City of Arvada 2011 Year-End Financial Report

Financial Report2011 Annual

Table of Contents

2011 Overview .....................................................1

General Fund .......................................................3

Arvada Center .....................................................9

Parks Fund ........................................................ 11

Special Revenue Funds ...................................... 13

Capital Improvement Fund ............................... 15

Enterprise Funds ................................................ 16

Internal Service Funds .......................................22

City of Arvada Investment Report ....................27

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overview 2011 OVERVIEW

2011 OverviewOfficially, the Great Recession began in December of 2007 and ended in June of 2009. As we all know, the end of this recession was quiet. It will take many state and local governments a few years to return to pre-2007 revenue levels. Having stated that, the City of Arvada fared generally better in 2011 than in 2010 and the City’s revenues are beginning to reflect 2007 levels. This means, like many citizens and businesses, the City’s revenues have remained flat or were lower than they were in 2007 and 2008.

As the nation slowly recovers from the Great Recession, the City is experiencing small, but positive increases in various revenue sources. Sales tax receipts – which pay for over 50 percent of our general expenditures – increased by 3.34 percent over 2010 levels. We continued to have building activity, particularly in the multi-family area with the construction of a large facility at one of our future rail transit areas. Automobile sales were higher nationally and locally, generating over $5 million for the City; an 11 percent increase above 2010.

The City has many ways to respond to the changing environment. The one major response has been to be ever-vigilant on ways to lower spending. In 2011 the City saved over $2 million in leaving positions vacant as employees left for different opportunities. Departments saved over $900,000 in various line items. Between 2010 and 2011, these types of savings have resulted in providing monies for major capital projects. This is the major story of 2011.

Through savings and analyzing all available cash reserves, over $10 million was identified for one-time capital expenditures. The Council allocated portions of the available monies over a series of meetings. Between May and August 2011 the Council allocated $6.075 million. The projects included:

Arterial Fencing $475,000Construct Missing Sidewalks $250,00056th Ave. Intersection $2,000,000Final Design for Indiana St. and 72nd Ave. $150,000Ralston Road Improvements $300,000New Seats at Arvada Center $200,000Gold Line Parking $750,000Gold Line Enhancements $1,400,000Section 16 Property $300,000Permit System Replacement $250,000Total $6,075,000

Then, in January 2012 the Council completed their allocations of one-time monies with the following allocations:

Additional Street Major Maintenance $2,000,000Additional City Wide Training $39,000Restrooms at Long Lake Ranch Park $611,000*Traffic Calming Program $250,000Total $2,900,000

*A total cost of $711,000 was authorized; Apex Recreational District has dedicated $100,000 to the project.

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A total of $8,975,000 will be appropriated for capital items above the City’s ongoing dedication of over $7 million for cash-financed capital projects and the debt requirements.1

The reasoning of the capital investment is twofold. The first is to ensure the City continues its assertive program of “taking care” of our current infrastructure. This ensures both the livability and the economic vitality of our community. The second is to complete projects in a variety of master plans that meet the population and demographic changes of our community.

There are quite a few examples of major projects. The City began the design for a major new bridge at Garrison Street to address long-term flooding challenges on Ralston Creek. This project, in turn, created the need to move and build a new, larger and very much improved indoor soccer and other sport facility in partnership with the Apex Recreational District. The City dedicated approximately $2,000,000 to help with this move and construction. This one bridge project also produced an opportunity to redevelop the entire park area of Ralston Creek in the core of the City. This also generated a movement to conduct a comprehensive plan for both transportation and other park needs in the Ralston Road corridor. One additional project from this effort will be the redevelopment of a large barren field beside the K – 8 school. This joint project with the school district will transform the south side of Ralston Corridor with an active park area. The traffic and multi-modal challenges are significant. The City worked with the community throughout 2011 on various plans. This work will continue through the next few years.

These projects join other major investments. The City purchased land for new parks in the South Central and East neighborhoods of the City; a 40,000 square foot Skate Park was nearly completed with a cost of over $2,100,000. It was finished enough that young people from

1 The difference between the $10.5 million and the noted allocations in the above section were placed in the cash reserves of the General Fund to balance future budgets. As the General Fund summary illustrates, the 2012 Budget assumed $2.616 million would be needed to balance the budget. With all the savings in 2011, we ended the year with an unallocated cash balance of $1.7 million, for future uses.

all over the region started using it before its opening. The City joined a neighborhood in the development of the first park that will include growing of fruit trees and vegetables for sale.

The City initiated a neighborhood grant program that provided $50,306 for neighborhood-identified needs including signs, “get to know your neighbor” events, and landscaping projects. The City also joined one specific neighborhood in building connections to determine ways to revitalize a neighborhood. “Get to Know Your Neighbor” events were offered on weekends and evenings. The City began a major street rehabilitation to improve the walkability and appearance of the area with wider sidewalks and a reconstructed street.

The City started completing sidewalks on the east side of State Highway 121 (also known as Wadsworth Boulevard). This is one of the City’s significant transportation corridors

and has no walkability on the east side. This project will provide safety for the neighborhood. The City also commenced re-construction of an aged median that will deliver additional vehicular safety on one of our major roads – 80th Avenue.

This past year was a significant year for producing results towards the City’s mission of “Continuing to Build a Great Community.” Through everyday

efforts of park and street maintenance, property and building code enforcement, public safety, and the myriad of other services offered to the citizens of the City, Arvada has been able to retain service levels and add amenities even as the country has faced some of the most difficult financial periods in over 50 years. With the monies set aside, continued focus on “taking lasting care” of the facilities we have and investment in the Ralston Fields, west side and transit areas, the City should easily be able to continue to be a great community for all families.

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general fund GENERAL FUND

General Fund OverviewThe General Fund pays for the City’s basic services. This includes police, street maintenance, planning, transportation planning, street light maintenance and costs, building activity and general administration. In addition, the General Fund also provides operational cash to the Arvada Center and the Parks Fund, $1,607,643 and $2,740,000, respectively. In 2011 the General Fund also paid $4,628,000 in general debt payments. The General Fund contributed $3,601,260 to build new parks, streets and other general infrastructure.

The following table provides a comparison of budgeted cash balances, revenues and expenditures to the actual outcomes in these areas.

2011 Budget 2011 ActualBeginning Fund Balance

$21,445,570 $21,445,570

Revenues $68,530,794 $69,051,480

Expenditures

Ongoing $69,925,923 $65,574,509

One Time

JPPHA $2,600,000 $861,667

AEDA $1,000,000 $500,000

2011 Expenditures $73,525,923 $66,936,176

Money Dedicated for 2012

2011 Budget 2011 Actual

JPPHA $ - $1,738,000

Long Lake Ranch Restrooms

- $611,000

Traffic Calming - $250,000

Citywide Training - $39,000

Street Major Maintenance

- $2,490,000

Other - $105,000

AEDA - $500,000

Total Expenditures $73,525,923 $72,669,176

19% of 2012 Expenditures $13,032,920

Debt Service Reserve $390,000

Use of Cash to Balance 2012 $2,616,701

Remaining Cash for Future Uses $1,788,253

As the table illustrates, we began the year with $21.4 million in cash reserves. We had expected revenue of $68.530 million and after the year, we had total revenues of $69.051 million – a very small increase of $520,686.

Revenue highlights follow in the next section.

On the expenditure side of the budget, departments saved a significant amount of money. We knew before the end

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of the year that we were going to have savings in various categories, and in a meeting on January 6th, asked the Council if we could dedicate some of the identified savings to a variety of important projects, including permanent restrooms at Long Lake Ranch, traffic calming and city-wide training. In addition, we also identified $2,000,000 in savings to dedicate to additional street maintenance.

Also, each year, we have projects that were not completed in that calendar year, and the request is to re-appropriate these monies again. Appropriations lapse at calendar end, thus requests must be made. We have monies remaining for JPPHA, street maintenance and miscellaneous small requests.

All of these costs must be identified prior to understanding the actual cash available for future years. These additions – new projects, re-appropriations and use of cash for 2012 – bring our total committed obligations to $72.669 million or $856,747 less than the original budget.

Our current reserve policies include that we set aside cash in the amount of 19 percent of our estimated 2012 expenditures in the General Fund. Also, in the Debt Service Fund we must maintain approximately one month’s worth of the annual payment.

Finally, a decision was made to use $2.616 million of our cash reserves to balance the 2012 Budget.

After all these changes are made, we finally have $1.788 million remaining to be dedicated to the future needs of the City. Given the capital needs and goal of increasing street maintenance by $2 million annually, these dollars will help in balancing 2013 and beyond.

Revenue HighlightsThe following section highlights the sources generated to meet the operating expenditures of the General Fund. The revenue to pay for all of this comes from many sources as the graph below illustrates. More information is provided regarding sales taxes, use taxes, intergovernmental and property tax revenue.

2011 REVENUE SOURCES

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SALES TAX COLLECTIONS

USE TAX COLLECTIONS

Sales TaxSales tax revenue is beginning to recover from the Great Recession. The following graph illustrates the actual collections.

Use TaxThe City has three prime use tax types: general, building and automobile. These are taxes paid in lieu of sales tax on purchases.

General Use tax was 10 percent above actual collections in 2010. In 2011 people did return to purchasing vehicles and this resulted in a 9 percent increase over the previous year.

Building use, surprisingly, was also 2.7 percent above 2010. This was due primarily to a very large multi-family housing development with over 300 units.

Overall these three sources of sales taxes generated $858,084 in additional revenue above our budget estimates.

Sales tax receipts were 3.4 percent above 2010 actuals. Our budget was $35,726,000; thus, statistically collections were 0.33 percent higher than our estimate or $128,169.

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Property TaxThe City’s property tax rate is 4.31 mills per $100 of valuation. In Colorado, the mill rate is placed on the assessed value. The following graph illustrates the collections over the past three years.

It is evident that while our property tax collections were somewhat lower in 2011 than 2010 (0.12 percent), overall this is a very stable revenue source. The City did collect $156,985 less than we had budgeted.

Intergovernmental RevenuesThere are two sources of revenue in this category: monies the state shares from gas tax receipts (also referred to as Highway Users Trust Fund) and property tax revenue Jefferson County shares for the maintenance of roads and bridges. Combined, these two revenues equal $4,585,139. The challenge with these revenues is that, overall, they are decreasing. The State of Colorado increased the tax in mid-2009, providing more dollars to the City in 2009 and 2010. Simultaneously, new vehicles are becoming more gas efficient, thus lowering the total gas consumption. The receipts between 2010 and 2011 were statistically identical.

As the graph further illustrates, the Jefferson County share for road and bridge maintenance has substantially decreased. Between 2010 and 2011 the decrease from Jefferson County was 20 percent. Since 2007 the decrease has been $468,029 a year or a 37 percent decrease.

This is particularly important as these monies are used to help offset the costs of street repair. The price of asphalt-related commodities rose 12 percent in 2011. Thus, our costs are increasing while the revenue source has been decreasing.

PROPERTY TAX COLLECTIONS

INTERGOVERNMENTAL REVENUES

It is evident that while our property tax collections were somewhat lower in 2011 than 2010 (0.12 percent), overall this is a very stable revenue source.

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All Other Revenue SourcesAs the pie chart on page 4 illustrated, the remainder of our revenue sources derive from building permits, fees on utilities, fees we place on other Funds for general services, fees and fines and miscellaneous. We would especially encourage you to read the section of this report on Investment Interest earnings. In the past, this has been a particularly good basis of revenue. However, over the past two years, this has not been a particularly healthy revenue source. In 2011 we had hoped to generate $500,000 for the General Fund. The total revenue was approximately $300,000.

Expenditure HighlightsPersonnel costs comprise 49 percent of our total General Fund expenditures.

GENERAL FUND EXPENDITURES

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Salary and Benefit SavingsSalary and Benefits comprise over 49 percent of our budget.

It is natural then that the greatest amount of savings would be in this area of the budget. The table below illustrates a total savings of $1.913 million in various salary and benefit types. These include salaries, retirement, insurance types and temporary wages.

Salary & Benefit Savings 2011 2012

PERSONNEL Budget Actual Savings Budget

Salaries & Wages $26,281,759 $24,936,880 $1,344,879 $27,062,997

Overtime 861,460 705,011 156,449 877,161

Group Insurance 3,995,599 3,774,518 221,081 4,494,739

Retirement 3,004,953 2,923,914 81,039 3,081,596

Medicare 299,338 290,042 9,296 311,913

Other 697,894 597,042 100,852 714,269

TOTAL $35,141,003 $33,227,406 $1,913,597 $36,542,675

Fuel 2011 2012

In 2011, gasoline

represented 72.5% of fuel consumed by volume, with

diesel at 27.2% and

E85 at 0.3%

FUEL Budget Actual Savings/Deficit Budget

CMO $417 $798 $(381) $430

Finance (Purch) 884 568 316 911

Police Department 279,414 243,466 35,948 287,900

Public Works 205,993 201,417 4,576 212,173

Comm. Dev. 17,317 16,542 775 17,837

IT (Gen. Svcs) 583 484 99 600

TOTAL $504,608 $463,275 $41,333 $519,851

Fuel costs are one of the most volatile budgetary items. The City’s overall fuel costs increased 19.3 percent between 2010 and 2011.

Salary and Benefi ts comprise over 49 percent of our budget. It is natural then that the greatest amount of savings would be in this area of the budget.

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arvada centerARVADA CENTER

Arvada CenterArvada Center 2011 Budget 2011 Actual

Beginning Fund Balance $242,307 $242,307

REVENUES

Generated $6,200,006 $5,657,316

SCFD 925,662 947,681

City Cash Transfer-Original 1,182,643 1,182,643

City Cash Transfer-Additional - 425,000

City In-Kind Transfer $1,967,270 $1,967,270

Total Revenues $10,275,581 $10,179,910

EXPENDITURES

Ongoing $8,308,311 $8,243,342

In-Kind 1,967,270 1,967,270


Income/(Loss) - (30,702)

Ending Fund Balance 242,307 211,605

Goal (11% of Expenditures) $1,130,314 $1,123,167

Excess/(Deficit) ($888,007) ($911,562)

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Revenue HighlightsIn 2011, generated revenues fell short of budget estimates by over $500,000. The areas contributing to this shortfall were performing arts, development and education. The City made an additional cash transfer of $425,000. The history of City contributions is shown in the table below.

Expenditure HighlightsExpenditures in the Arvada Center are about $64,000 less than budgeted. Insurance costs accounted for $88,000 of the savings. Expenditures in performing arts and marketing were higher than expected.

SCFD grant contributions increased 3.8 percent compared to 2010, however this source of revenue still has not recovered from 2008 levels.

SCFD REVENUE

CITY OF ARVADA CONTRIBUTIONS

The City of Arvada contributed $1,607,643 in cash support in 2011. This was a decrease of almost $306,000 from 2010. The 2012 budget assumes a transfer of $1.6 million.

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parks fund PARKS FUND

Parks FundParks Fund 2011 Budget 2011 Actual

Beginning Fund Balance $3,830,034 $3,830,034

REVENUES

Generated 220,726 199,417

Open Space 3,140,636 3,142,349

APEX Reimbursement 827,263 868,652

City Cash Transfer 2,840,273 2,740,040

Total Revenues $7,028,898 $6,950,458

EXPENDITURES

Ongoing 7,507,068 6,734,834

Capital 12,759 12,759


Income/(Loss) (490,929) 202,865

Ending Fund Balance 3,339,105 4,032,899

Goal (11% of Expenditures) 827,181 742,235

Excess/(Deficit) $2,511,924 $3,290,664

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Revenue HighlightsRevenues for the Parks Fund were a little below budget for 2011. This was caused by a reduction in the transfer from the General Fund to the Parks Fund. This reduction was related to salary savings of $52,898 and insurance cost savings of $47,335. These amounts were retained in the General Fund since the Parks Fund did not need them to meet expenditures.

The APEX reimbursement was larger than budgeted by 5 percent. The Parks department and APEX continue to build on and expand their relationship with each passing year.

Expenditure HighlightsExpenditures were under budget in 2011 by 9 percent. This was caused by one main item, a $610,000 transfer to the Capital Improvement Project Fund for Park Development Fees that was not needed. The transfer was made in 2010 as part of our audit adjustments but after the budget for 2011 had already been approved. If this amount was removed from the overall budget, Parks would have been within 2.3 percent of their budget with 1.3 percent of this made up by health care and the insurance cost savings and 1 percent made up by line items.

# of Parks Total Acres Irrigated Acres % of total

Community and Regional Parks 2 145.62 8.32 3.9%

Facility Landscaping 21 107.14 36.36 2.8%

Golf Clubs 2 297.50 217.90 7.9%

Historic Parks 4 71.05 0.20 1.9%

Lake Recreation 1 600.00 0.00 15.9%

Majestic View Nature Center 5 79.02 7.88 2.1%

Medians and Rights-of-Way 31 80.93 62.08 2.1%

Neighborhood Parks 79 532.92 365.03 14.1%

Open Space 18 1065.73 1.63 28.2%

Special Purpose Parks 4 101.00 1.70 2.7%

Sports Complexes 10 610.88 148.96 16.2%

Trail and Trail Corridors 19 80.12 24.53 2.1%

Urban Features 5 6.23 4.40 0.2%

Water Tanks Landscaping 4 1.42 1.01 0.0%

TOTALS 205 3779.56 880.00

PARKS REVENUE

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special revenue fundSPECIAL REVENUE FUNDS

.21 and .25 Tax Increment Funds 2011 Budget 2011 Actual

Beginning Fund Balance

$11,461,000 $11,461,000

REVENUES

Sales Tax 5,394,681 5,664,005

Use Tax 919,792 1,172,604

Other 314,141 292,752

Total Revenues $6,628,614 $7,129,361

EXPENDITURES

Ongoing 6,668,437 6,263,208


Ending Fund Balance

11,421,177 12,327,153

Goal 11% of Expenditures 733,528 688,953

Excess/(Deficit) $10,687,649 $11,638,200

Special Revenue Funds OverviewSpecial Revenue Funds account for revenues that are to be used for specific purposes. The following funds are considered special revenue funds:

• Tax Increment Funds• Community Development • Housing

Tax Increment Funds OverviewThere are two tax increment funds which account for the voter-approved sales tax increases to expand police services. The first fund accounts for the .21 cent sales tax for police services and the second accounts for the .25 cent sales tax. Sources in the tax increment fund include sales tax, general use tax, auto use tax, building use and interest income. Since the tax increment is in addition to the City’s 3 percent sales tax, the revenue trends in the tax increment fund will closely follow those in the General Fund.

Revenue HighlightsSales Tax - 0.52 percent increase over 2010Other Revenues include interest earnings, grants and recovered costs. Reimbursements from Lakewood, Jefferson County E911 Authority Board and Metro Area Theft Taskforce (MATT) represent a variety of revenues received under recovered costs.

Expenditure Highlights Actual Expenditures - $405,229 under budgetSalaries and Benefits - 83.12 percent of total actual expenditures

Th ere are two tax increment funds which account for the voter-approved sales tax increases to fund expanded police services.

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SavingsWhile Salaries and Benefits reflect a minimal vacancy savings of .03 percent, there was still a savings of $162,264. The remaining expenditure savings are reflected in Supplies/Expenses, Training and Meetings, Contracts and Clothing Allowance.

Community Development Fund OverviewCommunity Development Fund 2011 Budget 2011 Actual


$7,128,009 $7,128,009

REVENUES

Recovered 111,395 240,725

Grants 638,000 403,306

City Cash Transfer 45,000 45,000

Interest/Other 19,500 9,375

Total Revenues $813,895 $698,406

EXPENDITURES

Ongoing 324,637 514,576

Essential Home Repair 375,000 181,098

Loans 125,000 -

Capital 108,000 -

Total Expenditures $932,637 $695,674

Ending Fund Balance

$7,009,267 $7,130,741

Two areas with substantial budgets in 2011 were for Capital and Loans. The Capital budget of $108,000 was budgeted to cover any final expenses related to the Creekside Park project. However, Parks was able to see its final completion in 2010. The Loans line item was in place to provide for appropriation in case opportunities arose for assistance related to multifamily housing. However, such opportunities did not materialize in 2011.

In addition, Community Development engaged the services of Community Strategies Institute to formulate a ten-year plan for the effective use of the Apple Creek Repayment funds, which total in excess of $5 million.

Housing Fund OverviewHousing Fund 2011 Budget 2011 Actual


$429,737 $429,737

REVENUES

Recovered 18,619 14,851

Grants 3,900,000 3,653,379

Cash Transfer 26,000 118,000

Interest/Other 5,305 1,136

Total Revenues $3,949,924 $3,787,366

EXPENDITURES

Ongoing 374,319 390,927

Rents 3,480,000 3,382,602

Transfers 27,839 53,119


Ending Fund Balance

$497,503 $390,455

The Arvada Housing Authority assists over 500 families with rent subsidies on a monthly basis. These costs constitute a vast majority of the Fund’s expenditures (over 88 percent).

The City receives money directly from Energy Outreach Colorado (EOC), a nonprofit corporation, and distributes it to low income residents in Arvada as assistance with costs related to energy. An additional $21,000 was received in the summer of 2011, which accounts for the substantial increase year-over-year.

EOC ENERGY ASSISTANCE GRANTS2009-2011

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capital improvementCAPITAL IMPROVEMENT FUND

Capital Improvement Fund OverviewThe Capital Improvement Fund is where the City keeps track of capital projects for streets, traffic, parks, and the Arvada Center.

Revenue HighlightsThe majority of revenue in the Capital Improvement Projects (CIP) fund consists of transfers from the General Fund, Conservation Trust Fund and the Lands Dedicated Fund.

Other revenues include park development fees, grant revenue and contributions from other governmental agencies.

Expenditure HighlightsThe majority of expenditures in this fund in 2011 relate to the final payment of the Grandview Grade Separation project ($3.8M) and various park projects. Some of the larger park projects include the Arvada Skate Park, Saddlebrook, Quaker Acres, Danny Kendricks, Indiana Equestrian and purchases of land for East and South Central parks.

Reserved FundsThe CIP fund ended 2011 with a fund balance of $39 million and also has confirmed grant revenues of $5.3 million that will be received upon completion of the project. There are about 100 different CIP projects in various stages of construction totaling approximately $43 million.

Capital Improvement Fund 2011 Budget 2011 Actual

Beginning Fund Balance $43,300,346 $43,300,346 REVENUES Transfers in $7,331,811 $6,922,398 Interest - 257,244 Other 5,361,095 2,676,437 Total Revenues $12,692,906 $9,856,079

EXPENDITURESCIP Administration $100,000 $240,668 CIP Buildings - 154 CIP Streets 2,643,860 1,048,913 CIP Traffic 2,714,400 5,063,631 CIP Parks 8,745,374 7,404,731 CIP Arvada Center - 346,561 Total Expenditures $14,203,634 $14,104,658 Ending Fund Balance $41,789,618 $39,051,767 Anticipated Grant Revenue $5,273,012 ASSIGNED FOR PROJECTS:CIP Administration $15,015,449 CIP Buildings 708,273 CIP Streets 7,308,541 CIP Traffic 6,042,027 CIP Parks 9,638,471 CIP Arvada Center 306,452 Reserved for 2012 one time CIP 2,191,500 Reserved for Performance Based Budgeting 500,000 8% Reserve 1,128,373 Total Reserved $42,839,086 Unassigned Fund Balance* $1,485,693

* This assumes Grandview Grade Separation project closeout

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enterprise fundsENTERPRISE FUNDS

Water Fund 2011 Budget 2011 Actual


$59,500,000 $59,500,000

REVENUES

Water Charges 17,528,801 17,099,896

Tap Fees 3,014,343 2,394,110

Interest 716,060 747,479

Other 775,568 1,009,783

Total Revenues $22,034,772 $21,251,268

EXPENDITURES

Ongoing 15,916,667 15,044,637

Debt Service 2,264,600 2,256,495

Major Capital Maintenance 3,785,678 3,473,106

Capital 1,803,730 1,859,043


Ending Fund Balance $57,764,097 $58,117,987

25% of Op. Exp. Plus Debt Service

7,190,186 6,885,931

Excess $50,573,911 $51,232,056

Enterprise Funds OverviewEnterprise funds account for activities that generate a fee that makes the entity self supporting. The five enterprise funds in the City are:

• Water Fund• Wastewater Fund• Stormwater Fund• Golf Fund• Hospitality Fund

Water FundThe Water Fund accounts for all activities within the scope of the water utility operations including administration, operations, capital water projects, financing and related debt service and billing and collection.

Revenue and Expenditure HighlightsAs the following table illustrates, the operating revenues of water charges, tap fees and interest are lower than we budgeted and do not cover the expenditures of the fund. As a result, the fund balance decreased by about $1.4 million. While this would not be an issue for one year, expenditures have outpaced revenue since 2008 resulting in a decrease of the fund balance from $71.6 million in 2008 to $58.1 million in 2011. This is a concern as the Moffat Water project of approximately $90 million will be starting in 2-3 years.

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Water ConsumptionThis chart shows water consumption from 2006-2011. Water consumption in 2011 decreased slightly from 2010. This decrease is primarily due to the three weeks of rain during the summer of 2011. Overall, water consumption continues to decrease as residents continue to implement water saving methods both in and out of the house.

Tap FeesThis chart shows a six year history of tap fees. This is the third year of increased tap fees. Whisper Creek continues to be the area that is generating the tap fees.

Water BondsStandard and Poor’s (S&P) performed an annual review of the Water Bonds and reaffirmed the AA+ rating on the 2009 water bonds. However, S&P did inquire about the low debt service levels. As reported in 2010, the bond covenants require a debt service coverage level of 300 percent. The coverage level was 212 percent in 2010. We increased the coverage to 269 percent in 2011, but are still short of 300 percent. We will continue to work on cost cutting measures, however they will most likely need to be tied to increased revenues or an increase in water rates to achieve a 300 percent coverage level.

WATER FUND - TAP FEES

WATER CONSUMPTION (# of gallons)

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Wastewater FundThe Wastewater Fund accounts for all activities necessary in the collection, transmission and disposal of sewage and wastewater.

Wastewater Fund 2011 Budget 2011 Actual


$10,232,000 $10,232,000

REVENUES

Sewer Charges 10,094,914 9,690,813

Tap Fees 227,378 343,561

Other 638,777 653,068

Total Revenues $10,961,069 $10,687,442

EXPENDITURES

Ongoing 8,961,980 8,706,857

Major Capital Maint. 1,795,420 1,639,023

Capital 232,675 0


Ending Fund Balance

$10,202,994 $10,573,562

25% of Op. Exp 2,689,350 2,586,470

Excess $7,513,644 $7,987,092

Revenue & Expenditure HighlightsWastewater revenue is slightly lower than budget estimates. However, total revenues are still sufficient to cover ongoing and capital expenditures. Expenditures are about $644K less than budgeted. The majority of the savings is in personnel ($104K) and major capital maintenance ($155K).

Tap FeesThis chart shows the history of tap fees from 2006-2011. Similar to the Water fund, the tap fees in this fund increased because of Whisper Creek.

Stormwater FundThe Stormwater Fund accounts for all activities necessary to maintain a stormwater management plan.

Stormwater Fund 2011 Budget 2011 Actual


$10,797,000 $10,797,000

REVENUES

Stormwater Fee 3,059,027 3,142,063

Other 106,059 330,231

Total Revenues $3,165,086 $3,472,294

EXPENDITURES

Ongoing 1,114,320 1,028,145

Debt Service 933,588 933,588

Capital 6,969,000 1,396,659


Ending Fund Balance

$4,945,178 $10,910,902

25% of Op. Exp. and Debt Service

1,212,168 1,190,624

Excess $3,733,010 $9,720,278

Revenue HighlightsThe stormwater fee and interest are the two main sources of revenue in this fund. In 2011, we received a grant for $200,000. Since the stormwater fee is based, on impervious area, this revenue remains stable at just over $3 million.

Expenditure Highlights Ongoing expenditures in the stormwater fund are just over $1 million each year. Annual debt service payments of approximately $933K are made each year, which represent about 2/3 of the total debt service payment on the 2005 Certificates of Participation which were issued for Stormwater and Arvada Center capital projects. We had expected to spend over $6 million for the Garrison Street Bridge project. However, the project was delayed and we will be requesting to carryover much of this money into 2012 for the same project.

WASTEWATER FUND - TAP FEES

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Golf FundGolf Fund 2011 Budget 2011 Actual


($146,000) ($146,000)

REVENUES

Golf 2,629,812 2,698,794

Restaurant 1,126,806 1,108,780

City Cash Transfer 213,082 213,082

Total Revenues $3,969,700 $4,020,656

EXPENDITURES

Golf 1,967,396 1,873,653

Food 1,026,428 1,040,031

Operations 930,000 889,527

Capital 36,481 36,481


Income/(Loss) 9,395 180,964

Ending Fund Balance ($136,605) $34,964

Revenue HighlightsRounds at West Woods were up 5 percent, or 2,039, through September compared to 2010 but by the end of the year were down 2 percent or 915. Much of this decline was the rainy weather experienced in October and November.

Rounds at Lake Arbor were up 8 percent, or 2878, through September compared to 2010 but by the end of the year were up only 1 percent or 623. Again, this year over year decline was due to weather. Both courses tried a different approach to win back golfers by issuing specials for almost every day of the week. This was successful as it did increase special rounds…but at the cost of regular rounds. The courses are currently working on 2012’s plans.

Expenditure HighlightsThe Golf Operations used a little more than half of their Capital funds on temporary help on bunker maintenance at West Woods and Lake Arbor. This was also the first full year without one West Woods maintenance employee and the chef at West Woods. There were operational changes and the need for increased temporary staff to fill the needs.

Both courses tried a diff erent approach to win back golfers by issuing specials for almost every day of the week. Th is was successful as it did increase special rounds…but at the cost of regular rounds.

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WEST WOODS ROUNDS

WEST WOODS RESTAURANT LAKE ARBOR RESTAURANT

LAKE ARBOR ROUNDS

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ARVADA CENTER BANQUETS REVENUE

ARVADA CENTER BANQUETS EVENTS

Hospitality FundHospitality Fund 2011 Budget 2011 Actual


$929,000 $929,000

REVENUES

Banquets 927,231 903,140

Concessions 145,923 173,766

Miscellaneous 563,195 447,051

City Cash Transfer - 27,577

Total Revenues $1,636,349 $1,551,534

EXPENDITURES

Overhead 376,542 331,598

Operations 1,209,587 1,243,991

Capital 102,910 -

Transfer to General Fund 125,000 125,000


Income/(Loss) (177,690) (149,055)

Ending Fund Balance

751,310 779,945

Goal (25% of Operating Expenditures)

199,544 187,065

Excess/(Deficit) $551,766 $592,881

Revenue HighlightsThe Banquet facility continues to battle for events in a difficult market. While the number of events was down only 6 in 2011, the number of attendees was down 2,177. Revenues were also down in all of the categories except concessions. The increase in concessions was due to the new building and presence at Stenger Fields in 2011. This should be an area of opportunity as the recreational facility is further developed.

Expenditure Highlights Expenditures were flat in 2011 compared to 2010. The division decided to delay the purchase of some capital items due the difficult environment they are working in. The hope is that they have hit a low point and will be able to get back on the replacement schedule. The division was able to make its overhead transfer to the General Fund in 2011, but it had to use fund balance to do it.

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internal serviceINTERNAL SERVICE FUNDS

Internal Service Funds OverviewWe have four Internal Service Funds. The following table provides the beginning fund balances, revenues, and expenditures for each of the four. These Funds charge for goods and services to each division that uses them. The Funds then pay for all associated costs of things like purchasing insurance, vehicle purchases and maintenance, computer purchases and maintenance and buildings maintenance.

As illustrated, we have healthy cash reserves in each of the Funds. If we ever were faced with a significant crisis, we could tap into these reserves to meet emergency needs. However, in all cases, the reserves are closely related to future needs. These needs must be annually evaluated. The best example is currently we are setting aside monies for the replacement of our financial system. Currently, our philosophy is to maintain and upgrade our systems. A very important discussion we have each year, and will again for the 2013 – 2014 biennium, is the charges made for future replacement. We lowered those charges in 2011 and 2012.

This same conversation occurs about the life of computers and vehicles.

2011 INTERNAL SERVICE FUNDS

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RISK MANAGEMENT CLAIMS BY TYPE(2009-2011)

Insurance FundThe Insurance Fund, administered by the Risk Management Division of Finance, provides the means by which the City self-insures against loss. It is funded with contributions by all City divisions based on their levels and types of exposure. The Fund is also used for programs for loss prevention, the protection of City personnel and the preservation of City property and assets.

Insurance Fund 2011 Budget 2011 Actual


$4,606,000 $4,606,000

REVENUES

Transfers 2,681,159 2,004,571

Other 66,000 103,992

Total Revenues $2,747,159 $2,108,563

EXPENDITURES

RM Admin. 2,222,742 1,741,637

Risk Mgmt 673,693 553,504


Ending Fund Balance

$4,456,724 $4,419,422

Revenue HighlightsThe Insurance Fund receives six types of contributions from City divisions: Workers’ Compensation, Risk Management Services, as well as Property, General Liability, Auto Liability, and Auto Physical insurances. The levels of contributions are annually reallocated based on various exposure and actuarial factors. The Fund was able to lower rates in 2011 due to decreased insurance costs and Fund overhead, saving various Funds and Departments a total of $669,476.

Expenditure Highlights Claims expenditures were considerably under budget for 2011, due much in part to a drop in Auto Liability, Auto Physical, and General Liability claims. The number of property claims almost broke even. We had a 25 percent increase in the number of claims. Ironically, these were smaller cost claims, resulting in a 15 percent decrease between 2010 and 2011.

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Information Technology & Print ServicesThe Computers Fund provides resources for both the ongoing maintenance and replacement of the City’s computers, network hardware, and other electronic infrastructure. It is funded with contributions by all City divisions based on their levels of use of information technology. The Print Shop Fund provides ongoing capital support for the City’s printing needs.

Information Technology & Print Services

2011 Budget 2011 Actual


$8,919,000 $8,919,000

REVENUES

Maintenance 1,019,181 959,000

Replacement 867,137 957,775

Print Shop 412,669 313,187

Total Revenues $2,298,987 $2,229,961

EXPENDITURES

Maintenance 1,069,666 604,688

Replacement 3,118,550 1,610,208

Print Shop 367,530 270,211


Ending Fund Balance

$6,662,241 $8,663,854

Revenue HighlightsComputer Replacement charges to contributing Funds remained unchanged from 2011, while computer maintenance charges were reduced by 17 percent.

Expenditure Highlights A number of projects are planned for 2012, including phone system replacement, police information systems upgrade, desktop virtualization, and email system replacement.

VehiclesThe Vehicles Fund provides resources for the maintenance of City vehicles and heavy equipment, as well as their replacement when various factors demand their retirement. It is funded with contributions by all City divisions based on their vehicle inventory and use.

Vehicles 2011 Budget 2011 Actual


$8,101,000 $8,101,000

REVENUES

Maintenance 2,132,648 2,116,450

Replacement 1,452,002 1,262,544

Total Revenues $3,584,650 $3,378,995

EXPENDITURES

Maintenance 2,095,515 2,001,659

Replacement 3,374,285 2,557,064


Ending Fund Balance

$6,215,850 $6,921,272

*In 2011, Fleet purchased 16 vehicles and 18 pieces of equipment.

Revenue HighlightsThis Fund charges each department an annual replacement charge for each vehicle in the City’s inventory. The rate is based upon the expected life of the vehicle. The Fund also charges a maintenance fee for each vehicle based upon type and historical costs.

Expenditure Highlights In 2011, the Vehicle Fund purchased 16 vehicles and 18 pieces of equipment at a total replacement expense of over $2.5 million. Planned 2012 expenditures include the acquisition of 15 new Ford Police Interceptors, a new, purpose-built model created specifically for law enforcement.

Th e Computers Fund provides resources for both the ongoing maintenance and replacement of the City’s computers, network hardware, and other electronic infrastructure. It is funded with contributions by all City divisions based on their levels of use of information technology.

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Building MaintenanceThe Buildings Fund provides resources for maintaining major portions of facility infrastructure as replacement becomes necessary. The primary types of infrastructure are HVAC equipment, parking lots, roofs, and carpet. It is funded with contributions by all City divisions based on their facility occupancy.

Substantial replacements highlighting 2011 activity were the roofs at the Arvada Center and Indiana Shops.

Building Maintenance Fund 2011 Budget 2011 Actual

Beginning Fund Balance $1,796,000 $1,796,000

REVENUES

Transfers 407,351 407,351

Other 111,731 131,305

Total Revenues $519,082 $538,656

EXPENDITURES

Maintenance 681,887 668,799

Capital Lease 111,731 111,503

Total Expenditures $793,618 $780,302

Ending Fund Balance $1,521,464 $1,554,354

*Substantial expenditures were performed in 2011, including the replacement of the Arvada Center roof.

Th e primary types of infrastructure are HVAC equipment, parking lots, roofs, and carpet. It is funded with contributions by all City divisions based on their facility occupancy.

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Arvada Economic Development AssociationOperations 2011 Budget 2011 Actual

Beginning Fund Balance $405,315 $405,315

Revenue 705,000 666,037

Expenditures 701,591 642,121

Ending Fund Balance $408,724 $429,231

Revenue HighlightsRevenue in the AEDA Operations Fund consists of a transfer from the general fund equal to the personnel and operating expenditures.

Expenditure HighlightsExpenditures in 2011 are slightly lower than budget due to lower salary costs. Expenditures also included business appreciation event, landscaping study, social media campaign, and marketing.

Program 2011

Beginning Cash Balance $656,122

Revenue 524,212

Expenditures (458,852)

Ending Cash Balance 721,482

Reserved for AEDA Loan Program (300,000)

Reserved for Pilot AEDA Small Business Grant Program

(280,317)

Commitments (127,345)

Ending Unallocated Cash Balance $13,820

Revenue HighlightsRevenues in 2011 reflect the second $500,000 payment of the $1,500,000 transfer from the City of Arvada for the AEDA loan program.

Expenditure HighlightsExpenditures in 2011 reflect 1 new loan, 14 pilot small business grants, 3 public improvement grants, and seed funding for the AEDA microloan program.

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investment reportCITY OF ARVADA INVESTMENT REPORT

Dec 2010 Dec 2011 Difference

YTD Return 1.387 1.119 -27 basis points

YTD Benchmark Return

.59 .58 -1 basis points

Interest Booked YTD 2.401m 2.256m -.145m

Examples of contributors to these performance results are provided below:

1. Fed leaves rates at very low levels.2008 saw some of the most aggressive cuts by the Fed in recent history, sending rates down by 400 basis points (bps) by the end of the year. Throughout 2011, the discount rate has remained steady at .25 percent and the Fed has announced we will experience these low rates through 2013 and possibly into 2014. The Federal Reserve will keep rates unchanged until the dynamics of our economy significantly change.

2. Securities were called.For 2011, 23 securities totaling $101.245 million were called, representing 82 percent of all securities that rolled out of the portfolio in 2011. This is an increase from comparable months in 2010, which totaled 19 securities worth $77 million. The increase in called securities is due to a few reasons. Securities purchased in earlier years saw “lockout periods” expire. Although the Fed has not adjusted the key borrowing rate in 2011, there is a continuing consensus among the financial markets that a “flight to safety” strategy is still in play. The resulting outcome is increased reinvestment risk of securities being called.

Investment Portfolio ObjectivesPursuant to the City’s investment policy, the primary objectives of the City’s investment activities, in priority order, are safety, liquidity, and yield. Consistent with this policy, the portfolio of securities are invested in US Treasuries, US Agency debt, local government investment pools (LGIP’s), commercial paper, and corporate debt subject to rating and concentration limits. The City’s investment portfolio is managed to provide sufficient liquidity to meet all reasonably anticipated operating cash needs without selling securities prior to maturity.

Investment Portfolio PerformanceFor 2011, the portfolio managed a yield of 1.119 percent following annualized yields of 1.227 percent in the first quarter, 1.130 percent for the second quarter, and 1.060 percent for the third quarter of 2011. The benchmark yield for the City’s portfolio, as established in the investment policy, is a weighted benchmark of allowable securities. For the year, the weighted benchmark return was .58 percent, constructed using the average of 2011 monthly returns. The City’s portfolio yield continued to decline from its previous rolling four quarters, as evidenced by the considerable reduction in investment income and unfavorable reinvestment environment. The following table shows a year-over-year comparison with several key portfolio metrics:

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3. Money market yields putting a drag on interest income.As indicated by the table below, the past year has seen a drop in money market yields, ranging from .18 percent in December 2010 to .08 percent in December 2011. This signifies a loss of more than 57 percent of income interest today compared with one year ago in this investment category.

Average Yield Dec ‘10 Mar ‘11 Jun ‘11 Sep ‘11 Dec ‘11

1 Year Treasury .27% .25% .19% .12% .12%

CSAFE LGIP .18% .15% .11% .06% .07%

Colotrust LGIP .19% .14% .11% .08% .08%

*Average yields on 1yr Treasuries calculated by using mean of first and last days of each noted month ** LGIP rates taken per statement as of last day of noted month

Investment Environment2011 has proven to be a challenge regarding the City’s investment portfolio. The effects of Fed rate cuts in 2008 continued to be realized in 2011, reducing interest income as well as providing fodder for issuers to call bonds away from the portfolio. In August the Federal Open Market Committee (FOMC) announced that federal funds rates would remain between 0 percent and .25 percent through mid 2013. In October, the FOMC announced “Operation Twist” which extended the average maturity of the Federal portfolio. $400 billion of treasuries were to be sold with a maturity range of three years and under by June, 2012, this would flatten the treasury curve on the longer end. Maturing mortgage debt would be reinvested in Agency Mortgage Backed Securities to support the mortgage market. This lead to the decrease of treasury rates anywhere from 10bps to 286bps from the start of the year to the end of the year. The City saw $101.245 million in security calls during the year with reinvestment in lower yielding securities. The City has focused on the 3 to 5 year maturity range of the curve by purchasing “cushion calls” and “step coupons” that had a high probability of being called; however, we were able to garner a better than average coupon before the lockout expired, followed by an immediate call. Another note worth mentioning is the decrease of yields in the money market funds, for example, in December 2010, Colotrust yields were at .19 percent at the end of 2011, this yield decreased to .08 percent, or a 57.90 percent decrease.

One indirect benefit to the Arvada portfolio has been the capital appreciation that has been attained in this time, even though this is considered as “paper gains” and has no profound affect on the yield we use to benchmark. The 2011 gain was $653,654 which is an increase of $180,505 over the 2010 gain of $473,149.

Corporate credit ratings are sill not coming back; The City is permitted to purchase “AA” or better ratings, with our preference to purchase “AAA” credit ratings as they provide a “cushion” in the event of a downgrade. When “AA” rated investments can be found, they are sold at large premiums making investment for the City prohibitive.

Portfolio Changes-2011The City’s portfolio decreased 1.1 million from December, 2010 to December, 2011. LGIP balances increased by $4.9 million due to investment calls and timing of reinvesting the funds. Changes in the portfolio from December 2010 to December 2011 are shown in the chart below:

Security Sector Dec 31, 2010 Balance % of Portfolio Dec 31, 2011

Balance % of Portfolio % of Change

Savings $17,084,994.27 8.13% $21,135,849.35 10.11% +23.7%

Certificate of Deposit 9,097,316.63 4.33% 19,185,914.72 9.18% +110.1%

Corporate 27,000,000.00 12.84% 21,000,000.00 10.05% -22.2%

LGIP 62,042,876.51 29.51% 66,953,062.71 32.04% +8.0%

US Agency 88,000,000.00 41.86% 73,700,000.00 35.27% -16.20%

US Treasury 7,000,000.00 3.33% 7,000,000.00 3.35% 0.00%

Total $210,225,187.41 $208,974,826.78 -.5%

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Investment in Certificates of Deposit, with a maximum duration of one year, increased 110.1 percent in 2011. This provided a gain in yield over the Local Government Investment Pools. US Agency investments decreased 16.20 percent in 2011 due to agency investments called in late 2011 and not reinvested until 2012. We have been investing in callable agency securities with a call lock-out period to enhance yield, many times these investments are called on the call date.

During 2011 we focused on purchasing callable securities in the three to five year maturity range with call lock out periods to gain yield, understanding that many will be called on the call date. The December 31, 2011 portfolio maturity breakdown is shown in the graph below:

The City’s portfolio as of December 31, 2011 is shown on the next page, which includes credit ratings as of December31, face value and interest and dividend earnings for 2011.

PORTFOLIO DISTRIBUTION BY MATURITY RANGEDecember 2011

Investment in Certifi cates of Deposit, with a maximum duration of one year, increased 110.1 percent in 2011. Th is provided a gain in yield over the Local Government Investment Pools.

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Description CUSIP/Ticker Credit Rating 12/31/2011 Face Value Interest/

Dividends 2011

HIGH YIELD SAVINGS

JPMorgan Chase Bank Savings CHASE N/A 16,119,605.84 48,150.35

Wells Fargo Savings WELLSFARGO N/A 5,016,243.51 2,704.73

Sub Total Savings $21,135,849.35 $50,855.08

CERTIFICATE OF DEPOSIT

FIRSTBANK 0.5 7/27/2012 CD5343 N/A 5,010,948.70 10,948.70

FIRSTBANK 0.3 5/30/2012 CD7273F N/A 4,054,143.47 10049.56

FIRSTBANK 0.4 11/30/2012 CD7281E N/A 5,097,342.13 44,119.41

FIRSTBANK 0.7 5/3/2012 CD4673 N/A 5,023,480.42 23,480.42

Sub Total Certificate of Deposit $19,185,914.72 $88,598.09

CORPORATE

Berkshire Hathaway 4.75 5/15/2012-08 084670AS7 AA+ 3,000,000.00 142,500.00

Berkshire Hathaway Fin Corp 5 8/15/2013 084664BG5 AA+ 3,000,000.00 75,000.00

Citigroup Inc 2.125 4/30/2012 17313UAE9 AA+ 5,000,000.00 106,250.00

General Electric 2.2 6/8/2012 36967HAH0 AA+ 5,000,000.00 110,000.00

General Electric Co 5 2/1/2013 369604AY9 AA+ 2,000,000.00 0

US Bankccorp 2.25 3/13/2012 91160HAA5 AA+ 3,000,000.00 67,500.00

Sub Total Corporate $21,000,000.00 $501,250.00

Chart continues next page

City of Arvada Portfolio as of December 31, 2011

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Description CUSIP/Ticker Credit Rating 12/31/2011 Face Value Interest/

Dividends 2011

US AGENCY

FFCB 0.73 10/17/2014-12 31331KF47 AAA 5,000,000.00 0

FFCB 1.45 8/3/2015-12 31331KTP5 AAA 6,000,000.00 0

FFCB 1.5 8/24/2016-12 31331KWA4 AAA 5,000,000.00 0

FFCB 2.09 7/18/2016-12 31331KRN2 AAA 5,000,000.00 0

FFCB 3.875 11/13/2012 31331GEJ4 AAA 3,000,000.00 116,250.00

FHLB 1.375 1/27/2014-12 313372GM0 AAA 5,650,000.00 38,843.75

FHLB 1.5 3/21/2014-12 313372UJ1 AAA 3,000,000.00 22,125.00

FHLB 2.125 12/28/2015 3133727K4 AAA 2,000,000.00 42,500.00

FHLB Step 10/27/2015-12 313375XN2 AAA 3,300,000.00 0

FHLB Step 9/30/2013-12 313375RG4 AAA 5,000,000.00 0

FHLB Step 9/30/2016-11 313375RT6 AAA 5,000,000.00 0

FNMA 1.05 10/21/2015-13 3136FTDG1 AAA 5,000,000.00 0

FNMA 1.05 9/9/2013-11 3136FPEL7 AAA 5,000,000.00 52,500.00

FNMA 1.35 8/24/2016-12 3136FRT52 AAA 5,000,000.00 0

FNMA Step 10/20/2014-12 3136FTCT4 AAA 1,750,000.00 0

FNMA Step 9/14/2016-12 3136FRV26 AAA 5,000,000.00 0

FNMA Step 9/9/2014-12 3136FRX99 AAA 4,000,000.00 0

Sub Total US Agency $73,700,000.00 $272,218.75

US TREASURY

T-Bond 2.625 6/30/2014 912828KY5 AAA 2,000,000.00 26,250.00

T-Note 1.375 3/15/2013 912828MT4 AAA 5,000,000.00 68,750.00

Sub Total US Treasury $7,000,000.00 $95,000.00

Total $142,021,764.07 $1,007,921.92

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Investment Management Focus- 20112011 continued to be a struggle for the capital markets. We will continue to monitor the four items of focus we have highlighted below.

1. Diversification of maturities- Focus in the next year will be to move money away from the LGIP’s as much as possible to reduce balances and capture better interest income. We will focus on the “blended” strategy, which calls for emphasis in short term positions as well as long term positions (5 years in the City’s case), but also staggering maturities in between to smooth the income stream. Our rationale for this strategy is as follows:

• We want to be able to capitalize on investment opportunities if/when yields begin to recover.• Keep duration extension limited should the yield curve flatten (shorter duration means we get our cash flows back sooner).• Have ample cash should City operations experience unexpected needs.• Take advantage of better coupons in longer maturity buckets.

Currently, we have ample cash to invest, resulting from securities being called. As of December 31st, the City held a total of $88 mm in LGIP and bank funds.

2. Agency spreads are tighter, callables will get better yield- Call provisions are primarily used by issuers to refinance debt at cheaper levels. Since the Fed, however, cannot institute a large cut (max is 25bps from .25 percent to 0 percent) in the near future, our focus is to buy callable securities, with a “lock-out” period, that will enhance investment income over LGIP funds.

3. Treasuries continue to produce meager yields- Treasuries are directly impacted by the FOMC’s actions. During 2008, the Fed Funds rate had been cut by 400 bps, reflecting a reduction in yield of comparable Treasuries by a significant amount. From Dec 2010 through Dec 2011, the 2 year and 5 year Treasuries have seen a decrease in yields of 36 bps and 118 bps respectively. This has persuaded the City to move some funds to three to five year maturity securities with a callable “lock-out” period. The City would effectively be “losing out” on interest income if we continue to keep the same balance in LGIP funds. Since the Fed has announced rates are expected to stay low into 2014, we feel that LGIP rates will continue to stay low as well.

4. LGIP yields still very low- Our LGIP balances increased in 2011 from $62,042,877 to $66,953,063. This increase resulted from bonds being called late in the year with reinvestment happening in 2012. We will continue to look for callable investments with a “lock-out” period to reduce LGIP balances and enhance yield.

Finance Department • 8001 Ralston Road • Arvada, Colorado 80002(720) 898-7120 • www.arvada.org

Documents

City of Arvada 2011 Year-End Financial Report