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CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 by NeilYounger

VIEWS: 5 PAGES: 21

									THE CORPORATION OF THE CITY OF
         BELLEVILLE

 CONSOLIDATED FINANCIAL STATEMENTS

          December 31, 2008




                                                   Welch LLP
                                     An Independent Member of BKR International
                                                                                          Welch LLP



                                         AUDITORS’ REPORT


To the Members of Council, Inhabitants and Ratepayers of the
Corporation of the City of Belleville

        We have audited the consolidated statement of financial position of the Corporation of the City
of Belleville as at December 31, 2008 and the consolidated statements of financial activities and cash
flows for the year then ended. These financial statements are the responsibility of the Corporation’s
management. Our responsibility is to express an opinion on these financial statements based on our audit.

        We conducted our audit in accordance with Canadian generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable assurance whether the
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.

         In our opinion, these consolidated financial statements present fairly, in all material respects, the
financial position of the Corporation as at December 31, 2008 and the results of its financial activities and
cash flows for the year then ended in accordance with the accounting principles for municipal governments
established by the Canadian Institute of Chartered Accountants.




Belleville, Ontario                                                     CHARTERED ACCOUNTANTS
June 12, 2009                                                      LICENSED PUBLIC ACCOUNTANTS




                                                                                                            2

Welch LLP – Chartered Accountants
525 Dundas Street East, Belleville, ON K8P 1G4
T: 613 966 2844 F: 613 966 2206 W: www.welchllp.com
An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
              CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                     DECEMBER 31, 2008
                                               ASSETS
                                                                          2008                  2007
FINANCIAL ASSETS
  Cash and investments - note 4                                     $ 58,038,368 $ 44,416,752
  Taxes receivable                                                     4,222,478    3,696,776
  Accounts receivable                                                  5,225,249    5,508,265
  Deferred charges                                                        52,780       72,039
  Long-term investments - note 5                                      25,336,073   26,205,172

TOTAL ASSETS                                                        $ 92,874,948 $ 79,899,004



                                             LIABILITIES

LIABILITIES
  Accounts payable and accrued liabilities                          $ 14,098,395 $ 12,602,926
  Employee benefits payable - note 6                                   8,189,300    7,796,305
  Other liabilities - note 7                                           1,136,890    1,078,889
  Deferred revenue - note 8                                           22,283,478   13,539,092
  Municipal debt - note 9                                             25,235,909   27,726,000
TOTAL LIABILITIES                                                     70,943,972         62,743,212



                                        MUNICIPAL POSITION

FUND BALANCES - END OF THE YEAR
  Operating fund - schedule 1, note 11                                   (74,587)          (157,030)
  Capital fund - schedule 2, note 12                                   1,525,056          6,508,899
  Reserves - schedule 3, note 13                                       8,197,443          3,314,196
  Reserve funds - schedule 3, note 13                                 23,197,378         20,218,369
  Equity in Veridian Corporation                                      20,748,063         20,748,063
                                                                      53,593,353         50,632,497
   Amounts to be recovered                                           (31,662,377)       (33,476,705)
   Municipal Position - note 14                                       21,930,976         17,155,792

TOTAL LIABILITIES AND MUNICIPAL POSITION                            $ 92,874,948 $ 79,899,004


Contingent Liabilities and Commitments - note 10

                                         (See accompanying notes)



                                                                                                                       3


                                                                                               Welch LLP
                                                                                 An Independent Member of BKR International
               THE CORPORATION OF THE CITY OF BELLEVILLE
             CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES
                      YEAR ENDED DECEMBER 31, 2008

                                                              2008            2008                  2007
                                                             Budget           Actual                Actual
                                                           (unaudited)
REVENUES
  Taxation and user charges                           $ 92,834,100 $ 91,808,749 $ 88,208,149
  Grants                                                 9,414,300   12,909,515   10,078,427
  Other                                                  3,909,300    4,737,539    5,574,551
                                                          106,157,700     109,455,803        103,861,127
EXPENDITURES

Current
  General government                                        9,132,800       7,650,020           7,088,048
  Protection to persons and property                       21,600,400      22,671,164          20,636,540
  Transportation services                                  11,153,600      11,336,449          11,057,251
  Environmental services                                   13,352,000      13,174,314          12,704,386
  Health services                                           3,907,200       4,103,273           3,652,046
  Social and family services                               12,076,300      11,883,324          12,597,317
  Recreation and cultural services                          8,895,200       8,537,348           8,330,669
  Planning and development                                  1,577,800       1,362,606           2,979,611
  Social housing                                            2,966,800       2,953,152           2,773,960
                                                           84,662,100      83,671,650          81,819,828

Capital
  General government                                          448,500         722,294            1,725,338
  Protection to persons and property                          748,400         555,079            1,227,562
  Transportation services                                   5,131,000       8,808,713            4,817,818
  Environmental services                                    7,145,000       8,484,268            3,445,640
  Recreation and cultural services                          3,683,300       1,711,976            1,562,881
  Planning and development                                  2,560,000         705,309            2,443,853
                                                           19,716,200      20,987,639          15,223,092

TOTAL EXPENDITURE                                         104,378,300     104,659,289          97,042,920

NET REVENUE (EXPENDITURE)                                   1,779,400       4,796,514            6,818,207

New debt issues                                             2,500,000            -               1,989,000
Benefitting land owners principal repayment                      -            206,457              201,802
Debt principal repayments                                  (2,497,100)     (2,490,091)          (2,178,000)
Employee benefits                                                -            447,976              200,030

CHANGE IN FUND BALANCES                               $     1,782,300 $     2,960,856 $          7,031,039




                                         (See accompanying notes)

                                                                                                                             4


                                                                                                     Welch LLP
                                                                                       An Independent Member of BKR International
               THE CORPORATION OF THE CITY OF BELLEVILLE
             CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES
                      SCHEDULE 1 - OPERATING FUND
                      YEAR ENDED DECEMBER 31, 2008
                                                            2008           2008                  2007
                                                           Budget          Actual                Actual
                                                         (unaudited)
REVENUES
  Municipal taxation                                $ 66,216,400 $ 65,393,955 $ 61,853,412
  Taxation from other governments                      1,016,200    1,577,873    1,522,011
  User charges                                        25,266,500   24,676,448   24,431,625
  Grants - Province of Ontario                         6,491,000    6,514,126    6,468,071
  Grants - Government of Canada                            3,000       16,932      435,215
  Grants - Other Municipalities                          420,300      390,809      112,455
  Grants - Other                                            -            -         550,000
  Sale of capital assets                                  27,000        4,890       26,429
  Fines                                                  610,000      556,708      642,482
  Investment income                                      436,500      551,228      449,232
  Interest and penalties on taxes                        620,000      707,482      619,372
  Dividend from Veridian Corporation                        -         558,600      532,000
  Development charges levies earned                         -          66,000       40,000
  Donations                                               50,500       51,558      239,745
                                                     101,157,400  101,066,609   97,922,049
EXPENDITURES
  General government                                     9,132,800       7,650,020           7,088,048
  Protection to persons and property                    21,600,400      22,671,164          20,636,540
  Transportation services                               11,153,600      11,336,449          11,057,251
  Environmental services                                13,352,000      13,174,314          12,704,386
  Health services                                        3,907,200       4,103,273           3,652,046
  Social and family services                            12,076,300      11,883,324          12,597,317
  Recreation and cultural services                       8,895,200       8,537,348           8,330,669
  Planning and development                               1,577,800       1,362,606           2,979,611
  Social housing                                         2,966,800       2,953,152           2,773,960
                                                        84,662,100      83,671,650          81,819,828
NET REVENUE                                             16,495,300      17,394,959          16,102,221

FINANCING AND TRANSFERS
  Benefiting landowners principal repayment                    -            206,457            201,802
  Debt principal repayments                              (2,497,100)     (2,490,091)        (2,178,000)
  Employee benefits                                            -            447,976            200,030
  Transfer to capital fund                              (10,776,000)    (10,835,120)        (7,555,556)
  Transfer to reserve fund                               (3,211,500)     (4,641,738)        (5,672,065)
                                                        (16,484,600)    (17,312,516)       (15,003,789)

CHANGE IN OPERATING FUND BALANCE                            10,700          82,443            1,098,432

FUND BALANCE, beginning of year                           (157,030)       (157,030)          (1,255,462)

FUND BALANCE, end of year - note 11                 $     (146,330) $       (74,587) $          (157,030)



                                       (See accompanying notes)

                                                                                                                          5


                                                                                                  Welch LLP
                                                                                    An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
             CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES
                              SCHEDULE 2 - CAPITAL FUND
                            YEAR ENDED DECEMBER 31, 2008
                                                            2008          2008                  2007
                                                           Budget         Actual                Actual
                                                         (unaudited)
REVENUES
  Grants - Province of Ontario                      $    1,000,000 $    4,606,573 $          1,403,377
  Grants - Government of Canada                          1,500,000      1,381,075            1,109,309
  Donations and user charges                               110,000        320,695              326,864
  Development charges levies earned                           -            75,463              245,041
  Park levies earned                                          -            89,813               86,817
  Sale of land                                                -            50,000              711,819
                                                         2,610,000      6,523,619            3,883,227

EXPENDITURES
  General government                                       448,500        722,294            1,725,338
  Protection to persons and property                       748,400        555,079            1,227,562
  Transportation services                                5,131,000      8,808,713            4,817,818
  Environmental services                                 7,145,000      8,484,268            3,445,640
  Recreation and cultural services                       3,683,300      1,711,976            1,562,881
  Planning and development                               2,560,000        705,309            2,443,853
                                                        19,716,200     20,987,639          15,223,092

NET EXPENDITURE                                         (17,106,200)   (14,464,020)       (11,339,865)

FINANCING AND TRANSFERS
  Proceeds from long-term debt                           2,500,000           -               1,989,000
  Transfer from operating fund                          10,776,000     10,835,120            7,555,556
  Transfer from reserve fund                             3,830,200     (1,354,943)           7,684,565
                                                        17,106,200      9,480,177          17,229,121

CHANGE IN CAPITAL FUND BALANCE                                 -        (4,983,843)          5,889,256

FUND BALANCE, beginning of year                          6,508,899      6,508,899               619,643

FUND BALANCE, end of year - note 12                 $    6,508,899 $    1,525,056 $          6,508,899




                                       (See accompanying notes)

                                                                                                                         6


                                                                                                 Welch LLP
                                                                                   An Independent Member of BKR International
                THE CORPORATION OF THE CITY OF BELLEVILLE
            CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES
                   SCHEDULE 3 - RESERVES AND RESERVE FUNDS
                             YEAR ENDED DECEMBER 31, 2008

                                                         2008          2008                  2007
                                                        Budget         Actual                Actual
                                                      (unaudited)
REVENUES
  Donations                                       $         -    $       52,100 $             1,030
  Investment income                                    2,165,300      1,629,150           1,827,856
  Subdivider contributions                                  -           117,881             152,728
  User charges                                           225,000         66,444              74,237
                                                       2,390,300      1,865,575           2,055,851

FINANCING AND TRANSFERS
  Transfer from operating fund                         3,211,500      4,641,738           5,672,065
  Transfer to capital fund                            (3,830,200)     1,354,943          (7,684,565)
                                                        (618,700)     5,996,681          (2,012,500)

CHANGE IN RESERVES AND RESERVE FUNDS                   1,771,600      7,862,256                43,351

FUND BALANCES, beginning of year                      23,532,565     23,532,565         23,489,214

FUND BALANCES, end of year - note 13              $ 25,304,165 $ 31,394,821 $ 23,532,565




                                     (See accompanying notes)

                                                                                                                      7


                                                                                              Welch LLP
                                                                                An Independent Member of BKR International
                THE CORPORATION OF THE CITY OF BELLEVILLE
                  CONSOLIDATED STATEMENT OF CASH FLOWS
                           YEAR ENDED DECEMBER 31, 2008

                                                                          2008                  2007

CASH FLOWS FROM OPERATING ACTIVITIES
  Net revenue (expenditures)                                      $    4,796,514 $         6,818,207

  Adjustments for:
    Employee benefits                                                   429,666               182,200
                                                                       5,226,180           7,000,407

  Net change in non-cash working capital components:
     Taxes receivable                                                   (525,702)           (150,036)
     Accounts receivable                                                 283,016               2,900
     Deferred charges                                                     19,259              19,258
     Accounts payable and accrued liabilities                          1,495,469              35,194
     Deferred revenue                                                  8,744,386           3,576,929
                                                                      15,242,608         10,484,652

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from investment in own debentures                            230,702               236,975
  Net investment in lease                                               567,435               537,852
  Other investments                                                      11,095                 7,512
  Bell Boulevard water and sewer recoverable costs                       59,867               (36,587)
                                                                        869,099               745,752

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from long-term debt                                              -              1,989,000
  Long-term debt repaid                                               (2,490,091)         (2,178,000)
                                                                      (2,490,091)            (189,000)



NET INCREASE IN CASH
  AND CASH EQUIVALENTS                                                13,621,616         11,041,404

CASH AND CASH EQUIVALENTS, beginning of year                          44,416,752         33,375,348

CASH AND CASH EQUIVALENTS, end of year                            $ 58,038,368 $ 44,416,752




                                       (See accompanying notes)


                                                                                                                       8


                                                                                               Welch LLP
                                                                                 An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008

1.   SIGNIFICANT ACCOUNTING POLICIES

     The consolidated financial statements of the Corporation of the City of Belleville are the
     representation of management prepared in accordance with accounting policies for local
     governments, as recommended by the Public Sector Accounting Board of the Canadian Institute of
     Chartered Accountants. Significant aspects of the accounting policies adopted by the Corporation
     are as follows:

     Reporting Entity

     The consolidated financial statements reflect the assets, liabilities, revenues, expenditures, and cash
     flows of the reporting entity. The reporting entity is comprised of all organizations and enterprises
     accountable for the administration of their financial affairs and resources to the Corporation and
     which are owned or controlled by the Corporation. In addition to general government tax-supported
     operations, they include the following:

               Belleville Public Library Board
               Belleville Downtown Improvement Area

     Interdepartmental and organizational transactions and balances are eliminated.

     The following local boards and joint local boards are not consolidated:

               Belleville General Hospital
               The Belleville Non-Profit Housing Corporation
               Centre and South Hastings Waste Management Board
               The Hastings and Prince Edward Counties Health Unit
               Hastinet - a joint board of The Belleville Public Library Board and Quinte West Public
                    Library Board

     Accounting for School Board Transactions

     The assets, liabilities, revenues, and expenditures with respect to the operations of school boards
     are not reflected in these consolidated financial statements.

     Trust Funds

     Trust funds and their related operations administered by the Corporation are not reflected in these
     consolidated financial statements, but are reported separately on the "Trust Funds Balance Sheet and
     Statement of Continuity".

     Basis of Accounting

     The basis of accounting followed in the financial statements includes revenues in the period in
     which the transaction or events occurred that gave rise to the revenues, and expenditures in the
     period the goods and services are acquired and a liability is incurred or transfers are due.



                                                                                                                   9


                                                                                                         Welch LLP
                                                                                           An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008


1.   SIGNIFICANT ACCOUNTING POLICIES (continued)

     Fund Accounting

     Funds within the consolidated financial statements consist of the operating, capital and reserve
     funds. Transfers between funds are recorded as adjustments to the appropriate fund balance.

     Deferred Charges

     Deferred charges include debt discount and commissions and are amortized on a straight-line basis
     over the term of the related debenture.

     Physical Assets

     Physical assets, comprised of capital assets, local improvements, land for future municipal purposes,
     and inventories of materials and supplies, are recognized as expenditures in the period they are
     acquired.

     Deferred Revenue - Obligatory Reserve Funds

     The Corporation receives contributions under the authority of provincial legislation and City by-
     laws. These funds by their nature are restricted in their use and until applied to applicable projects
     are recorded as deferred revenue. Amounts applied to projects are recorded as revenue in the fiscal
     period they are expended.

     Amounts to be Recovered

     Amounts to be recovered make up part of the Municipal Position, which includes balances for
     employee benefits payable, other liabilities and municipal debt.

     Use of Estimates

     The preparation of consolidated financial statements in conformity with accounting policies for local
     governments, as recommended by the Public Sector Accounting Board of the Canadian Institute of
     Chartered Accountants requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
     date of the consolidated financial statements and the reported amounts of revenues and expenditures
     during the reporting period. Actual results could differ from those estimates.




                                                                                                                10


                                                                                                        Welch LLP
                                                                                          An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008


1.   SIGNIFICANT ACCOUNTING POLICIES (continued)

     Taxation and Related Revenues

     Property tax billings are prepared by the Corporation based on assessment rolls issued by the
     Municipal Property Assessment Corporation ("MPAC"). Tax rates are established annually by City
     Council incorporating amounts to be raised for local services and amounts the Corporation is
     required to collect on behalf of the Province of Ontario in respect of education taxes. Realty taxes
     are billed based on the assessment rolls provided by MPAC. Taxation revenues are recorded at the
     time tax billings are issued. A normal part of the assessment process is the issue of supplementary
     assessment rolls that provide updated information with respect to changes in property assessment.


     Once a supplementary assessment roll is received, the Corporation determines the taxes applicable
     and renders supplementary tax billings. Assessments and the related property taxes are subject to
     appeal. Any supplementary billing adjustments made necessary by the determination of such
     changes will be recognized in the fiscal year they are determined and the effect shared with the
     school boards as appropriate.

2.   NEW ACCOUNTING STANDARDS

     Effective January 1, 2007, the Corporation adopted Accounting Guideline 7 (PSG-7) of the Public
     Sector Accounting Handbook of the Canadian Institute of Chartered Accountants ("CICA") with
     respect to the disclosure of tangible capital assets of local governments. PSG-7 provides transitional
     guidance on presenting information related to tangible capital assets until Section 3150 -Tangible
     Capital Assets of the Public Sector Accounting Handbook comes into effect on January 1, 2009.

     The Corporation is in the process of drafting their tangible capital asset policies and obtaining the
     approval of council. Within these policies, the Corporation will establish guidelines for categories
     of capital assets, capitalization thresholds, classes and sub-classes of assets, estimated useful lives,
     and other key information.

     To date, no formal reporting under tangible capital asset guidelines has been completed.
     Management intends to compile the information throughout the 2009 calendar year, and has engaged
     appropriate specialists for assistance in compiling aspects of capital asset inventory and performing
     valuation or useful life estimates.


3.   FINANCIAL INSTRUMENTS

     The Corporation’s financial instruments consist of cash, taxes receivable, accounts and notes
     receivable, investments, accounts payable and accrued liabilities and municipal debt. Unless
     otherwise noted, it is management’s opinion that the Corporation is not exposed to significant
     interest, currency or credit risks arising from these financial instruments.




                                                                                                                 11


                                                                                                         Welch LLP
                                                                                           An Independent Member of BKR International
                THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                            YEAR ENDED DECEMBER 31, 2008


4.   RESTRICTED ASSETS

     Cash and investments in the amount of $22,248,381 (2007 - $13,485,632) have been restricted to
     support obligatory reserve funds, reserves and deferred revenue.


5.   LONG-TERM INVESTMENTS
                                                                                 2008                  2007

      Investment in own debentures                                        $      149,468 $    380,170
      Net investment in lease                                                  1,176,280    1,743,715
      Bell Boulevard water and sewer recoverable costs                         3,065,239    3,125,106
      Notes receivable Veridian Corporation                                    2,206,000    2,206,000
      Notes receivable Veridian Connections Inc.                               5,588,000    5,588,000
      Investment in Veridian Corporation                                      12,954,063   12,954,063
      Other investments                                                          197,023      208,118
                                                                          $ 25,336,073 $ 26,205,172


     a)   Investment in Own Debentures

     The investment in own debentures is recorded at cost. The fair value of this financial instrument
     at December 31, 2008 amounted to $176,860 (2007 - $408,448).

     b)   Net Investments in Lease

     The net investment in lease includes the following:
                                                                                 2008                  2007

              Total lease payment receivable                              $    1,240,432 $        1,887,614
              Less: Unearned interest income                                      64,152            143,899
                                                                          $    1,176,280 $        1,743,715



     The Corporation leased certain leasehold improvements and equipment to Stream International
     Canada Inc. which are accounted for as a direct financing lease. The lease is guaranteed by Stream
     International Inc., bears interest at 5.36%, is repayable in monthly payments of $53,932 and matures
     November 27, 2010.




                                                                                                              12


                                                                                                      Welch LLP
                                                                                        An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                              YEAR ENDED DECEMBER 31, 2008


5.   LONG-TERM INVESTMENTS (continued)
     c)   Bell Boulevard water and sewer recoverable costs
     The Corporation entered into a servicing agreement with the owners of lands on the westerly end
     of Bell Boulevard to attract development to the area, which will increase assessment, job creation
     and community development. All recoverable costs as a result of the Corporation installing
     services, together with accrued interest, shall be repayable at the earlier of the issuance of a building
     permit for development or the expiry of 15 years from the date of the agreement. The interest rate
     throughout the term of this agreement is fixed at the rate of 2.67%. Security consists of a one foot
     road frontage which will be released once the recoverable costs are paid or satisfactory terms of
     payment have been arranged with the Corporation.
     Deposits received of $734,847 (2007 - $801,715) regarding these costs have been included in
     deferred revenue as disclosed in note 8.
     d)   Notes Receivable
     The notes receivable mature on November 1, 2009, bear interest at 7.6%, and are convertible into
     common shares at the option of the holder at the rate of one common share for every $1,000 of
     principal then outstanding, on or before maturity.
     The Corporation has signed an inter-creditor agreement confirming the subordinated ranking of
     these promissory notes to the senior debt financing issued by Veridian Corporation.
     e)   Investment in Veridian Corporation
     The Corporation retains an investment of 1,330 common shares of Veridian Corporation
     representing a 13.3% interest in the company which is carried at the cost of the Corporation’s
     investment in the Electric Utility at September 30, 2001.
     The following table provides condensed financial information of Veridian Corporation at December
     31, 2008.
                                                                                2008            2007
      Consolidated Balance Sheet
      Current Assets                                                    $ 69,599,771 $ 75,527,060
      Capital Assets                                                      136,095,099     131,398,612
      Other Assets                                                          21,290,615     15,823,736
                                                                        $ 226,985,485 $ 222,749,408

      Current Liabilities                                                    $ 108,931,221 $ 53,948,442
      Long-term Liabilities                                                     23,821,779    79,087,223
      Shareholders’ Equity                                                      94,232,485    89,713,743
                                                                             $ 226,985,485 $ 222,749,408

      Consolidated Statement of Operations
      Revenue                                                                $ 228,759,331 $ 235,271,455
      Expenses                                                                 220,040,589   226,357,750
      Net income for the year                                                $ 8,718,742 $ 8,913,705


                                                                                                                                13


                                                                                                          Welch LLP
                                                                                            An Independent Member of BKR International
                  THE CORPORATION OF THE CITY OF BELLEVILLE
                CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                                YEAR ENDED DECEMBER 31, 2008


6.   EMPLOYEE BENEFITS PAYABLE
     a)   The Corporation provides certain employee benefits which will require funding in future
          periods. An actuarial valuation of future liabilities was completed on June 1, 2004 and forms
          the basis for the estimated liability reported in these financial statements.
          The main actuarial assumptions employed for the valuation as follows:
          i)    General inflation:
                Future general inflation levels as measured by changes in the Consumer Price Index
                ("CPI"), were assumed at 3.5% in 2003 and thereafter.
          ii)   Interest (discount) rate:
                The obligation as at December 31, 2008, of the present value of future liabilities and the
                expense for the 12 months ended December 31, 2008, were determined using an annual
                discount rate of 5.5%. This corresponds to the assumed CPI rate plus an assumed real
                rate of return of 2.0%.
          iii) Salary levels:
                Future general salary and wage levels were assumed to increase at 2% per annum.
          iv) Medical costs:
                Medical costs were assumed to increase at the CPI rate plus a further increase of 5% in
                2003 graded down to 1% in 2007 and thereafter.
          v)    Dental costs:
                Dental costs were assumed to increase at the   CPI rate plus a further increase of 1% in
                2003 and thereafter.
                                             Medical
                                            Dental,Life           Sick
                                             Insurance           Leave            2008                   2007
                                              Benefits          Benefits          Total                  Total
                Employee future benefits
                  payable beginning
                  of year                 $ 5,392,030 $        2,124,935 $     7,516,965 $          7,342,673
                Service cost                   148,800           125,870         274,670              274,640
                Interest expense
                  on benefits                  300,500           134,665         435,165               421,500
                Benefit payments              (249,300)          (67,540)       (316,840)             (576,828)
                Amortization of actuarial
                  losses                        17,980            37,000          54,980               54,980
                                            5,610,010          2,354,930       7,964,940            7,516,965
                Unamortized actuarial
                  gain                          29,790           194,570         224,360               279,340
                Employee future benefits
                  payable, end of year    $ 5,639,800 $        2,549,500 $     8,189,300 $          7,796,305




                                                                                                                              14

                                                                                                        Welch LLP
                                                                                          An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008


6.   EMPLOYEE BENEFITS PAYABLE (continued)

     b)   Pension Plan

     The Corporation makes contributions to the Ontario Municipal Employees Retirement System
     (OMERS), which is a multi-employer plan, on behalf of its staff. The plan is a defined benefit plan
     which specifies the amount of the retirement benefit to be received by the employees based on the
     length of service and rates of pay. Contributions are expensed when they are made.

     The amount contributed to OMERS for 2008 was $2,257,900 (2007 - $2,081,900) for current
     service and is included as an expenditure on the "Consolidated Statement of Financial Activities".

     c)   Liability for Vested Sick Leave Benefits

     Under the sick leave benefit plan, unused sick leave can accumulate and certain employees may
     become entitled to a cash payment when they leave the Corporation’s employment.

     d)   Reserves

     Reserves of $1,759,674 (2007 - $1,309,079) have been established to partially provide for these
     liabilities, and are reported in note 13 to the financial statements.


7.   OTHER LIABILITIES

     The other liability balance consists of the following:
                                                                                   2008                  2007

               Liability for annual leave                                  $     647,973 $             647,973
               Solid waste landfill closure and
                        post-closure care                                        452,000               394,000
               Other                                                              36,917                36,916
                                                                           $    1,136,890 $         1,078,889
     a)   Liability for Annual Leave

     Under the Corporation’s employment policies, unused annual leave may accumulate and employees
     may become entitled to a cash payment when they leave the Corporation’s employment. The
     estimated liability for annual leave which could be taken in cash by an employee on termination
     amounted to $ 647,973 (2007 - $647,973).

     b)   Landfill Closure and Post-Closure Care

     The Ontario Environmental Protection Act sets out the regulatory requirements to properly close
     and maintain all active and inactive landfill sites. The estimated liability for these expenditures is
     recognized based on the cumulative capacity used to date, compared to total estimated landfill
     capacity.


                                                                                                                15


                                                                                                        Welch LLP
                                                                                          An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008


7.   OTHER LIABILITIES (continued)

     The estimated liability for the Thurlow landfill is $452,000 based on the present value of closure
     and post-closure costs estimated at $1,194,000, using assumed rates of 3.5% for inflation and 5.5%
     for interest.

     The Thurlow landfill has an estimated remaining capacity of 32% and is expected to provide
     capacity for 10 years based on estimated current waste generation rates.

     A reserve of $333,605 has been established to partially provide for this liability, and is reported in
     note 13 to the financial statements.

     Post-closure care is estimated to continue for a period of approximately 20 years.


8.   DEFERRED REVENUE

     The deferred revenue balance consists of the following:

                                                                                   2008                  2007
      Obligatory Reserve Funds:
             Development charges                                           $    8,321,440 $         6,842,419
             Park                                                                 294,180             294,172
             Building code act                                                  1,439,530           1,363,587
             Provincial gas tax                                                 1,327,827             788,892
             Federal gas tax                                                    4,359,500           3,132,710
             Federal transit                                                         -                206,018
                                                                               15,742,477         12,627,798
      Other:
               Belleville Public Library                                           23,823               11,086
               Bell Boulevard water and sewer extension                           734,847              801,715
               Miscellaneous                                                       73,872               98,493
               Investing in Ontario Act                                         4,645,234                 -
               Provincial Road/Bridges Grant                                    1,063,225                 -
                                                                                6,541,001              911,294
                                                                           $ 22,283,478 $ 13,539,092




                                                                                                                              16


                                                                                                        Welch LLP
                                                                                          An Independent Member of BKR International
                THE CORPORATION OF THE CITY OF BELLEVILLE
              CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008


8.   DEFERRED REVENUE (continued)

     The following provides a summary of the change in obligatory reserve funds:

                                                                              2008                  2007

      Balance, beginning of year                                        $ 12,627,798 $         8,893,730
      Revenue
       Development charges                                                  1,272,516          1,399,596
       Donations                                                                 -                 4,223
       Interest                                                               531,811            510,890
       Lot levies                                                              78,785             89,605
       Fees and other revenue                                                  66,532            828,589
       Gas tax grants                                                       2,205,537          1,892,508
       Transit grant                                                             -                 1,180
                                                                            4,155,181          4,726,591
      Expenditure
       Development charges recognized as revenue in the year                  75,463      285,041
       Federal gas tax recognized as revenue in the year                     408,133       16,441
       Federal transit recognized as revenue in the year                     213,500         -
       Park levies recognized as revenue in the year                         129,286       86,817
       Provincial gas tax recognized as revenue in the year                  214,119      604,224
                                                                           1,040,501      992,523
      Balance, end of year                                              $ 15,742,478 $ 12,627,798


9.   MUNICIPAL DEBT

     The balance of municipal debt consists of the following:
                                                      2008                              2007

                                             Carrying            Fair       Carrying                 Fair
                                             Amount             Value       Amount                  Value

        Debentures                      $ 19,899,000 $ 22,163,000 $ 21,957,000 $ 23,946,000
        OSIFA Loan                         3,500,000    3,500,000    3,780,000    3,780,000
        Mortgage loan                      1,836,909    1,836,909    1,989,000    1,989,000
                                        $ 25,235,909 $ 27,499,909 $ 27,726,000 $ 29,715,000

        Long-term debt is comprised of:
          Tax Supported                $    1,836,909                   $   1,989,000
           Self-liquidating debt        $ 23,399,000                    $ 25,737,000

     Debentures have an effective interest rate of 6.25% to 10.00% (2007-6.125% to 10.00%) with
     maturity dates from January 1, 2008 to December 1, 2017.


                                                                                                           17


                                                                                                   Welch LLP
                                                                                     An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008


9.    MUNICIPAL DEBT (continued)

      OSIFA loan bears interest at 2.35%, payable in semi-annual payments of $140,000 plus interest with
      a maturity date of January 4, 2021.

      The mortgage loan bears interest at 5.75%, is payable in blended monthly instalments of $21,766
      with a maturity date of January 1, 2018.

      Principal repayments are estimated to be as follows:

               2009                            $ 2,670,962
               2010                              8,326,351
               2011                              2,624,287
               2012                              2,830,802
               2013                              3,055,931
               2014 to 2018                      5,027,576
               2019 and subsequently               700,000


10.   CONTINGENT LIABILITIES AND COMMITMENTS

      The Corporation has an outstanding commitment to the Tri-County Healthcare Foundation joint
      diagnostic campaign of $1,050,000 payable $350,000 annually from 2009 to 2011.

      The Corporation has an outstanding commitment to the University Hospitals Kingston Foundation
      of $822,000 payable $137,000 annually from 2012 to 2017.

      The Corporation has an outstanding committment to Belleville General Hospital Foundation of
      $950,000 payable, $50,000 annually from 2009 to 2011 and then $400,000 annually from 2012 to
      2013.

      The Corporation has a commitment to Hastings County to finance debentures related to the capital
      construction of Hastings Manor of approximately $13,972,200 based on current proportionate share
      of resident days, with annual payments of approximately $1,000,200 for 15 years. Debentures have
      an effective interest rate of $4.82% to 5.04% with maturity dates from August 31, 2023 to
      September 30, 2023.

      The Corporation has a commitment to Hastings County to finance debentures related to the capital
      construction of Centennial Manor of approximately $1,158,600 based on a proportionate share of
      weighted assessment (Thurlow and Quinte annex), with annual payments of approximately $86,000
      for 14 years. Debentures have an effective interest rate of 5.24% to 6.42% with maturity date of
      May 30, 2022.

      The Corporation has entered into a Shortfall Payment Covenant and Indemnity agreement regarding
      natural gas usage with a business in the municipality. The Corporation will indemnify the business
      for certain payments it may be required to make if its natural gas consumption does not exceed
      certain budgeted amounts. No payments have been made to date and the Corporation’s obligation
      under the agreement in the future is not determinable.



                                                                                                       18
                                                                                                     Welch LLP
                                                                                       An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
                CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                             YEAR ENDED DECEMBER 31, 2008


10.   CONTINGENT LIABILITIES AND COMMITMENTS (continued)

      A lawsuit in the amount of $1,000,000 was instituted against the Corporation, consisting of a claim
      for damages regarding migration of contaminants onto the plaintiff’s property. The Corporation has
      contested the claim and the related costs have been accounted for as incurred. It is not possible at
      this time to assess the outcome of this claim; however, management believes there will be no
      material impact on the financial position of the Corporation.

      The City of Belleville has developed a doctor recruitment and retention program. The program
      provides education funding to medical students for up to 6 years at $25,000 per year. The medical
      students enter into an agreement for the education funding in exchange for a minimum five year
      commitment to practice family medicine within the City of Belleville.

      Future payments for the program, based on agreements in force at December 31, 2008, are as
      follows:

               2009                             $ 475,000
               2010                               500,000
               2011                               525,000
               2012                               525,000
               2013                               325,000


11.   OPERATING FUND

      The operating fund balance is comprised of the following:
                                                                                  2008                  2007

       City of Belleville                                                  $    (203,150) $          (182,206)
       Water Utility                                                                -                    -
       Consolidated City of Belleville                                          (203,150)            (182,206)
       Library Board                                                              56,017               (6,846)
       Belleville Downtown Improvement Area                                       72,546               32,022
                                                                           $     (74,587) $          (157,030)

12.   CAPITAL FUND

      The capital fund balance is comprised of the following:

                                                                                  2008                  2007

       City of Belleville - Unexpended capital financing                   $    8,638,879 $ 5,786,502
       City of Belleville - Unfinanced capital outlay                          (7,604,191)  (2,049,002)
       Water Utility - Unexpended capital financing                               490,368    2,771,399
                                                                           $   1,525,056 $         6,508,899



                                                                                                                             19


                                                                                                       Welch LLP
                                                                                         An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
               CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                            YEAR ENDED DECEMBER 31, 2008


13.   RESERVES AND RESERVE FUNDS

      The balance of reserves and reserve funds is comprised of the following:

                                                                                 2008                  2007

       Reserves set aside for specific purposes for:
              Belleville Water Utility                                  $    7,579,424 $          2,667,660
              Future capital expenditures                                      269,864              341,013
              Recreation and cultural programs and facilities                   88,070               45,439
              Working capital                                                  260,084              260,084

       TOTAL RESERVES                                                   $    8,197,442 $          3,314,196

       Reserve funds set aside for specific purposes by Council:

                                                                                 2008                  2007

               Road renewal                                             $    1,662,260 $    252,718
               Parking development                                             317,808      349,002
               Insurance                                                       378,963       62,228
               Sidewalks                                                       291,208       38,086
               Retirement                                                       78,804       68,522
               Low cost housing                                                   -       1,143,275
               Sick-leave                                                      601,644      444,321
               Recreation facilities                                            69,991       34,373
               Industrial land                                                 334,923      276,691
               Museum improvements                                             291,613      236,271
               Capital equipment                                               547,900      367,682
               Corby garden                                                     14,243       12,643
               Thurlow lot levy                                                  5,323        5,127
               Thurlow water and sewer debenture                                37,251       35,875
               Cannifton phase-in                                               10,242        9,863
               Infrastructure oversizing                                          -         111,214
               Facade improvement                                               95,929       21,569
               Storm water management                                          985,125      674,630
               Employee future benefits                                      1,079,226      796,236
               Fire department                                                   5,273        4,364
               Canada Day                                                       38,141       27,656
               Tax rate stabilization                                        1,479,118    1,418,384
               Landfill closure                                                333,605      272,525
               Capital levy                                                  1,427,519      413,733
               Sewage service                                               13,111,269   13,141,381

       TOTAL RESERVE FUNDS                                              $ 23,197,378 $ 20,218,369


                                                                                                                            20


                                                                                                      Welch LLP
                                                                                        An Independent Member of BKR International
                 THE CORPORATION OF THE CITY OF BELLEVILLE
                CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                              YEAR ENDED DECEMBER 31, 2008


14.   EXPENDITURES BY OBJECT

      Expenditures reported on the consolidated statement of financial activities consist of the following:

                                                                                   2008                  2007

       Current expenditures consist of:
             Salaries, wages and employee benefits                         $ 41,081,575 $ 38,159,476
             Contracted and general services                                  5,695,720    5,509,914
             Materials and supplies                                          14,350,602   14,303,467
             Rents and financial expenses                                     1,729,303    2,574,008
             Interest on long-term debt                                       1,835,210    1,901,747
             External transfers                                              18,979,240   19,371,216
                                                                           $ 83,671,650 $ 81,819,828


       Capital expenditures consist of:
              Salaries, wages and employee benefits                        $      534,545 $           514,873
              Contracted and general services                                  15,993,467           6,811,756
              Materials and supplies                                            4,451,517           7,896,463
              External transfers                                                    8,110                -
                                                                           $ 20,987,639 $ 15,223,092



15.   OPERATIONS OF SCHOOL BOARD

      Further to note 1, the taxation, other revenues and expenditures of school boards comprised the
      following:

                                                                                   2008                  2007

               Taxation                                                    $ 22,977,537 $ 22,619,629
               Requisitions                                                  22,977,537   22,619,629
                                                                           $          -      $                -



16.   BUDGET FIGURES

      Budgets established for Capital Funds, Reserves and Reserve Funds are based on a project-oriented
      basis, the costs of which may be carried out over one or more years. As such, they may not be
      directly comparable with the current year actual amounts.




                                                                                                                  21


                                                                                                        Welch LLP
                                                                                          An Independent Member of BKR International

								
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