• - The assets of the City of Post Falls exceeded its liabilities at the close of the most recent fiscal year by $133,598,070 (net assets). 
• -At the end of the current fiscal year, undesignated fund balance for the general fund was $4,643,329, or 35.2 percent of total general fund expenditures.
• -The governments net assets increased by $18,311,049. Approximately half of this increase is attributed to one-time infusions of resources from capital contributions.
• -In the City’s business-type activities, operating revenues increased by $428,701 (5.8 percent) and operating expenses increased by $8,203 (less than one percent).
• -The City began construction of a new city hall in April 2007.  During FY 07 the city expended $3,500,000 on this project.  It will be completed in FY 08.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City of Post Falls’ basic financial statements.  The City of Post Falls’ 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.

The government-wide financial statements are designed to provide readers with a broad overview of the City of Post Falls’ finances, in a manner similar to a private-sector business.

The statement of net assets presents information on all the City of Post Falls’ assets and liabilities, with the difference between the two reported as net assets.  Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Post Falls is improving or deteriorating.

The statement of activities presents information showing how the City’s net assets changed during the most recent fiscal year.  All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.  Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the City of Post Falls that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their cost through user fees and charges (business-type activities).  The governmental activities of the City of Post Falls include general government, public safety, streets, parks and recreation.  The business-type activities of the City of Post Falls include water, wastewater, and sanitation. 

The government-wide financial statements include not only the City of Post Falls itself (known as primary government), but also a legally separate urban renewal district for which the City of Post Falls is not financially accountable.  Financial information for this component unit is reported separately from the financial information presented for the primary government itself. 

The government-wide financial statements can be found on pages 27 to page 28 of this report.

Fund financial statements.  A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives.  The City of Post Falls, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.  All of the funds of the City of Post Falls can be divided into two categories:  governmental funds and proprietary funds.

Governmental Funds.  Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements.  However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on 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 funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City of Post Falls maintains sixteen 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 fund, LID 2004-1, and the capital fund, all of which are considered to be major funds.  Data from the other thirteen governmental funds are combined into a single, aggregated presentation.  Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.

The City of Post Falls adopts an annual appropriated budget for its general fund.  A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget.

The basic governmental fund financial statements may be found on page 29 page 30 to page 31 of this report.

Proprietary funds.  The City of Post Falls maintains three 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 of Post Falls uses enterprise funds to account for its Water, Sewer and Sanitation operations. 

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, Sewer and Sanitation operations, all of which are considered to be major funds of the City of Post Falls. 

The basic proprietary fund financial statements may be found on page 32, page 33 to page 34 of this report.

Notes to the financial statements.  The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.  The notes to the financial statements may be found on pages 35 to 58 of this report.

Other information.  The combining statements referred to earlier in connection with nonmajor governmental funds may be found on pages 60 to page 61 of this report.  Combining and individual fund statements and schedules can be found on pages of this report.

Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position.  In the case of the City of Post Falls, assets exceeded liabilities by $133,598,070 at the close of the most recent fiscal year.

By far the largest portion of the City of Post Falls’ net assets (66 percent) reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, other improvements, infrastructure, and construction in progress); less any related debt used to acquire those assets that are still outstanding.  The City of Post Falls uses these assets to provide services to citizens; consequently, these assets are not available for future spending.  Although the City of Post Falls’ 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 sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Below is a summary of the City of Post Falls’ Net Assets statement.
City of Post Falls’ Net Assets

An additional portion of the City of Post Falls’ net assets (13 percent) represents resources that are subject to external restrictions on how they may be used.  The remaining balance of unrestricted net assets ($28,336,529) may be used to meet the government’s ongoing obligations to citizens and creditors.

At the end of the current fiscal year, the City of Post Falls is able to report 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.

At the end of the current fiscal year, 73 percent of the liabilities are made up of noncurrent liabilities.  This primarily represents bonds and leases discussed in Notes 6 and 7 of the notes to the financials.

Governmental activities.  Governmental activities’ key elements are broken down in the following charts.  Governmental activities increased the net assets by $10,627,180 and business-type activities increased net assets by $7,683,869.

The City’s direct charges to users of governmental services made up $4,940,214 or 21 percent of total governmental revenue.  These charges are for park rentals, recreation classes, building permits and other fees related to public safety and administration. 

Public safety which includes police, domestic violence assistance, animal control and dispatch services accounts for $4,065,252 in expenditures, or 29% of the total.  Highway and public works accounts for $2,422,039 in expenditures, or 17% of the total.  Culture and recreation accounts for $1,594,522 in expenditures, or 11% of the total.  General government, the largest program, accounts for $5,701,979 in expenditures, or 40% of the total.   

Below is a summary of the City of Post Falls’ Changes in Net Assets.
City of Post Falls’ Changes in Net Assets

• -The majority of the City of Post Falls’ governmental activities’ revenue is received from property tax (29 percent) with grants and contributions right behind (28 percent). 
• -When all taxes are added together, they make up 42 percent of the budget.
• -When revenues are compared to expenses, it shows that only the City of Post Falls’ highways and public works program is self supporting.  This is due to donated capital assets from developers.  Each program is funded by taxes or other general revenues. 
• -Grants and contributions are primarily received by public safety and public works.  These grants normally have matching requirements by the City, but allow programs and projects that may not happen without those additional funds.  The City currently runs a domestic violence program that is primarily funded through federal grants each year.

For the most part, increases in expenses closely paralleled inflation and growth in the demand for services.  The only major transactions during the year were a force main extension in sewer and the ground breaking for a new city hall in the capital fund.  No significant losses or revenues were received during the year and building permit revenue has remained high.

Major funds in the City are general fund, LID 2004-1 and the capital fund.  Significant transactions within the general fund this year mainly consisted of repayment of debt, payment of personnel (has been steadily increasing since a wage study was performed in 2001 and since health insurance has been increasing each year) and a transfer of funds to the capital fund to begin the city hall.  The average wage increase in the City for the current fiscal year was 4.5 percent.  No significant transactions occurred for LID 2004-1 this year.  Last, in the capital fund $3,500,000 has been expended on the new city hall project.

The general fund has a significant cash balance at year end.  A portion of this cash balance has been designated as a contingency fund and the balance has been reallocated for expenditure in the FY 08 budget.  Last, the capital fund has a large cash balance that is primarily made up of money that is being saved for future capital projects such as a completion of the new city hall and future road construction. 

Business-type activities.   Business-type activities’ key elements are broken down in the following charts.

• -One of the major sources of the City of Post Falls’ business-type activities’ revenue is received from charges for services (54 percent).  Currently, the City of Post Falls’ business-type activities do not use property taxes for any type of funding.
• -The second major source of revenue is capital contributions.  These contributions are received by water and sewer only.  The sanitation for the City of Post Falls is contracted out, and the City has no capital investment in that program.
• -When revenues are compared to expenses, it shows that all of the City of Post Falls’ programs are self supporting. 
• Investment earnings are starting to show a recovery with the strengthening market and they have improved over the prior year.

• Again, for the most part, increases in expenses closely paralleled inflation and growth in the demand for services.  The City has been growing at a very rapid pace over the last couple of years.  The City is the only sewer provider within the City limits and is one of three providers of water within the City limits.  All sanitation services are provided through the City. 

Financial Analysis of the Government’s Funds
As noted earlier, the City of Post Falls uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds.  The focus of the City of Post Falls governmental funds is to provide information on near-term inflows, outflow, and balances of spendable resources.  Such information is useful in assessing the City of Post Falls’ financing requirement.  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.

At the end of the current fiscal year, the City of Post Falls’ reported a combined ending fund balance of $13,927,183, an increase of $1,242,482 in comparison with the prior year.  This increase is primarily due to capital project savings and building permit fees.  The current fund balance contains $410,450 of reserved dollars, $724,801 of designated dollars and the balance of $12,791,932 is unreserved, which is available for spending at the government’s discretion. 

The general fund is the chief operating fund of the City of Post Falls.  At the end of the current fiscal year, unreserved fund balance of the general fund was $4,643,329, with a total fund balance of $5,423,748.  As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures.  Unreserved fund balance represents 35.2 percent of total general fund expenditures, while total fund balance represents 38.1 percent of that same amount.

The other major funds of the City of Post Falls have the following fund balances at year-end:  LID 2004-1 has an unreserved fund balance of $367,229.  This balance is due to prepayments on the LID.  The Capital Fund has a reserved fund balance of $354,832.  This is reserve set by debt service requirements.  The Capital Fund has an unreserved fund balance of $7,713,348.  This fund balance will be used towards future capital projects in the City’s CIP.

Proprietary funds.  The City of Post Falls’ proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Unrestricted net assets of the water, sewer and sanitation funds at the end of the year amounted to $22,305,506 (water $5,092,714; sewer $16,882,267; and sanitation $330,525).  Restricted net assets at the end of the year amounted to $7,657,572 (water $3,167,232 and sewer $4,490,340). 

General Fund Budgetary Highlights

Four budget amendments were performed during the current fiscal year.  These amendments increased the budget by a total of $3,325,610.  General Fund revenues ended the fiscal year with a total positive variance of 7.6 percent.  Expenditures ended the fiscal year with a total positive variance of 7.2 percent.  The major variance in revenues was due to building permits and an improving economy.  The variance in expenditures was due to a combination of numerous small savings in the general government area.    

Capital Asset and Debt Administration

City of Post Falls’ Capital Assets
(net of accumulated depreciation)

Major capital asset events during the current fiscal year included the following:

• Donated capital assets from developers as they develop commercial areas and subdivisions.
• Continued with upgrades in various parks owned by the City.
• Constructed a Communications site at Blossom Mountain allowing for more wireless communication capabilities in the City.
• Various Sewer projects across the City in an effort to keep up with growth.
• Started construction of a new City Hall.

Additional information on the City of Post Falls’ capital assets can be found in note 4 on pages 43 to 44 of this report.

Long-term debt.  At the end of the current fiscal year, the City of Post Falls had total bonded debt outstanding of $12,470,373.  Of this amount, $980,000 is comprised of debt backed by the full faith and credit of the government and $2,435,001 is special assessment debt for which the government is liable in the event of default by the property owners subject to the assessment.  The remainder of the City of Post Falls’ debt represents bonds secured solely by specified revenue sources (i.e., revenue bonds), a water loan from DEQ secured solely by specified revenue sources, leases secured by general fund, and compensated absences accrued by employees and a liability of general fund ($731,555), water ($51,118) and sewer ($60,851).

         Debt Type                                2007 Balance                  2006 Balance

General Obligation Bonds:                    $   980,000                  $1,115,000
Sewer Revenue Bonds:               5,907,948                    6,560,559
Water – DEQ Loan                                3,147,424                    3,268,028
            Special Assessment Bonds:                     2,435,001                    2,555,001
            Leases                                                    4,393,665                    4,687,182
            Compensated Absences                            843,524                       757,376
                                                                      $17,707,562                $18,943,146     

The State of Idaho mandates a general obligation debt limit of 2% of the assessed market value of taxable property within the City boundaries.  The limit totaled $34,021,388 on September 30, 2007.  The City’s general obligation bond above is subject to this limit.  Therefore, $33,041,388 is available for future general obligation indebtedness.

Economic Factors and Next Year’s Budgets and