies at various interest rates and maturities sufficient to meet all debt service requirements of the refunded debt, of which $17,130,000 was outstanding at September 30,2003. These assets are administered by trustees and are restricted to use for retirement of the refunded debt. The liability for the refunded bonds and the related securities and escrow accounts are not included in the accompanying financial statements as the City defeased its obligation for payment of the refunded bonded debt upon completion of the refunding transactions. 55 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 The following schedule reflects the outstanding principal on refunded bonds as of September 30: Governmental Activities: Utility Revenue Certificates, 1975 Utilities Tax and Bridge Revenue Bonds, Series 1977 Utilities Tax Bonds, Series 19n Special Obligation bonds, Series, 1978A Utility Revenue Bonds, 1978 Total Governmental Activities Business-type Activities: Total Business-type Activities Total $ 600,000 1 ,350,000 2,380,000 10,000 12,790,000 17,130,000 $ 17,130,000 56 City of Clearwater, Florida Notes to the Financial Statements September 30,2003 G. Segment information Generally accepted accounting principles require segment disclosure fornonmajor enterprise funds with revenue bonds outstanding. The following condensed statements are presented for the Parking System enterprise fund to satisfy this disclosure requirement. Condensed Statement of Net Assets Assets: Current assets $ Due from other funds Restricted assets Deferred charges Net pension asset Capital assets Total assets Liabilities: Current liabilities Current liabilities payable from restricted assets Noncurrent liabilities Compensated absences Revenue bonds payable Notes, loan pool agreement and acquisition contracts Advances from other funds Total noncurrent liabilities Total liabilities Net assets: Invested in capital assets (net of related debt) Restricted assets Unrestricted Total net assets $ Parking System 1,866,739 3,153,239 7,526,347 483 172,476 3,340,516 16,059,800 225,225 16,953 34,809 53,773 265,302 4,000,000 4,353,884 4,596,062 2,835,670 181,870 8,446,198 11 ,463,738 Condensed Statement of Revenues, Expenses, and Changes Parking Parking in Net Assets System Condensed Statement of Cash Flows System Operating revenues $ 3,975,121 Depreciation expense (226,443) Net cash provided (used) by; Other operating expenses (2,887,182) Operating activities $ 1,185,362 Operating income 861 ,496 Noncapital financing activities (1,659,000) Nonoperating revenues (expenses): Capital and related financing activities (330,741) Earnings on investments 306,918 Investing activities 306,918 Interest expense (155,831) Net increase (decrease) (497,461 ) Other 26,686 Beginning cash and cash equivalents 2,380,573 Transfers out to other funds (119,927) Ending cash and cash equivalents $ 1,883,112 Change in net assets 919,342 Beginning net assets 10,544,396 Ending net assets $ 11,463,738 57 Assets of the Water and Sewer Utility Fund restricted under the provisions of the ordinances authorizing the issuance of Water and Sewer Revenue Bonds consisted of the following at September 30, 2003: Water and Sewer Revenue Bonds Debt Service: Equity in Pooled Cash and Investments Water and Sewer Revenue Bonds Renewals and Replacements: Equity in Pooled Cash and Investments Due from Other Funds Water and Sewer Revenue Bonds Construction: Equity in Pooled Cash and Investments Assets of the Water and Sewer Utility Fund restricted by agreement with other govemmental entities for improvements to the water and reclaimed water systems and the Northeast Water Pollution Control facility at September 30, 2003: Due from Other Funds Due from Other Governmental Entities Assets of the Water and Sewer Utility Fund representing Customers' Deposits and therefore restricted, consisting entirely of Equity in Pooled Cash and Investments at September 30, 2003 Total restricted assets - Water and Sewer Utility Fund 2. Gas Utility Fund Assets in the Gas Utility Fund restricted under the provisions of the ordinance authorizing the issuance of revenue bonds consisted of the following at September 30, 2003: Gas Svstem Revenue Bonds Debt Service: Equity in Pooled Cash and Investments Renewals and Replacements: Equity in Pooled Cash and Investments Assets of the Gas Utility Fund representing Customers' Deposits at September 30, 2003: Equity in Pooled Cash and Investments Total restricted assets - Gas Utility Fund 3. Solid Waste Utility Fund Restricted assets in the Solid Waste Utility Fund designated for construction represent customer deposits in the amount of $797,013 at September 30. 2003, and consisted entirely of Equity in Pooled Cash and Investments. City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 H. Restricted assets 1. Water and Sewer Utility Fund Assets in the Water and Sewer Utility Fund restricted for construction include: Water Improvement charges, the use of which is restricted by the authorizing ordinance to the construction of additions and improvements to the water system; assets remaining at September 30, 2003, are: Equity in Pooled Cash and Investments $ Due from Other Funds Sewer Improvement charges, the use of which is restricted by the authorizing ordinance to the construction of additions and improvements to the sewer system; assets remaining at September 30, 2003, are: Equity in Pooled Cash and Investments Due from Other Funds 58 799,712 614,498 3,497,166 759,692 16,568,192 8,098.646 3,660,054 17,508,898 2,771 1,515,391 1.940.402 $54.965.422 $ 174,994 300,000 1.316.585 $ 1.791.579 City of Clearwater, Florida Notes to the Financial Statements September 30,2003 4. Stormwater Utility Fund Assets in the Stormwater Utility Fund restricted under the provisions of the ordinances for the issuance of revenue bonds consisted of the following at September 30, 2003: Stormwater System Revenue Bonds - Series 1999 Debt Service: Equity in Pooled Cash and Investments Construction: Equity in Pooled Cash and Investments Stormwater Revenue Bonds - Series 2002 Debt Service: Equity in Pooled Cash and Investments Construction: Equity in Pooled Cash and Investments Contributions from the Special Development Fund include proceeds restricted by City Commission policy for improvements to the stormwater drainage system within the City; assets remaining at September 30, 2003: Due From Other Funds Total restricted assets - Stormwater Utility Fund 5. Parking System Fund Assets in the Parking System restricted under the provisions of the ordinance authorizing the issuance of the Public Service Tax and Bridge Revenue Bonds as of September 30, 2003: Equity in Pooled Cash and Investments Investments Assets in the Parking System restricted under the provisions of a development agreement between Clearwater Seashell Resort LC and the City of Clearwater as of September 30, 2003: Due From Other Funds Contributions from the Special Development Fund include proceeds restricted by City Commission policy for improvements to the stormwater drainage system within the City; assets remaining at September 30, 2003: Due From Other Funds Total restricted assets - Parking System Fund Note IV - Other Information $ 280,627 1,721,433 849,565 11,123,297 1.020 $13.975.942 $ 16,817 9,530 6,000,000 1.500.000 $ 7.526.347 A. Risk management The City is self-insured within certain parameters for losses arising from claims for general liability, auto liability, police professional liability, public official's liability, property damage, and workers' compensation. Insurance coverage has been maintained by the City to pay for or indemnify the City for losses in excess of certain specific retentions and up to specified maximum limits in the case of claims for liability, property damage, and workers' compensation. The liability and workers compensation excess coverage is $7,000,000 per occurrence ($14,000,000 aggregate) with self-insured retention of $500,000. The property damage excess coverage is $287,000,000 with a $500,000 self-insured retention. Settled claims have not exceeded excess coverage in any of the past three years. The transactions relating to the self-insurance program are accounted for in the Central Insurance Fund, an Internal Service Fund. The billings by the Central Insurance Fund to the various operating funds (the interfund premiums) are based on actuarial estimates of the amounts needed to pay prior and current year claims. The claims liability reported at September 30, 2003, is based on the requirements of Governmental Accounting Standards Board Statement No.1 0, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. 59 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Changes in the claims liability amounts in fiscal years 2002 and 2003 were: Self Insurance $ 9,337,296 Balance at October 1, 2001 Current year claims and changes in estimates Claim payments Balance at September 30, 2002 Current year claims and changes in estimates Claim payments Balance at September 30, 2003 6,464,068 (4,361,086) 11 ,440,278 5,078,380 (3,562,176 12,956,482 B. Statements of cash flows For purposes of the statements of cash flows, investments with original maturities of three months or less are considered to meet the definition of cash equivalents. The majority of the investments in which the City's proprietary funds have equity are held by the City's consolidated pool of cash and investments. Since fund equities in this cash management pool have the general characteristics of demand deposits in that additional funds may be deposited at any time and also funds may be withdrawn at any time without prior notice or penalty, each fund's equity account is considered a cash equivalent regardless of the maturities of investments held by the pool. Funds with deficit (overdraft) positions within the consolidated pool report the deficits as interfund payables to the City's Capital Improvement Fund. C. Capitalization of interest Interest costs incurred in enterprise funds during construction are capitalized, net of interest income from the proceeds of related tax-exempt debt if applicable, as part of the cost of the related assets of the respective enterprise funds. Interest costs on long-term debt incurred and capitalized during the year ended September 30, were as follows: Total Interest Interest Costs Net Interest Business-type activities: Costs Incurred Capitalized Expense Water & Sewer Utility Fund $ 5,506,416 $ . (660,128) $ 6,166,544 Gas Utility Fund 1,500,423 87,065 1,413,358 Solid Waste Utility Fund 54,180 54,180 Stormwater Utility Fund 1,138,221 (89,306) 1,227,527 Non-major Enterprise Funds 162,176 162,176 Total business-type activities $ 8,361,416 $ (662,369) $ 9,023,785 D. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from the estimates. 60 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 E. Employee retirement systems and pension plans 1. Defined benefit pension plans The City contributes to two separate single-employer, self-administered defined benefit pension plans covering approximately three-fourths of all City employees. The Employees' Pension Plan covers all permanent, full-time City employees who successfully pass the required physical examination, except for firefighters employed prior to July 1, 1963, and certain nonclassified (primarily managerial) employees. The Firemen's Relief and Pension Plan covered eligible firefighters hired prior to July 1, 1963, and is closed to new entrants. Neither of these plans issues a stand-alone financial report. As indicated, both plans are self-administered, and the costs of administering the plans are paid from the respective plan assets. The Employees' Pension Plan is authorized by and operates under the provisions of Sections 2.391 through 2.411 of the Municipal Code. of the City of Clearwater. Plan provisions have been duly approved as required by the voters in referendums. There were no changes in plan provisions for the current year. The normal retirement benefit is a monthly benefit equal to 2-3/4% of average monthly compensation for the final 5 years of service multiplied by the number of years of service to date of retirement. The minimum benefit under the plan is $300 per month. Eligibility for normal retirement occurs upon completion of at least 10 years of service and the attainment of age 65, or completion of at least 20 years of service and the attainment of age 55, or completion of 30 years of service, for employees engaged in non-hazardous duty. For those engaged In hazardous duty, eligibility occurs upon completion of 20 years of service. The normal monthly benefits are payable for the life of the participant and continue, after the participanfs death, to be paid at the same amount for 5 years to eligible surviving beneficiaries; after 5 years, the survivor annuity is reduced to fifty percent (50%) of the original amount. The plan provides for an annual cost of living increase of up to one and one-half percent (1-1/2%). The plan also provides for disability and death benefits, vesting after completion of 10 years of service and the refund of employee contributions in case of a non-vested termination. There are seven other benefit payment options that are computed to be the actuarial equivalent of the normal benefit. Covered employees contribute 8% of their compensation. It is the city's obligation to provide a sufficient additional contribution to maintain the actuarial soundness of the fund but, in any event, not less than 7% of participating employee's compensation per the ordinance governing the plan. The Firemen's Relief and Pension Plan is authorized and operated under the provisions of Subpart B, Article I (Laws of Florida, Chapter 30658, 1955 and amendments), Sections 1 through 27 of the Municipal Charter and Related Law of the City of Clearwater and Chapter 26, Article III, Sections 26.50 through 26.52 of the Municipal Code of the City of Clearwater. The normal retirement benefit is a monthly benefit in the amount of 50% of the prevailing wage at the date of retirement of the lowest rank held by the participant during the three years immediately preceding retirement plus 2% of such prevailing wage for each year of service in excess of 20 years up to a maximum of 60%. Participants retiring at the age of 65 years are entitled to a benefit of 60% of the prevailing wage of the lowest rank held by the participant during the three years immediately preceding retirement. The ending rate of pay specified above may not exceed the highest rate of pay for the rank of Captain. Eligibility for normal retirement occurs upon completion of 20 years of service or attainment of age 65. The monthly benefits are payable for the life of the participant and continue, after the participant's death, to be paid to certain eligible surviving beneficiaries at an amount that is one-half of the amount received by the participant. Benefits are also provided for children of the deceased participant who are less than 18 years of age subject to certain limitations as to amount. The plan also provides for disability and death benefits and for vesting upon completion of at least 12 years of service. The plan provides for post retirement cost of living increases equal to the increase in the prevailing wage for the rank at which the participant retired with a limitation for those retiring on or after January 1, 1972, of 100% of the initial pension benefit for total cost of living increases. Participating employees are required to contribute 6% of their salaries up to the equivalent of the salary of a fireman holding the rank of Captain. The City is required to contribute a sufficient additional amount to maintain the actuarial soundness of the plan for a period of 35 years commencing January 1, 1972. This contribution is based upon, but not limited to, thecamount of property tax that a levy of 0.6 mills would produce. 61 City of Clearwater, Florida Notes to the Financial Statements September 30,2003 As of the January 1, 2002, actuary valuation date (upon which the current fiscal year funding is based), the membership of the plans: Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving them Active employees: Fully vested Nonvested Total number of participants Employees' Pension Plan 566 47 Firemen's Relief Pension Plan 48 793 799 2,205 48 For the fiscal year ended September 30,2003, the covered payroll for the Employees' Pension Fund is $66,478,229. The City's total payroll for the same period is $75,580,718. Annual pension cost and contributions information for the last three fiscal years follows: Emolovees' Pension Fund Year Annual (a) Ended Required Sept 30 Contribution 2001 $ 174,377 2002 $ 0 2003 $ 0 Employer Contributions $ 4,255,484 $ 4,439,829 $ 4,649,642 (b) Percent Contributed 2440% nla nla Net Pension Asset $ 15,845,929 $ 21,445,982 $ 25,832,535 (a) The actuarially determined contribution requirements for the City's fiscal year ended September 30, 2003, are based on actuarial valuations as of January 1, 2002. Since the City's contributions are made during its fiscal year (which commences nine months after the date of the actuarial valuation), the City, with approval of State regulatory authorities, is following the practice of adding interest to its required contributions at the assumed rate of return on investments for a period of one year. (b) Actual contributions for fiscal 2003 totaled $4,649,642, as required by the ordinance governing the pension plan. Firemen's Relief Pension Fund Year Ended Sept 30 2001 2002 2003 Annual (a) Required Contribution $ 1,098,990 $ 1,153,732 $ 1,211,210 Employer Contributions $ 1,098,990 $ 1,153,732 $ 1,211,210 Percent Contributed 100% 100% 100% a) The actuarially determined contribution requirements for the City's fiscal year ended September 30, 2003, are based on actuarial valuations as of January 1, 2002. Since the City's contributions are made during its fiscal year (which commences nine months after the date of the actuarial valuation), the City, with approval of State regulatory authorities, is following the practice of adding interest to its required contributions at the assumed rate of return on investments for a period of one year. 62 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 The Employees' Pension Fund net pension asset at September 30, 2003 totaled $25,832,535. It was comprised of the following components: Annual required cOntributions (ARC) Interest on the net pension asset Adjustment to annual contribution Annual pension cost Fiscal 2003 employer contributions Increase in net pension asset Net pension asset beginning of year Net pension asset end of year $ (514,517) (1,502,968) 2,280,574 263,089 4,649,642 4,386.553 21,445,982 $ 25,832,535 The net pension asset at transition (October 1, 1997) was determined in accordance with GASB Statement No. 27, "Accounting for Pensions by State and Local Governmental Employees". The amount of the pension asset at transition was $3,503,365. The net pension asset for the Employees' Pension Plan, representing excess contributions as calculated per GASB 27 requirements, is identical in amount to the plan "credit balance" as disclosed in prior years. A total of $17,731,175 of the current net pension asset balance is attributable to governmental funds and therefore is not reflected in the govemmental fund financial statements in accordance with the modified accrual basis of accounting. The remaining $8,1 01,360 attributable to proprietary funds is reflected in the proprietary fund financial statements on the accrual basis of accounting. Each pension fund is accounted for as a pension trust fund; therefore each is accounted for in substantially the same manner as proprietary funds with a "capital maintenance" measurement focus and the accrual basis of accounting. Fund assets, primarily investments, ate valued at fair value for balance sheet purposes, in accordance with GASB No. 25. Investment values are determined using the estimated fair value determined by averaging estimated fair values obtained from three or more nationally recognized brokers. As of September 30, 2003, neither the Employees' Pension Fund nor the Firemen's Relief and Pension fund held investments (other than U.S. Government or U.S. Government guaranteed obligations) in anyone organization comprising 5% or more of the net assets available for benefits. Significant actuarial assumptions utilized in the actuarial valuations as of January 1, 2002, are as follows: Employees' Pension Plan (1) Assumed rate of return on investments of 7.5% per annum. (2) Projected salary increase at a rate of 6% per year, including both cost-of-Iiving adjustments of 3% and merit or seniority increases at 3%. (3) Mortality based on the 1994 Group Annuity Reserving Table for males with female ages set back five years. (4) Pre-retirement withdrawals assumed to occur in accordance with a table of declining withdrawal rates for male, female, and hazardous duty categories. (5) Pre-retirement incidence of disability is assumed to occur in accordance with a standard scale of moderate disability rates (Class 1, 1952 Inter-Company); rates for females assumed to be twice that for males. Firemen's Relief and Pension Plan (1) Assumed rate of return on investments of 5.5% compounded annually. (2) Assumed benefits grow at an annually compounded rate of 2%. There are no longer any active members in this plan. (3) Mortality based on the 1983 Group Annuity Mortality Table for retired participants; assumed disabled participants will experience mortality according to PBGC Tables 3 and 4 for males and females, respectively. (4) Assumed no withdrawals will occur. (5) Assumed probability of an active participant becoming disabled is zero (no active participants). (6) Assumed value of one mill of ad valorem tax will increase at rate of 5% per year. 63 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 The actuarial valuation of the Employees' Pension Fund as of January 1, 2002 reflected several changes in actuarial assumptions, as follows: An investment yield of 7.5% assumed whereas the prior valuation assumed 7.0%. Salaries were projected to increase at 6% versus the prior valuation assumption of 5%. Employee turnover rates were revised for male and female employees and separate rates were adopted for hazardous duty employees. The mortality table was changed from the 1983 Group Annuity Mortality Table to the 1994 Group Annuity Reserving Table. And finally, the retirement age assumption was changed from 100% retirement at first eligibility for unreduced benefits to a table of decrements at different ages. The impact of these changes decreased the unfunded actuarial accrued liability from $72,178,974 to $41,332,472. It is the City's policy to fund pension costs accrued as determined on an actuarial basis. Annual required contributions (ARC) for the Employees' Pension Fund are calculated using the Entry Age Normal with Frozen Initial Liability method. The initial unfunded actuarial accrued liability determined at July 1, 1963, is being amortized over a 40-year period; changes made in 1979 and subsequent years which have had the effect of either increasing or decreasing the actuarial liability are being amortized over a 30-year period from their effective dates in accordance with State law. The amortization method is level dollar closed. Annual required contributions (ARC) for the Firemen's Relief and Pension Fund are based on a variation of the aggregate actuarial cost method, under which the unfunded portion of the present value of the projected benefits is allocated over the present value of a 6.0% per year increasing annuity for the remaining years in the 35-year funding period which began January 1, 1972, pursuant to an agreement between the City and the Plan participants. For this purpose, the unfunded actuarial liability is determined after consideration of the available assets at the valuation date. The increasing fixed schedule produced by this method was established in 1988 and will be modified in the future only to the extent that a current valuation indicates a higher required cost level, or if the resulting cost level exceeds 60% of a mill in a current year. Under the non-standard cost method used for this plan (due to the fact that there are no longer any active employees), all liabilities are unfunded actuarial liabilities and are being amortized according to the closed cost method. Governmental Accounting Standards Board Statement Nos. 25 and 27 require the presentation, as supplementary information, of certain 6-year historical trend information. The disclosures follow these Notes to the Financial Statements. 2. Police Supplemental Pension Fund A supplemental defined contribution pension plan exists for all eligible policemen which is funded by earmarked revenues received from the State and is administered by the City. The revenues received from the State are allocated among eligible police officers on the basis of days employed as Clearwater Police Officers. These revenues, which comprise the plan contributions, amount to $809,271 in the year ended September 30, 2003, and are obtained from an eighty-five one hundredths of one percent (.85)% excise tax on the gross receipts from premiums collected on casualty insurance policies covering property within the City's corporate limits. The current year contributions represent 5.2% of current year covered payroll. The fair value of investments at September 30, 2003, totaled $9,881,078. The Police Supplemental Pension Fund is authorized by and operates under the provisions of Sections 2.471 through 2.480 of the Municipal Code of the City of Clearwater and Chapter 185 of Florida Statutes. Under the plan provisions, the total monies received during each fiscal year, after payment or provision for all costs and expenses of management and operation of the plan, are allocated to participants on the basis of the total number of shares to which each participant is entitled. Each participant is entitled to one share in the fund for each day of service as a police officer of the City. All police officers, as defined in Section 26.70(g) of the Code of Ordinances of the City of Clearwater, who are elected, appointed, or employed full-time by the City are eligible to participate in the plan. There are no employee contributions to the supplemental plan. Benefits are fully vested for a lump sum distribution after twenty years from the date of hire, with provision for partial vesting after ten or more years under the plan. Accumulated benefits are payable in full in case of death while employed by the City or in case of total and permanent job-related disability. Non-vested participants' account values upon termination of employment during any fiscal year are added to the monies received during that fiscal year for allocation to the remaining participants in the plan on the basis of total days worked. 64 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 For the fiscal year ended September 30, 2003, the payroll of the covered officers' was $15,538,166; the City's total payroll for the same period was $75,580,718. Since the entitlement to benefits is based entirely upon the allocation of monies received by the plan to the participants' share accounts, there is no actuarial liability on the part of either the State or the City. 3. Firefighters Supplemental Pension Fund A supplemental defined contribution pension plan exists for all eligible firemen, which is funded by earmarked revenues received from the State and is administered by the City. The revenues received from the State are allocated among eligible firemen on the basis of days worked during the previous year. These revenues, which comprise the plan contributions, amounted to $654,462 in the year ended September 30, 2003, and are obtained from a one and eighty-five one hundredths percent (1.85%) excise tax on the gross receipts from premiums collected on property insurance policies covering property within the City's corporate limits. The contributions represent 6.86% of current year covered payroll. The fair value of investments at September 30,2003, totaled $8,257,623. As the plan is described as a money purchase pension plan, whereby contributions are allocated based on the number of days worked during the fiscal year ended September 30, and interest earnings allocated based on the beginning balances in each participant's account, there is no actuarial liability on the part of the State or City. The Firefighters Supplemental Pension Fund is authorized by and operates under the provisions of Sections 2.441 through 2.450 of the Municipal Code of the City of Clearwater and Chapter 175 of Florida Statutes. Eligibility requires two years of credited calendar year service as a firefighter with concurrent participation in the Employees' Pension Plan. There is no employee contribution to the supplemental plan, and benefits are vested for a lump sum distribution at ten years unless there is early retirement, disability or death. Non-vested participants' account values upon termination of employment are reallocated among the remaining participants on the basis of days worked during the previous year. For the fiscal year ended September 30, 2003, the covered payroll was $9,543,405 the City's total payroll for the same period was $75,580,718. 4. 401 (a) defined contribution plan For all management employees not covered under either of the defined benefit pension plans, the City provides pension benefits through a 401 (a) defined contribution plan. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. Employees are participants from the date of employment and are fully vested upon enrollment. The plan is totally contributory on the part of the City in an amount equal to 15% of compensation on behalf of the City Manager and the City Attorney; 14% of compensation on behalf of the Chief of Police; and 8% of compensation on behalf of all other management contract employees and assistant city attorneys. The City makes bi-weekly contributions to the Trust throughout the plan year to meet its funding obligations under the plan. The International City Management Association Retirement Corporation (ICMA-RC), the trustee for the defined annuity, offers participants a variety of investment options. The City's total payroll for the fiscal year ended September 30,2003, was $75,580,718. The Plan members' payroll for the same period totaled $4,370,690. The City's contribution, per the above contribution rates, totaled $370,480. The assets of the trust, at market value, totaled $1,562,848 at September 30, 2003. 5. Deferred compensation plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. Effective January 1, 1997, Federal legislation converted the Section 457 deferred compensation assets from City assets to employee assets. As a result of these changes, plan assets are no longer subject to the claims of the City's general creditors. 65 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 The City has previously reported the assets and associated liabilities of the deferred compensation plan in the City's financial statements as an agency fund. Effective with the change in legislation these assets are no longer City assets and the fiduciary responsibility has been transferred to the third party plan administrator. Consequently, effective with fiscal 1997, these assets are no longer reported in the accompanying financial statements, in compliance with Governmental Accounting Standards Board Statement No. 32. F. Securities lending transactions The City of Clearwater Employees' Pension Plan participates in securities lending transactions via a Securities Lending Authorization Agreement with Northern Trust Company, who is also the pension plan's custodian. Securities are loaned versus collateral that may include cash, U.S government securities, and irrevocable letters of credit. U.S. government securities are loaned versus collateral at 102% of the market value of the securities plus any accrued interest. Non-U.S. securities are loaned versus collateral at 105% fo the market value plus any accrued interest. Non-cash collateral cannot be pledged or sold unless the borrower defaults. All securities loans can be terminated on demand by either the lender or the borrower. The average term for the pension plans loans at September 30,2003 was 41 days. Cash "open" collateral is invested in a short term investment pool, the Core USA Collateral Section. which had an average weighted maturity of 30 days as of September 30, 2003. Cash collateral may also be invested separately in "term loans" in which investments match the loan term. These term loans may be terminated on demand by either the lender or the borrower. There were no significant violations of legal or contractual provisions, nor any borrower or lending agent defaults known to the securities lending agent. The City did not impose any restrictions on the amount of loans made by Northern Trust during fiscal year 2003. Northern Trust indemnified the City for losses attributable to violations by the entity of the Standard of Care set out in the Agreement. Northern Trust has also indemnified the City for all losses as a result of borrower default and for any losses resulting from insufficient collateral. There were no losses during fiscal year 2003. As of September 30, 2003, the City had no credit risk exposure to borrowers. The following is a summary of securities on loan and their collateral: 4.842,113 11.152,373 8,298,725 24,293,211 $ 4,928,302 11,441,217 8,427,302 24.796,821 Securities Collateralized by Non-Cash Market Value Non-Cash Collateral $ 2,050,950 $ 2,092,721 725,257 737,775 Security Type U.S. Agency U.S. Corporate Fixed U.S. Equity U.S. Government Fixed Total Securities Collateralized by Cash Market Value Cash Collateral $ $ $ $ 2,776,207 $ 2,830,496 G. Contingencies and commitments Loan Guarantee - PACT. Inc. PACT, Inc. is a nonprofit corporation formed in 1978, for the purpose of financing, constructing, and operating a performing arts center. Per a Guaranty Agreement dated May 18, 2001, the City guaranteed $1,000,0000 on a $5,000,000 mortgage note for PACT, Inc., used to refinance a previous mortgage with a similar City guarantee. City management does not consider it probable that this guarantee will be called, and, accordingly, no amounts have yet been accrued or otherwise recorded in the accompanying financial statements to reflect this possibility. 66 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Loan Guarantee - Chi Chi Rodriquez Youth Foundation. Inc. On March 30, 1992, the City Commission approved a contingent loan guarantee of $1,000,000 on a $2,500,000 note for the Chi Chi Rodriquez Youth Foundation, Inc. The proceeds of the note were used to refinance existing foundation debt incurred to construct a golf course on a parcel of City owned land. Subsequently, the note was refinanced with Variable Rate Demand Revenue Bonds (Chi Chi Rodriquez Youth Foundation Project), Series 1998, on August 1,1998. In the event of default, the City is obligated to contribute $1,000,000 out of legally available non-ad valorem revenues. In addition, the City has the option to retire the entire unpaid balance and assume ownership and operation of the golf course facility. At the present time, management expects the foundation to meet all debt service payments and does not consider it likely that the City's guarantee will be invoked. Soil and groundwater contamination site The City owns a property, currently used by the City Gas Division as its administrative offices and operating facility, that has been identified as having soil and groundwater impacts in a June 1990 report prepared by a United States Environmental Protection Agency contractor. The contamination allegedly resulted from the prior operation of a manufactured gas plant (MGP). Contamination assessment activities by the City were initiated during 1995 and a draft Contamination Assessment Report was submitted to the Florida Department of Environmental Protection (FDEP) on December 29,1999. On March 20, 2000, FDEP requested further assessment be undertaken. On July 25,2000, FDEP approved the City's proposed scope of work for additional on and off-site assessment activities. Additional field activities were initiated in December 2000. The supplemental contamination assessment results were submitted to FDEP as part of the May 2001 and July 2001 site status reports. The cost of this additional work, including preparation and submittal of the May and July 2001 site status reports, was approximately $39,462. On May 16, 2002, the City received a letter from FDEP requiring additional fieldwork to better define the soil and groundwater contamination on the site. In September 2002, Clearwater Gas met with FDEP to discuss their May 16th letter and the future ofthe gas plant site. In that meeting, it was agreed the City would install seven (7) new monitoring wells and drill twelve (12) soil samples around the perimeter of the MGP site. This additional work was performed in early 2003 and the results were submitted to FDEP in June 2003. FDEP has not made any comments on this June 2003 report. Since 1993, the City has spent $447,107 on the MGP assessment activities, which includes both environmental consultant and outside attorney fees. Approximately $487,500 has been recovered from City insurance policies to be applied to any required remediation. Letter of Credit Guarantee - soil contamination sites The City has provided a standby letter of credit in the amount of $463,040 to the Florida Department of Environmental Protection (FDEP). The Letter of Credit is required by FDEP for the City's approximate 41 ''10 share of the remediation costs for three City-owned petroleum contamination sites under FDEP's "Pre-approved Advance Cleanup" (PAC) program. The PAC program awards state funds to assist with remediation of petroleum contaminated sites. The City has available funds set aside to fully fund the City's commitment of $463,040 under the PAC agreements. Contractual Commitment - Water and Sewer Utility Under the terms of a 30-year contract between the City and Pinellas County, which is effective through September 30, 2005, the City is required to purchase a minimum of 4 million gallons of water per day on an annual average basis from the County within each calendar year, with a maximum amount of water available to the City of 10 million gallons per day on an annual average basis. Effective October 1, 1995, the rate, which is set by the Pinellas County Board of County Commissioners (BOCC), was $1.7902 per 1,000 gallons, including a $.60 per 1,000 gallon surcharge for funding capital projects. On November 19, 2002, the BOCC approved the following rate increases: $1.9334 effective January 1, 2003; $2.0881 effective October 1, 2003; $2.2969 effective October 1, 2004; $2.5266 effective October 1, 2005; and $2.7792 effective October 1, 2006. The cost of water purchased from the County during fiscal years 2002 and 2003 was $7,516,678 and $6,103,150, respectively. 67 City of Clearwater, Florida Notes to the Financial Statements September 30, 2003 Potential Claim - Gas System As a member of the Florida Gas Utility (FGU), Clearwater Gas System is a party to gas supply contracts that FGU enters into on behalf of the members. In November 2002, FGU received a verbal claim from representatives of Enron North America Corporation, or one of its affiliated companies (Enron), claiming that unspecified amounts were due and owing to FGU to Enron as a result of certain favorable pricing for gas received by FGU in the open market, but for which confirmations had been placed with Enron under an earlier contract. FGU has since received a letter dated December 12, 2003, from Enron asserting a claim, demanding payment, and threatening action in the Bankruptcy Court for the Southern District of New York or other forum. Enron failed to make deliveries of gas in December 2001 and FGU accordingly terminated all confirmations and any existing contract with Enron. FGU disclaims any obligation that may be claimed by Enron pursuant to any gas confirmation or any contract with Enron. FGU plans to vigorously contest the claim by Enron. Due to the early nature of these proceedings, FGU indicates that they are unable to make an informed judgment concerning FGU's ultimate liability, nor Clearwater Gas System's member share of any ultimate liability, and the extent of any unfavorable outcome cannot be ascertained at this time. With such uncertainties, the City is unable to determine the potential impact on the financial statements as of September 30, 2003. Contractual Commitment - Parking System Under the terms of a development agreement, the City has committed to repurchase a beach land parcel at the appraised amount not to exceed $6,000,000, if the developer is unable to proceed with the development project by March 2006. A contingency reserve was established in the Parking System fund in the amount of $6,000,000 during fiscal year 2002. Grant Revenues During fiscal year 2003 and prior fiscal years, the City received revenues and contributions related to grants from the Southwest Water Management District, the State of Florida, the federal government, and other grantors. These grants are for specific purposes and are subject to review and audit by the grantor agencies. Such audits could result in requests for reimbursement for expenditures disallowed under the terms of the grants. Based upon prior experience, City management believes such disallowances, if any, will not be significant. H. Pending litigation In the normal course of operations the City is a defendant in various legal actions, the ultimate resolution of which is not expected to have a material effect on the financial statements, other than for amounts that have been reserved and recorded as liabilities in the Central Insurance Fund. I. Conduit debt The City has one issue of conduit debt outstanding as follows: Original Issue Description / Purpose Amount Amount Outstanding at 9/30/02 Amount Outstanding at 9/30/03 Drew Gardens Refunding Bonds / residential rental facility $ 3,425,000 $ 3,040,000 $ 2,985,000 The bonds do not constitute a debt, liability, or obligation of the City of Clearwater, the State of Florida, or any political subdivision thereof and accordingly have not been reported in the accompanying financial statements. 68 City of Clearwater, Florida Notes to the Financial Statements September 30,2003 J. Subsequent events Water and Sewer Revenue Refunding Bonds. Series 2003 On October 1, 2003, the City issued Water and Sewer Revenue Refunding Bonds, Series 2003, in the amount of $8.41 million, with an average interest rate of 3.14%, to advance refund $8.29 million of outstanding Water and Sewer Refunding Revenue Bonds, Series 1993, with an average interest rate of 5.49%. The net proceeds of $8.58 million (after payment of $111,000 in underwriting fees, insurance, and other issuance costs and $7,800 deposited to the Debt Service Fund), including $182,000 of transfers from the refunded issue debt service fund and $44,000 released debt service reserve escrow, were deposited into an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded bonds. The City completed the advance refunding to reduce its total debt service payments over the next 15 years by $874,000 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $528,000. Gas System Revenue Refundina Bonds. Series 2004 On January 15, 2004, the City issued Gas System Revenue Refunding Bonds, Series 2004, in the amount of $8.89 million, with an average interest rate of 4.07%, to advance refund $8.18 million of outstanding Gas System Revenue Bonds, Series 1996A, with an average interest rate of 5.77%. The net proceeds of $8.76 million (after payment of $191,000 in underwriting fees, insurance, and other issuance costs and $24,000 deposited to the Debt Service Fund), including $195,000 of transfers from the refunded issue debt service fund, were deposited into an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded bonds. The City completed the advance refunding to reduce its total debt service payments over the next 23 years by $1.67 million and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $970,000. 69 Page 2 of 3 City of Clearwater, Florida Defined Benefit Pension Plans Required Supplementary Information - Unaudited Schedules of Employer Contributions: Year Ended Sept. 30, 1998 1999 2000 2001 2002 2003 Employees' Pension Fund $ $ $ $ $ $ Annual (a) Required Contribution 3,080,802 840,558 Percent Contributed 119% 464% N/A 2440% n/a n/a (b) 174,377 (a) The actuarially determined contribution requirements for the City's fiscal year ended September 30, 2003 are based on actuarial valuations as of January 1, 2002. Since the City's contributibnS are made during its fiscal year, which commences nine months after the date of the actuarial valuations, the City, with approval of State regulatory authorities, is following the practice of adding interest to its required contributions at the assumed rate of return on investments for a period of one year. (b) Actual contribution for fiscal 2003 was $4,649,642, as required by City pension ordinance. Year Ended Sept. 30, 1998 1999 2000 2001 2002 2003 Firemen's Relief Pension Fund $ $ $ $ $ $ Annual (a) Required Contribution 955,920 1,003,758 1,046,856 1,098,990 1,153,732 1,211,210 Percent Contributed 100% 100% 100% 100% 100% 100% (a) The actuarially determined contribution requirements for the City's fiscal year ended September 30, 2003 are based on actuarial valuations as of January 1, 2002. Since the City's contributions are made during its fiscal year, which commences nine months after the date of the actuarial valuations, the City, with approval of State regulatory authorities, is following the practice of adding interest to its required contributions at the assumed rate of return on investments for a period of nine months. 71 Page 1 of 3 '" City of Clearwater, Florida Defined Benefit Pension Plans Required Supplementary Information - Unaudited Schedules of Funding Progress: Employees Pension Fund Actuarial Actuarial Actuarial Unfunded AAL Valuation Value of Accrued Liability Unfunded Funded Covered as a Percentage Date Assets (AAL) - Entry Age AAL Ratio Payroll * of Covered Payroll (a) (b) (b-a) (a/b) (c) ((b-a) Ie) 1/1/1998 $ 308,596,133 $ 333,250,492 $24,654,359 93% $47,281,198 52% 1/1/1999 $ 354,088,751 $ 377,788,731 $23,699,980 94% $49,666,523 48% 1/1/2000 $ 414,826,422 $ 490,426,940 $75,600,518 85% $50,937,403 148% 1/1/2001 $ 461 ,724,610 $ 535,672,208 $73,947,598 86% $54,864,584 135% 1/1/2002 $ 491 ,859,015 $ 533,191,487 $41,332,472 92% $58,929,582 70% 1/1/2003 $477,541,459 $ 517,933,495 $40,392,036 92% $65,150,820 62% Firefighters Relief and Pension Fund Actuarial Actuarial Actuarial Unfunded AAL Valuation Value of Accrued Liability Unfunded Funded Covered as a Percentage Date Assets (AAL) - Entry Age AAL Ratio Payroll * of Covered Payroll (a) (b) (b-a) (a/b) (c) ((b-a) Ie) 1/1/1998 $ 3,626,850 $ 10,565,127 $ 6,938,277 34% $ 50,573 13719% 1/1/1999 $ 3,963,395 $ 10,473,888 $ 6,510,493 38% $ 15,605 41721% 1/1/2000 $ 4,092,298 $ 9,746,671 $ 5,654,373 42% $ nla 1/1/2001 $ 4,668,572 $ 9,527,303 $ 4,858,731 49% $ nla 1/1/2002 $ 5,213,993 $ 8,907,427 $ 3,693,434 59% $ nla 1/1/2003 $ 5,741,450 $ 10,483,967 $ 4,742,517 55% $ nla * Covered payroll is for the calendar year period used for the actuarial valuation. 70 Page 3 of 3 City of Clearwater, Florida Defined Benefit Pension Plans Required Supplementary Information - Unaudited Notes To Schedules Of Required Pension Supplementary Information Annual required contributions for the Employees' Pension Fund are calculated using the Entry Age Normal with Frozen Initial Liability method. The initial unfunded actuarial accrued liability determined at July 1, 1963 is being amortized over a 40-year period; changes made in 1979 and subsequent years which have had the effect of either increasing or decreasing the actuarial liability are being amortized over a 3D-year period from their effective dates in accordance with State law. The amortization method is level dollar closed. Annual required contributions for the Firemen's Relief and Pension Fund are based on the aggregate actuarial cost method, under which the unfunded portion of the present value of the projected benefits is allocated over the present value of a 6.0% per year increasing annuity for the remaining years in the 35-year funding period which begin January 1, 1972, pursuant to an agreement between the City and the Plan participants. For this purpose, the unfunded actuarial liability is determined after consideration of the available assets at the valuation date. The increasing fixed schedule produced by this method was established in 1988 and will be modified in the future only to the extent that a current valuation indicates a higher required cost level, or if the resulting cost level exceeds 60% of a mill in a current year. The amortization method for the Firemen's Relief and Pension Fund is a non-standard (no active employees) closed cost method. The actuarially determined contribution requirements for the City's fiscal year ended September 30, 2003, are based on actuarial valuations as of January 1, 2002. Since the City's contributions are made during its fiscal year, which commences nine months after the date of the actuarial valuations, the City, with approval of State regulatory authorities, is following the practice of adding interest to its required contributions at the assumed rate of return on investments for a period of one year in the case of the Employees' Pension Fund and for nine months in the case of the Firemen's Relief and Pension Fund. Significant actuarial assumptions utilized in the actuarial valuations as of January 1, 2002, in the determination of the annual required contribution are as follows: Employees' Pension Fund (1) Assumed rate of retum on investments of 7.5% per annum. (2) Projected salary increase at a rate of 6% per year, including cost-of-living adjustments of 3% and merit or seniority increases at 3%. (3) Mortality based on the 1994 Group Annuity Reserving Table for Males with female ages set back five years. (4) Pre-retirement withdrawals assumed to occur in accordance with a table of declining withdrawal rates for male, female, and hazardous duty categories. (5) Pre-retirement incidence of disability assumed to occur in accordance with a standard scale of moderate disability rates (Class 1, 1952 Inter-Company); rates for females assumed to be twice that for males. (6) Assumed inflation rate of 3% Firemen's Relief and Pension Fund (1) Assumed rate of return on investments of 5.5% compounded annually. (2) Assumed benefits grow at annually compounded rate of 2% related to cost of living adjustments only. (3) Mortality based on the 1983 Group Annuity Mortality Table (no active); assumed disabled participants will experience mortality according to PBGC Tables 3 & 4 for males and females, respectively. (4) Assumed no withdrawals will occur. (5) Assumed probability of an active participant becoming disabled is zero (no active participants). (6) Assumed value of one mill of ad valorem tax will increase at rate of 5% per year. (7) Assumed inflation rate of 3% Significant changes affecting the presented 6-year trend information include: The actuarial valuation of the Employees' Pension Fund as of January 1, 2002 reflected several changes in actuarial assumptions, as follows: An investment yield of 7.5% assumed whereas the prior valuation assumed 7.0%. Salaries were projected to increase at 6% versus the prior valuation assumption of 5%. Employee turnover rates were revised for male and female employees and separate rates were adopted for hazardous duty employees. The mortality table was changed from the 1983 Group Annuity Mortality Table to the 1994 Group Annuity Reserving Table. And finally, the retirement age assumption was changed from 100% retirement at first eligibility for unreduced benefits to a table of decrements at different ages. The impact of these changes decreased the unfunded actuarial accrued liability from $72,178,974 to $41,332,472. 72 Nonmajor Governmental Funds Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes. Special Programs Fund - to account for grants and contributions, the use of which is restricted for certain programs. Community Redevelopment Agency Fund - to account for receipt, custody, and expenditure of property tax increment funds associated with related redevelopment projects. Local Housing Assistance Trust Fund - to account for monies allocated to the City under the Local Housing Assistance grant program. 73 Debt Service Funds Debt service funds provide separate accounting records for all debt interest, principal, and reserve requirements for general government long-term. Debt of proprietary funds is serviced through restricted accounts maintained within the individual enterprise or internal service fund associated with the debt. Improvement Revenue Refunding Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of public service tax and communications services tax revenues from the General Fund and the payment of currently maturing installments of principal and interest during each fiscal year. Infrastructure Sales Tax Revenue Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of sales tax revenues from the Special Development Special Revenue Fund and the payment of currently maturing installments of principal and interest during each fiscal year. . Notes and Mortgages Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of General Revenues from the General and Special Revenue Funds and the payment of currently maturing installments of principal and interest on the various note and mortgage obligations of the governmental funds during each fiscal year. Spring Training Facility Revenue Bonds Debt Service Fund - to account for the advance monthly accumulation of resources by transfer of sales tax revenues from the Special Development Special Revenue Fund and the payment of currently maturing installments of principal and interest during each fiscal year. 74 Capital Projects Funds Capital projects funds are used to account for resources to be used for the acquisition or construction of major capital improvement projects, other than those financed by proprietary funds. A major capital improvement project is a property acquisition, a major construction undertaking, or a major improvement to an existing facility or property, with a cost greater than $25,000 and a minimum useful life of at least five years. Sales Tax Revenue Construction Fund - to provide separate accounting records for the financing and construction of the entryway and roundabout at Clearwater Beach, a new Main Library, and a new Memorial Causeway Bridge. Community Sports Complex Construction Fund - to provide separate accounting records for the financing and construction of a new community sports complex including a new spring training facility to be used by the Philadelphia PhiIJies major league baseball organization. 75 City of Clearwater, Florida Combining Balance Sheet Nonmajor Governmental Funds September 30, 2003 Special Revenue Funds Community Local Housing Special Redevelopment Assistance Programs Agency Trust Total ASSETS Cash on hand and in banks $ $ 100 $ $ 100 Equity in pooled cash and investments 7,021,580 502,375 7,523,955 Receivables: Mortgage notes 4,434,843 5,261,311 9,696,154 Rehab advances 38,767 30,247 69,014 Other 14,961 86,459 101,420 Investments Due from other govemments - grants 258,071 161,141 419,212 Land held for resale 84,701 913,641 998,342 Total assets $ 11,852,923 $ 1,000,200 $ 5,955,074 $ 18.808,197 LIABILITIES Accounts and contracts payable $ $ $ $ Accrued payroll 15,421 15,421 Due to other governmental entities 215 215 Construction escrows 205,875 304,497 510,372 Due to other funds 120,402 120,402 Due to other funds (deficit in pooled cash) 419,695 419,695 Advances from other funds 361,204 361,204 Deferred revenue 958 86,331 87,289 Total liabilities 222,469 987,632 304,497 1,514,598 FUND BALANCES Reserved for: Encumbrances 12,568 12,568 Advances and notes 4,244,946 5,261,311 9,506,257 Grant programs 3,030,431 3,030,431 Debt service: Current requirements - principal Current requirements - interest Future requirements Unreserved, reported in: Special revenue funds 4,355,077 389,266 4,744,343 Debt service funds Capital projects funds Total fund balances 11,630,454 12,568 5,650,577 17.293,599 Total liabilities and fund balances $ 11.852,923 $ 1,000,200 $ 5,955,074 $ 18.808,197 The notes to the financial statements are an integral part of this statement. 76 Debt Service Funds Capital Project Funds Spring Improvement Infrastructure Training Total Revenue Sales Tax Facility Community NonmaJor Refunding Revenue Revenue Sales Tax Sports Governmental Bonds Bonds Bonds Total Revenue Complex Total Funds $ $ $ $ $ $ $ $ 100 297,296 4,984,896 5,282,192 4,152,454 2,178,751 6,331,205 19,137,352 9,696,154 69,014 158,308 158,308 259,728 865,185 610,450 1,475,635 1,475,635 419,212 998,342 $ 1,162,481 $ 4,984,896 $ 610,450 $ 6,757,827 $ 4,310,762 $ 2,178,751 $ 6,489,513 $ 32,055,537 $ $ $ $ $ 1,922,173 $ 308,723 $ 2,230,896 $ 2,230,896 15,421 215 510,372 120,402 259,397 259,397 679,092 361,204 87,289 259,397 25~,397 1,922,173 308,723 2,230,896 4,004,891 611,245 1,397,779 2,009,024 2,021,592 9,506,257 3,030,431 223,452 4,391,667 268,333 4,883,452 4,883,452 83,113 593,229 52,286 728,628 728,628 855,916 855,916 855,916 4,744,343 30,434 30,434 30,434 1,777,344 472,249 2,249,593 2,249,593 1,162,481 4,984,896 351,053 6,498,430 2,388,589 1,870,028 4,258,617 28,050,646 $ 1,162,481 $ 4,984,896 $ 610,450 $ 6,757,827 $ 4,310,762 $ 2,178,751 $ 6,489,513 $ 32,055,537 77 City of Clearwater, Florida Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2003 Special Revenue Funds Improvement Community Local Housing Revenue Special Redevelopment Assistance Refunding Programs Agency Trust Total Bonds REVENUES Intergovernmental $ 3,662,056 $ 465,516 $ 921,989 $ 5,049,561 $ Charges for services 471,755 471,755 Fines and forfeitures 584,405 584,405 Interest Income 112,916 23,520 41,069 177,505 56,067 Miscellaneous 1 ,971 ,609 73,035 2,044,644 Total revenues: 6,802,741 562,071 963,058 8,327,870 56,067 EXPENDITURES Current: General government 45,833 45,833 Public safety 1,988,784 1,988,784 Physical environment 143,317 143,317 Economic environment 1,830,983 223,015 439,396 2,493,394 Human services 127,128 127,128 Culture and recreation 1,771,484 1,771,484 Debt service: Principal 331,132 Interest & fiscal charges 503,644 Bond Issuance costs Capital outlay 715,080 715,080 Total expenditures 6,622,609 223,015 439,396 7,285,020 834,776 Excess (deficiency) of revenues over / (under) expenditures 180,132 339,056 523,662 1,042,850 (778,709) OTHER FINANCING SOURCES (USES) Transfers in 1,190,462 375,033 1,565,495 778,315 Transfers out (356,073) (723,258) (143,727) (1,223,058) Sale of capital assets 925,000 925,000 Total other financing sources (uses) 1,759,389 (348,225) (143,727) 1,267,437 778,315 Net change In fund balances 1,939,521 (9,169) 379,935 2,310,287 (394) Fund balances - beginning 9,690,933 21,737 5,270,642 14,983,312 1,162,875 Fund balances - ending $ 11,630,454 $ 12,568 $ 5,650,577 $ 17,293,599 $ 1,162,481 The notes to the financial statements are an integral part of this statement. 78 Debt Service Funds Capital Project Funds Infrastructure Spring Total Sales Tax Notes Training Community Nonmajor Revenue and Facility Sales Tax Sports Governmental Bonds Mortgages Revenue Bonds Total Revenue Complex Total Funds $ 3,000,000 $ $ 1,087,654 $ 4,087,654 $ $ $ $ 9,137,215 471,755 584,405 138,989 27,027 222,083 250,421 303,548 553,969 953,557 2,044,644 3,138,989 1,114,681 4,309,737 250,421 303,548 553,969 13,191,576 45,833 1,988,784 143,317 2,493,394 127,128 1,771,484 5,100,000 1,325,173 165,000 6,921,305 6,921,305 1,881,688 155,804 601 ,048 3,142,184 3,142,184 6,755 (2,420) 4,335 4,335 9,697,170 9,428,254 19,125,424 19,840,504 6,988,443 1,480,977 763,628 10,067,824 9,697,170 9,428,254 19,125,424 36,478,268 (3,849,454) (1,480,977) 351,053 (5,758,087) (9,446,749) (9,124,706) (18,571,455) (23,286,692) 3,923,121 1,480,977 6,182,413 6,692 6,692 7,754,600 (1,802,529) (1,802,529) (3,025,587) 925,000 3,923.121 1,480,977 (1,802,529) 4,379,884 6,692 6,692 5,654,013 73,667 (1,451,476) (1,378,203) (9,446,749) (9,118,014) (18,564,763) (17,632,679) 4,911,229 1 ,802,529 7,876,633 11,835,338 10,988,042 22,823,380 45,683,325 $ 4,984,896 $ $ 351,053 $ 6,498,430 $ 2,388,589 $ 1,870,028 $ 4,258,617 $ 28,050,646 79 City of Clearwater, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual (GAAP Basis) Community Redevelopment Agency For the Year Ended September 30, 2003 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) REVENUES Intergovernmental $ 459,562 $ 465,516 $ 465,516 $ Interest income 15,000 15,000 23,520 8,520 Miscellaneous 63,275 63,275 73,035 9,760 Total revenues 537,837 543,791 562,071 18,280 EXPENDITURES Current - Economic environment 413,755 405,655 223,015 182,640 Total expenditures 413,755 405,655 223,015 182,640 Excess of revenues over expenditures 124,082 138,136 339,056 200,920 OTHER FINANCING SOURCES (USES) Transfers in 354,160 375,033 375,033 Transfers out (478,242) (513,169) (723,258) (210,089) Total other financing sources (uses) (124,082) (138,136) (348,225) (210,089) Excess of revenues and other sources over expenditures and other uses (9,169) (9,169) Fund balances - beginning 21,737 21,737 21,737 Fund balances - ending $ 21,737 $ 21,737 $ 12,568 $ (9,169) The notes to the financial statements are an integral part of this statement. 81 Nonmajor Enterprise Funds Enterprise funds are used to account for the financing, acquisition, operation, and maintenance of governmental facilities that are supported primarily by user charges. Recycling Utility Fund - to account for the financing, processing, operation and maintenance of the City's recycling service from charges made to users of the services and funds received from the sale of recyclable commodities processed to meet market requirements. The service area extends beyond the City limits Marine & Aviation Fund - to account for the financing, operation and maintenance of the City marina and associated real property on Clearwater Beach from rents collected from users; and to account for the City's airpark operations. Parking System Fund - to account for the financing, construction, operation and maintenance of the City's parking system, including on- and off-street parking on Clearwater Beach and Downtown Clearwater, from parking charges. Harborview Center Fund - to account for the operation of the City's convention center and related facilities. 83 City of Clearwater, Florida Combining Statement of Net Assets Nonmajor Enterprise Funds September 30, 2003 Recycling Marine & Parking Harborvlew Utility Aviation System Center Total ASSETS Current assets: Cash on hand and in banks $ $ 817 $ 22,050 $ 200 $ 23,067 Equity in pooled cash and investments 1,585,485 253,342 1,844,689 3,683,516 Accounts and contracts receivable: Billed 72,864 26,750 247,006 346,620 Unbilled charges estimated 119,823 119,823 192,687 26,750 247,006 466,443 Less: Allowance for uncollectable accounts (2,863) (2,863) Total receivables, net 189,824 26,750 247,006 463,580 Due from other funds 1,087,539 1,143,773 3,153,239 25,409 5,409,960 Inventories, at cost 19,018 19,018 Total current assets - unrestricted 2,862,848 1,443,700 5,019,978 272,615 9,599,141 Current assets - restricted: Restricted equity in pooled cash 16,817 16,817 Investments 136 136 Total current assets - restricted 16,953 16,953 Total current assets 2,862,848 1,443,700 5,036,931 272,615 9,616,094 Noncurrent assets: Restricted: Investments 9,394 9,394 Due from other funds 7,500,000 7,500,000 Deferred charges 483 483 Net pension asset 266,097 178,997 172,476 617,570 Capital assets: Land and other nondepreciable assets 1,120,656 926,000 2,046,656 Capital assets, net of accumulated depreciation 1,503,733 2,239,619 2,219,860 9,303,148 15,266,360 Total noncurrent assets 1,769,830 2,418,616 11,022,869 10,229,148 25,440,463 Total assets 4,632,678 3,862,316 16,059,800 10,501,763 35,056,557 LIABILITIES Current liabilities: Accounts and contracts payable 16,606 32,063 18,846 197,995 265,510 Accrued payroll 20,054 21,859 26,690 68,603 Due to other funds 59,602 59,602 Due to other funds - deficit in pooled cash 71,583 71 ,583 Deposits 20,583 1,963 111 ,986 134,532 Deferred revenue and liens 4,194 4,194 Current portion of long-term liabilities: Compensated absences 3,574 5,677 3,825 13,076 Revenue bonds 8,274 8,274 Notes, loan pool agreement and acquisition contracts 50,910 161,433 212,343 Total current liabilities (payable from current assets) 91,144 139,784 225,225 381,564 837,717 Current liabilities (payable from restricted assets): Accrued interest payable 406 406 Current portion of long-term liabilities, revenue bonds 16,547 16,547 Total current liabilities payable from restricted assets 16,953 16,953 Total current liabilities 91,144 139,784 242,178 381,564 854,670 Noncurrent liabilities: Compensated absences 32,523 51,663 34,809 118,995 Revenue bonds (net of unamortized discounts and deferred amount on refunding) 53,773 53,773 Notes, loan pool agreement and acquisition contracts 292,351 265,302 557,653 Advances from other funds 59,602 4,000,000 4,059,602 Total non-current liabilities 324,874 111,265 4,353,884 4,790,023 Total liabilities 416,018 251,049 4,596,062 381 ,564 5,644,693 Net assets: Invested in capital assets, net of related debt 1,160,472 2,120,415 2,835,670 10,229,148 16,345,705 Restricted for: Revenue bond debt service and sinking fund requirements 9,394 9,394 Employees' pension benefits 266,097 178,997 172,476 617,570 Unrestricted 2,790,091 1,311,855 8,446,198 (108,949) 12,439,195 Total net assets $ 4,216,660 $ 3,611,267 $ 11,463,738 $ 10,120,199 $ 29,411,864 The notes to the financial statements are an integral part of this statement. 84 City of Clearwater, Florida Combining Statement of Revenues, Expenses, and Changes In Fund Net Assets Nonmajor Enterprise Funds For the Year Ended September 30, 2003 Recycling Marine & Parking Harborvlew Utility Aviation System Center Totals Operating revenues: Sales to customers $ 940,935 $ 1,676,543 $ $ $ 2,617,478 Service charges to customers 8,862 182,300 191,162 User charges to customers 1,477,390 79,937 3,788,296 5,345,623 Rentals 1 ,236,541 4,525 1,602,708 2,843,774 Total operating revenues 2,427,187 2,993,021 3,975,121 1,602,708 10,998,037 Operating expenses: Personal services 831,665 892,777 910,174 2,634,616 Purchases for resale 259,908 1,321,020 842,896 2,423,824 Operating materials and supplies 72,554 118,449 103,427 18,744 313,174 Transportation 252,158 6,222 50,373 5,607 314,360 Utility service 6,622 141,682 38,283 148,224 334,811 Depreciation 186,000 278,872 226,443 553,930 1,245,245 Interfund administrative charges 441,900 217,660 616,590 8,760 1,284,910 Other current charges: Professional fees 3,750 45,288 897,285 742,704 1,689,027 Advertising 8,484 9,926 1,082 8,297 27,789 Communications 5,698 24,112 12,406 22,780 64,996 Printing and binding 2,251 4,717 2,073 9,041 Insurance 41,380 58,000 32,040 23,555 154,975 Repairs and maintenance 16,873 52,480 20,367 64,798 154,518 Rentals 852 2,665 170,075 4,180 177,772 Miscellaneous 13,783 47,229 403 16,315 77,730 Data processing charges 29,500 30,540 29,960 23,750 113,750 Taxes 125 15,813 15,938 Provision for estimated uncollectable accounts 2,314 . 15,000 17,314 Total other current charges 122,634 272,616 1,168,335 939,265 2,502,850 Total operating expenses 2,173,441 3,249,298 3,113,625 2,517,426 11,053,790 Operating income (loss) 253,746 (256,277) 861,496 (914,718) (55,753) Nonoperating revenues (expenses): Earnings on investments 56,354 25,555 306,918 1,674 390,501 Interest expense (523) (5,822) (155,831 ) (162,176) Amortization of bond discount and issue costs (991 ) (991) Gain (loss) on exchange of assets (9,708) (9,708) Other 131,523 27,677 57,918 217,118 Total nonoperating revenue (expenses) 55,831 151,256 177,773 49,884 434,744 Income (loss) before transfers 309,577 (105,021) 1 ,039,269 (864,834) 378,991 Capital grants and contributions 568,196 568,196 Transfers in 625,050 625,050 Transfers out (99,830) (176,590) (119,927) (396,347) Changes in net assets 209,747 286,585 919,342 (239,784) 1,175,890 Total net assets - beginning 4,006,913 3,324,682 10,544,396 10,359,983 28,235,974 Total net assets - ending $ 4,216,660 $ 3,611,267 $ 11,463,738 $ 10,120,199 $ 29,411,864 The notes to the financial statements are an integral part of this statement. 85 City of Clearwater, Florida Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended September 30, 2003 Recycling Marine & Parking Harborvlew Utility Aviation System Center Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 2,434,247 $ 2,994,792 $ 3,976,323 $ 1 ,546,282 $ 10,951,644 Cash payments to suppliers (414,555) (1,986,089) (1,165,993) (2,307,682) (5,874,319) Cash payments to employees (890,933) (907,437) (927,264) (2,725,634) Cash payments to other funds (741,136) (121,125) (725,381) (77,380) (1,665,022) Other revenues 131,523 27,677 57,918 217,118 Net cash provided (used) by operating activities 387,623 111,664 1,185,362 (780,862) 903,787 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in from other funds 625,050 625,050 Transfers out to other funds (99,830) (176,590) (119,927) (396,347) Receipt of cash on loans to/from other funds 71 ,583 71,583 Payment of cash on loans to/from other funds (19,867) (214,301 ) (1,539,073) (25,409) (1,798,650) Net cash provided (used) by noncapital financing activities (119,697) (390,891) (1,659,000) 671,224 (1,498,364) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on debt (3,637) (160,618) (164,255) Interest paid (523) (5,822) (155,950) (162,295) Acquisition of fixed assets (507,702) (521,447) (14,173) (1,043,322) Proceeds from issuance of debt 333,456 333,456 Capital contributed by other governmental entities 562,796 562,796 Net cash provided (used) by capital and related financing activities (178,406) 35,527 (330,741) (473,620) CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 56,354 25,555 306,918 1,674 390,501 Net cash provided by investing activities 56,354 25,555 306,918 1,674 390,501 Net increase (decrease) in cash and cash equivalents 145,874 (218,145) (497,461) (107,964) (677,696) Cash and cash equivalents at beginning of year 1,439,611 472,304 2,380,573 108,164 4,400,652 Cash and cash equivalents at end of year $ 1 ,585,485 $ 254,159 $ 1,883,112 $ 200 $ 3,722,956 Cash and cash equivalents classified as: Cash on hand and in banks $ $ 817 $ 22,050 $ 200 $ 23,067 Equity in pooled cash and Investments 1 ,585,485 253,342 1,844,689 3,683,516 Restricted equity in pooled cash and investments 16,373 16,373 Total cash and cash equivalents $ 1,585,485 $ 254,159 $ 1,883,112 $ 200 $ 3,722,956 The notes to the financial statements are an integral part of this statement. 86 City of Clearwater, Florida Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended September 30, 2003 Recycling Utility Marine & Aviation Parking System Harborview Center Totals Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ 253,746 $ (256,277) $ 861 ,496 $ (914,718) $ (55,753) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Other revenue from nonoperating section of income statement 131,523 27,677 57,918 217,118 Depreciation 186,000 278,872 226,443 553,930 1,245,245 Non-cash land rental expense 103,498 103,498 Provision for uncollectible accounts (917) (917) Change in assets and liabilities: Decrease (Increase) in accounts receivable 10,291 (50,749) (40,458) Decrease in inventory 7,390 7,390 (Decrease) in accounts and contracts payable (2,229) (36,954) (17,864) (421,566) (478,613) Increase (decrease) in deposits 1,770 (100) 6,823 8,493 Increase (decrease) in deferred revenue 1,302 (12,500) (11,198) (Increase) in net pension asset (44,743) (32,022) (29,390) (106,155) Increase (decrease) in accrued payroll (14,525) 17,362 12,300 15,137 Total adjustments 133,877 367,941 323,866 133,856 959,540 Net cash provided (used) by operating activities $ 387,623 $ 111,664 $ 1 ,185,362 $ (780,862) $ 903,787 Noncash investing, capital and financing activities: Loss on exchange of assets $ $ $ $ (9,708) $ (9,708) Asset contributions from general govemment $ $ 5,400 $ $ $ 5,400 Amortization of bond issue costs $ $ $ (257) $ $ (257) Amortization of discount on bond issuance $ $ $ (728) $ $ (728) Amortization of deferred loss on defeasance of debt $ $ $ (965) $ $ (965) Increase in net pension asset $ 44,743 $ 32,022 $ 29,390 $ $ 106,155 87 Internal Service Funds Internal service funds are used to account for services and commodities furnished by a . designated department to other departments within the City or to other governments on a cost reimbursement basis. Garage Fund - to account for the cost of automotive and other motorized equipment of the City. The acquisition cost of new or upgraded equipment is financed through user departments and the asset value is simultaneously contributed to the Garage Fund. The cost of replacement of existing equipment is financed by the Garage Fund. Administrative Services Fund - to account for various support activities including information technology, printing, mailing, and telephone services. The cost for these services is charged to user departments based on the cost of providing units of service. General Services Fund - to account for various support activities including building maintenance and custodial services for all City departments and facilities. The cost for these services is charged to user departments based on the cost of providing units of service. Central Insurance Fund - to account for the City's limited self-insurance program wherein all funds are assessed charges based on damage claims incurred and on management's assessment of individual funds' risk exposure. All claims and premiums are paid out of this fund, together with other costs necessary to administer the program. Medical insurance premiums are also paid from this fund. 89 City of Clearwater, Florida Combining Statement of Net Assets Internal Service Funds September 30, 2003 Garage Administrative General Central Fund Services Services Insurance Total ASSETS Current assets: Cash on hand and in banks $ $ 1,900 $ $ $ 1,900 Equity in pooled cash and investments 4,081,388 1 ,243,155 491,704 21,505,812 27,322,059 Due from other funds 1,050,696 194,980 650,127 1,895,803 Inventories, at cost 220,491 220,491 Prepaid expenses and other assets 618,058 618,058 Total current assets 4,301,879 2,295,751 686,684 22,773,997 30,058,311 Noncurrent assets: Interest receivable 5,793 5,793 Advances to other funds 4,012,876 4,012,876 Net pension asset 566,548 1,050,405 376,608 99,331 2,092,892 Capital assets: Land and other nondepreciable assets 696,681 696,681 Capital assets, net of accumulated depreciation 13,868,106 2,583,256 141,688 34,554 16,627,604 Total noncurrent assets 15,137,128 3,633,661 518,296 4,146,761 23,435,846 Total assets 19,439,007 5,929,412 1,204,980 26,920,758 53,494,157 LIABILITIES Current liabilities: Accounts' and contracts payable 5,000 6,250 5,000 233,845 250,095 Accrued payroll 47,709 86,856 32,730 9,413 176,708 Due to other funds 2,088 362,724 364,812 Deferred revenue 1,212,306 1,212,306 Current portion of long-term liabilities: Compensated absences 10,105 29,146 7,531 2,817 49,599 Notes, loan pool agreement and acquisition contracts 2,446,495 252,692 4,759 2.703,946 Claims payable 3,678,100 3,678,100 Total current liabilities (payable from current assets) 3,723,703 737,668 50,020 3,924,175 8,435,566 Noncurrent liabilities: Compensated absences 91 ,968 265,263 68,541 25,635 451 ,407 Notes, loan pool agreement and acquisition contracts 5,388,354 322,945 16,413 5.727,712 Advances from other funds 824,882 824,882 Claims payable 9,278,382 9,278,382 Total noncurrent liabilities 5,480,322 1,413,090 84,954 9,304,017 16,282,383 Total liabilities 9,204,025 2,150,758 134,974 13,228,192 24,717,949 NET ASSETS Invested in capital assets, net of related debt 6,729,938 2,007,619 120,516 34,554 8,892,627 Restricted for employees' pension benefits 566,548 1,050,405 376,608 99,331 2,092,892 Unrestricted 2,938,496 720,630 572,882 13,558,681 17,790,689 Total net assets $ 10,234,982 $ 3,778,654 $ 1,070,006 $ 13,692,566 $ 28,776,208 The notes to the financial statements are an integral part of this statement. 90 City of Clearwater, Florida Combining Statement of Revenue, Expenses, and Changes in Fund Net Assets Internal Service Funds For the Year Ended September 30, 2003 .' Garage Administrative General Central Fund Services Services Insurance Total Operating revenues Billings to departments $ 8,633,526 $ 8,025,826 $ 2,994,265 $ 13,071,556 $ 32,725,173 Operating expenses: Personal services 1,791,982 3,576,373 1,465,770 390,953 7,225,078 Purchases for resale 2,0251601 2,025,601 Operating materials and supplies 280,350 196 ,452 229,328 4,170 710,300 Transportation 7,200 83,403 80,611 4,571 175,785 U1i1ity service 86,946 4,887 348,307 440,140 Depreciation 3,087,902 537,343 12,551 6,569 3,644,365 Interfund.administrative charges 174,810 50,780 225,590 Other current charges: Professional fees 292,539 147,085 17,000 72,632 529,256 Advertising 100 100 Communications 25,335 1,222,636 43,453 14,212 1,305,636 Printing and binding 246 49,216 49,462 Insurance Premiums 283,980 61,340 39,130 10,378,941 10,763,391 Claims incurred 629,014 3,528,861 4,157,875 Repairs and maintenance 570,668 906,459 9,435 1,486,562 Rentals 2,776 303,709 10,358 1,934 318,777 Miscellaneous 32,950 100,142 30,918 29,332 193,342 Data processing charges 128,360 264,720 43,940 18,830 455,850 Taxes 5,707 5,707 Total other current charges 1,400,907 2,719,516 1,091,258 14,054,277 19,265,958 Total operating expenses 8,855,698 7,168,754 3,227,825 14,460,540 33,712,817 Operating income (Joss) (222,172) 857,072 (233,560) (1,388,984) (987,644) Nonoperating revenues (expenses) Eamings on investments 84,347 46,848 23,396 690,461 845,052 Interest expense (270,346) (43,184) (634) (314,164) Gain (loss) on exchange of assets 234,329 (150,671) (4,080) 79,578 Other 231,132 7,467 238,599 Total nonoperating revenue (expenses) 279,462 (139,540) 18,682 690,461 849,065 Income (loss) before transfers 57,290 717,532 (214,878) (698,523) (138,579) Capital grants and contributions 7,722 60,000 67,722 Transfers in 549,577 238,477 788,054 557,299 60,000 238,477 855,776 Change in net assets 614,589 777,532 (214,878) (460,046) 717,197 Total net assets - beginning 9,620,393 3,001,122 1 ,284,884 14,152,612 28,059,011 Total net assets - ending $ 10,234,982 $ 3,778,654 $ 1,070,006 $ 13,692,566 $ 28,776,208 The notes to the financial statements are an integral part of this statement. 91 City of Clearwater, Florida Combining Statement of Cash Flows Internal Service Funds For the Year Ended September 30, 2003 Garage Administrative General Central Fund Services Services Insurance Total CASH FLOWS FROM OPERATING ACTIVITIES Cash received from other funds $ 8,633,526 $ 8,025,826 $ 2,994,265 $ 13,071 ,556 $ 32,725,173 Cash payments to suppliers (3,924,369) (2,389,993) (1,515,825) (11,489,779) (19,319,966) Cash payments to employees (1,877,375) (3,722,861 ) (1,518,245) (406,243) (7,524,724) Cash payments to other funds (198,807) (691,897) (229,019) (44,511) (1,164,234) Other revenues 231,132 7,467 238,599 Net cash provided (used) by operating activities 2,864,107 1,228,542 (268,824) 1,131,023 4,954,848 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in from other funds 549,577 60,000 238,477 848,054 Receipt of cash on loans to/from other funds 181,614 109,587 1,083,465 1,374,666 Payment of cash on loans to/from other funds (138,839) (1,361,488) (1,500,327) Net cash provided (used) by non capital financing activities 731,191 (78,839) 109,587 (39,546) 722,393 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on debt (2,379,382) (241,910) (2,621,292) Interest paid (270,346) (43,184) (634) (314,164) Acquisition of fixed assets (3,684,198) (712,077) (21,824) (4,418,099) Sale of fixed assets 242,462 242,462 Proceeds from issuance of debt 2,618,833 112,905 (4,510) 2,727,228 Net cash (used) by capital and related financing activities (3,472,631) (884,266) (26,968) (4,383,865) CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 84,347 46,848 23,396 690,461 845,052 Net cash provided by investing activities 84,347 46,848 23,396 690,461 845,052 Net increase (decrease) in cash and cash equivalents 207,014 312,285 (162,809) 1,781,938 2,138,428 Cash and cash equivalents at beginning of year 3,874,374 932,770 654,513 19,723,874 25,185,531 Cash and cash equivalents at end of year $ 4,081,388 $ 1,245,055 $ 491,704 $ 21,505,812 $ 27,323,959 Cash and cash equivalents classified as: Cash on hand and in banks $ $ 1,900 $ $ $ 1,900 Equity in pooled cash and investments 4,081,388 1,243,155 491,704 21,505,812 27,322,059 Total cash and cash equivalents $ 4,081,388 $ 1,245,055 $ 491,704 $ 21,505,812 $ 27,323,959 The notes to the financial statements are an integral part of this statement. 92 City of Clearwater, Florida Combining Statement of Cash Flows Internal Service Funds For the Year Ended September 30, 2003 Garage Administrative General Central Fund Services Services Insurance Total Reconciliation of operating Income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ (222,172) $ 857,072 $ (233,560) $ (1,388,984) $ (987,644) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Other revenue from nonoperating section of income statement 231,132 7,467 238,599 Depreciation 3,087,902 537,343 12,551 6,569 3,644,365 Change in assets and liabilities: (Increase) in inventory (34,916) (34,916) Decrease in prepaid expenses 921,027 921,027 Increase (decrease) in accounts and contracts payable (112,446) (26,852) 4,660 1,607,701 1,473,063 (Increase) in net pension asset (91 ,240) (183,358) (61,849) (19,739) (356,186) Increase in accrued payroll 5,847 36,870 9,374 4,449 56,540 Total adjustments 3,086,279 371,470 (35,264) 2,520,007 5,942,492 Net cash provided (used) by operating activities $ 2,864,107 $ 1,228,542 $ (268,824) $ 1,131,023 $ 4,954,848 Noncash investing, capital and financing activities: Gain (loss) on exchange of assets $ 234,329 $ (143,681 ) $ (4,080) $ $ 86,568 Asset contributions from general government $ 7,722 $ $ $ $ 7,722 Asset contributions to general government $ $ (6,990) $ $ $ (6,990) Contributed assets per radio lease agreement $1,101,825 $ $ $ $ 1,101,825 Increase in net pension asset $ 91,240 183,358 $ 61,850 $ 19,738 $ 356,186 The notes to the financial statements are an integral part of this statement. 93 Fiduciary Funds Fiduciary Funds are used to account for resources that are managed in a trustee capacity or as an agent for other parties or funds. Employees' Pension Fund - to account for the financial operation and condition of the major employee retirement system. Firemen's Relief and Pension Fund - to account for the financial operation and condition of the Firemen's Relief and Pension Fund, closed to new members in 1962, containing 48 retired members and no active members. Police Supplemental Pension Fund - to account for the financial operation and condition of a supplemental pension plan funded by the State for sworn police officers. Firefighters Supplemental Pension Fund - to account for the financial operation and condition of a supplemental pension plan funded by the State for firefighters. Treasurer's Escrow Agency Fund - to account for the receipt, custody, and expenditure of funds held temporarily in trust for other parties. 95 City of Clearwater, Florida Combining Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2003 The notes to the financial statements are an integral part of this statement. 96 City of Clearwater, Florida Statement of Changes In Assets and Liabilities Agency Fund For the Year Ended September 30, 2003 The notes to the financial statements are an integral part of this statement. 98 Capital Assets Used in the Operation of Governmental Funds 99 City of Clearwater, Florida Capital Assets Used In the Operation of Governmental Funds Comparative Schedules by Source 1 September 30, 2003 and 2002 2003 2002 Schedule of General Fixed Assets: Land $ 43,593,863 $ 39,914,725 Buildings 49,498,895 37,933,951 Improvements other than buildings 54,078,550 52,455,386 Equipment 35,917,695 33,070,403 Infrastructure 2,225,540 1,076,247 Construction In progress 30,440,628 11,550,775 $ 215,755,171 $ 176,001,487 Sources of Investments In General Fixed Assets: General fund revenue $ 141,237,902 $ 124,200,861 General obligation bonds 6,297,870 6,297,870 Revenue bonds 31,705,092 13,111 ,869 Notes, mortgages, and other obligations 3,057,044 4,910,150 Special assessments 2,012,192 2,012,192 Federal and state grants 15,639,257 10,435,417 Gifts 7,187,208 6,414,522 Contributions from developers 7,539,144 7,539,144 Undetermined investments prior to July 1, 1954 1,079,462 1,079,462 $ 215,755,171 $ 176,001,487 I This schedule presents only the capital asset balances related to govemmental funds. Accordingly the capital assets reported in internal service funds are excluded from the above amounts. The notes to the financial statements are an integral part of this statement. 101 City of Clearwater, Florida Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity 1 September 30, 2003 Improvements Machinery Other Than and Function and Activity Total Land Buildings Buildings Equipment Infrastructure Fixed Assets Unallocated by Function $ 18,144,222 $ 9,958,088 $ 7,938,114 $ $ 248,020 $ General Government Legislative 3,531 3,531 Executive 457,680 1,528 456,152 Financial & Administrative 935,649 9,679 925,970 Legal 159,010 2,106 156,904 Planning 6,285 6,285 Comprehensive Planning 12,417 12,417 Other General Government 25,809,530 6,404,795 16,169,786 131,761 3,103,188 27,384,102 6,404,795 16,183,099 131,761 4,664,447 Public Safety: Law Enforcement 9,976,073 639,194 440,831 200,256 8,695,792 Fire Control 8,406,083 483,299 1,820,020 66,294 6,036,470 Protective Inspections 213,997 11,432 202,565 Emergency and Disaster Relief 403,868 88,482 315,386 Ambulance and Rescue Services 1,369,053 12,254 1,356,799 20,369,074 1,122,493 2,373,019 266,550 16,607,012 Physical Environment: Solid Waste I Recycling 21,565 21,565 Conservation and Resource Management 90,541 76,210 14,331 Other Physical Environment 430,119 2,855 340,686 86,578 542,225 2,855 416,896 122,474 Transportation: Road and Street Facilities 58,780,982 9,944,467 4,311,791 41,610,589 689,335 2,224,800 Parking 35,988 35,988 Other Transportation Services 528,111 1,200 171,262 148,000 206,909 740 59,345,081 9,981,655 4,483,053 41,758,589 896,244 2,225,540 Economic Environment: Industry Development 1,428,826 1,396,655 16,901 15,270 Housing and Urban Development 698,747 329,835 293,682 75,230 Other Economic Environment 71,093 71,093 2,198,666 1,797,583 310,583 90,500 Human Services: Other Human Services 23,377 23,377 Culture and Recreation: Libraries 14,983,680 158,058 1,958,327 133,859 12,733,436 Parks & Recreation 36,537,273 10,120,317 15,574,159 10,364,760 478,037 Cultural Centers 28,508 993 27,515 Special Recreation Facilities 5,758,335 4,048,019 677 ,548 1,006,135 26,633 57,307,796 14,326,394 18,211,027 11,504,754 13,265,621 Total Allocated to Functions 185,314,543 $ 43,593,863 $ 49,498,895 $ 54,078,550 $ 35,917,695 $ 2,225,540 Construction in Progress 30,440,628 Total General Fixed Assets $ 215,755,171 I This schedule presents only the capital asset balances related to govemmental funds. Accordingly the capital assets reported in internal service funds are excluded from the above amounts. The notes to the financial statements are an integral part of this statement. 102 City of Clearwater, Florida Capital Assets Used In the Operation of Governmental Funds Schedule of Changes by Function and Activity 1 For the Year Ended September 30,2003 General General Fixed Assets Fixed Assets 10/01/02 Additions Deductions 09130/03 Fixed Assets Unallocated by Function $ 18,144,222 $ 18,144,222 General Government: Legislative 3,531 3,531 Executive 481,500 7,078 (30,898) 457,680 Financial & Administrative 935,649 935,649 Legal 144,794 14,216 159,010 Planning 6.285 6,285 Comprehensive Planning 4,165 8,252 12,417 Other General Government 25,556,599 268,370 (15,439) 25,809,530 27,132,523 297,916 (46,337) 27,384,102 Public Safety: Law Enforcement 8,565,028 1 ,772,846 (361,800) 9,976,074 Fire Control 4,956,823 3.449,259 8,406,082 Protective Inspections 180,565 33,432 213,997 Emergency and Disaster Relief 403,868 403,868 Ambulance and Rescue Services 1,359,806 18,242 (8,995) 1 ,369,053 15,466,090 5,273,779 (370,795) 20,369,074 Physical Environment: Solid Waste / Recycling 15,940 5,625 21,565 Conservation and Resource Management 90,541 90,541 Other Physical Environment 394,908 35,211 430,119 501,389 40,836 542,225 Transportation: Road and Street Facilities 57,074,460 1 ,859,203 (152,681) 58,780.982 Parking 35,988 35,988 Other Transportation Services 502,091 51,474 (25,454) 528,111 57.612,539 1,910,677 (178,135) 59,345,081 Economic Environment: Industry Development 1 ,428,826 1 ,428,826 Housing and Urban Development 698,747 698,747 Other Economic Environment 33,125 37,968 71,093 2,160,698 37,968 2,198,666 Human Services: Other Human Services 23,377 23,377 Culture and Recreation: Libraries 13,556,327 1,822,432 (395,079) 14,983,680 Parks & Recreation 24,174,314 12,540,107 (177,148) 36,537,273 Cultural Centers 28,508 28,508 Special Recreation Facilities 5,650,725 107,610 5,758,335 43,409,874 14,470,149 (572,227) 57,307,796 Total Allocated to Functions 164,450,712 22,031,325 (1,167,494) 185,314,543 Construction in Progress 11,550,775 25,031,143 (6,141,290) 30,440,628 Total General Fixed Assets $ 176,001,487 47,062,468 (7,308,784) $ 215,755,171 I This schedule presents only the capital asset balances related to governmental funds. Accordingly the capital assets reported in internal service funds are excluded from the above amounts. The notes to the financial statements are an integral part of this statement. 103 Supplementary Information 105 Page 1 of 4 City of Clearwater, Florida Continuing Disclosure - Gas System Revenue Bonds Series 1996A, 1997A&B, and 1998 Supplementary Information The Svstem: Rates, Fees and Charges The City Commission has established a schedule of rates and charges by ordinance, which includes a purchased gas cost adjustment provision allowing the City to pass-through to customers any increase or decrease in the purchased price of gas. The City is not subject to regulation by any State agency in establishing or revising its rates. Where competitive fuel sources or transportation service are available to the customer, the City Commission has authorized the City Manger to enter into contract gas service rates at special rates and/or conditions as required to obtain/retain the customer load. Such contract service must meet the normal construction feasibility formula to insure profitable payback to the City. As of September 30, 2003, contract rates applied to 737 customer accounts and impacted 30.28% of total revenues. The rates charged by the System through September 3D, 1996, were part of the Phase I Gas Rate Case implemented October 1, 1995, which was based on a comprehensive cost of service study performed by the Utility Advisory Services Group of the international accounting firm of Coopers & Lybrand, LLP (the "Rate Study"). This Phase I implementation resulted in an extensive overhaul of the Gas System customer rates, providing numerous classes of service and a modernized billing methodology. The new rates, effective October 1, 1996, were designed to be industry-based and responsive to the competitive energy challenges. The goal of the Rate Study was to establish rates which would be fair to all classes of customers, provide funding to implement planned expansion in both existing northern Pinellas County services area and into the newly acquired southwestern Pasco service area, and provide an adequate growth potential in return to the City of Clearwater to further offset the ad valorem tax rates (current impact is about 0.5 mills). As the result of experiences during the first seven months of the Phase I implementation, adjustments made to the Phase II rates were implemented October 1, 1996 and additional adjustments (Phase III) were implemented effective October 1, 1997. The total projected impact of both new phases of the rate case is $1.05 million or less than 7.9% of total gas sales revenues. The rate ordinance containing the Phase II and Phase III rate changes was approved by the City Commission on June 6, 1996. 106 CLEARWATER GAS SYSTEM NATURAL GAS RATE BILLING FACTORS FOR MARCH 1, 2003 - SEPTEMBER 30, 2003 BASED ON APPROVED GAS ADJUSTMENT FACTORS Applicable Annual Therm Range or Other Rate Determinant Monthly Cuslomer Charge Non-F....l Ener~y CharjjlelTherm Non-Fuel Energy Charge Energy Conservation Adj. (ECA) Environmental Imposition Adj. (EIA) Weather Nonnalizalion Adj. (WNA) ...... o -....J Total Non-Fuel Energy Charge Purchased Gas Adjustment (PGA) Total Energy Charge/Therm Minimum Monthly Bill Compares to LP/Gal10n Rate of with 6.0% Franchise Change from 01101 Therm Rate % Change from 01101 Therm Rate Utili~ TalC Note. Fuel Rate per Therm 10101fl3 Non-Utility Taxable FueVfherm Rrm Natural Gas Rate Schedules ---BS..-6ME..-.MME..~~...MGL~....BAC.-~-1AC... NA(1- NA(4+ NA(4+ NA(4+ 0- 18,000- 100,000 NA(I- NA(O- NA(150 3 Units) Units) Units) Units) 17,999 99,999 &up 3Un~s) 1491ons) tons&+) $7.00 $15.00 $20.00 $50.00 $15.00 $20.00 $50.00 $7.00 W $15.00 W $20.00 if $15.00 not prevo not prevo not prevo billed billed billed $0.580 $0.580 $0.580 $0.580 $0.470 $0.410 $0.350 $0.200 $0.150 $0.100 $0.200 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.160 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 o.ooao.ooao.ooao.ooao.ooao.ooall.llOOo.ooall.llOOlI.lIlIllll.llllll $0.740 $0.740 $0.740 $0.740 $0.630 $0.570 $0.510 $0.360 $0.310 $0.260 $0.360 ll..B2Oll..B2OlI.S2llll.S2llll.S2llll.S2llll.S2llll.S2llll.S2llll.S2llll.S2ll $1.560 $1.560 $1.660 $1.560 $1.450 $1.390 $1.330 $1.180 $1.130 $1.080 $1.180 $7.00 $15.00 $20.00 $50.00 $15.00 $20.00 $50.00 $7.00 @ $15.00 @ $20.00 @ $15.00 premise premise premise + FAC -6.L SL wlM& Blillgbl NA NA Interr. NG.Ba1ll ~~~ NA NA 100,000 & up $15.00 $7 Resl} $30.00 $100.00 $15 GS W not prevo bRled $0.300 $0.100 $0.470 $0.280 0.160 0.160 0.160 NA 0.000 0.000 0.000 NA o.ooa o.ooa ll.llllll ll.llllll $0.460 $0.260 $0.630 $0.280 lI.S2ll lI.S2ll lI.S2ll ll.Z5ll Contract f<<LBate ~ NA By Contract o o ::s == ::s c enJ ~C en (D' fir 0 C (I) () -. 'tJ ..... _~ 'tJ 0 -CD (I) 0 CDCDC_ 3cn...O CD)>CD_ ::I ~ . CD _.....QD) .~ ~ D) i 'C; ...... en D) :.5')> en S' - 120 '< ... ~ m! ~ 3 ~ CD::!! D)D)3~ _ ::s _. -. Q. :D C. O.....CDD) ::Ico< co CD co::s C CD m o ::s c. (I) By Contract NA NA o.ooa Contract + $0.000 Plus ll.Z5ll $1.280 $1.080 $1.450 $1.030 $0.750 + Non-Fuel $15.00 $7 Res/J $30.00 $100.00 Customer + FAC $15 GS @ + FAC + Non-Fuel Charge + premise Therm Rate for Non-Fuel Therm + FAC 250 !herms X Rate for Contract # Days In Mo. # ofTherms $ 1.427 $ 1.427 $ 1.427 $ 1.427 $ 1.327 $ 1.272 $ 1.217 $ 1.080 $ 1.034 $ 0.988 $1.080 $ 1.171 $ 0.988 $ 1.327 $ 0.942 $ 1.513 $ 1.513 $ 1.513 $ 1.513 $ 1.406 $ 1.348 $1.290 $ 1.144 $ 1.096 $ 1.047 $ 1.144 $ 1.241 $ 1.047 $ 1.406 $ 0.999 ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.330) ($0.360) -17.5% -17.5% -17.5% -17.5% -18.5% -19.2% -19.9% -21.9% -22.5% -23.4% -21.9% -20.5% -23.4% -18.5% -25.9% $0.069 $0.069 $0.069 $0.069 $0.069 $0.069 $0.069 $0.069 $0.069 $0.069 $0.069 $0.751 $0.751 $0.751 $0.751 $0.751 $0.751 $0.751 $0.751 $0.751 $0.751 $0.751 BTU FACTOR" THERMSI100 CUBIC FEET (CCF) Firm Service Rates Interruptible Service Rates 1.OL02 ll102 12lO2ll1lll302lll3l13lll3Il41l1305lll3ll6Lll3llZlO3OBlll3 1.055 1.061 1.056 1.056 1.068 1.061 1.061 1.059 1.066 1.070 1.070 1.034 1.041 1.035 1.035 1.047 1.041 1.040 1.038 1.045 1.049 1.049 $0.069 $0.069 $0.069 $0.055 $0.751 $0.751 $0.751 $0.695 lI9lll3 1.065 1.044 ($0.360) -32.4% $0.069 $0.681 "0 D) CQ CD N o - ,1::0 P.age 3 of 4 City of Clearwater, Florida Continuing Disclosure - Gas System Revenue Bonds Series 1996A, 1997A&B, and 1998 Supplementary Information Service Area The Clearwater Gas System (CGS) is owned and operated as an enterprise utility by the City of Clearwater. CGS operates over 685 miles of underground gas main and handles the supply and distribution of both natural and propane (LP) gas throughout northern Pinellas County and western Pasco County. As a "full service" gas utility, CGS provides gas appliance sales, service and repair (both commercial and residential), installation of customer gas piping, construction and maintenance of underground gas mains and service lines, and 24 hour response to any gas emergency call within the service area. CGS is regulated for safety by the Florida Public Service Commission and the Federal Department of Transportation. CGS has been serving customers in the Clearwater area for over 80 years (since 1923) when operations were begun with a manufactured gas plant operation from coal and coke. In 1959, when natural gas transmission lines were finally extended to the Florida peninsula, CGS discontinued manufacturing gas and began receiving piped natural gas from Florida Gas Transmission. Clearwater Gas System serves over 17,275 customers in a 298 square mile service territory, which includes 17 municipalities as well as the unincorporated areas of northern Pinellas County and western Pasco County. The Pinellas County service territory is 181 square miles and extends generally from Ulmerton and Walsingham Roads on the South to the Pasco County line on the North and from the Gulf of Mexico on the West to the Hillsborough County line on the East. This includes all of the Pinellas beach communities south to Redington Beach. The Pasco County service territory is 117 square miles and extends from the Gulf of Mexico on the West inland about 10 miles to just West of State Road 41 and Land 0' Lakes (generally along the right-of-way of the Sun coast Parkway) and from the Pinellas and Hillsborough County lines on the South to generally State Road 52 on the North. The CGS service territory extends 42.3 miles from the southernmost to the northernmost points. Clearwater Gas System prides itself in being a competitive and public service-minded utility, providing safe, economical and environmentally-friendly gas, which is made in America, available in our communities for all of the homes and businesses in our service area, with special focus on the residential customers who make up over 87.5% of our customer base. 108 Page 4 of 4 City of Clearwater, Florida Continuing Disclosure - Gas System Revenue Bonds Series 1996A, 1997A&B, And 1998 Supplementary Information As of September 30, 2003 the System's active natural gas customers were located as shown in the following table: Location Meters 355 112 20 19 6,996 1,012 62 43 1,015 194 10 53 11 5 10 600 1,298 1,258 2,556 15,629 Selleair Selleair Seach Selleair Sluffs Selleair Shores Clearwater Dunedin Indian Rocks Beach Indian Shores Largo New Port Richey North Redington Beach Oldsmar Port Richey Redington Beach Redington Shores Safety Harbor Tarpon Springs Unincorporated Areas Pasco Unincorporated Areas Pinellas Total Percentage 2.27% 0.72% 0.13% 0.12% 44.76% 6.48% 0.40% 0.28% 6.49% 1.24% 0.06% 0.34% 0.07% 0.03% 0.06% 3.84% 8.31% 8.05% 16.35% 100.00% The following table shows the five largest interruptible customers by peak monthly consumption am the percent of the System's revenues derived from such customers during the 12 months endin~ September 30, 2003: Customer Name Morton Plant Hospital National Linen Services, Inc. Metal Industries, Inc. Mease Hospital HCA Columbia Hospital Peak Monthly Therms 96,447 88,834 74,484 61,333 25,868 % of Gross Revenues 2.05% 2.00% 1.74% 1.17% 0.92% The following table shows the breakdown of the System's customers by category as well as the volume of gas sold and the sales revenues generated by each category for the fiscal year ended September 30 2003: Average No. Gas Gas Customers Volume Sales Interruptible 14 21.03% 10.79% Residential 13,530 16.60% 25.27% Commercial 2,085 62.37% 63.94% 109 Page 1 of 3 City of Clearwater, Florida Continuing Disclosure - Water and Sewer Refunding Revenue Bonds Series 1993 and 1998; and Revenue Bonds Series 2002 Supplementary Information Historical Financial Information Water System: Source and Volume of Water Pumped (in million gallons per day, averaged over the Fiscal Year) FY 1998 1999 2000 2001 2002 2003 CitvWells 3.140 3.070 3.047 3.067 2.258 3.927 County 11 .540 12.094 11 .528 11 .260 11 .739 8.916 Historical Growth in Number of Water Customers (all figures are as of September of the year indicated) Year Water Customers 1998 1999 2000 2001 2002 2003 38,440 39,931 39,562 40,167 40,340 40,227 Ten Largest Water Customers Fiscal Year Ending September 30, 2003 Water Used (in 100 Cubic Feet) 98,532 77,932 46,516 53,120 50,853 36,437 34,038 38,312 16,328 22.783 Name of User 1. Church of Scientology 2. Morton Plant Mease Hospital 3. Pine lias County Schools 4. Clearwater Housing Authority 5. United Dominion Realty Trust 6. Sheraton Sand Key 7. 880 Mandalay 8. AGH Leasing UP 9. City of Clearwater 10. Countryside Mall Total 476.851 110 Total 14.680 15.164 14.575 14.327 13.997 12.843 Revenues Produced $ 286,028 269,031 250,442 158,058 131,561 104,322 99,174 98,034 88,672 84.166 $ 1.569.488 , I Page 2 of 3 City of Clearwater, Florida Continuing Disclosure - Water and Sewer Refunding Revenue Bonds Series 1993 and 1998; and Revenue Bonds Series 2002 Supplementary Information Historical Growth in Number of Sewer Customers (as of September of the year indicated) Fiscal Sewer Year Customers Sewer System: Average Sewage Flow Fiscal Year 1998 1999 2000 2001 2002 2003 Annual Ave. Daily Flow In MGD 17.9 16.5 15.4 14.4 14.3 16.2 1998 1999 2000 2001 2002 2003 Ten Largest Sewer Customers Fiscal Year Ending September 30, 2003 Sewer Used (in 100 Cubic Feet) 74,599 41,981 83,790 50,853 44,739 38,312 33,360 32,376 28,737 22.783 Name of User 1. Morton Plant Mease Hospital 2. Pinellas County Schools 3. Church of Scientology 4. United Dominion Realty Trust 5. Clearwater Housing Authority 6. AGH Leasing UP 7. Sheraton Sand Key 8. 880 Mandalay 9. King's Savannah Trace Assoc., UP 10. Lane Clearwater UP Total 451 530 33,174 33,383 33,075 32,933 33,215 33,215 Revenues Produced $ 284,350 276,207 271,005 160,919 139,130 119,075 106,897 100,610 89,372 76.328 $1 623 893 Rates. Fees And Charaes The City uses a three-tiered rate structure for water and sewer usage. The base rate includes a minimum usage for residential and nonresidential water rates. Any usage over the minimum is billed at one rate per 100 cubic feet up to a designated level and at a second rate for usage over that level. For irrigation, there is a base rate, with no minimum, and a charge per 100 cubic feet of water usage up to a designated level and a higher charge for usage over that amount. The sewer base rate includes a minimum usage and a fixed charge per 100 cubic feet of water usage over the basic allowance. The minimum usage and second tier usage level vary with the size of the meters. For fiscal year 2003 there were no changes to the three-tiered rate structure for water or sewer usage. Effective October 1, 2000 the basis for billing was converted from cubic feet to gallons. 111 Page 3 of 3 City of Clearwater, Florida Continuing Disclosure - Water and Sewer Refunding Revenue Bonds Series 1993 and 1998; and Revenue Bonds Series 2002 Supplementary Information Residential and October 1, October 1 , October 1, October 1, October 1 , Nonresidential Water Rates 1999 2000 gQM 2002 2003 Size of Meter Cubic Feet Gallons Minimum- LInder 1 inch 7.08 7.53 8.07 8.64 9.90 1 inch 15.93 17.57 18.83 20.16 23.10 1.5 inch 237.39 251.00 269.00 288.00 330.00 2 inch 550.47 584.83 626.77 671.04 768.90 3 or 2 inch manifold 849.60 901.09 965.71 1,033.92 1,184.70 4 inch 1,635.48 1,734.41 1,858.79 1,990.08 2,280.30 6 inch 4,200.21 4,455.25 4,774.75 5,112.00 5,857.50 8 inch 7,080.00 7,530.00 8,070.00 8,640.00 9,900.00 Additional charges are assessed for cubic feet of usage in excess of designated minimums. Rates for Irriaation (Lawn) Meters October 1, October 1, October 1, October 1, October 1, 1999 2000 2001 2002 2003 Size of Meter Cubic Feet Gallons Minimum- Under 1 inch 2.52 2.69 2.88 3.08 3.53 1 inch 7.57 8.07 8.64 9.24 10.59 1.5 inch 37.85 40.35 43.20 46.20 52.95 2 inch 105.99 112.99 120.96 129.36 148.26 3 or 2 inch manifold 209.45 223.27 239.04 255.64 292.99 4 inch 403.76 430.41 460.80 492.80 564..80 6 inch 1 ,218.85 1,299.29 1 ,391.04 1,487.64 1,704.99 Sewer Rates October 1, October 1 , October 1. October 1, October 1, 1999 2000 2001 2002 2003 Size of Meter Cubic Feet Gallons Minimum- Under 1 inch 9.72 10.38 11.10 11.88 13.62 1 inch 21.87 24.22 25.90 27.72 31.78 1.5 inch 325.62 346.00 370.00 396.00 454.00 2 inch 755.73 806.18 862.10 922.68 1,057.82 3 or 2 inch manifold 1 ,166.40 1,242.14 1 ,328.30 1 ,421.64 1,629.86 4 inch 2,245.32 2,239.86 2,556.70 2,736.36 3,137.14 6 inch 5,766.39 6,141.50 6,567.50 7,029.00 8,058.50 8 inch 9,720.00 10,380.00 11,100.00 11,880.00 13,620.00 Per 100 cubic feet of water used over 2.43 3.46 3.70 3.96 4.54 that allowed in minimum Additional Indebtedness Additional indebtedness incurred of $97,555 was for the lease purchase of capital equipment. 112 City of Clearwater, Florida Continuing Disclosure - Stormwater System Revenue Bonds Series 1999 and 2002 Supplementary Information Rates. Fees. and Charaes The City uses a measurement of one equivalent residential unit or ERU as the basis for the stormwater management utility fee. The rate per ERU was unchanged from the inception of the utility on January 1, 1991 until 1998 when annual increases were adopted for five fiscal years beginning October 1, 1998. In November 2001, additional increases were adopted including a change to the increase previously adopted to be effective October 1, 2002. The monthly rates at inception and as adopted in 1998 and 2001 are: Effective Date January 1, 1991 October 1, 1998 October 1, 1999 October 1, 2000 October 1,2001 January 1, 2002 October 1 , 2002 October 1 , 2003 October 1 , 2004 October 1 , 2005 Rate Per ERU $3.00 $4.00 $4.17 $4.35 $4.54 $6.13 $7.16 $8.01 $8.65 $9.35 Single-family homes, multifamily units, condominium units, apartments and mobile homes are rated as one ERU per dwelling unit. Nonresidential property is charged at the rate of 1,830 square feet of impervious area per ERU. HISTORICAL NET REVENUES Fiscal Years Ended Seotember 30. 1999 2000 2001 2002 2003 Net Operating Revenues (Excluding Depreciation) $1,361,656 $1,622,157 $1 ,433,541 $2,793,204 $3,726,983 Interest Income and other Non- Operating Revenues (Expenses) 46,209 132,921 281,471 95,305 206,202 Total Net Revenues $1,407,865 $1,755,078 $1,715,012 $2,888,509 $3,933,185 Maximum Annual Debt Service $520,974 $520,974 $520,974 $2,052,538 $2,052,538 Coverage 2.71 3.37 3.29 1.41 1.92 113 City of Clearwater, Florida Continuing Disclosure -Infrastructure Sales Tax Revenue Bonds, Series 2001 Supplementary Information Historical Debt Service CoveraQe 2001 2002 2003 Sales tax revenues (1) $8,339,694 $8,457,553 $8,661,615 Maximum annual debt service $7,083,688 $7,083,688 $7,049,688 Debt service coverage 1.18 1.19 1.23 (1) The Infrastructure Sales Tax Revenue Bonds, Series 2001, were issued June 1, 2001 in the amount of $46,445,000. They are secured by a lien upon and a pledge of the City's share of the proceeds derived by Pinellas County, Florida from the levy and collection of the one-cent discretionary infrastructure sales tax pursuant to Section 212.055(2), Florida Statutes, as amended (sales tax revenues). City of Clearwater, Florida Continuing Disclosure - Improvement Revenue Refunding Bonds, Series 2001 Supplementary Infc)rmation Historical Debt Service CoveraQe 2001 2002 2003 Pledged Revenues (1) $ 15,486,388 $18,272,521 $ 17,381,418 Maximum annual debt service $ 866,760 $ 866,760 $ 865,310 Debt service coverage 17.87 21.08 20.09 (1) The Improvement Revenue Refunding Bonds, Series 2001, were issued October 15, 2001 in the amount of $11 ,470,000. They were secured by a lien upon and a pledge of the Public Service Tax pursuant to Section 166.231, Florida Statutes as amended. Effective October 1, 2001, the Florida Legislature repealed the public service tax on telecommunications created per Section 166.231 (9), Florida Statutes, and created a simplified tax structure for communications services pursuant to Chapter 2000-260, Laws of Florida. To the extent that the Public Service Tax receipts derived by the City pursuant to Section 166.231 (9), Florida Statutes, is eliminated as a result of this new tax, all of the revenues received by the City pursuant to the new Communications Services Tax shall be deemed to replace the Public Service Tax receipts so eliminated. Consequently the pledged revenues include both publiC service taxes and communications services taxes effective October 1, 2001 . 114 City of Clearwater, Florida Fire Services Program Supplementary Information Pursuant to agreements between the City of Clearwater, the Pinellas County Fire Authority and the Pinellas County Emergency Medical Services Authority, the City has provided fire and emergency medical services to the respective authorities. With respect to fire services, the services are provided for the benefit of properties located outside the corporate limits of the City, but within a designated service area. Emergency medical services are provided for the benefit of persons residing both inside and outside the corporate limits of the City, based on the Authority's nearest unit dispatch policy. With respect to the Fire Services Program, a budget was prepared by Fire Department personnel covering proposed expenditures for fiscal year ending September 30, 2003, for the Fire Department as a whole. Since the funding for the Emergency Medical Services Program is based on the level fixed in prior years, the Fire Services Program budget is essentially the residual obtained by deducting the approved level of funding for the Emergency Medical Services Program from the budgeted amounts included in the total Fire Department budget. This budget was submitted to, and duly approved by, the relevant Authority prior to the commencement of the fiscal year. Income received from Pinellas County Fire Protection Authority and valid program expenditures for the Fire Services Program for the fiscal year ended September 30, 2003 are summarized below. Total Revenue Received from Pinellas County Fire Protection Authority $ 2,185,964 Total Fire Service Expenditures for Fiscal Year Ended September 30,2003 $ 15,786,226 The Fire Services Program does not currently utilize an equipment reserve. 115 Statistical Section 117 City of Clearwater, Florida General Governmental Expenditures By Function (a) Last Ten Fiscal Years Fiscal General Public Physical Economic Year Government Safety Environment Transportation Environment 1994 $ 6,944,313 $ 30,348,800 $ 1,461,345 $ 4,485,318 $ 944,189 1995 7,100,253 32,230,932 1,368,074 4,727,961 1,827,083 1996 8,422,146 32,473,158 1,448,830 4,935,058 1,931,839 1997 9,143,485 35,014,716 1 ,593,525 4,950,263 2,305,384 1998 10,149,047 36,269,061 1,926,168 5,017,921 2,918,024 1999 10,457,801 38,489,701 318,590 6,755,168 2,722,985 2000 9,126,217 41 ,362,225 2,245,047 5,091,703 2,177 ,534 2001 9,486,088 42,442,045 2,221,979 5,401,902 2,385,926 2002 10,545,629 45,920,782 2,839,608 8,940,748 3,268,188 2003 10,586,022 48,161,524 2,289,250 6,672,874 4,307,323 (a) Includes operating and capital outlay expenditures of all governmental funds. General Governmental Expenditures By Function (a) Fiscal Year Ending September 30, 2003 Public Safety 35% General Government 8% Physical Env. 1.5% General Debt 7"k Transportation 5% Economic Environment 3% '" Capital Outlay 24% Human Services 0.5% Culture and Recreation 16% 118 TABLE I Culture Reporting Human and Capital General Entity Services Recreation Outlay Debt Totals $ 637,739 $12,190,549 $ 9,297,004 $ 1,556,939 $ 67,866,196 760,196 13,172,327 14,059,318 2,169,809 77,415,953 693,940 13,582,796 23,283,499 2,496,111 89,267,377 794,432 14,459,550 15,703,411 4,327,382 88,292,148 893,812 15,059,753 12,700,027 2,401,704 87,335,517 934,791 16,300,735 14,783,956 2,230,312 92,994,039 633,960 16,932,942 16,885,678 2,141,246 96,596,552 699,699 18,301,610 42,676,646 2,257,198 125,873,093 565,668 20,740,013 19,594,274 4,571 ,463 116,986,373 576,307 22,251,601 32,271,707 10,067,824 137,184,432 Millions 75 Total General Governmental Expenditures Last Ten Fiscal Years (a) 150 125 100 50 25 o 1994 1995 1996 1997 1998 1999 2000 2001 Fiscal Years 2002 2003 119 City of Clearwater, Florida General Revenues By Source (a) Last Ten Fiscal Years Fiscal Other Licenses Fines and Year Property Taxes (b) and Permits Forfeitures 1994 $ 21,107,231 $ 17,350,297 $ 3,047,814 $ 1,822,424 1995 17,265,880 19,012,336 3,620,891 1,756,680 1996 21,060,994 20,434,460 2,937,586 1,736,731 1997 21,652,492 20,706,412 3,403,879 1,592,702 1998 22,242,072 22,081,683 3,406,987 1,598,936 1999 23,293,933 22,736,582 4,241,747 1,989,510 2000 26,087,648 22,985,603 5,432,799 1,921,448 2001 27,712,010 24,187,094 4,408,637 2,015,067 2002 30,322,411 17,489,020 3,987,963 2,264,041 2003 33,927,390 17,502,509 4,838,207 2,077,633 (a) Revenues are those of all governmental funds. (b) Includes franchise, utility and communication services taxes. General Revenues by Source (a) Fiscal Year Ending September 30, 2003 Other Taxes 15% Fines & Forfeitures 2% Licenses and Permits 4% Property Taxes 29% 120 Other Miscellaneous 3% Investment Earnings 2% Charges for Services 9% TABLE II Inter- Charges governmental for Revenue Miscellaneous Services Total $ 18,118,364 $ 3,153,097 $ 5,505,849 $ 70,105,076 19,814,366 3,627,036 5,523,544 70,620,733 20,617,058 3,835,839 5,695,288 76,317,956 23,744,019 4,427,296 6,289,164 81,815,964 24,615,308 4,581,291 7,564,833 86,091 ,110 26,551,416 5,518,920 7,677,873 92,009,981 26,073,855 3,253,487 8,127,038 93,881,878 33,105,406 7,011,060 9,378,667 107,817,941 44,208,496 8,775,946 10,428,964 117,476,841 41,600,441 5,406,400 10,471,361 115,823.941 Total General Revenues Last Ten Fiscal Years (a) 75 125 100 50 25 o 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Fiscal Years 121 City of Clearwater, Florida Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Total Current Percent Delinquent Year Tax Levy Collections (a) of Levy Collections Collected 1994 $ 21,281,744 $ 21,154,946 99.40% $ 603,226 1995 21,458,160 21,388,692 99.68 159,918 1996 21,761,730 21,675,311 99.60 73,731 1997 22,410,181 22,281,502 99.43 80,253 1998 23,008,214 22,856,951 99.34 129,690 1999 23,951,878 23,854,396 99.59 226,812 2000 26,998,318 26,876,461 99.55 106,800 2001 28,664,112 28,567,429 99.66 77,716 2002 31,303,900 31,204,025 99.68 130,632 2003 35,153,114 35,038,555 99.67 91 ,548 (a) Collections are reported at the gross amount before any discount allowance 122 Percent Percent of of Total Delinquent Total Collections Outstanding Taxes to Collections to Current Delinquent Current Levy Taxes Levy $ 21,758,172 102.24% $ 946,874 4.45% 21,548,610 100.42 856,443 3.99 21,749,042 99.94 868,209 3.99 22,361,755 99.78 914,383 4.08 22,986,640 99.91 935,957 4.07 24,081,208 100.54 806,626 3.37 26,983,261 99.94 821,683 3.04 28,645,145 99.93 840,651 2.93 31,334,657 100.10 809,894 2.59 35,130,103 99.93 824,673 2.35 123 TABLE III City of Clearwater, Florida Assessed and Estimated Actual Property Valuations Last Ten Fiscal Years Assessed Valuations (a) Tax Collection Non-Exempt Personal Other Total Year Year Real Estate Property Property(b) Taxable 1993 1994 $ 3,789,902,836 $ 390,841,880 $ 569,338 $ 4,181,314,054 1994 1995 3,782,134,930 403,392,150 580,731 4,186,107,811 1995 1996 3,820,217,710 431,622,230 592,909 4,252,432,849 1996 1997 3,918,747,480 457,182,870 628,698 4,376,559,048 1997 1998 3,999,483,300 493,752,640 1 ,026,819 4,494,262,759 1998 1999 4,153,719,690 537,808,800 870,404 4,692,398,894 1999 2000 4,353,493,520 549,051,160 934,183 4,903,478,863 2000 2001 4,657,074,110 550,845,380 867,947 5,208,787,437 2001 2002 5,130,069,970 557,588,870 767,087 5,688,425,927 2002 2003 5,580,157,650 524,125,950 794,789 6,105,078,389 (a) Pinellas County Property Appraiser (b) Railroad and Telegraph Companies (c) Includes governmental, educational, qualified religious, literary, scientific, and health care properties and special exemptions for individual property owners. Qualified property owners are entitiled to a $25,000 Homestead Exemption based on residency requirement. 124 01 TABLE IV Percentages Assessed Total Total Values to Yearly Increases Exempt(c) All Estimated Market Taxable Total $ 1,391,537,458 $ 5,572,851,512 100.0 0/0 (0.2) % 1.2 0/0 1,455,095,094 5,641,202,905 100.0 0.1 1.2 1,480,760,538 5,733,193,387 100.0 1.6 1.6 1,508,032,959 5,884,592,007 100.0 2.9 2.6 1,555,308,467 6,049,571,226 100.0 2.7 2.8 1,657,162,640 6,349,561,534 100.0 4.4 5.0 1,751.871,312 6,655,350,175 100.0 4.5 4.8 1,899,322,835 7,108,110,272 100.0 6.2 6.8 2,170,560,750 7,858,986,677 100.0 9.2 10.6 2,451,056,137 8,556,134,526 100.0 7.3 8.9 125 City of Clearwater, Florida Property Tax Rates All Direct and Overlapping Governments Last Ten Fiscal Years Fiscal Downtown Year City Development (a) School 1994 5.1158 1.0000 9.0820 1995 5.1158 1.0000 9.3590 1996 5.1158 1.0000 9.3290 1997 5.1158 1.0000 9.1760 1998 5.1158 1.0000 9.1330 1999 5.1158 1.0000 9.1100 2000 5.5032 1.0000 8.6660 2001 5.5032 1.0000 8.4330 2002 5.5032 1.0000 8.4870 2003 5.7530 1.0000 8.4490 Property Tax Rates: Expressed as mills per $1,000 of taxable value. Source: Pinellas County Property Appraiser (a) A separate taxing district established by referendum which affects only downtown properties. (b) "Other" includes Pinellas County Planning Council 0.0225; Juvenile Welfare Board 0.8117; SW Florida Water Management District 0.4220; Pinellas Anclote River Basin 0.4000. 126 TABLE V Emergency Transit Medical County District Services Other Total 5.4290 0.6697 0.8500 1 .1820 23.3285 5.5850 0.6697 0.8720 1.4221 24.0236 5.5140 0.6697 0.8060 1.6308 24.0653 5.5100 0.6697 0.7520 1.6561 23.8796 5.5380 0.6697 0.7410 1.6561 23.8536 5.5380 0.6501 0.7130 1.6561 23.7830 5.8540 0.6501 0.6470 1.6572 23.9775 6.0040 0.6501 0.7470 1.6562 23.9935 6.1410 0.6501 0.6600 1.6562 24.0975 6.1410 0.6319 0.6600 1.6562 (b) 24.2911 Operating Debt Service Road Capital Improvements Comm. Redevelopment Agency Total City Tax 2003 5.2169 0.1299 0.3452 0.0610 5.7530 2002 4.9638 0.1383 0.3452 0.0559 5.5032 127 TABLE VI City of Clearwater, Florida Principal Taxpayers September 30, 2003 Percentage Type of Assessed to Total Taxpayer Business Value * Assessed Value Bellwether Prop. LP Ltd. Shopping Center $ 91,974,300 1.65% California State Teachers Apartment Complex 27,600,000 0.49% Taylor, John S. III Landowner 27,401,700 0.49% Weingarten Nostat Inc. Shopping Center 24,939,600 0.45% Sand Key Association Ltd. Hotel 24,000,000 0.43% Clearwater Land Co. Adult Congregate Facility 23,848,700 0.43% St. Joe Co Office Building 23,549,300 0.42% Northwood Plaza Shopping Center 22,309,100 0.40% ZOM Bays ide Arbors Ltd. Apartment Complex 19,268,000 0.35% Furnary, Stephen J. Apartment Complex 19,200,000 0.34% Sub-Total 304,090,700 5.45% All Others 5,276,066,950 94.55% Total $ 5,580,157,650 100.00% * Based on non-exempt real property assessed taxable values. Source: Pinellas County Property Appraiser, 2002 tax rolls for 2003 collections. 128 TABLE VII City of Clearwater, Florida Ratio of Net General Bonded Debt to Taxable Assessed Value And Net Bonded Debt Per Capita Last Ten Fiscal Years Ratio of Net Net Taxable Gross Net General General Fiscal Assessed General Less General Bonded Debt Bonded Year Population Value (a) Bonded Sinking Bonded To Assessed Debt (000) Debt Fund Debt Value Per Capita 1993 100,768 $4,188,105 $ 635,000 $ 286,522 $ 348,478 0.008% $ 3.46 1994 100,604 4,181,314 545,000 302,300 242,700 0.006% 2.41 1995 101,162 4,186,108 450,000 316,403 133,597 0.003% 1.32 1996 101,867 4,252,433 355,000 333,402 21,598 0.001 % 0.21 1997 102,472 4,376,559 255,000 90,000 165,000 0.004% 1.61 1998 102,874 4,494,262 135,000 101,250 33,750 0.001 % 0.33 1999 104,281 4,692,398 (b) n/a 0.00 2000 104,454 4,903,478 n/a 0.00 2001 108,787 5,208,787 n/a 0.00 2002 109,231 5,688,426 n/a 0.00 2003 109,719 6,105,078 n/a 0.00 (a) Values listed are for year of collections. (b) Final maturity of General Obligation Bonds, 1978 Series, was January 1, 1999, in the amount of $135,000. 129 TABLE VIII City of Clearwater, Florida Ratio of Annual Debt Service Expenditures For General Obligation Bonded Debt To Total General Governmental Expenditures (a) Last Ten Fiscal Years Ratio of Total Debt Service Total General to General Fiscal Debt Governmental Governmental Year Principal Interest (b) Service Expenditures (a) Expenditures 1994 $ 90,000 $ 33,615 $ 123,615 $ 67,866,196 0.2% 1995 95,000 28,816 123,816 77,415,953 0.2% 1996 95,000 23,114 118,114 89,267,377 0.1% 1997 100,000 17,580 117,580 88,292,148 0.1% 1998 120,000 11,280 131,280 87,335,517 0.2% 1999 135,000 3,915 138,915 92,994,039 0.1% 2000 0 0 0 96,596,552 0.0% 2001 0 0 0 125,873,093 0.0% 2002 0 0 0 116,986,373 0.0% 2003 0 0 0 137,184,432 0.0% (a) Includes operating and capital outlay expenditures of all governmental funds. (b) Excludes bond issuance and other costs. 130 City of ClealWater, Florida Computation of Legal Debt Margin September 30, 2003 Assessed Valuation of Non-Exempt Real Estate (a) Times: Twenty Percent Limitation Per City Charter Equals Legal Indebtedness Limitation Debt SUbject to Indebtedness Limitation' Revenue Bonds: 1996A Gas System Revenue Bonds 1997 Gas System Revenue Bonds 1998 Gas System Revenue Bonds 1993 Water and Sewer Revenue Bonds 1998 Water and Sewer Revenue Bonds 2002 Water and Sewer Revenue Bonds 1999 Stormwater system Revenue Bonds 2002 Storrnwater system Revenue Bonds 2001 Infrastracture Sales Tax Revenue Bonds 2001 Improvement Revenue Refunding Bonds 2002 Spring Training Revenue Bonds Notes, Mortgages and Contracts Totals Legal Indebtedness Margin Gross Debt Less Sinking Fund Assets $ 8,270,000 11,870,000 7,860,000 14,005,000 51,924,771 58,680,000 7,150,000 24,685,000 41,345,000 11,005,000 14,645,000 13,746,259 265,186,030 7,917 43,750 2,917 9,496,000 1,561,045 4,268,135 119,167 403,333 4,391,667 1,105,310 268,333 21,667,574 (a) Valuation listed is from 2002 tax year for 2003 collections. City of ClealWater, Florida Computation of Direct and Overlapping Debt September 30, 2003 TABLE IX $ 5,580,157,650 x 20% 1,116,031,530 Net Debt Subject to Limitation 8,262,083 11,826,250 7,857,083 4,509,000 50,363,726 54,411,865 7,030,833 24,281,667 36,953,333 9,899,690 14,376,667 13,746,259 243,518,456 $ 872,513,074 TABLE X Net General Obligation Debt Govemmental Unit Outstanding Percent Amount City of Clearwater $ 100.0% $ Pinellas County School Board $ 66,895,235 13.6% (a) $ 9,097,752 (a) Applicable Net Debt Percentage is based on ratio of City to County Taxable values for 2003 collections ($5,580,157,650 I $41,167,093,480=13.6%). 131 TABLE XI City of Clearwater, Florida Water and Sewer Revenue Bonds Coverage Last Ten Fiscal Years Net Revenues Fiscal Gross Available for Year Revenues (a) Expenses (b) Debt Service 1994 $ 32,529,074 $ 17,824,720 $ 14,704,354 1995 33,058,297 18,495,960 14,562,337 1996 34,814,929 22,311,433 12,503,496 1997 35,816,439 23,417,605 12,398,834 1998 36,311,233 24,608,494 11,702,739 1999 35,850,799 24,806,085 11,044,714 2000 37,406,823 25,882,873 11,523,950 2001 39,485,997 27,336,550 12,149,447 2002 39,452,012 28,551,889 10,900,123 2003 40,243,263 29,610,534 10,632,729 Debt Service Requirements Fiscal PrinclpaVSlnking Debt Service Year Fund Interest Total Coverage 1994 $ 2,880,000 $ 3,916,263 $ 6,796,263 2.16 1995 3,760,000 3,380,470 7,140,470 2.04 1996 3,990,000 3,186,295 7,176,295 1.74 1997 4,140,000 3,038,845 7,178,845 1.73 1998 4,305,000 2,869,738 7,174,738 1.63 1999 4,500,000 2,083,179 6,583,179 1.68 2000 4,705,000 1,581 ,403 6,286,403 1.83 2001 4,920,000 1 ,358,690 6,278,690 1.94 2002 5,165,000 1 ,117,880 6,282,880 1.73 2003 5,430,000 3,334,202 8,764,202 1.21 (a) Includes interest eamings and gross revenues of Water and Sewer Divisions of Utility System. Extraordinary gain and contributed revenues are excluded. (b) Excludes depreciation (and similar noncash expenses), amortization of bond discount and issue costs, bond interest, sinking fund and reserve requirements and extraordinary loss. Note: In April, 1993, the City issued $53,445,000 Refunding Revenue Bonds to finance the cost of refunding entirely the series 1988A and 1988B bonds. In November, 1998, the City issued $43,642,690 Refunding Revenue Bonds to finance the cost of refunding entirely the series 1988 bonds. In July, 2002, the City issued $58,680,000 revenue bonds for the purpose of paying the costs of capital improvements to the City's water, wastewater collection, water pollution control and reclaimed water systems. 132 Fiscal Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Gross Revenues (a) $ 13,316,619 13,672,905 16,423,147 17,779,715 19,438.030 18,772,104 21,533,228 31,211,839 27,218,076 30,372,858 TABLE XI City of Clearwater, Florida Gas Revenue Bonds Coverage Last Ten Fiscal Years Expenses (b) $ 10,220,164 10,555,346 13,199,962 14,124,064 14,975,445 14,701,728 16,462,986 24.575,414 20,664,704 23,729,436 Net Revenues Available for Debt Service $ 3,096,455 3,117,559 3,223,185 3,655,651 4,462,585 4,070,376 5,070,242 6,636,425 6,553,372 6,643,422 Maximum Debt Debt Service Requirements Service Principal Interest Total Coverage Coverage(c) $ $ 488,020 $ 488,020 6.34 1.74 150,000 978,195 1,128,195 2.76 1.75 240,000 1,052,923 1,292,923 2.49 1.81 320,000 1,454,765 1,774,765 2.06 2.06 455,000 1,379.358 1,834,358 2.43 2.05 540,000 1,564,891 2,104.891 1.93 1.87 560,000 1 ,543,494 2,103,494 2.41 2.33 580,000 1,518,713 2,098,713 3.16 3.05 610,000 1 ,494,887 2,104,887 3.11 3.01 630,000 1,469,679 2,099,679 3.16 3.05 Includes Interest earnings and gross revenues from Gas System. Fiscal Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 (a) (b) Excludes depreciation (and similar noncash expenses), amortization of bond discount and issue costs, bond interest, and reserve adjustments. (c) Maximum debt service coverage is presented for continuing disclosure on the Gas System Revenue Bonds, and is based upon the maximum debt service for the outstanding bonds and parity bonds. For fiscal 2003 the maximum debt service totals $ 2,176,810. Note: In September, 1994, the City issued $8,110,000 Gas System Revenue Bonds, Series 1994A, for additions, extensions, supplements or replacements of the existing gas system in Pinellas County, Florida. Approximately $1,340,000 was to be used to develop new gas markets. In July, 1996, the City Issued $8,815,000 Gas System Revenue Bonds, Series 1996A, for additions and extensions to the gas system in Pinellas County and Pasco County, Florida, as well as supplements and replacements of the existing gas system in Pine lias County, Florida. During October 1997 the City issued $ 7,895,000 Gas System Revenue Bonds, Series 1997A, for additions extensions, supplements, or replacements of the existing gas system within Pinellas and Pasco Counties. Also during October 1997 the City issued $6,710,000 Gas System Revenue Refunding Bonds, Series 1997B, to advance refund the Gas system Revenue Bonds, Series 1991. During January 1998 the City issued $ 8,020,000 Gas System Revenue Bonds, Series 1998, to advance refund the Gas System Revenue Bonds, Series 1994A. 133 TABLE XI Fiscal Year 2000 2001 2002 2003 Fiscal Year 2000 2001 2002 2003 City of Clearwater, Florida Stormwater Revenue Bonds Coverage Four Fiscal Years Since Issuance Debt Service Requirements PrincipaVSinklng Fund Gross Revenues (a) $ 4,938,338 5,323,293 6,846,086 8,660,373 Expenses (b) $ 3,183,260 3,608,281 3,957,577 4,727,187 Net Reven ues Available for Debt Service $ 1,755,078 1,715,012 2,888,509 3,933,186 $ Total 185,225 504,593 515,093 1 ,229,070 Debt Service Coverage 9.48 3.40 5.61 3.20 Interest 185,225 399,593 395,093 1,104,070 (a) Includes interest earnings and gross revenues of the Stormwater Utility System Fund. Extraordinary gain and contributed revenues are excluded. $ $ (b) Excludes depreciation (and similar noncash expenses), amortization of bond discount and issue costs, bond interest, sinking fund and reserve requirements, and extraordinary loss. 105,000 120,000 125,000 Note: In November 1999 the City issued $7,500,000 Stormwater System Revenue Bonds for the purpose of paying the costs of capital improvements to the City's stormwater management system. In September 2002 the City issued $24,685,000 Stormwater Revenue Bonds for the purpose of paying the costs of capital improvements to the City's stormwater management system. Consequently only four years of data are available as of September 30, 2003. TABLE XI Fiscal Year 2001 2002 2003 City of Clearwater, Florida Infrastructure Sales Tax Revenue Bonds Coverage Three Fiscal Years Since Issuance Sales Tax PrinclpaVSinking Revenues (a) Fund Interest Total $ 8,339,694 $ $ $ 8,457,553 1,983,688 1,983,688 8,661,615 5,100,000 1,881,688 6,981,688 Debt Service Requirements Debt Service Coverage n/a 4.26 .1.24 (a) City's share of the revenues derived by Pinellas County, Florida from the levy and collection of a one-cent discretionary infrastructure sales surtax pursuant to Section 212.055(2), Florida Statutes, as amended. Note: During June 2001 the City issued $46,445,000 Infrastructure Sales Tax Revenue Bonds, Series 2001, for the purpose of paying the costs of certain capital improvements to the City, including, but not limited to, costs relating to road and bridge projects and a new main public library. Consequently only three years of data are available as of September 30, 2003. 134 TABLE XI City of Clearwater, Florida Spring Training Facility Revenue Bonds Coverage Three Fiscal Years (a) Fiscal Year Pledged Revenues (b) Debt Service Requirements Principal/Sinking Fund (a) Interest Total Debt Service Coverage n/a n/a 2001 2002 2003 $ 647,912 $ 1,147,925 1,114,681 $ $ 165,000 629,080 794,080 1.40 (a) Though fiscal 2002 was the year of issuance, fiscal year 2001 is disclosed as the first year that pledged revenues were received for debt service coverage. (b) Includes interest eamings and payments received by the City from the State of Florida pursuant to Section 212.20, Florida Statutes: and from Pinellas County, Florida, pursuant to an inter-local agreement dated December 1, 2000. Note: In September 2002 the City issued $14,810,000 Spring Training Facility Revenue Bonds forthe purpose of building a spring training facility for the Philadelphia Phillies. The City started receiving the money from both the State of Florida and Pinellas County commencing March 2000; consequently only three years of data is available as of September 30, 2003. City of Clearwater, Florida Improvement Revenue Refunding Bonds Coverage Two Fiscal Years Since Issuance Debt Service Requirements Fiscal Pledged Principal/Sinking Debt Service Year Revenues (a) Fund Interest Total Coverage 2002 $ 18,272,521 $ 110,000 $ 407,537 $ 517,537 35.31 2003 17,381,418 350,000 506,435 856,435 20.30 (a) The Improvement Revenue Refunding Bonds, Series 2001, were issued October 15, 2001 in the amount of $11,470,000. They were secured by a lien upon and a pledge of the Public Service Tax pursuant to Section 166.231, Florida Statutes as amended. Effective October 1, 2001, the Florida Legislature repealed the public service tax on telecommunications created per Section 166.231 (9), Florida Statutes, and created a simplified tax structure for communications services pursuant to Chapter 2000-260, Laws of Florida. To the extent that the Public Service Tax receipts derived by the City pursuant to Section 166.231 (9), Florida Statutes, is eliminated as a result of this new tax, all of the revenues received by the City pursuant to the new Communications Services Tax shall be deemed to replace the Public Service Tax receipts so eliminated. Consequently the pledged revenues include both public service taxes and communications services taxes effective October 1, 2001. Note: During October 2001 the City issued $11,470,000 Improvement Revenue Refunding Bonds, Series 2001, for the purpose of providing a portion of the funds necessary to defease the City's outstanding Florida Public Service Tax and Bridge Revenue Bonds, Series 1985, and Improvement Revenue Bonds, Series 1995. 135 TABLE XII City of Clearwater, Florida Property Value and Construction Last Ten Fiscal Years Commercial Construction Residential Construction Fiscal Number of Number of Total Assessed Year Permits Value Permits Value Property Value (a) 1994 1,077 $ 66,558,783 4,662 $ 21,151,330 $ 5,572,851,512 1995 1,391 120,116,220 5,832 27,199,318 5,641,202,905 1996 1,860 43,299,453 6,527 32,039,292 5,733,193,387 1997 1,762 94,445,784 6,605 36,259,408 5,884,592,007 1998 1,392 52,983,592 7,253 50,906,470 6,049,571,226 1999 1,821 90,770,055 5,624 37,677,855 6,349,561,534 2000 2,667 177,569,812 5,485 30,376,636 6,555,350,175 2001 2,312 164,701,145 5,512 34,182,620 7,108,110,272 2002 2,196 108,939,096 5,448 37,498,719 7,858,986,677 2003 1,834 193,901,304 6,084 54,304,855 8,556,134,526 (a) Source: Pinellas County Property Appraiser, values listed are for year of collections. 136 TABLE XIII City of Clearwater, Florida Demographic Statistics Last Ten Fiscal Years Per Capita Median School Unemployment Year Population (a) Income (b) Age (c) Enrollment (d) Rate (e) 1994 100,604 $ 22,148 42.9 10,043 5.5 % 1995 101,162 23,412 42.2 10,284 4.8 1996 101,867 23,768 42.1 11,960 4.2 1997 102,472 25,111 43.3 15,264 3.7 1998 102,874 26,287 43.6 13,714 2.9 1999 104,281 27,704 43.9 14,551 3.0 2000 104,454 29,041 44.2 15,978 2.7 2001 108,787 29,818 43.0 16,293 2.7 2002 109,231 31,406 43.0 17,047 3.9 2003 109,719 32,408 43.9 16,295 4.9 (a) Source is the University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (b) Data is for Pinellas County. Source isthe University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (c) Source is the University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (d) Source of data is the Pinellas County School District. (e) Source is the University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003, as of December 31 51 of the current fiscal year. Note: Data is the latest published annual data available for an unspecified point in each year, not specifically September 30. 137 TABLE XIV Date of Incorporation: Town of Clearwater Municipal Corporation June 2, 1897 May 27, 1915 Form of Government: Commission - Mayor Fiscal Year: October 1 - September 30 Population: U.S. Bureau of the Census Area: Land Water 1930 1940 1950 1960 1970 1980 1990 2000 Clearwater 7,607 10,136 15,581 34,653 52,074 85,170 98,784 108,787 25.4 Square Miles 8.6 Square Miles Public Works: Streets: Paved Unimproved Sanitary Sewers: Sanitary Sewer Mains Storm Sewer Mains Treatment Plants Daily Capacity Water: Mains Accounts Fire Hydrants Gas: Mains Accounts 304 Miles 10 Miles City of Clearwater, Florida Miscellaneous Facts September 30, 2003 Tampa Bay Metro Area 231,190 291,622 436,365 820,443 1,105,553 1 ,613,603 2,067,959 2,395,997 363 Miles 147 Miles 3 29 Million Gallons 559 Miles 40,227 4,042 686 Miles 17,275 Public Safety: Police Protection: Stations Employees Fire Protection: Stations Employees Total Municipal Employees Libraries: Branches (including main library) Collection Marina Airpark Recreational Facilities: Parks Playgrounds Golf Courses Beach Ballfields Tennis Basketball Horseshoe Soccer and Football Handball Swimming Pools Stadium Recreation Centers Special Recreation Facilities Recreational Paths Lawn Bowling Shuffleboard Fitness Courses Disc Golf Courses 138 9 399 7 200 1,851 5 556,966 209 Boat Slips 177 Spaces 1,130 Acres 31 3 Courses 42 Acres 36 Diamonds 64 Courts 22 Courts 24 Courts 17 Fields 10 Courts 5 Pools 6,917 Seats 12 32 7.4 Miles 24 Rinks 62 Courts 8 2 Single Audit I Grants Compliance 139 Grant Thornton e Accountants and Business Advisors REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor - Commissioner, City Commissioners and City Manager City of Clearwater, Florida We have audited the financial statements of the governmental activities. the business-type activities, each major fund, and the aggregate remaining fund information of the City of Clearwater, Florida (the City), as of and for the year ended September 30,2003, which collectively comprise the City's basic financial statements. We have also audited the financial statements of each of the City's nonmajor govemmental, nonmajor enterprise, intemal service and fiduciary funds presented as supplementary information in the accompanying combining and individual fund financial statements as of and for the year ended September 30, 2003, and have issued our report thereon dated January 16, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Comoliance As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, . contracts and grants, noncompliance with which could have a direct and material effect on the determination of the City's 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. Internal Control Over Financial Reoortino In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the City's financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters inVOlving the intemal control over financial reporting that we have reported to management in a separate letter dated January 16, 2004. This report is intended solely for the information of the Mayor-Commissioner, City Commissioners, City Manager, management, federal awarding agencies, pass-through entities, and State of Florida program officials and is not intended to be, and should not be, used by anyone other than these specified parties. ~ ~ LLfJ Tampa, Florida January 16, 2004 Suite 3850 101 E. Kennedy Blvd Tampa, FL 33602-5152 T 813.229.7201 F 813.223.3015 W www.grantthornto~.com Grant Thornton LLP US Member of Grant Thornton International 141 Grant Thornton m Accountants and Business Advisors REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 AND CHAPTER 10.550, RULES OF THE AUDITOR GENERAL Honorable Mayor - Commissioner, City Commissioners and City Manager City of Clearwater, Florida Compliance We have audited the compliance of the City of Clearwater, Florida (the "City") with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement and the requirements described in the Executive Office of the Governor's State Project Compliance Supplement that are applicable to each of its major federal programs and major state projects for the year ended September 30, 2003. The City's major federal programs and major state projects are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs and major state projects is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and Chapter 10.550, Rules of the Auditor General. Those standards, OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or major state project occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs and major state projects for the year ended September 30, 2003. The results of our auditing procedures disclosed no instances of noncompliance that are required to be reported in accordance with OMS Circular A-133 or Chapter 10.550, Rules of the Auditor General. Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs and state projects. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program or major state project in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General. Suite 3850 101 E. Kennedy Blvd Tampa, FL 33602-5152 T 813.229.7201 F 813.223.3015 VI www.grantthornton.com Grant Thornton UP US Member of Grant Thornton International 143 Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program or major state project being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information of the Honorable Mayor-Commissioner, City Commissioners, City Manager, management, federal awarding agencies, pass-through entities and State of Florida program officials and is not intended to be, and should not be, used by anyone other than these specified parties. ~ 1J-.t.. LLP Tampa, Florida January 16, 2004 145 City of Clearwater, Florida Schedule of Expenditures of Federal Awards and State Financial Assistance For the year ended September 30, 2003 Federal Grantor I Program Federal Pass-through Grantor I CFDNCSFA or Award Share of Program Title Number Grant I.D. Number Amount (a) Expenditures FEDERAL AWARDS U.S. Department of Commerce: Economic Development Adminstration North Greenwood Planning 11.307 04-69-04764 $ 35,000 $ 9,717 Total U.S. Department of Commerce 35,000 9,717 U.S. Department of Housing and Urban Development (HUD): Passed through Clearwater Housing Authority: Homer Villas 14.193 FL 14DEP07501 01 142,501 47,459 Community Development Block Grant - Entitlement 14.218 B-01-MC-12-0002 15,500,000 932,652 Passed through Pinellas County: Home Investment Partnerships Program 14.239 M-01-MC-12-0230 4,232,914 Beach by Design Initiative 14.246 B-02-SP-FL-0129 490,000 165,805 Total U.S. Department of HUD 20,365,415 1,145,916 U.S. Department of the Interior, National Park Service: Passed through Florida Department of State Division of Historical Resources: Downtown Clearwater Design Guidelines 15.904 FEID #59-60001874 F0216 10,000 5,000 Total U.S. Department of the Interior 10,000 5,000 U.S. Department of Justice: Neighborhood PoliCing Initiative for the Homeless 16.580 2001-DD-BX-0056 997,800 409,137 Local Law Enforcement Block Grant '02 16.592 2001-LB-BX-1821 245,829 124,406 Local Law Enforcement Block Grant '03 16.592 2002-LB-BX-0113 203,782 Weed & Seed 2001 16.595 200o-WS-QX-0041 175,000 1,441 Weed & Seed Asset Forfeiture '01 16.595 200o-WS-QX-0041 50,000 2,114 Federal Forfeiture Sharing N1A N1A 240,888 40,883 Community Oriented Policing Services (COPS) Universal Hiring Award 16.710 96UMWX0784 1,275,000 COPS Technology 16.710 2001 CKWXOO35 748,350 634,510 Bullet Proof Vests 16.607 02010017 720 720 Dept of Justice passed through State of Florida Attorney General's Office: VOCA Grant 16.575 V1123 34,910 VOCA Grant 16.575 V2092 34,510 34,510 Dept of Justice Passed through Florida Department of Law Enforcement, Byrne Formula Grant Program: Project Next Step 16.579 01-CJ-J1-D8-62-02-058-01 78,500 Operacion Apoyo Hispano 16.579 02-CJ-2H-08-62-02-147 65,000 18,084 Operacion Apoyo Hispano 16.579 03-CJ-5A-08-62-D2-022 68,794 48,521 Total U.S. Department of Justice 4,219,083 1 ,314,326 146 City of Clearwater, Florida Schedule of Expenditures of Federal Awards and State Financial Assistance - Continued For the year ended September 30, 2003 Federal Grantor / Pass-through Grantor / Program Title CFDAlCSFA Number Grant 1.0. Number Program or Award Amount (a) Federal Share of Expend~ures U.S. Department of Transportation: Passed thru Florida Dept of Transportation: Clearwater Beach West Bridge Connector 20.205 Federal No. 9045-019C,Contract #AI 915 689,775 361,029 McMullen Booth Road Overpass 20.205 Federal No. 9045-018C,Contract #A916 400,000 193,200 Clearwater Pedestrian / Bicycle Coordinator 20.600 Contract AN21 0 52,787 33,470 Clearwater OUt Enforcement 20.600 Project #AL-03-05-05/ DOT #AM668 36,000 36,000 Total U.S. Department of Transportation 1 ,178.562 623.699 U.S. Environmental Protection Agency: Passed thru Florida Dept of Environmental Protection: Alligator's Creek 66.460 DEP Contract #WM781 242,000 22,000 Brownfield - Federal 66.811 BP-98405396-4 50,000 36,728 Brownfield - Federal 66.811 BP98405396-3 150,000 Brownfield - Federal 66.811 BP-98405396-2 100,000 Brownfield - Federal 66.811 BP98405396-1 100,000 Brownfield - Federal 66.811 V-98405396-0 100,000 Brownfield - Federal 66.811 BL984872-99-0 500,000 9,300 Vulnerability Assessment 66.476 HS-82988401 115,000 33,046 Total U.S. Environmental Protection Agency 1,357,000 101,074 Total Federal Financial Assistance $27,165,060 $ 3,199,732 147 City of Clearwater, Florida Schedule of Expenditures of Federal Awards and State Financial Assistance. Continued For the year ended September 30, 2003 State Grantor I Pass-through Grantor I Program TiUe Grant I.D. Number Program or Award Amount (a) CFDAlCSFA Number STATE FINANCIAL ASSISTANCE Florida Executive Office of the Governor, Office of Tourism, Trade, and Economic Development: Brownfield Grant Total Rorida Executive Office of the Governor 31.011 V 984053-96-0 $ 600,000 $ 600,000 Florida Department of Environmental Protection: Waste Tire Grant 37.015 WT97 -52 14,707 37.017 FRDAP Grant F-01330 150,000 Dep Contract #F1330 37.017 DEP 0334 200,000 37.039 WAP051 400,000 37.039 WAP050 2,500,000 3,264,707 Cliff Stephens Park Florida Recreation Development Assistance Program Eddie C. Moore Softball Town Pond Stevenson Creek Water Quality State Share of Transfers to Expenditures (b) Subrecipients (c 15,894 $ 15,894 14,699 68,170 400,000 275,000 Total Department of Environmental Protection Florida Department of State, Secretary of State: Division of Library & Information Services North Greenwood Branch Library Project #01-PLC-09 45.030 300,000 120,000 Total Florida Department of State, Secretary of State 300,000 Rorida Housing Finance Corporation: State Housing Initiative Partnership Program (SHIP) 52.901 6,578,591 50,949 Total Florida Housing Finance Corporation 6,578,591 Florida Department of Community Affairs: Historic Bayview Environmental Park 52.002 FCT #02-CT-5H-01-F1-A1-144 1,726,875 FCT#01-144-FFI 1,726,875 55.004 WPII40300619401 Contract AI076 300,000 55.004 FM403oo618401 250,000 55.004 FM40300618401 668,800 55.004 WP#40299118401 Contract AI 20,745 55.004 WPI#40297918401 Contract#} 50,000 55.004 WPI#40297918401 Contract#} 59,964 55.004 WPI#40297918401 Contract#} 100,000 55.004 WP40298619401 Contract AJi 175,000 55.004 WP40298619401 Contract AJi 280,000 55.004 FM#40299319401 70,000 1,974,509 148 Total Department of Community Affairs Rorida Department of Transportation (FDOT): T -Hangars T-Hangars T-Hangars Declared Distance Airpark Master Plan Airpark Master Plan Airpark Master Plan Runway Overrun & BERM Runway Overrun & BERM Security Upgrade 757,869 120,000 2,419,616 50,949 2,419,616 1,726,875 1,726,875 100,591 372,262 40 Total Department of Transportation 472,893 State Grantor I Pass-through Grantor I Program Tille Florida Department of Law Enforcement: Violent Crime Investigative Emergencies City of Clearwater, Florida Schedule of Expenditures of Federal Awards and State Financial Assistance - Continued For the year ended September 30, 2003 CFDA/CSFA Number Grantl.D. Number 71.005 109701 Total Florida Department of Law Enforcement Florida Department of Revenue: Phillies Stadium Total Florida Department of Revenue 73.016 Total State Financial Assistance Total Expenditures of Federal Awards and State Financial Assistance (a) Includes awards under prior year grants, which remain active. (b) Funded with State grants and aids appropriations. (c) State projects only. 149 Program or Award Amount (a) State Share of Transfers to Expenditures (b) Sub recipients (c: 45,000 14,158 45,000 14,158 15,000,000 795,285 15,000,000 795,285 $ 29,489,682 $ 6,322,590 $ 50,949 $ 9,522,322 City of Clearwater, Florida NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE Year ended September 30,2003 NOTE 1 - BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards and state financial assistance includes the federal and state grant activity for City of Clearwater, Florida and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations and Chapter 10.550, Rules of the Auditor General. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the financial statements. NOTE 2 - CFDAlCSFA NUMBER CFDA numbers represent Catalog of Federal Domestic Assistance and apply only to Federal Awards. CSFA numbers represent Catalog of State Financial Assistance and apply only to State Financial Assistance. 150 City of Clearwater, Florida SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended September 30, 2003 SECTION I - SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued (unqualified, qualified, adverse, disclaimer). Internal Control Over Financial ReportinQ: Material weaknesses identified Reportable conditions identified that are not considered to be a material weakness Noncompliance material to financial statements noted? Federal Awards Internal control over major programs: Material weaknesses identified? Reportable conditions identified that are not considered to be a material weakness Type of auditor's report issued on compliance for major programs (unqualified, qualified, adverse, disclaimer). Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Identification of major programs: Federal Programs CFDA Numbers 14.218 16.710 20.205 Name of Federal Program or Cluster Community Development .Block Grant COPS Technology Clearwater Beach West Bridge Connector State Project CSFA Numbers 37.039 52.002 52.901 55.004 Name of State Project Town Pond Historic Bayview Environmental Park State Housing Initiative Partnership Program Runway Overrun & BERM Dollar threshold used to distinguish between type A and type B programs. Auditee qualified as a low risk auditee for Federal single audit purposes? Auditee qualified as a low risk auditee for State single audit purposes? 151 Yes Yes Yes Yes Yes Yes l Yes -X.. Yes l No l No l No l No -X.. No l No $300.000 No No City of Clearwater, Florida SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended September 30, 2003 SECTION 11- FINANCIAL STATEMENT FINDINGS NONE SECTION 111- FEDERAL AWARD FINDINGS AND QUESTIONED COSTS NONE SECTION IV - OTHER ISSUES · No summary schedule of prior audit findings is required because there were no prior audit findings related to Federal Programs or State Projects. · No corrective action plan is required because there were no findings required to be reported under the Federal or State single audit acts. 152 Grant Thornton ~ Accountants and Business Advisors MANAGEMENT LETTER REQUIRED BY SECTION 10.554(1)(g) OF THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA Honorable Mayor-Commissioner, Commissioners and City Manager City of Clearwater, Florida We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Clearwater, Florida (the City), as of and for the year ended September 30,2003, which collectively comprise the City's basic financial statements. We have also audited the financial statements of each of the City's nonmajor governmental, nonmajor enterprise, internal service and fiduciary funds presented as supplementary information in the accompanying combining and individual fund financial statements as of and for the year ended September 30, 2003, and have issued our report thereon dated January 16, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We have issued our Report of Independent Certified Public Accountants on Compliance and on Internal Control over Financial Reporting. Disclosures in that report, if any, which is dated January 16, 2004 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. Those rules (Section 10.554(1 )(g)1.a.) require that we address in the management leUer, if not already addressed in the auditor's reports on compliance and internal controls or schedule of findings and questioned costs, whether or not inaccuracies, shortages, defalcations, fraud and/or violations of laws, rules, regulations and contractual provisions reported in the preceding annual financial audit report have been corrected. There were no inaccuracies, irregularities, shortages, defalcations and/or violations of laws, rules, regulations and contractual provisions disclosed in the preceding annual report. The Rules of the Auditor General (Section 10.554(1)(g)1.b.) require that we address in the management letter, if not already addressed in the auditor's reports on compliance and internal controls or schedule of findings and questioned costs, whether or not recommendations made in the preceding annual financial audit report have been followed. The current status of the recommendations made in the preceding annual financial report are included under the heading "Current Year Status of Prior Year Comments." As required by the Rules of the Auditor General (Section 10.554(1)(g)2.), the scope of our audit included 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 City complied with Section 218.415, Florida Statutes. The Rules ofthe Auditor General (Section 10.554 (1) (g) 3.) require disclosure in the management letter of any recommendations to improve financial management, accounting procedures and internal controls. Recommendations for improvement are noted beginning on page 155. The Rules of the Auditor General (Section 10.554 (1) (g) 4.) require disclosure in the management leUer of the following matters if not already addressed in the auditor's reports on the internal control structure or compliance: there were no violations of laws, rules, regulations and contractual provisions which mayor may not materially affect the financial statements that were discovered during the audit; there were no illegal or improper expenditures which mayor may not materially affect the financial statements that were discovered during the audit; there were no improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements) that were discovered during the audit; there were no failures to properly record financial transactions, or other inaccuracies, irregularities, shortages, or defalcations discovered by the auditor. Suite 3850 101 E. Kennedy Blvd Tampa. FL 33602-5152 T 813.229.7201 F 813.223.3015 W www.grantthornton.com Grant Thornton LLP US Member of Grant Thornton International 153 The Rules of the Auditor General (Section 10.554 (1) (g) 5.) also require that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. The City, located in Pinellas County, Florida, was incorporated in June 1923. The legal authority by which the City was created and is governed is its charter, which was derived from Chapter 9710 Special Laws of Florida, as amended. The Clearwater Redevelopment Agency (CRA), a blended component unit of the City of Clearwater, Florida, was created by authority of Florida Statute Chapter 163, Part III, and the City of Clearwater Resolution 81.68. The Clearwater Downtown Development Board, a discretely presented component unit of the City of Clearwater, Florida, was created by authority of Florida Statutes 70-635 and 77-637 and City Ordinance 5347-93. As required by the Rules of the Auditor General (Section 10.554 (1) (g) 6a.), the scope of our audit included a review of the provisions of Section 218.503 (1), Florida Statutes, Determination of Financial Emergency. In connection with our audit, we determined that the City of Clearwater, Florida, is not in a state of financial emergency as a consequence of the conditions described by Section 218.503(1), Florida Statutes. The financial condition assessment procedures pursuant to Rule 10.556 (8) were applied in this determination. As required by the Rules of the Auditor General Section 10.554 (1 )(g) 6b.), we determined that the annual financial report for the City of Clearwater, Florida for the fiscal year ended September 30, 2003, that was filed with the Department of Banking and Finance 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, 2003. As required by the Rules of the Auditor General (Section 10.554(1 )(g)6.c.1. and 6.c.2.), the auditor applied financial condition assessment procedures pursuant to Rules of the Auditor General 10.566(8). The City of Clearwater, Florida does not have deteriorating conditions as defined in Section 11.45(3}(a) 8, Florida Statutes. This management letter is intended solely for the information of the City of Clearwater, Florida and management and the State of Florida Office of the Auditor General and is not intended to be, and should not be, used by anyone other than these specified parties. ~ ~ ~LI Tampa, Florida January 16, 2004 154 CURRENT YEAR COMMENTS WATER/SEWER RATE Observation: During our testing of the utility cash receipts, we noted that the rate charged for water/sewer was less then the City Ordinances established rate on certain sampled items. Upon further review, it w~s discovered that this was due to inconsistencies in customer account billing codes. Recommendation: We recommend that consideration be given to establishing an information technology control that allows only the established City ordinance rates to be charged. Management Response: Management concurs and has created an exception report that identifies these billing inconsistencies on a monthly basis for review and correction. YEAR-END ADJUSTMENTS - GENERAL FIXED ASSET ACCOUNT GROUP Observation: During our testing of the General Capital Assets, we noted that additions related to certain capital improvement funds were not accurately reflected. This was due to year-end adjustments within the capital improvement funds that were not reflected within the General Capital Assets. Recommendation: We recommend that the City put into place procedures to reconcile the expenditures per the "Program/Project Expenditures and Transfers" report to the General Capital Assets Additions/Deletions Totals for each respective capital improvement fund. This would ensure that all adjustments to the capital improvement funds are also adjusted within the General Capital Assets. Management Response: Management concurs and will add the recommended additional control procedure to ensure that all year-end adjustments are included for all capital improvement funds. CAPITAL ASSET INVENTORY Observation: During our testing of the COPS Technology Grant Revenue/expenditures, we noted a piece of equipment purchased, was not tagged and recorded on the City's fixed asset listing. Recommendation: We recommend that the City implement procedures that require a fixed asset tag to be issued before an entry to a capital code within the general ledger. This will alleviate the risk of the City purchasing fixed assets that are then not recorded on the City's fixed asset inventory. 156 Management Response: Management concurs that this additional control would be desirable if practical, and will review in conjunction with the implementation of a new financial system during fiscal 2004. MAINTENANCE OF CONTRACT FILES Observation: During our testing of the Community Development Block Grant (CDBG), we noted several instances where the construction contract files for contractors performing work under the program were not complete. In addition, we noted that the contract files of the subrecipients for whom construction work was contracted were not complete. Specifically, contract files were missing contracts, signatures executing contracts, certain certifications required for Federal projects of this type, and other miscellaneous documentation. Recommendation: We recommend that the department consider implementing a procedure, such as a completeness checklist, to ensure that contract files are complete. Additionally, we recommend that the department consider monitoring the contract files of its subrecipients to ensure that contract files are complete. Management Response: Management concurs that there needs to be tighter administrative controls in place to assure compliance with all federal labor standards, rules, and regUlations associated with the Housing Division's use of U.S. Department of Housing and Urban (HUD) funds. Management has implemented new policy whereby all disbursement requests involving public facilities/improvements will need to be approved by both the Assistant Director and the Housing Manager prior to expending federal funds. Additionally, management has developed a checklist that will be placed in all new, and current ongoing; public facilities/improvements files that will be signed by each responsible party. This will ensure that all required documentation is included in each file. 157 CURRENT YEAR STATUS OF PRIOR YEAR COMMENTS MORTGAGE RECEIVABLES . Observation: During our testing of the Local Housing Assistance Trust Fund (SHIP) and the Rehabilitation Loan Fund (HOME Program), we noted a significant amount of deferred payment loans receivable. Based upon the nature of these loans (repayment is not required for a specified period of time or until the property is no longer owned or used by the borrower), there is the risk that the original mortgagee could have sold the property or could be renting the property to another person and therefore repayment of the loan would be required. Recommendation: We recommend that the City consider performing periodic reviews of the deferred payment loans, including site visits, if necessary, to ensure that the original mortagee is still listed as the property owner in the County tax collector's records and still occupies the property in accordance with the loan documents and provisions of the City's grant agreements. This will also help ensure the Federal and State funds are being used for allowable costs and activities. Management Response: Management concurs that the monitoring of deferred loans is an important function and believes that it has adequate controls currently in place, including required annual insurance certification of the properties by the mortgagee. Additionally, the State of Florida and U.S. Department of Housing and Urban Development (HUD) monitor the programs on a bi-annual basis, with both reviewing and issuing satisfactory reports on the Housing Division and related loan programs during fiscal 2002. Management will review, on a cost/benefit basis, the recommendation to add a procedure for site visits and will implement site visits during fiscal 2003, if warranted. Current Status: The City stands behind its position that the annual insurance certification process is a reasonable and effective mechanism to ensure that the properties are still inhabited by the appropriate parties. 158 APPENDIX C CONFORMED COPY OF AMENDED ORDINANCE ORDINANCE NO. 6931-02 AN ORDINANCE OF THE CITY OF CLEARWATER, FLORIDA, AMENDING ORDINANCE NO. 6378-99 TO AUTHORIZE ADDITIONAL STORMW ATER SYSTEM REVENUE BONDS, SERIES (TO BE DETERMINED) OF THE CITY OF CLEARWATER, FLORIDA, TO BE ISSUED IN ONE OR MORE SERIES OVER ONE OR MORE YEARS, TO CORRECT CERTAIN DEFINITIONS THEREIN AND TO REVISE OTHER COVENANTS AND AGREEMENTS IN CONNECTION THEREWITH; AND PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF CLEARWATER, FLORIDA: SECTION 1. AUTHORITY FOR TIDS ORDINANCE. This Ordinance is enacted pursuant to Chapter 166, Part II, Florida Statutes, the Charter of the City of Clearwater, Ordinance No. 6378-99 and other applicable provisions oflaw. SECTION 2. DEFINITIONS. (A) The following definitions set forth in Ordinance No.. 6378-99 are hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): "Additional Parity Obligations" shall mean additional obligations issued in compliance with the terms, conditions and limitations contained herein and which (i) shall have a lien on the Parity Pledged Revenues equal to that of the Bonds, (ii) shall be payable from the Parity Pledged Revenues on a parity with the Bonds, and (iii) rank equally in all other respects with the Bonds. "Bond Insurance Policy" shall mean, with respect to a Series of Bonds, any municipal bond new issue insurance policy issued by a Bond Insurer that guarantees payment of principal of and interest on such a Series of [the] Bonds.:. "Bonds" shall mean (i) the Stormwater System Revenue Bonds, Series 1999; (ii) the Stormwater System Revenue Bonds, Series 2002 herein authorized to be issued and (iii) any Additional Parity Obligations permitted to be issued hereunder from time to time in accordance with the provisions hereof. "City Manager" shall mean the City Manager or an Assistant City Manager of the Issuer, or such other person as may be duly authorized by the City Manager of the Issuer to act on his or her behalf. Ordinance No. 6931-02 "Clerk" shall mean the City Clerk or an Assistant City Clerk of the Issuer, or such other person as may be duly authorized by the City Clerk of the Issuer to act on his or her behalf. "Finance Director" shall mean the [Financial Services Administrator] Finance Director ofthe Issuer or her designee. "Pledged Revenues" shall mean, with respect to any Series of Bonds (i) the Parity Pledged Revenues [Net Revenues of the System], and (ii) the moneys on deposit in the various funds and . accounts created pursuant to this Ordinance allocable to such Series of Bonds, including but not limited to the Construction Fund and the Reserve Account for such Series, with the exception of the Rebate Fund. "Reserve Requirement" shall be. with respect to each Series of Bonds, the lesser of (i) the Maximum Bond Service Requirement for such Series of Bonds, (ii) 125% of the Average Annual Bond Service Requirement of such Series of Bonds, or (iii) the largest amount as shall not adversely affect the exclusion of interest on the Bonds from gross income for Federal income tax purposes. (B) The following new definitions are hereby added: "Parity Pledged Revenues" shall mean (i) the Net Revenues of the System and (ii) the moneys on deposit in the Bond Service Fund. "Series" or "Series of Bonds" or "Bonds of a Series" shall mean all Bonds issued under this Ordinance and designated as being of the same Series issued and delivered on original issuance in a simultaneous transaction, and any Bonds thereafter delivered in lieu thereof or in substitution therefor pursuant to this Ordinance. "2002 Project" shall mean the Project authorized to be financed with the proceeds of the Series 2002 Bonds as identified by subsequent resolution of the Issuer adopted prior to the issuance of the Series 2002 Bonds, consisting of constructing and acquiring certain additions, extensions and improvements to the Issuer's System, including but not limited to piping, the purchase of real property for retention ponds and drainage improvements, and other similar improvements, additions, renovations, acquisitions and related capital projects of the System. (C) Any terms not defined herein shall have the meaning assigned to such term in Ordinance No. 6378-99. SECTION 3. FINDINGS. It is hereby ascertained, determined and declared that: (A) The Issuer now owns, operates and maintains the System and will continue to derive revenue from rates, fees, rentals and other charges made and collected for the services of such System, which revenues and the other revenues pledged pursuant to the provisions hereof are not now pledged or encumbered in any manner except for payment of the Series 1999 Bonds. 2 Ordinance No. 6931-02 (B) It is in the best interests of the Issuer and in the furtherance of the public health and safety of the residents thereof that the Issuer authorize the issuance of the Bonds for the purpose of designing, permitting, acquiring and constructing the improvements and additions to its Stormwater System. (C) Such Bonds shall be payable from the Pledged Revenues. (D) Any Series of Bonds, after the issuance of the Series 2002 Bonds herein authorized, shall be issued upon approval by supplemental resolution of the Issuer as provided by law. The proceeds of any Series of Bonds shall be applied as provided in a supplemental ordinance or resolution. (E) The principal of and interest and redemption premium on each Series of the Bonds and all reserve and other payments shall be payable solely from the Pledged Revenues. The Issuer shall never be required to levy ad valorem taxes on any real or personal property therein to pay the principal of and interest on the Bonds herein authorized or to make any other payments provided for herein. The Bonds shall not constitute a lien upon any properties owned by or located within the boundaries of the Issuer or upon any property other than the Pledged Revenues. (F) The Bonds herein authorized shall be on a parity and rank equally, as to lien on and source and security for payment from the Parity Pledged Revenues and in all other respects, with the Series 1999 Bonds. (0) The Pledged Revenues should be sufficient to pay all principal of and interest and redemption premium on the Bonds to be issued hereunder, as the same become due, and to make all required deposits or payments required by this Ordinance. (H) All costs of the 2002 Project incurred after the date of this Ordinance shall be reimbursed from proceeds of the Bonds. SECTION 4. AUTHORIZATION OF DESIGN, PERMITTING, ACQUISITION AND CONSTRUCTION OF THE 2002 PROJECT. There is hereby authorized the design, permitting, acquisition and construction of the 2002 Project. SECTION 5. Section 6 of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): SECTION 6. AUTHORIZATION OF BONDS. Subject and pursuant to the provisions hereof and as shall be described in subsequent resolutions of the Issuer to be adopted prior to the issuance of any series of Bonds, obligations of the Issuer to be known as "Stormwater System Revenue Bonds, Series (to be determined)" are authorized to be issued in one or more series (including Additional Parity 3 Ordinance No. 6931-02 Obligations) from time to time in the aggregate principal amount of not exceeding [$30,000,000] the total amount of Bonds that can be issued within the parameters of Section 20(0) hereof, which may mature at higher Compounded Amounts to include the maturity amount of Capital Appreciation Bonds and Capital Appreciation Income Bonds. There is expressly authorized to be issued an initial Series of Bonds to be called the "Stormwater System Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), the proceeds of which will fund the costs of the 1999 Proiect. and a second Series of Bonds to be called the "Stormwater System Revenue Bonds. Series 2002" (the "Series 2002 Bonds"), the proceeds of which will fund the costs of the 2002 Proiect, all as shall be described in a subsequent resolution to be adopted prior to the issuance of such Series [1999].ofBonds. SECTION 6. Section 7 of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): SECTION 7. DESCRIPTION OF BONDS. The Bonds shall be issued in fully registered form; may be Capital Appreciation Bonds, Capital Appreciation Income Bonds, Option bonds, Variable Rate Bonds, Serial Bonds or Term Bonds; shall be dated; shall be numbered consecutively from one upward in order of maturity preceded by the letter "R"; shall be in the denomination of$5,000 each, or integral multiples thereof for the Current Interest Bonds and in $5,000 maturity amounts for the Capital Appreciation Bonds or in $5,000 multiples thereof, or such other denominations as shall be approved by the Issuer in a supplemental resolution prior to the delivery of the Bonds; shall have such Paying Agent and Registrar as designated in a subsequent Resolution of the Issuer adopted prior to the issuance of such Series of Bonds; shall bear interest at such rate or rates not exceeding the maximum rate allowed by State law, the actual rate or rates to be approved by the governing body of the Issuer prior to or upon the sale of the Bonds; such interest to be payable semiannually at such times as are fixed by supplemental resolution of the Issuer if Current Interest Bonds and shall mature annually on such date in such years [(not exceeding 30 years from the date of issuance)] and such amounts as will be fixed by supplemental resolution of the Issuer prior to or upon the sale of the Bonds; and may be issued with [variable, adjustable, convertible or other rates with] original issue discounts and [as Capital Appreciation Bonds] original issue premiums; all as the Issuer shall provide herein or hereafter by supplemental resolution. Each [Serial] Current Interest Bond shall bear interest from the interest payment date next preceding the date on which it is authenticated, unless authenticated on an interest payment date, in which case it shall bear interest from such interest payment date, or, unless authenticated prior to the first interest payment date, in which case it shall hear interest from its date; provided, however, that if at the time of authentication payment of any interest which is due and payable has not 4 Ordinance No. 6931-02 been made, such [Serial] Current Interest Bond shall bear interest from the date to which interest shall have been paid. The Capital Appreciation Bonds shall bear interest only at maturity or upon redemption prior to maturity in the amount determined by reference to the Compounded Amount. The principal of and the interest redemption premium, if any, on the Bonds shall be payable in any coin or currency of the United States of America which on the respective dates of payment thereof is legal tender for the payment of public and private debts. The interest on the [Serial] Current Interest Bonds shall be payable by the Paying Agent on each interest payment date to the person appearing on the registration books of the Issuer hereinafter provided for as the registered Holder thereof, by check or draft mailed to such registered Holder at his address as it appears on such registration books or by wire transfer to Holders of $1,000,000 or more in principal amount of the Bonds. Payment of the principal of all [Serial] Current Interest Bonds and the Compounded Amount with respect to the Capital Appreciation Bonds shall be made upon the presentation and surrender of such Bonds as the same shall become due and payable. Notwithstanding any .other provisions of this section, the Issuer may, at its option, prior to the date of issuance of any Series of Bonds, elect to use an immobilization system or pure book-entry system with respect to issuance of such Series of Bonds, provided adequate records will be kept with respect to the ownership of such Series of Bonds issued in book-entry form or the beneficial ownership of bonds issued in the name of a nominee. As long as any Bonds are outstanding in book-entry form the provisions of this Ordinance inconsistent with such system of book-entry registration shall not be applicable to such Bonds. The details of any alternative system of issuance, as described in this paragraph, shall be set forth in a resolution of the Issuer duly adopted at or prior to the sale of such Series of Bonds. SECTION 7. Section 20(B)(2) of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): (2)The Issuer shall next deposit from moneys remaining in the Revenue Fund an amount required to make the amount on deposit in the Reserve Fund with respect to a Series of Bonds equal the Reserve Requirement for such Series of Bonds, subject to the funding limitations set forth in this paragraph (2). Any withdrawals from the Reserve Fund shall be subsequently restored from the first moneys available in the Revenue Fund, after all required current payments for Cost of Operation and Maintenance as set forth above and all current applications and allocations to the Bond Service Fund, including all deficiencies for prior payments 5 Ordinance No. 6931-02 have been made in full. Notwithstanding the foregoing, in case of withdrawal from the Reserve Fund, in no event shall the Issuer be required to deposit into the Reserve Fund an amount greater than that amount necessary to ensure that the difference between the Reserve Requirement and the amounts on deposit in the Reserve Fund with respect to a Series of Bonds on the date of calculation shall be restored not later than sixty (60) months after the date of such deficiency (assuming equal monthly payments into the Reserve Fund for such sixty (60) month period). The Issuer may provide that the difference between the amounts on deposit in the Reserve Fund with respect to a Series of Bonds and the Reserve Requirement with respect to a Series of Bonds shall be an amount covered by obtaining bond insurance issued by a reputable and recognized municipal bond insurer, by a letter of credit rated in one of the two highest categories by one 01 two nationally recognized rating agencies, by a surety bond acceptable to any company issuing a policy of municipal bond insurance guaranteeing the payment of principal and interest on such Series of Bonds, or any combination thereof. Moneys in each account.in the Reserve Fund applicable to a Series of Bonds shall be used only for the purpose of the payment of Amortization Installments, principal of, or interest on the Outstanding Bonds of such Series when the other moneys allocated to the Bond Service Fund for such Series of Bonds are insufficient therefor, and for no other purpose. Securities in the Reserve Fund shall be valued annually at market rate. Deficiencies in the amounts on deposit in the Reserve Fund resulting from a . decline in market value shall be restored no later than the succeeding interest payment date. In the event of the refunding of any Series of Bonds, the Issuer may withdraw from the Reserve Fund, all or any portion of the amounts accumulated therein [with respect to the] allocable to that portion of the Series of Bonds being refunded and deposit such amounts as required by the resolution authorizing the refunding of such Series of Bonds; provided that such withdrawal shall not be made unless (a) immediately thereafter that portion of the Series of Bonds being refunded shall be deemed to have been paid pursuant to the provisions hereof and (b) the amount remaining in the [Reserve Fund] account in the Reserve Fund applicable to that portion of the Series of Bonds not being refunded after giving effect to the issuance of such refunding obligations and the disposition of the proceeds thereof shall not be less than the Reserve Requirement for [any] that portion of the Series of Bonds then Outstanding and not being refunded. SECTION 8. Section 20(B)(5) of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with (brackets]): (5)The Bond Service Fund (including the accounts therein), the Reserve Fund, the Revenue Fund, and any other special funds herein established and created shall be deemed to be held in trust for the purposes provided herein for such funds. The money in all such funds shall be continuously secured in the same 6 Ordinance No. 6931-02 manner as state and municipal deposits are authorized to be secured by the laws of the State of Florida in Permitted Investments. Moneys in any fund or account created hereunder (with the exception of the Reserve Fund) may be invested and reinvested in Permitted Investments which mature not later than the dates on which the moneys on deposit therein will be needed for the purpose of such fund. [Moneys in the Reserve Fund may be invested and reinvested in Permitted Investments maturing not later than five (5) years after deposit into such Reserve Fund by the Issuer.] All income on such investments, except as otherwise provided, shall be deposited in the respective funds and accounts from which such investments were made and be used for the purposes thereof unless and until the maximwn required amount (or, with respect to the Construction Fund, the amount required to acquire, construct and erect the Project) is on deposit therein, and thereafter shall be deposited in the Revenue Fund. SECTION 9. Section 20(D) of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): (D) RATE COVENANT. The Issuer will fix, establish, revise from time to time whenever necessary, maintain and collect always such fees, rates, rentals and other charges for the use of the products, services and facilities of the System which will always provide Net Revenues in each year sufficient to pay [the lesser of the aggregate of] one hundred fifteen percent (115%) of the Bond Service Requirement becoming due in such year on the Outstanding Bonds. Such rates, fees, rentals or other charges shall not be reduced so as to render them insufficient to provide revenues for the purposes provided therefor by this Ordinance. SECTION 10. Section 20(Q)(1) of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): (Q) ISSUANCE OF ADDITIONAL P ARITY OBLIGATIONS. No Additional Parity Obligations shall be issued after the issuance of the Series 2002 Bonds herein authorized, except upon the conditions and in the manner hereinafter provided: (I)There shall have been obtained and filed with the Clerk a certificate of [an independent certified public accountant] the Finance Director stating: (a) that the books and records of the Issuer relative to the System and the [Pledged] Net Revenues have been reviewed by an independent certified public accountant; and (b) the amount of the [Pledged] Net Revenues derived for any consecutive twelve (12) months out of the preceding twenty-four (24) months preceding the date of issuance of the proposed Additional Parity Obligations as adjusted pursuant to paragraphs 2,3,4 and/or 5 below, is equal to not less than 120% 7 Ordinance No. 6931-02 of the Maximum Bond Service Requirement becoming due in any Fiscal Year there- after on (i) all Bonds issued under this Ordinance, [if any] then Outstanding, and (ii) on the Additional Parity Obligations with respect to which such certificate is made. SECTION 11. Section 24(A) of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): SECTION 24. DEFEASANCE. The covenants and obligations of the Issuer shall be defeased and discharged under terms of this Ordinance as follows: (A) Ifthe Issuer shall payor cause to be paid, or there shall otherwise be paid, to the Holders of [all] one or more Series of Bonds the principal, redemption premium, if any, and interest due or to become due thereon, at the times and in the manner stipulated herein, then the pledge of the Pledged Revenues and all covenants, agreements and other obligations of the Issuer to [the] such Bondholders, shall thereupon cease, terminate and become void and be discharged and satisfied. If the Issuer shall payor cause to be paid, or there shall otherwise be paid, to the Holders of any Outstanding Bonds the principal or redemption premium, if any, and interest due or to become due thereon, at the times and in the manner stipulated herein, such Bonds shall cease to be entitled to any lien, benefit or security under this Ordinance, and all covenants, agreements and obligations of the Issuer to the Holders of such Bonds shall thereupon cease, terminate and become void and be discharged and satisfied. SECTION 12. Section 28 of Ordinance No. 6378-99 is hereby amended to read as follows (additional language is underlined and deleted language is indicated with [brackets]): SECTION 28. CAPITAL APPRECIATION BONDS. For the purposes of (i) receiving payment of the redemption price of a Capital Appreciation Bond if redeemed prior to maturity,. (ii) receiving payment if the principal of all Bonds is declared immediately due and payable, and (iii) [computing Bond Service Requirement, and (iv)] computing the amount of Holders required for any notice, consent, request or demand hereunder for any purpose whatsoever, the principal amount of a Capital Appreciation Bond shall be deemed to be its Compounded Amount. SECTION 13. REPEAL OF INCONSISTENT INSTRUMENTS. Any other ordinance or resolutions, or parts thereof, in conflict herewith are hereby repealed to the extent of such conflict. SECTION 14. EFFECTIVE DATE. The provisions of this Ordinance shall take effect upon its enactment, as required by law. [Remainder of page left intentionally blank] 8 Ordinance No. 6931-02 , . SECTION 15. PUBLIC NOTICE. Notice of the proposed enactment ofthis Ordinance has been properly advertised in a newspaper of general circulation In accordance with Chapter 166.041, . Florida Statutes. PASSED ON FIRST READING June 20.. PASSED ON SECOND AND FINAL READING July 18 May!f~1tr- Attest: ~. .:..' ".~.4tJ~.. ~ .RjJCYli a.:- GoUdeau. J . ~ V City Clerk . . Approved as to form: ~Akin City Attorney 9 . 2002 . 2002 Ordinance No. 6931-02 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFI CATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Clearwater, Florida (the "Issuer") in connection with the issuance of its $14,350,000* Stormwater System Revenue Bonds, Series 2004 (the "Series 2004 Bonds"). The Series 2004 Bonds are being issued pursuant to Ordinance No. 6378-99, enacted by the City on April 15, 1999, as amended by Ordinance No. 6931-02, enacted by the City on July 18, 2002, as supplemented (the "Ordinance"). The Issuer covenants and agrees as follows: SECTION 1. PURPOSE OF DISCLOSURE CERTIFICATE. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Series 2004 Bondholders and in order to assist the original underwriters of the Series 2004 Bonds in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 (the "Rule"). SECTION 2. PROVISION OF ANNUAL INFORMATION. Except as otherwise provided herein, the Issuer shall provide to all of the nationally recognized municipal securities information repositories described in Section 4 hereof (the "NRMSIRs"), and to any state information depository that is established within the State of Florida (the "SID"), on or before June 30 of each year, commencing June 30, 2005, the information set forth below in this Section 2. Notwithstanding the immediately preceding sentence, to the extent any such information does not become available to the Issuer before June 30 of any year, the Issuer shall provide such information when it becomes available, but no later than one year following the end of the Issuer's Fiscal Year. (A) the Issuer's Comprehensive Annual Financial Report for the immediately preceding Fiscal Year (the "CAFR"), which shall include the audited financial statements of the Issuer for the immediately preceding Fiscal Year prepared in accordance with Generally Accepted Accounting Principles, as modified by applicable State of Florida requirements and the governmental accounting standards promulgated by the Government Accounting Standards Board; provided, however, if the audited financial statements of the Issuer are not completed prior to June 30 of any year, the Issuer shall provide unaudited financial statements on such date and shall provide the audited financial statements as soon as practicable following their completion; and (B) to the extent not set forth in the CAFR, additional financial information and operating data of the type included with respect to the Issuer in the final official statement prepared in connection with the sale and issuance of the Series 2004 Bonds (as amended, the "Official Statement"), as set forth below: 1 1. Updates of the financial information set forth in the Official Statement under the subcaptions "Rates, Fees and Charges" and "Historical Net Revenues" under the principal captions "THE STORMW ATER MANAGEl\1ENT SYSTEM" ( in the case of the material under the caption "Historical Net Revenues," for the then-immediately preceding five fiscal years). 2. Description of any additional indebtedness payable in whole or in part from the Net Revenues (as defined in the Ordinance). 3. Any other financial information or operating data of the type included in the Official Statement which would be material to a holder or prospective holders of the Series 2004 Bonds. For purposes of this Disclosure Certificate, "Fiscal Year" means the period commencing on October 1 and ending on September 30 of the next succeeding year, or such other period of time provided by applicable law. SECTION 3. REPORTING SIGNIFICANT EVENTS. The Issuer shall provide to the NRMSIRs or the Municipal Securities Rulemaking Board (the "MSRB") and to the SID, on a timely basis, notice of any of the following events, if such event is material with respect to the Series 2004 Bonds or the Issuer's ability to satisfy its payment obligations with respect to the Series 2004 Bonds: (A) (B) (C) difficulties; (D) (E) (F) (G) (H) (I) Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on the debt service reserve fund reflecting financial Unscheduled draws on credit enhancement reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Series 2004 Bonds; Modifications to rights of Series 2004 Bondholders; Redemptions; Defeasances; 2 (J) Release, substitution, or sale of property securing repayment ofthe Series 2004 Bonds; (K) Rating changes; and (L) Notice of any failure on the part of the Issuer or any other Obligated Person (as defined herein) to meet the requirements of Section 2 hereof. The Issuer may from time to time, in its discretion, choose to provide notice of the occurrence of certain other events, in addition to those listed in this Section 3, if, in the judgment of the Issuer, such other events are material with respect to the Series 2004 Bonds, but the Issuer does not specifically undertake to commit to provide any such additional notice ofthe occurrence of any material event except those events listed above. Whenever the Issuer obtains knowledge ofthe occurrence of a significant event described in this Section 3, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities law to holders of Series 2004 Bonds, provided. that any event under clauses (D), (E), (F), (K) or (L) above will always be deemed to be material. SECTION 4. NRMSIRs. The NRMSIRs to which the Issuer shall provide the information described in Sections 2 and 3 above, to the extent required, shall be the following organizations, their successors and assigns: Bloomberg Municipal Repository 100 Business Park Drive Skillman, New Jersey 08558 Phone: (609) 279-3225 Fax: (609) 279-5962 Email: Munis@Bloomberg.com DPC Data Inc. One Executive Drive Fort Lee, NJ 07024 Phone: (201) 346-0701 Fax: (201) 947-0107 Email: nrmsir@dpcdata.com FT Interactive Data Attn: NRMSIR 3 100 William Street New York, New York 10038 Phone: (212) 771-6999 Fax: (212) 771-7390 (Secondary Market Information) (212) 771-7391 (Primary Market Information) Email: NRMSIR@FTID.com Standard & Poor's J. J. Kenny Repository 55 Water Street 45th Floor New York, NY 10041 Phone: (212) 438-4595 Fax: (212) 438-3975 Email: nrmsir_repository@sandp.com (F) Any NRMSIRs that are established subsequently and approved by the SEC. (G) A list of the names and addresses of all designated NRMSIRs as of any date may currently be obtained by calling the SEC's Fax on Demarid Service at 202/942-8088 and requesting document number 0206. 4 SECTION 5. NO EVENT OF DEFAULT. Notwithstanding any other provision in the Ordinance to the contrary, failure of the Issuer to comply with the provisions of this Disclosure Certificate shall not be considered an event of default under the Ordinance; provided, however, any Series 2004 Bondholder may take such actions as may be necessary and appropriate, including pursuing an action for mandamus or specific performance, as applicable, by court order, to cause the Issuer to comply with its obligations hereunder. For purposes of this Disclosure Certificate, "Series 2004 Bondholder" shall mean any person who (A) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2004 Bonds (including persons holding Series 2004 Bonds through nominees, depositories or other intermediaries), or (B) is treated as the owner of any Series 2004 Bond for federal income tax purposes. SECTION 6. INCORPORATION BY REFERENCE. Any or all of the information required herein to be disclosed may be incorporated by reference from other documents, including official statements or debt issues of the Issuer of related public entities, which have been submitted to each of the NRMSIRs and the SID, if any, or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each document incorporated by reference. SECTION 7. DISSEMINATION AGENTS. The Issuer may, from time to time, appoint or engage a dissemination agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such agent, with or without appointing a successor disseminating agent. SECTION 8. TERMINATION. The Issuer's obligations under this Disclosure Certificate shall terminate upon (A) the legal defeasance, prior redemption or payment in full of all of the Series 2004 Bonds, or (B) the termination of the continuing disclosure requirements ofthe Rule by legislative, judicial or administrative action. SECTION 9. AMENDMENTS. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision may be waived, if such amendment or waiver is supported by an opinion of counsel that is nationally recognized in the area of federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule. 5 SECTION 10. ADDITIONAL INFORMATION. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in its annual information described in Section 2 hereof or notice of occurrence of a significant event described in Section 3 hereof, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in its annual information or notice of occurrence of a significant event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in its future annual information or notice of occurrence of a significant event. SECTION 11. OBLIGATED PERSONS. If any person, other than the Issuer, becomes an Obligated Person (as defined in the Rule) relating to the Series 2004 Bonds, the Issuer shall use its best efforts to require such Obligated Person to comply with all provisions of the Rule applicable to such Obligated Person. Dated as of [ ], 2004 ATTEST: CITY OF CLEARWATER, FLORIDA City Clerk By: Brian J. Aungst, Sr. Mayor 6 APPENDIX E FORM OF BOND COUNSEL OPINION APPENDIX E Upon delivery of the Series 2004 Bonds in definitive form, Bryant Miller & Olive P.A., Bond Counsel, proposes to render its final approving opinion in substantially the following fonn: [Date of delivery of the Bonds] City Council City of Clearwater Clearwater, Florida $ CITY OF CLEARWATER, FLORIDA STORMW A TER SYSTEM REVENUE BONDS, SERIES 2004 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the City of Clearwater, Florida (the "Issuer"), of its $ Stormwater System Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), pursuant to the Constitution and laws of the State of Florida, Chapter 166, Part II, Florida Statutes, and other applicable provisions of law, Ordinance No. 6378-99, enacted by the City Council of the Issuer on April 15, 1999, as amended and supplemented by Ordinance No. 6931-02, enacted by the City Council of the Issuer on July 18, 2003 (collectively, the "Bond Ordinance"), as amended and supplemented by Resolution No. 04-23 adopted by the City Council of the Issuer on [August 5],2004 (collectively, the "Resolution"), as amended and supplemented. Any capitalized undefined terms used herein shall have the meaning set forth in the Ordinance. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the Bond Ordinance and the Resolution and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. We have not undertaken an independent audit, examination, investigation or inspection of such matters and have relied solely on the facts, estimates and circumstances described in such proceedings and certifications. We have assumed the genuineness of signatures on all documents and instruments, the authenticity of documents submitted as originals and the conformity to originals of documents submitted as copies. We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of any offering material relating to the Series 2004 Bonds. This opinion should not be construed as offering material, an offering circular, prospectus or official statement and is not intended in any way to be a disclosure statement used in connection with the sale or delivery of the Series 2004 Bonds. Furthermore, we are not passing on the accuracy or sufficiency of any CUSIP E-l numbers appearing on the Series 2004 Bonds. In addition, we have not been engaged to and, therefore, express no opinion as to compliance by the Issuer or the underwriter with any federal or state statute, regulation or ruling with respect to the sale and distribution of the Series 2004 Bonds. In rendering this opinion, we have examined and relied upon the opinion of even date herewith of Pamela K. Akin, Esquire, Counsel for the Issuer, as to the due creation and valid existence of the Issuer, the due enactment of the Bond Ordinance and due adoption of the Resolution, the due authorization, execution and delivery of the Series 2004 Bonds and the compliance by the Issuer with all conditions precedent to the issuance of the Series 2004 Bonds. The Series 2004 Bonds are payable from and secured by a lien upon and pledge of the Net Revenues (as defined in the Ordinance) of the City's Stormwater Management System, on a parity with the Issuer's $7,500,000 Stormwater System Revenue Bonds, Series 1999 (the "Series 1999 Bonds") and the Issuer's $7,020,000 Stormwater System Revenue Bonds, Series 2002 (the "Series 2002 Bonds," together with the Series 1999 Bonds, the "Parity Bonds"). Pursuant to the terms, conditions and limitations contained in theBond Ordinance, the Issuer has reserved the right to issue obligations in the future which shall have a lien on the Net Revenues equal to that of the Series 2004 Bonds and the Parity Bonds. The Series 2004 Bonds do not constitute a general obligation or indebtedness of the Issuer within the meaning of any constitutional, statutory or other limitation of indebtedness and the holders thereof shall never have the right to compel the exercise of any ad valorem taxing power of the Issuer or taxation in any form of any real or personal property for the payment of the principal of or interest on the Series 2004 Bonds. The opinions set forth below are expressly limited to, and we opine only with respect to, the laws of the State of Florida and the federal income tax laws of the United States of America. Based on our examination, we are of the opinion, as of the date of delivery of and payment for the Series 2004 Bonds, as follows: 1. The Bond Ordinance has been duly enacted by the Issuer, the Resolution has been duly adopted by the Issuer, and each constitutes a valid and binding obligation of the Issuer enforceable upon the Issuer in accordance with its terms. 2. The Series 2004 Bonds have been duly authorized, executed and delivered by the Issuer and are valid and binding special obligations of the Issuer enforceable in accordance with their terms, payable solely from the sources provided therefor in the Bond Ordinance. 3. The Internal Revenue Code of 1986, as amended (the "Code"), establishes certain requirements which must be met subsequent to the issuance and delivery of the Series 2004 Bonds in order that interest on the Series 2004 Bonds be and remain excluded from gross income for E-2 purposes of federal income taxation. Non-compliance may cause interest on the Series 2004 Bonds to be included in federal gross income retroactive to the date of issuance of the Series 2004 Bonds, regardless of the date on which such non-compliance occurs or is ascertained. The Issuer has covenanted in the Bond Ordinance to comply with such requirements in order to maintain the exclusion from federal gross income of the interest on the Series 2004 Bonds. Subject to compliance by the Issuer with the aforementioned covenants, (a) interest on the Series 2004 Bonds is excluded from gross income of the holders thereof for purposes of federal income taxation, and (b) interest on the Series 2004 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations. We express no opinion regarding other federal tax consequences arising with respect to the Series 2004 Bonds. 4. The Series 2004 Bonds are exempt from intangible taxes imposed pursuant to Chapter 199, Florida Statutes. It is to be understood that the rights of the owners of the Series 2004 Bonds and the enforceability thereof may be subject to the exercise of judicial discretion in accordance with general principles of equity, to the valid exercise of the sovereign police powers of the State of Florida and of the constitutional powers of the United States of America and to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted. Our opinions expressed herein are predicated upon present law, facts and circumstances, and we assume no affirmative obligation to update the opinions expressed herein if such laws, facts or circumstances change after the date hereof. Very truly yours, BRYANT MILLER & OLIVE P.A. E-3 APPENDIX F FORM OF MUNICIPAL BOND INSURANCE POLICY Ambac Financial Guaranty Insurance Policy Obligor: Obligations: Ambac Assurance Corporation One State Street Plaza, 15th Floor New York, New York 10004 Telephone: (212) 668-0340 Policy Number: Premium: noti that any payment of principal of or interest on an t a Holder by or on behalf of the Obligor has been deemed a nt to the United States Bankruptcy Code in accordance with Holder will be entitled to payment from Ambac to the extent o er than (i) the Obligor or (ii) any person whose obligations constitute the gations who. at the time of Nonpayment, is the owner of an Obligation or of ein, "Due for Payment", when referring to the principal of Obligations, is when e mandato aemption date for the application of a required sinking fund installment has been any earlier date on which payment is due by reason of call for redemption (other than by application stallments). acceleration or other advancement of maturity; and, when referring to interest on the uled date for payment of interest has been reached. As used herein, "Nonpayment" means the failure 1Ve ro d sufficient funds to the trustee or paying agent for payment in full of all principal of and interest h ch are Due for Payment. elable. The premium on this Policy is not refundable for any reason. including payment of the Obligations prior to m . This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of Ambac, nor against any risk other than Nonpayment. In witness whereof. Ambac has caused this Policy to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignature of its duly authorized representative. fJ j /!-L President .-"- #,)v."NC* ~\ ,. ~~c;;:;o...~.~....o, I".. ~ ",.' ,...... - ....... ,~i \0' ,.~, ~. y :s, .1 ~:, t 1 : , , \ ! I .\ lit , . .,. .." .. .....~'S("o..,~...... , " .......... . "'..- Effective Date: THE BANK OF NEW YORK acknowledges that it has agreed to perform the duties of Insurance Trustee under this Policy. Form No.: 2B-0012 (1/01) A- L~.~ Secretary Authorized Representative ~ Authorized Officer of Insurance Trustee CONTINUING DISCLOSURE CERTIFI CA TE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Clearwater, Florida (the "Issuer") in connection with the issuance of its $14,350,000* Stormwater Revenue Bonds, Series 2004 (the "Series 2004 Bonds"). The Series 2004 Bonds are being issued pursuant to Ordinance No. 6378-99, enacted by the City on April 15, 1999, as amended by Ordinance No. 6931-02, enacted by the City on July 18, 2002, as supplemented (the "Ordinance"). The Issuer covenants and agrees as follows: SECTION 1. PURPOSE OF DISCLOSURE CERTIFICATE. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Series 2004 Bondholders and in order to assist the original underwriters of the Series 2004 Bonds in complying with Rule 15c2-12(b )(5) promulgated by the Securities and Exchange Commission ("SEe") pursuant to the Securities Exchange Act of 1934 (the "Rule"). SECTION 2. PROVISION OF ANNUAL INFORMATION. Except as otherwise provided herein, the Issuer shall provide to all of the nationally recognized municipal securities information repositories described in Section 4 hereof (the "NRMSIRs"), and to any state information depository that is established within the State of Florida (the "SID"), on or before June 30 of each year, commencing June 30, 2005, the information set forth below in this Section 2. Notwithstanding the immediately preceding sentence, to the extent any such information does not become available to the Issuer before June 30 of any year, the Issuer shall provide such information when it becomes available, but no later than one year following the end of the Issuer's Fiscal Year. (A) the Issuer's Comprehensive Annual Financial Report for the immediately preceding Fiscal Year (the "CAFR"), which shall include the audited financial statements of the Issuer for the immediately preceding Fiscal Year prepared in accordance with Generally Accepted Accounting Principles, as modified by applicable State of Florida requirements and the governmental accounting standards promulgated by the Government Accounting Standards Board; provided, however, if the audited financial statements ofthe Issuer are not completed prior to June 30 of any year, the Issuer shall provide unaudited financial statements on such date and shall provide the audited financial statements as soon as practicable following their completion; and (B) to the extent not set forth in the CAFR, additional financial information and operating data of the type included with respect to the Issuer in the final official statement prepared in connection with the sale and issuance of the Series 2004 Bonds (as amended, the "Official Statement"), as set forth below: 1 1. Updates of the financial information set forth in the Official Statement under the subcaptions "Rates, Fees and Charges" and "Historical Net Revenues" under the principal captions "THE STORMW ATER MANAGEMENT SYSTEM" ( in the case of the material under the caption "Historical Net Revenues," for the then-immediately preceding five fiscal years). 2. Description of any additional indebtedness payable in whole or in part from the Net Revenues (as defined in the Ordinance). 3. Any other financial information or operating data of the type included in the Official Statement which would be material to a holder or prospective holders of the Series 2004 Bonds. For purposes of this Disclosure Certificate, "Fiscal Year" means the period commencing on October 1 and ending on September 30 ofthe next succeeding year, or such other period of time provided by applicable law. SECTION 3. REPORTING SIGNIFICANT EVENTS. The Issuer shall provide to the NRMSIRs or the Municipal Securities Rulemaking Board (the "MSRB") and to the SID, on a timely basis, notice of any of the following events, if such event is material with respect to the Series 2004 Bonds or the Issuer's ability to satisfy its payment obligations with respect to the Series 2004 Bonds: (A) (B) (C) difficulties; (D) (E) (F) (G) (H) (I) Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on the debt service reserve fund reflecting financial Unscheduled draws on credit enhancement reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Series 2004 Bonds; Modifications to rights of Series 2004 Bondholders; Redemptions; Defeasances; 2 (J) Release, substitution, or sale of property securing repayment of the Series 2004 Bonds; (K) Rating changes; and (L) Notice of any failure on the part of the Issuer or any other Obligated Person (as defined herein) to meet the requirements of Section 2 hereof. The Issuer may from time to time, in its discretion, choose to provide notice of the occurrence of certain other events, in addition to those listed in this Section 3, if, in the judgment of the Issuer, such other events are material with respect to the Series 2004 Bonds, but the Issuer does not specifically undertake to commit to provide any such additional notice ofthe occurrence of any material event except those events listed above. Whenever the Issuer obtains knowledge of the occurrence of a significant event described in this Section 3, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities law to holders of Series 2004 Bonds, provided, that any event under clauses (D), (E), (F), (K) or (L) above will always be deemed to be material. SECTION 4. NRMSIRs. The NRMSIRs to which the Issuer shall provide the information described in Sections 2 and 3 above, to the extent required, shall be the following organizations, their successors and assigns: Bloomberg Municipal Repository 100 Business Park Drive Skillman, New Jersey 08558 Phone: (609) 279-3225 Fax: (609) 279-5962 Email: MuniS@Bloomberg.com DPC Data Inc. One Executive Drive Fort Lee, NJ 07024 Phone: (201) 346-0701 Fax: (201) 947-0107 Email: nrmsir@dpcdata.com FT Interactive Data Attn: NRMSIR 3 100 William Street New York, New York 10038 Phone: (212) 771-6999 Fax: (212) 771-7390 (Secondary Market Information) (212) 771-7391 (Primary Market Information) Email: NRMSIR@FTID.com Standard & Poor's J. J. Kenny Repository 55 Water Street 45th Floor New York, NY 10041 Phone: (212) 438-4595 Fax: (212) 438-3975 Email: nrmsir_repository@sandp.com (F) Any NRMSIRs that are established subsequently and approved by the SEC. (G) A list of the names and addresses of all designated NRMSIRs as of any date may currently be obtained by calling the SEC's Fax on Demand Service at 202/942-8088 and requesting document number 0206. 4 SECTION 5. NO EVENT OF DEFAULT. Notwithstanding any other provision in the Ordinance to the contrary, failure of the Issuer to comply with the provisions of this Disclosure Certificate shall not be considered an event of default under the Ordinance; provided, however, any Series 2004 Bondholder may take such actions as may be necessary and appropriate, including pursuing an action for mandamus or specific performance, as applicable, by court order, to cause the Issuer to comply with its obligations hereunder. For purposes of this Disclosure Certificate, "Series 2004 Bondholder" shall mean any person who (A) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2004 Bonds (including persons holding Series 2004 Bonds through nominees, depositories or other intermediaries), or (B) is treated as the owner of any Series 2004 Bond for federal income tax purposes. SECTION 6. INCORPORATION BY REFERENCE. Any or all of the information required herein to be disclosed may be incorporated by reference from other documents, including official statements or debt issues of the Issuer of related public entities, which have been submitted to each of the NRMSIRs and the SID, if any, or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each document incorporated by reference. SECTION 7. DISSEMINATION AGENTS. The Issuer may, from time to time, appoint or engage a dissemination agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such agent, with or without appointing a successor disseminating agent. SECTION 8. TERMINATION. The Issuer's obligations under this Disclosure Certificate shall terminate upon (A) the legal defeasance, prior redemption or payment in full of all of the Series 2004 Bonds, or (B) the termination of the continuing disclosure requirements of the Rule by legislative, judicial or administrative action. SECTION 9. AMENDMENTS. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision may be waived, if such amendment or waiver is supported by an opinion of counsel that is nationally recognized in the area of federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule. 5 SECTION 10. ADDITIONAL INFORMATION. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in its annual information described in Section 2 hereof or notice of occurrence of a significant event described in Section 3 hereof, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in its annual information or notice of occurrence of a significant event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in its future annual information or notice of occurrence of a significant event. SECTION 11. OBLIGATED PERSONS. If any person, other than the Issuer, becomes an Obligated Person (as defined in the Rule) relating to the Series 2004 Bonds, the Issuer shall use its best efforts to require such Obligated Person to comply with all provisions of the Rule applicable to such Obligated Person. Dated as of [ ], 2004 ATTEST: CITY OF CLEARWATER, FLORIDA City Clerk By: Brian J. Aungst, Sr. Mayor 6 EXHIBIT E COMMITMENTS FOR FINANCIAL GUARANTY INSURANCE POLICY E-l EXHIBIT F FINANCIAL GUARANTY POLICY ADDITIONAL PROVISIONS Additional Covenants with Bond Insurer Definitions The following definitions shall be applicable to this Resolution: "Ambac Assurance" shall mean Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company. ''Financial Guaranty Insurance Policy" shall mean the financial guaranty insurance policy issued by Ambac Assurance insuring the payment when due of the principal of and interest on the Series 2004 Bonds as provided therein. Covenants Regarding Ambac Assurance Consent Rights A. Consent of Ambac Assurance. Any provision of the Bond Resolution or this Resolution (collectively, the "Series 2004 Authorizing Documents") expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. Ambac Assurance reserves the right to charge the Issuer a fee for any consent or amendment to the Financing Documents while the Financial Guaranty Insurance Policy is outstanding. B. Consent of Ambac Assurance in Addition to Holder Consent Unless otherwise provided in the Series 2004 Authorizing Documents and so long as there is not event of default occurring or continuing under the Financial Guarantee Insurance Policy or the Reserve Surety and no insolvency of Ambac Assurance, Ambac Assurance's consent shall be required in addition to Holder consent, when required, for the following pwposes: (i) execution and delivery of any supplemental Ordinance or Resolution which seeks to amend the Series 2004 Authorizing Documents as such apply to the Series 2004 Bonds and (ii) initiation or approval of any action not described above which requires Holder consent C. Consent of Ambac Assurance in the Event of Insolvency Any reorganization or liquidation plan with respect to the Issuer must be acceptable to Ambac Assurance. In the event of any reorganization or liquidation, Ambac Assurance shall have the right to vote on behalf of all Holders who hold Ambac Assurance-insured Series 2004 Bonds absent the insolvency of Ambac Assurance or a default by Ambac Assurance under the applicable Financial Guaranty Insurance Policy insuring such Series 2004 Bonds. D. Consent of Ambac Assurance Upon Default Anything in the Series 2004 Authorizing Documents to the contraIy notwithstanding, upon the occurrence and continuance of an event of default as defined herein, so long as Ambac Assurance is not insolvent and absent a default under the Financial Guaranty Insurance Policy or Reserve Surety, Ambac Assurance shall be entitled to control and direct the E-2 enforcement of all rights and remedies granted to the Holders under the Series 2004 Authorizing Documents. NoticeslInfonnation To Be Given To Ambac Assurance Notices to be sent to the attention of the SURVEILLANCE DEPARTMENT: A. While the Financial Guaranty Insurance Policy is in effect. the Issuer shall furnish to Ambac Assurance, upon request. the following: (a) a copy of any financial statement. audit and/or annual report of the Issuer such additional information it may reasonably request. Upon request. such information shall be delivered at the Issuer's expense to the attention of the Surveillance Department. unless otherwise indicated. B. a copy of any notice to be given to the registered owners of the Series 2004 Bonds, including, without limitation, notice of any redemption of or defeasance of Series 2004 Bonds, and any certificate rendered pursuant to the Series 2004 Authorizing Docwnent relating to the security for the Series 2004 Bonds. C. To the extent that the Issuer has entered into a continuing disclosure agreement with respect to the Series 2004 Bonds, Ambac Assurance shall be included as party to be notified. Notices to be sent to the attention of the GENERAL COUNSEL OFFICE: A. The Issuer shall notify Ambac Assurance of any failure of the Issuer to provide relevant notices, certificates, etc. B. Notwithstanding any other provision of the Series 2004 Authorizing Document. the Issuer shall immediately notify Ambac Assurance if at any time there are insufficient moneys to make any payments of principal and/or interest as required and immediately upon the occurrence of any event of default hereunder. Other Information to be l!iven to Ambac Assurance: The Issuer will pennit Ambac Assurance to discuss the affairs, finances and accounts of the Issuer or any infonnation Ambac Assurance may reasonably request regarding the security for the Series 2004 Bonds with appropriate officers of the Issuer. The Issuer will permit Ambac Assurance to have access to and to make copies of all books and records relating to the Series 2004 Bonds at any reasonable time. Payment Procedure Pursuant to the Financial Guaranty Insurance Policy As long as the Financial Guaranty Insurance Policy for the Series 2004 Bonds insurance shall be in full force and effect. the Issuer and any Paying Agent agree to comply with the following provisions: (a) At least one (1) day prior to all Interest Payment Dates the Paying Agent will determine whether there will be sufficient funds in the Funds and Accounts to pay the principal of or interest on the Series 2004 Bonds on such Interest Payment Date. If the Paying Agent determines that there will be insufficient funds in such Funds or Accounts, or Paying Agent, if any, shall so notify Ambac Assurance. Such notice shall specify the amount of the anticipated deficiency, the Series 2004 Bonds to E-3 which such deficiency is applicable and whether such Series 2004 Bonds will be deficient as to principal or interest, or both. If the Paying Agent has not so notified Ambac Assurance at least one (1) day prior to an Interest Payment Date, Ambac Assurance will make payments of principal or interest due on the Series 2004 Bonds on or before the first (1st) day next following the date on which Ambac Assurance shall have received notice of nonpayment from the Paying Agent. (b) . the Paying Agent shall, after giving notice to Ambac Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac Assurance's direction, to The Bank of New York, in New York, New York, as insurance trustee for Ambac Assurance or any successor insurance trustee (the "Insurance Trustee"), the registration books of the Issuer and all records relating to the Funds and Accounts maintained under the Series 2004 Authorizing Document. (c) the Paying Agent shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Series 2004 Bonds entitled to receive principal or interest payments from Ambac Assurance under the terms of the Financial Guaranty Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Series 2004 Bonds entitled to receive full or partial interest payments from Ambac Assurance and (ii) to pay principal upon Series 2004 Bonds surrendered to the Insurance Trustee by the registered owners of Series 2004 Bonds entitled to receive full or partial principal payments from Ambac Assurance. (d) the Paying Agent shall, at the time it provides notice to Ambac Assurance pursuant to (a) above, notify registered owners of Series 2004 Bonds entitled to receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of Holder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from Ambac Assurance, they must surrender their Series 2004 Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Series 2004 Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the Paying Agent and (iv) that should they be entitled to receive partial payment of principal from Ambac Assurance, they must surrender their Series 2004 Bonds for payment thereon first to the Paying Agent who shall note on such Series 2004 Bonds the portion of the principal paid by the Paying Agent and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) in the event that the Paying Agent has notice that any payment of principal of or interest on the Series 2004 Bonds which has become Due for Payment and which is made to a Holder by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Paying Agent shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the E-4 Paying Agent shall furnish to Ambac Assurance its records evidencing the payments of principal of and interest on the Series 2004 Bonds which have been made by the Paying Agent and subsequently recovered from registered owners and the dates on which such payments were made. (f) in addition to those rights granted Ambac Assurance under the Series 2004 Authorizing Document, Ambac Assurance shall, to the extent it makes payment of principal of or interest on Series 2004 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the tenns of the Financial Guaranty Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Paying Agent shall note Ambac Assurance's rights as subrogee on the registration books of the Issuer maintained by the Paying Agent upon receipt from Ambac Assurance of proof of the payment of interest thereon to the registered owners of the Series 2004 Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Paying Agent shall note Ambac Assurance's rights as subrogee on the registration books of the Issuer maintained by the Paying Agent upon surrender of the Series 2004 Bonds by the registered owners thereof together with proof of the payment of principal thereof. Interested Parties A. Ambac As Third Party Beneficiary. To the extent that the Series 2004 Authorizing Document confers upon or gives or grants to Ambac any right, remedy or claim under or by reason of the Series 2004 Authorizing Document, Ambac is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right remedy or claim conferred, given or granted hereunder. B. Parties Interested Herein. Nothing in the Series 2004 Authorizing Docwnent expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Issuer, the Trustee, Ambac Assurance, the Paying Agent, if any, and the registered owners of the Series 2004 Bonds, any right, remedy or claim under or by reason of the Series 2004 Authorizing Document or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in the Series 2004 Authorizing Docwnent contained by and on behalf of the Issuer shall be. for the sole and exclusive benefit of the Issuer, the Trustee, Ambac Assurance, the E-5 EXHIBIT D CONTINUING DISCLOSURE CERTIFICATE 0-1 city manager and the city attorney. All other administrative and professional positions are appointed by the city manager in accordance with the City's Civil Service System. The City has approximately 1,851 employees, covered by the City's Civil Service law relating to recruitment, promotion, evaluation and discipline based on merit principles. Four employee unions represent the City's civil labor force: two units of the Fraternal Order of Police; two of the International Association of Fire Fighters; and one from the Communications Workers of America. Transportation Pinellas County and Clearwater are served by three major causeways and bridges over Tampa Bay, by U.S. 19 and 1-275 to the north and south, by 1-4 and U.S. 60 to the east. State Roads 590 and 686 also afford access to the City. Tampa International Airport, located approximately seventeen miles from downtown Clearwater, provides air travel access with approximately 260 national and international flights daily. Limousine and taxi service to and from the airport is available from Clearwater and throughout Pinellas County. St. Petersburg/Clearwater International Airport, approximately ten miles from downtown Clearwater, offers regularly scheduled passenger service and charter and special group flights, on a more limited basis to both domestic and foreign destinations, particularly to Canada, Mexico, and Central and South America. The Executive Airpark, which is slightly over a mile from the downtown business section, provides service and maintenance for private plane owners. The airport has one 3,000 foot hard-surface runway and facilities for visiting and locally based planes. The Port of Tampa (22 miles to the east) is the closest deep water port. The port is serviced by a variety of steamship agents and operators. The United States Coast Guard maintains an air station at the St. Petersburg/Clearwater International Airport, and a search and sea rescue cutter station on Clearwater Harbor opposite Sand Key. Gulf Coast Motor Lines provides service daily between Clearwater, St. Petersburg and Tampa and makes connections with Greyhound and Trailways Bus Lines in Tampa. Scenic tours are available via Gray Line out of Clearwater and St. Petersburg, and both Gray Line and Gulf Coast have buses for charter. Pinellas Suncoast Transit System maintains 54 routes in 19 municipalities in Pinellas County. Utilities, Public Service and Community Facilities The City owns and operates its own water and wastewater collection systems. Water is obtained from 17 deep wells owned and operated by the City (approximately 20- 25%) and from wholesale purchases from the Pinellas County Water System A-2 (approximately 75-80%). Total daily average is approximately 29 million gallons per day. The wastewater collection program provides for the transmission of wastewater through the City's underground sewer mains, collectors and interceptor lines and for the maintenance, repair and replacement of 363 miles of sanitary sewer lines. The Department of Public Works maintains 304 miles of paved streets, 10.5 miles of unpaved streets, approximately 147 miles of storm sewer mains, and approximately 559 miles of water mains. Electric power is provided by Progress Energy and telephone service is provided by Verizon of Florida, Inc. Bright House Networks and Knology provide cable television service under franchises with the City. Local editions of the daily St. Petersburg Times and The Tampa Tribune, plus weekly newspapers from adjacent Dunedin, Largo, Seminole and Clearwater Beach are widely distributed. The Clearwater Public Library System consists of a main library and four branches which are spread evenly throughout the community for easy access. The City offers over 42 acres of public beach front, 1,130 acres of parks, 31 playgrounds, numerous athletic courts and fields, five swimming pools, a 6,917 seat baseball and softball stadium, golf course, civic and recreational centers, 7.4 miles of recreational paths, boat ramps and a 209 slip yacht basin and marina. The Philadelphia Phillies conduct spring training at the municipal baseball stadium and have a long-term contract for farm club training on Clearwater's specially constructed facilities during the Winter Instructional League Program. Clearwater is the home of the Clearwater Bombers, a national amateur fastpitch softball team. Tourism The State of Florida reported 75.6 million tourists came to Florida during the year 2003, exceeding the previous record set in 2002 by nearly 2.5%. The estimated number of domestic visitors to the State in 2003 totaled 69.6 million, an increase of 2.5% over 2002, while the number of Canadian visitors surged nearly 6% to just under 1.7 million for the year. The lone decrease was a slight drop in the number of overseas visitors to Florida, which was 1.1 percent to 4.4 million. Tourism is a $5.2 billion industry annually to the County. Pinellas County is ranked seventh of the top ten destinations in Florida and generated approximately 5 million overnight guests and 7.5 million day visitors in 2003. Clearwater's Fun 'N Sun Festival each spring attracts thousands of visitors. Education The Pinellas County School District is the seventh largest in the State and operates a total of 144 schools comprising elementary through high school, exceptional, alternative and vocational schools within the County and serves more than 113,000 A-3 students. During the 2003-2004 school year, Pinellas County Schools expects enrollment of more than 16,295 compared to 17,047 during the 2002-2003 school year with students attending 82 elementary, 24 middle and 16 high schools along with five exceptional education centers, four alternative schools, four partnership schools and three charter schools. The district also operates three community schools, three adult education/learning centers, two technical education centers and one secondary vocational center. Private schools and academies are also located within or near the City limits. In addition, St. Petersburg College has a Clearwater campus. Eckerd College in St. Petersburg, Beacon College in Largo, Stetson University College of Law in Gulfport, the University of South Florida and the University of Tampa in Tampa offer nearby college and post-graduate education. Industry, Commerce and Labor Light, clean industry is encouraged in Clearwater. In 1957, the City of Clearwater developed a 100 acre industrial park adjacent to the Clearwater Airpark (Executive Airport) and to the CSX Transportation Company. There is also a privately owned, 35 acre industrial park. Large industries located near Clearwater include Honeywell, General Electric, UNISYS, Concept and Hercules Defense Electronics Systems, Inc. During the 1999 fiscal year IMRglobal Corp. ("IMR") occupied its new world headquarters in downtown Clearwater. Pension Plan The Employees' Pension Plan and the Fireman's Pension Plan are self- administered by the City. City contributions for fiscal year ending 2003 were $4,649,642 to the Employees' Plan and $1,211,210 to the Fireman's Plan, and were in accordance with actuarially determined funding requirements. In addition, supplemental pensions exist for certified Police Officers and Firefighters, funded solely from excise taxes on certain insurance premiums covering property in Clearwater, collected by the State and remitted to the City. Both plans require benefits to be adjusted to equal funds assets provided by the defined contributions. [Remainder of page intentionally left blank] A-4 Demographic Information Last Ten Fiscal Years (a) (b) (c) (d) (e) Permanent Per Capita Median School Unemployment Year Population Income Age Enrollment Rate (%) 1994 100,604 22,148 42.9 10,043 5.5% 1995 101,162 23,412 42.2 10,284 4.8 1996 101,867 23,768 42.1 11,906 4.2 1997 102,4 72 25,111 43.3 15,264 3.7 1998 102,874 26,287 43.6 13,714 2.9 1999 104,281 27,704 43.9 14,551 3.0 2000 104,454 29,041 44.2 15,978 2.7 2001 108,787 29,818 43.0 16,293 2.7 2002 109,231 31,406 43.0 17,047 3.9 2003 109,719 32,408 43.9 16,295 4.9 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30,2003. (a) University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (b) Data is for Pinellas County. Source is the University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (c) University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003. (d) Pinellas County School District. (e) University of Florida, Bureau of Economic and Business Research, Florida Statistical Abstract 2003, as of December 31 of the current fiscal year. NOTE: Data is for an unspecified point in each year, not specifically September 30. A-5 Property Values and Construction Last Ten Fiscal Years Commercial Construction Residential Construction Number Number Total Assessed Fiscal of of Property Value Year Permits Value Permits Value (a) 1994 1,077 $ 66,558,783 4,662 $21,151,330 $5,572,851,512 1995 1,391 120,116,220 5832 27,199,318 5,641,202,905 1996 1,860 43,299,453 6527 32,039,292 5,733,193,387 1997 1,762 94,445,784 6605 36,259,408 5,884,592,007 1998 1,392 52,983,592 7253 50,906,470 6,049,571,226 1999 1,821 90,77,005 5624 37,677,855 6,349,561,534 2000 2,667 177,569,812 5485 30,376,636 6,555,350,175 2001 2,312 164,701,145 5512 34,182,620 7,108,110,272 2002 2,196 108,939,096 5448 37,498,719 7,858,986,677 2003 1,834 193,901,304 6084 54,304,855 8,556,134,526 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30, 2003. (a) Pine lias County Property Appraiser, values listed are for years of collections. A-6 Assessed and Estimated Actual Property Valuations Last Ten Fiscal Years Assessed Valuations (a) Percentages Assessed Values to Yearly Increases Tax Collection Non-Exempt Personal Other Total Total Total Estimated Year Year Real Estate Property Property(b ) Taxable Exempt( c) All Market Taxable Total 1993 1994 $3,789,902,836 $390,841,880 $ 569,338 $4,181,314,054 $1,391,537,458 $5,572,851,512 100.0% (0.2)% 1.2% 1994 1995 3,782,134,930 403,392,150 580,731 4,186,107,811 1,455,095,094 5,641,202,905 100.0 0.1 1.2 1995 1996 3,820,217,710 431,622,230 592,909 4,252,432,849 1,480,760,538 5,733,193,387 100.0 1.6 1.6 1996 1997 3,918,747,480 457,182,870 628,698 4,376,559,048 1,508,032,959 5,884,592,007 100.0 2.9 2.6 1997 1998 3,999,483,300 493,752,640 1,026,819 4,494,262,759 1,555,308,467 6,049,571,226 100.0 2.7 2.8 1998 1999 4,153,719,690 537,808,800 870,404 4,692,398,894 1,657,162,640 6,349,561,534 100.0 4.4 5.0 > 1999 2000 4,353,493,520 549,051,160 934,183 4,903,478,863 1,751,871,312 6,655,350,175 100.0 4.5 4.8 I -..,J 2000 2001 4,657,074,110 550,845,380 867,947 5,208,787,437 1,899,322,835 7,108,1l0,272 100.0 6.2 6.8 2001 2002 5,130,069,970 557,588,870 767,087 5,688,425,927 2,170,560,750 7,858,986,677 100.0 9.2 10.6 2002 2003 5,580,157,650 524,125,950 794,789 6,105,078,389 2,451,056,137 8,556,134,526 100.0 7.3 8.9 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30,2003. (a) Pinellas County Property Appraiser. (b) Railroad and Telegraph Companies. (c) Includes governmental, educational, qualified religious, literary, scientific, and health care properties and special exemptions for individual property owners. Qualified property owners are entitled to a $25,000 Homestead Exemption based on residency requirement. Property Tax Levies and Collections Last Ten Fiscal Years Percent Percent of OfTotal Delinquent Percent Collections Outstanding Taxes to Fiscal Total Current of Levy Delinquent Total To Current Delinquent Current Year Tax Levy Collections (a) Collected Collections Collections Levy Taxes Levy 1994 $21,281,744 $21,154,946 99.40% $603,226 $21,758,172 102.24% $946,874 4.45% 1995 21,458,160 21,388,692 99.68 159,918 21,548,610 100.42 856,443 3.99 1996 21,761,730 21,675,311 99.60 73,731 21,749,042 99.94 868,209 3.99 1997 22,410,181 22,281,502 99.43 80,253 22,361,755 99.78 914,383 4.08 1998 23,008,214 22,856,951 99.34 129,690 22,986,640 99.91 935,957 4.07 :> 1999 23,951,878 23,854,396 99.59 226,812 24,081,208 100.54 806,626 3.37 I 00 2000 26,998,318 26,876,461 99.55 106,800 26,983,261 99.94 821,683 3.04 2001 28,664,112 28k567,429 99.66 77,716 28,645,145 99.93 840,651 2.93 2002 31,303,900 31,204,025 99.68 130,632 31,334,657 100.1 0 809,894 2.59 2003 35,153,114 35,038,555 99.67 91,548 35,130,103 99.93 824,673 2.35 Source: City of Clearwater, Florida Comprehensive Annual Financial Report for period ending September 30, 2003. (a) Collections are reported at the gross amount before any discount allowance. Property Tax Rates - All Direct and Overlapping Governments Last Ten Fiscal Years Downtown County Emergency Fiscal Develop- School Transit Medical Year City ment(a) Board County District Services Other Total 1994 5.1158 1. 0000 9.0820 5.4290 0.6697 0.8500 1.1820 23.3285 1995 5.1158 1.0000 9.3590 5.5850 0.6697 0.8720 1.4221 24.0236 1996 5.1158 1.0000 9.3290 5.5140 0.6697 0.8060 1.6308 24.0653 1997 5.1158 1.0000 9.1760 5.5100 0.6697 0.7520 1.6561 23.8796 1998 5.1158 1.0000 9.1330 5.5380 0.6697 0.7410 1.6561 23.8536 1999 5.1158 1.0000 9.11 00 5.5380 0.6501 0.7130 1.6561 23.7830 > 2000 5.5032 1.0000 8.6660 5.8540 0.6501 0.6470 1.6572 23.9775 I 2001 5.5032 1.0000 8.4330 6.0040 0.6501 0.7470 1.6562 23.9935 1.0 2002 5.5032 1.0000 8.4870 6.1410 0.6501 0.6600 1.6562 24.0975 2003 5.7530 1.0000 8.4490 6.1410 0.6319 0.6600 1.6562(b) 24.2911 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30,2003; Pinellas County Property Appraiser. Property Tax Rates: Expressed as mills per $1,000 of taxable value. (a) A separate taxing district established by referendum which affects only downtown properties. (b) "Other" includes Pinellas County Planning Council (0.0225); Juvenile Welfare Board (0.8117); SW Florida Water Management District (0.4220); Pinellas Anclote River Basin (0.4000). City of Clearwater, Florida Principal Taxpayers* September 30,2003 Percentage to Total Assessed Assessed Taxpayers Type of Business Value* Value Bellwether Prop. LP Ltd. Shopping Center $ 91,974,300 1.65% California State Teachers Apartment Complex 27,600,000 0.49 Taylor, John S. III Landowner 27,401,700 0.49 Weingarten Nostat Inc. Shopping Center 24,939,600 0.45 Sand Key Association Ltd. Hotel 24,000,000 0.43 Clearwater Land Co. Adult Congregate Facility 23,848,700 0.43 St. Joe Co. Office Building 23,549,300 0.42 Northwood Plaza Shopping Center 22,309,100 0.40 ZOM Bayside Arbors Ltd. Apartment Complex 19,268,000 0.35 Furnary, Stephen J. Apartment Complex 19,200,000 0.34 Subtotal 304,090,700 5.45 All Others 5,276,066,950 94.55 Total $5,580,157,650 100.00% * Based on non-exempt real property assessed taxable values. Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2003; Pinellas County Property Appraiser, 2002 tax rolls for 2003 collections. A-lO City of Clearwater, Florida Ratio of Net General Bonded Debt to Taxable Assessed Value and Net Bonded Debt Per Capita Last Ten Fiscal Years Ration of Net Net Taxable Net General General Assessed General Bonded Debt Bonded Fiscal Value Bonded To Assessed Debt Year Population (000)(1 ) Debt Value Per Capita 1993 100,768 $4,188,105 348,478 0.008% 3.46 1994 100,604 4,181,314 242,700 0.006 2.41 1995 101,162 4,186,108 133,597 0.003 1.32 1996 101,867 4,252,433 21,598 0.001 0.21 1997 102,472 4,376,559 165,000 0.004 1.61 1998 102,874 4,494,262 33,750 0.001 0.33 1999 104,281 4,692,398 n/a 0.00 2000 104,454 4,903,478 n/a 0.00 2001 108,787 5,208,787 n/a 0.00 2002 109,231 5,688,426 n/a 0.00 2003 109,719 6,105,078 n/a 0.00 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002. (1) Values listed are for year of collections. [Remainder of page intentionally left blank] A-ll City of Clearwater, Florida Computation of Legal Debt Margin September 30, 2003 Assessed Valuation of Non-Exempt Real Estate(a) ..................................... $5,580,157,650 Times: Twenty Percent Limitation per City Charter .................................... x .20 Equals Legal Indebtedness Limitation ......................................................... $1.116.031.530 Debt Subject to Indebtedness Limitation: Revenue Bonds: 1996A Gas System Revenue Bonds 1997 Gas System Revenue Bonds 1998 Gas System Revenue Bonds 1993 Water and Sewer Revenue Bonds 1998 Water and Sewer Revenue Bonds 2002 Water and Sewer Revenue Bonds 1999 Stormwater System Revenue Bonds 2002 Stormwater System Revenue Bonds 2001 Infrastructure Sales Tax Revenue Bonds 2001 Improvement Revenue Refunding Bonds 2002 Spring Training Revenue Bonds Notes, Mortgages and Contracts Totals Legal Indebtedness Margin Gross Debt $8,270,000 11,870,000 7,860,000 14,005,000 51,924,771 58,680,000 7,150,000 24,685,000 41,345,000 11,005,000 14,645,000 13,746.259 $265,186,030 Less Sinking Fund Assets 7,917 43,750 2,917 9,496,000 1,561,045 4,268,135 119,167 403,333 4,391,667 1,105,310 268,333 o $21.667,574 Net Debt Subject to Limitation 8,262,083 11,826,250 7,857,083 4,509,000 50,363,726 54,411,865 7,030,833 24,281,667 36,953,333 9,899,690 14,376,667 13,746.259 $243,518.456 $872.513.074 Source: City of Clearwater, Florida, Comprehensive Annual Financial Report for period ending September 30, 2002. (a) Valuation listed is from 2002 tax year for 2003 collections. A-12 City of Clearwater, Florida Computation of Direct and Overlapping Debt September 30, 2003 Net General Obligation Debt Governmental Unit Outstanding Percent Amount City of Clearwater $ 100.0% $ Pinellas County School Board $66,895,235 13.6% $9,097,752 (a) Applicable Net Debt Percentage is based on ratio of City to County Taxable values for 2003 collections ($5,580,157,650/ $41,167,093,480 = 13.6%). A-13