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CITY OF COVINGTON, LOUISIANA

Annual Financial Statements

For the Year Ended December 31, 2008

Under provisions of state law, this report is a public document, Acopy of tlie report has been submitted to the entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office ofthe LegislativeAuditor and, where appropriate, at the office of the parish clerk of court.

Release Date %\^o1

Contents

Independent Auditor's Report

Required Supplemental Information - (Part 1) Management's Discussion and Analysis

Statement Schedule Page

1 -2

4 - 1 1

Basic Financial Statements

Government-Wide Financial Statements Statement of Net Assets A 13 Statement of Activities B 14

Fund Financial Statements Governmental Funds

Balance Sheet C 16 Reconciliation ofthe Governmental Funds

Balance Sheet to the Government-Wide Financial Statement of Net Assets D 17

Statement of Revenues, Expenditures, and Changes in Fund Balances E 18-19

Reconciliation ofthe Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Financial Statement of Activities F 20

Proprietary Fund Statements of Net Assets G 22-23 Statements of Revenues, Expenses, and Changes

in Net Assets H 24 Statements of Cash Flows I 25-26

Notes to Financial Statements 28 - 53

Required Supplemental Information - (Part II)

Budgetary Comparison Schedules 1 to 4 55-64

Other Supplemental Information

Non-Major Governmental Funds Combining Balance Sheet 1 66 Combining Statement of Revenues, Expenditures,

and Changes in Fund Balances 2 67 Schedule of Council Members 3 68

Contents Statement Schedule Page

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Audit ing Standards 69 - 70

Schedule of Findings and Responses 71

Summary Schedule of Prior Year Findings and Questioned Costs 72

Management Letter 73

LAPORTESEHRT ROMIGHAND c m t n e n rLMic ACCOUN IAN r-.

Independent Auditor's Report

To The Honorable Candace Watkins, Mayor and Members ofthe City Council City of Covington, Louisiana

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Covington, Louisiana, (the City) as of and for the year ended December 31, 2008, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe City's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Govemment Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information ofthe City, as of December 31, 2008, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Governmental Auditing Standards, we have also issued our report dated June 3, 2009, on our consideration ofthe City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the intemal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governmental Auditing Standards and should be considered in assessing the results of our audit.

1

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The management's discussion and analysis and budgetary comparison information, as listed in the table of contents, are not required parts of the basic financial statements of City, but are supplementary information required by accounting principles generally accepted In the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City's basic financial statements. Other supplemental information, as listed In the table of contents, are presented for the purposes of additional analysis and are not required part of the basic financial statements. The other supplemental information, as listed In the table of contents, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated In all material respects in relation to the basic financial statements taken as a whole.

A Professional Accounting Corporation

June 3, 2009

REQUIRED SUPPLEMENTAL INFORMATION - (PART I) MANAGEMENT'S DISCUSSION AND ANALYSIS


Management's Discussion and Analysis For the Year Ended December 31, 2008

Our discussion and analysis of City of Covington's (the City) financial performance provides an overview of the city's financial activities for the fiscal year ending December 31, 2008. Please review in conjunction with the transmittal letter and the City's financial statements.

Reviewing the Annual Report The annual report covers multiple financial statements. The Statement of Net Assets and the Statement of Activities supply data about the activities of the city as a whole and provide information regarding the City's finances. For government activities, these statements provide long-term and short-term information about the City's overall status. Financial reporting is similar to that found In the private sector with its basis in full accrual accounting. Fund financial statements show city operations in more detail than govemment-wide statements, as they provide Information about the City's most Important funds.

Financial Highlights Due to this year's operations, the city's net assets are as follows: Net assets of business-type activities were $23,351.9 thousand and net assets of governmental activities were $14,599.3 thousand.

o The current year's expense total was $16,169.5 thousand as compared to the $18,057.6 thousand generated in fees and charges, grants, general revenues, and taxes for governmental programs (before extraordinary items). In the previous year, expenses were $14,323.1 thousand as compared to the $18,978.8 thousand generated in tax and other revenues for governmental programs (before extraordinary Items).

• For business-type activities, city revenues were $2,873.7 thousand. Expenses were $4,245.0 thousand.

• The annual cost of all city programs was $16,169.5 thousand. The previous year's cost was $14,323.1 thousand.

The City as a Whole Analysis Because the Statement of Net Assets and the Statement of Activities provide facts about the City as a whole, the statements can help determine if a city's financial condition has improved or deteriorated as a result of the year's activities. All assets and liabilities are included in the statements using the accrual basis of accounting. The accrual method is comparable to the accounting used by most private corporations. All current year revenues and expenses are Included. It does not matter when cash is paid or received.

These statements give an account of the City's net assets and any changes in those assets. However, to truly judge the condition of the City, some non-financial factors, such as diversification of the taxpayer base or the condition of the City's infrastructure, must be considered in addition to the financial information provided in this report.



The Statement of Net Assets and the Statement of Activities divide the City into two types of activities:

Governmental Activities The City's basic services are accounted for in this section, including the police, fire, public works, parks departments and general administration. Sales tax, property taxes, franchise fees, and state and federal grants finance the majority of these activities.

Business-Type Activities These activities generally report services for which the City charges customers a fee. There are two kinds of Business-type activities. These are enterprise funds and Internal service funds. Enterprise funds essentially encompass the same functions reported as Business-type activities in the government-wide statements. Services are provided to customers extemal to the City organization, such as water utilities. Internal service funds provide services and charge fees to customers within the organization such as fleet services (maintenance and repair of vehicles) and the print shop (mail and printing services for city departments).

Detailing the Most Important Funds The fund financial statements provide detailed information about the most important funds ofthe City. Certain funds are mandated by State law and by bond agreements. Other funds are established to manage money, meet legal requirements or for certain taxes or grants.

Government Funds Basic services are reported in government funds. Government fund financial statements detail how money flows in and out of the funds and reports the balances left at year-end that are on hand for disbursement. Government funds are reported using an accounting method called modified accmal accounting. This method measures cash and financial assets that can easily be converted to cash. The governmental fund accountability focuses on the use of spendable resources during the year and balances of spendable resources available at the end ofthe year. They are useful in evaluating annual financing requirements of govemmental programs and the commitment of spendable resources for the next term.

Budgetary comparison schedules are included as required supplementary Information to the basic financial statements for the general fund and major special revenue funds. These schedules demonstrate compliance within the City's adopted and final revised budget.

Proprietary Funds Proprietary funds are those the City charges for services it provides, both to city units and outside customers. Proprietary funds are reported in the Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Fund Net Assets. The City's enterprise fund Is the same as the business-type activities we report In the government-wide statements, but they give more detailed information such as cash flow. Another component of proprietary funds is intemal service funds. Internal service funds cover activities that provide supplies and services for City programs.



Notes to Financial Statements The notes provide additional information that is necessary for a full understanding of the data provided in the accompanying financial statements.

Other Information In addition to the financial statements and notes, this report contains supplementary information and details ofthe accompanying financial statements.

Current and Other Assets Capital Assets

Total Assets

Long-Term Liabilities Other Liabilities

Total Liabilities

Net Assets Invested in Capital Assets, Net

of Related Debt Restricted Unrestricted

ToUl Net Assets

Table 1 Net Assets

(In Thousands)

Governmental Business-Type Activities Activities

Current Year

$ 15,122.6 15,889.3 31,011.9

12,350.9 4,061.7

16,412.6

621.4 6,991.8 6,986.1

$ 14,599.3

Previous Year

$ 20,335.2 12,972.8 33,308.0

12,430.9 4,717.0

17.147.9

1,482.7 5,292.3 9,385.1

$ 16.160.1

Current Year

$ 980.9 22,846.6 23.827.5

39.0 436.6 475.6

22,807.6 312.4 231.9

$23,351.9

Previous Year

$ 1,633.6 19.869.1 21,502.7

76.0 341.6 417.6

19,793.2 308.5 983.4

$ 21,085.1

Total Primary

Government

Current Year

$ 16.103.5 38,735.9 54.839.4

12.389.9 4.498.3

16.888.2

23,429.0 7,304.2 7.218.0

$ 37,951.2

Previous Year

$21,968.8 32.841.9 54,810.7

12,506.9 5,058.6

17,565.5

21,275.9 5,600.8

10,368.5 $ 37,245.2

City as a Whole The City's combined net assets from the previous year were $37,245.2 thousand as compared to $37,951.2 thousand this year. However, net assets and expenses from governmental and business-type activities must be reviewed separately. Table 1 focuses on the net assets and Table 2 focuses on changes In the net assets of the City's governmental and business-type activities.

The City's net assets for governmental activities were $14,599.3 thousand this year as compared to $16,160.1 thousand last year. Unrestricted net assets were $9,385.1 thousand last year as compared to $6,986.1 thousand this year. Unrestricted net assets are those that can be used to finance everyday operations without restrictions set by legislation, debt covenants, or other legal regulations.

The net assets of the City's business-type activities were $23,351.9 thousand this year as compared to $21,085.1 thousand last year.



City revenues (excluding extraordinary items) for the current year were $18,057.6 thousand as compared to $18,978.9 thousand in the previous year. The total yearly cost of all programs and services was $16,169.5 thousand as compared to $14,323.3 thousand in the previous year.

Table 2 Changes in Net Assets

(In Thousands)

Governmental Activities

Business-Type Activities Total

Current Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Revenues Program Revenues

Charges for Services Restricted Operating Grants Restricted Capital Grants

General Revenues Property Taxes Other Taxes Interest and Investment

Income Other General Revenues

Total Revenues

Program Expenses General Govemment Public Safety Public Works Culture and Recreation Interest on Long-Term Debt Water and/or Sewer Other Utilities Total Expenses

Excess (Deficit) Before Special Items

and Transfers Capital Contributions Special Items Transfers Change in Net Assets

220.2 379.6

2,289.1 10,215.8

304 2 1,774 9

15.183.9

11,924,5

242.0 202.6

1,064.4

2,079.2 10,262 2

558.1 1.712.0

$ 2,872,7 $ 2,856.4 $

16,120.5

10,177.1

1,0 1.9

2,873.7 2,858.3

4,245,0 4,146.0

3,093,0 379.8

2,289.1 10,215.8

305.2 1,774.9

18,057.6

16,169.5

3,098.4 202.6

1,054.4

2,079.2 10,262.2

560.0 1,712.0

18,978.8

3,037,1 4,967.3 2,597.5

829.0 493.6

--

2,6497 4,413.9 1,972 8

621,4 519.3

--

----

44 3.510.7

729,9

-. --

6,4 3,413.4

726,2

3,037,1 4,967,3 2,597.5

829,0 498,0

3,5107 729-9

2,6497 4,413.9 1,972.8

621,4 525.7

3,413.4 726 2

14,323.1

3,259.4 (2,939.9)

(900.0) (698.2)

$ (1,278,7)

5,943.4 (2,971.1)

(118.4) (1,354 3)

$ 1,499,6 g

(1,371.3) 2.939.9

-698,2

; 2,266.8

(1,287.7) 1,888.1 2,971.1

(900.0) 1,354 3

$ 3,037.7 $ 988.1

4,655.7 -

(118.4) -

$ 4,537.3

Governmental Activities This year's governmental activities revenues were $15,183.9 thousand as compared to $16,120.5 thousand last year. This year's governmental activities cost was $11,924.5 thousand as compared to $10,177.1 thousand in the previous year.



Table 3 details the cost of the City's major programs as well as each program's net cost (total cost less revenues generated by the program). The net cost indicates the financial burden that was shifted to the City's taxpayers by each of these programs.

Table 3 Governmental Activities

(In Thousands)

Total Cost of Services

Current Year

$ 3,561.0 1,406.3 2,597.5

829.0 3,530.7

$11,924.5

Previous Year

$ 3,307.5 1,106.4 1,972.8

621.4 2,649.7

$ 9,657.8

Net Cost of Services

Current Year

$ 3,528.3 1,354.1 2,574.8

631.5 3,235.9

$11,324.5

Previous Year

$ 3,164.8 952.8

1,512.5 413.2

2,105.5

$ 8,148.8

Police Department Fire Department Public Works Parks and Recreation All Others

Totals

Business-Type Activities This year's Business-type activities revenues (see Table 2) were $2,873.7 thousand as compared to $2,858.3 thousand last year. This year's expenses were $4,245.0 thousand as compared to $4,146.0 thousand in the previous year. These figures are somewhat due to the following reasons:

• Revenues remained relatively stable In the City's Business-type activities. The expenses increased mainly because of increased electrical costs and fuel costs.

General Fund Budgetary Statements The City Council revisits the budget several times during the year. The current year's budgets focus on general funds, major funds and on availability of fund resources.

City Funds At year end the City reported a government funds balance of $12,916.5 thousand as compared to $16,919.1 thousand in the previous year. These figures are somewhat due to these reasons:

• Some major projects were completed In 2008. These projects included the Recreation Complex, the Recreation Complex Roadway, and the Trailhead Complex.



Capital Assets

Table 4 Capital Assets at Year-End

(Net of Depreciation, In Thousands)

Land Buildings and

Improvements Equipment Infrastructure Other

Total


Current Year

$ 557.6

8,908.9 649.8

4.596.1 1,176.9

X15.889.3

Previous Year

$ 557.6

3,245.1 644.3

3.531.9 4,993.9

$12,972.8

Business-Type Activities

Current Year

$

3,582.4 627.4

12,385.9 6,250,9

$ 22.846.6

Previous Year

$

3,692.4 693.4

12.279.7 3,203.6

$19,869.1

Total Cunent Year

$ 557.6

12.491.3 1,277.2

16,982.0 7,427.8

$ 38.735.9

Previous Year

$ 557.6

6,937.5 1.337.7

15,811.6 8,197.5

$ ^ , 8 4 1 ^

At the close of the year; the City had invested $38,735.9 thousand in capital assets such as land, buildings and improvements, equipment or infrastructure (see Table 4). $32,841.9 thousand was invested in similar assets last year.

The current year's chief capital asset additions included:

Governmental Activities: Vehicles, street improvements, bridge repairs, and renovations to the council chambers. The City also purchased a new fire truck - pumper apparatus and completed construction on a new recreation complex and a trailhead complex. Also, the recreation complex roadway project was completed.

Business-Type Activities: Vehicles, and lift station repairs. The City also continued construction on a new sewer treatment plant which is expected to be completed in 2009. The City completed replacing all water meters with meters that have radio read capability.

Debt Management At the close of the year, the City had $12,506.9 thousand in outstanding bonds and notes as compared to $13,366.9 thousand in the previous year (see table 5). This decrease in debt of $896.0 thousand is due to normal debt retirement.



Table 5 Outstanding Debt at Year-End

(In Thousands)

Governmental Business-Type Activities Activities Total

Current Previous Current Previous Current Previous Year Year Year Year Year Year

General Obligation Bonds (Backed by the City) $ 6,880.0 $ 7.220.0 $ - $ - $ 6.880.0 $ 7,220.0

Revenue Bonds and Notes (Backed by Specific Tax and Fee Revenues) 3,750.0 4.270.0 76.0 112.0 3.826.0 4,382.0

Federal Community Disaster Loan 1.800.9 1,800.9 - : 1,800.9 1,800.9

Total $ 12,430.9 $ 13.290.9 $76,000.0 $ 112.0 $ 12.506.9 $ 13,402.9

Economic Issues/Upcoming Yearly Budgets City public officials considered many issues when establishing the upcoming year's budget, tax rates, and fees.

More than 50% of the City's revenues are derived from sales taxes. While the City saw an increase of more than $2,000,000 in sales tax revenues from 2005 to 2006, due to the anomaly of sales generated as a result of the recovery from Hurricane Katrine, sales tax revenues have been flat since 2007. Sales tax receipts in 2007 showed a small increase of $700,000 over 2006. Due to this leveling off, the City took a conservative approach and budgeted 2008 sales tax revenue based on estimated collections for 2007 fiscal year with no increase.

It is estimated that the City will collect just over $9,000,000 in sales tax revenues for fiscal year 2009 based on the current revenues collected through June of 2008. Approximately $7,000,000 will go directly to the General Fund. The remaining $2,000,000 balance is "shared revenue" provided by St. Tammany Parish through the City/Parish Growth Management Agreement, and as such is dedicated to roads, bridges and drainage projects that benefit the residents of St. Tammany Parish Sales Tax District 3.

Ad Valorem Tax is anticipated to generate just over $1,600,000 in revenue for the 2009 Operating Budget and approximately $500,000 to service general obligation bond debt. This is an increase over 2008 and is based upon an assessed valuation of $92,000,000 up from $86,500,000. It should be noted that property taxes represent only 8% of the 2009 Operating Budget. The City currently has the following assessments: 23.04 mills Ad Valorem taxes representing 5.5 mills for retiring general obligation bonds, 7.54 mills to general fund revenues, 10.00 mills for operation and maintenance ofthe fire department.

10



Contact Information This report has been created to give our citizens, taxpayers, customers. Investors and creditors a summary of City finances and to show how its revenues are used. If you have any questions regarding this report, or If you need additional financial infonnation, please contact:

Beverly Gariepy 609 N Columbia St.

Covington, l_A 70433 Phone:985-892-1811

Fax: 985-898-2651 [email protected]

11

mailto:[email protected]

BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS

12

CITY OF COVINGTON, LOUISIANA Statement of Net Assets December 31, 2008

Statement A

Governmental Business-Type Activities Activities Total

Assets Cash and Cash Equivalents Equity in Pooled Cash Investments Certificates of Deposit Receivables Intemal Balances Restricted Assets

Cash Equity in Pooled Cash

Capital Assets, Net

Total Assets

Liabilities Accounts Payable Accrued Payroll Expenses Pooled Cash in Other Funds Customer Deposits Accrued Interest Defen-ed Revenues Compensated Absences Contingent Liabilities

Due Within One Year Due in More Than One Year

Payable from Restricted Assets Revenue Bonds Accrued Interest

Revenue Bonds Payable Due Within One Year Due in More Than One Year

General Obligations Bonds Payable Due Wthin One Year Due in More Than One Year

Community Disaster Loan

Total Liabilities

Net Assets Invested In Capital Assets, Net of Related Debt Restricted for

Debt Service Perpetual Care Capital Outlay

Unrestricted

Total Net Assets

$ 6,886.423 $ 362.111

1,763,435 3,084.246 3.047.120

(20,702)

--

15,889,298

31,011.931

803,224 295.734 924,955

-158,227 182.252 717.294

230,000 670,000

--

545.000 3,205.000

205,000 6.675.000 1,800,900

16,412.586

621,414

1.753.537 55,846

5.182.419 6,986,129

$ 14.599,345 $

25 $ 293,415

--

313.161 20.702

84.191 269.429

22,846,610

23,827,533

148,812 18,383

-228.252

---

--

37,000 4,198

-39,000

---

475,645

22.807.610

312.422 --

231.856

23.351,888 $

6,886.448 655,526

1,763.435 3.084,246 3.360,281

-

84.191 269.429

38,735,908

54,839,464

952.036 314.117 924.955 228.252 158.227 182.252 717,294

230,000 670,000

37.000 4,198

545.000 3,244,000

205,000 6,675.000 1.800,900

16.888,231

23,429.024

2.065.959 55.846

5,182,419 7,217,985

37,951.233

The accompanying notes are an integral part of these financial statements.

13

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CITY OF COVINGTON, LOUISIANA Reconciliation ofthe Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets December 31, 2008

Statement D

Amounts reported for governmental activities in the Statement of Net Assets are different because:

Fund Balances - Total Governmental Funds $ 12,916,468

Capita! assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds.

Governmental Capital Assets Less: Accumulated Depreciation

Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the governmental funds.

Compensated Absences Contingent Liabilities Accrued Interest on Bonds Revenue Bonds General Obligation Bonds Community Disaster Loan

Net Assets of Governmental Activities

22,026,037 (6,136,739)

(717,294) (900,000) (158,227)

(3,750,000) (6,880,000) (1,800,900)

$ 14,599,345


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CITY OF COVINGTON, LOUISIANA Statement F Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities For the Year Ended December 31, 2008

Changes in Fund Balances - Total Govemmental Funds $ (4,002,593)

Amounts reported for govemmental activities in the Statement of Activities are different because:

Governmental funds report capital outlays as expenditures; however, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives through depreciation expense. This is the amount by which capital outlay charged exceeded depreciation in the cun'ent period. 2,920,936

Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. 860,000

Obligations for claims and contingencies are not recognized in governmental funds until they are due and payable, because they are not considered uses of current financial resoursces until that time. (900,000)

Losses on the disposal of capital assets reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the govemmental funds. (4,431)

Some expenses reported in the Statement of Activities do not require the use of current financial resourses and, therefore, are not reported as expenditures in govemmental funds.

Change in Accmed Interest 8,237

Change in Compensated Absences (160,845)

Change in Net Assets of Govemmental Activities $ (1,278,696)


20

BASIC FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS

PROPRIETARY FUND

21

CITY OF COVINGTON, LOUISIANA Statements of Net Assets Proprietary Fund December 31, 2008 and 2007

Statement G

2008 2007 Assets

Current Assets Cash and Cash Equivalents Equity in Pooled Cash Receivables

Accounts Receivable, Net of Uncollectible Deferred Charges Due from Other Funds

Total Current Assets

Restricted Assets Cash

Equity in Pooled Cash

Total Restricted Assets

Capital Assets, Net

Total Assets

25

293,415

274,963 38,198

25 855,858

258,690 38,198

22,000

628,601

84,191 269,429

353,620

22,846,610

23,828,831

137,487

1,290,258

83,144 265,541

348,685

19,869,170

21.508,113


22

CITY OF COVINGTON, LOUISIANA Statements of Net Assets Proprietary Fund December 31. 2008 and 2007

Statement G (Continued)

2008 2007 Liabilities

Current Liabilities (Payable from Current Assets)

Accounts Payable Accrued Expenses Customer Deposits Due to Other Funds

148,812 18,383

228,252 1,298

91,967 10,151

199,292 5,458

Total Current Liabilities (Payable from Current Assets)

Current Liabilities (Payable from Restricted Assets)

Revenue Bonds Accrued Interest

Total Current Liabilities (Payable from Restricted Assets)

Long-Term Liabilities Revenue Bonds Payable

Total Long-Term Liabilities

Total Liabilities

Net Assets Invested in Capital Assets, Net of Related Debt Restricted for:

Debt Service Unrestricted Net Assets

Total Net Assets

396,745

37,000 4,198

41,198

39,000

39,000

476,943

22,807,610

312,422 231,856

$ 23,351,888 j

306,868

36,000 4,198

40,198

76,000

76,000

423,066

19,793,170

308,487 983,390

> 21.085,047

The accompanying notes are an Integral part of these financial statements.

23

CITY OF COVINGTON, LOUISIANA Statements of Revenues, Expenses, and Changes in Net Asse ts Propr ietary Fund For the Years Ended December 3 1 , 2008 and 2007

Statement H

2008 2007 Operating Revenues

Sewer Maintenance Fees Water Revenues Garbage Collection Fees Water Installations Miscellaneous Connection Fees DHHFee Sewer Installations FEMA Reimbursements

Total Operating Revenues

Operating Expenses Water Department Expenses Sewer Department Expenses Garbage Department Expenses

Total Operating Expenses

Operating Loss

Non-Operating Revenues (Expenses)

Interest Income Interest Expense

Total Non-Operating Expenses

Loss Before Contributions and Transfers

Operating Transfers and Contributions Operating Transfers Capital Contributions

Total Operating Transfers and Contributions

Changes in Net Assets

Net Assets, Beginning of Year

Net Assets, End of Year

1,043,951 $ 1,069,616 977,518 718,143 49,363 44,651 18,645 13,834 6,600

2,872,705

1,248,381

2,262,346 729,880

4,240,607

(1,367,902)

993

(4,370)

(3,377)

982,339 676.253 36,850 27,072 23,699 13,805 17,350 9,423

2.856,407

1.306,176

2,107,232 726.224

4,139.632

(1,283,225)

1.943 (6,440)

(4,497)

(1,371,279) (1,287722)

698,240 2,939,880

3,638,120

2,266,841

21,085,047

$ 23,351,888 3

1,354.278 2,971.131

4,325.409

3.037,687

18.047.360

> 21.085.047


24

CITY OF COVINGTON, LOUISIANA Statements of Cash Flows Proprietary Fund For the Years Ended December 31, 2008 and 2007

Statement I

2008 2007 Cash Flows from Operating Activities

Receipts from Customers and Users Other Receipts Payments to Suppliers Payments to Employees

Net Cash Used in Operating Activities

Cash Flows from Noncapital Financing Activities Net Interfund Borrowings from Other Funds

Net Cash Provided by Noncapital Financing Activities

Cash Flows from Capital and Related Fmancing Activities Transfers In Purchase of Capital Assets Outlays for Construction in Process Capital Contribution Principal Paid on Capital Debt Interest Paid on Capital Debt

Net Cash Used in Capital and Related Financing Activities

Cash Flows from Investing Activities

Interest Received

Net Decrease in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Year

Cash and Cash Equivalents, End of Year

$ 2,840,741 $ 44,651

(1,738,906) (1,240,694)

(94,208)

111,327

111,327

698,240 (1,258,429) (2,914,941) 2,939,880

(36,000) (4,370)

(575,620)

993

(557,508)

1,204,568

$ 647,060 $

2.753,649 36,495

(2,646,874) (876,717)

(733,447)

50,282

50,282

1,354,278 (1,773,688) (2,907,847) 2,971,131

(34,000) (6,440)

(396,566)

1,943

(1,077,788)

2,282,356

1,204,568


25

CITY OF COVINGTON, LOUISIANA Statements of Cash Flows Proprietary Fund For the Years Ended December 31, 2008 and 2007

Statement I (Continued)

2008 2007 Cash and Cash Equivalents Reconciliation

Cash and Cash Equivalents (Unrestricted) Equity in Pooled Cash Restricted Cash and Cash Equivalents Restricted Equity in Pooled Cash

Cash and Cash Equivalents, End of Year

Reconciliation of Operating Loss to Net Cash Provided by Operating Activities

Operating Loss Adjustments to Reconcile Operating Loss to Net Cash

Used in Operating Activities Depreciation Loss on Disposal of Capital Assets Changes in Assets and Liabilities

(Increase) Decrease in: Accounts Receivable Prepaid Expenses

Increase (Decrease) in: Accounts Payable Accrued Expenses Customer Deposits

$ 25 $ 293,415 84,191

269,429

$ 647.060 S

$ (1,367,902) $

1,195,930 -

(16,273) -

56.845 8,232

28,960

25 855,858 83,144

265,541

; 1.204.568

(1,283,225)

1,024,123 1,435

(83,953) 38,198

(418,882) (28,833) 17,690

Net Cash Used in Operating Activities

Supplemental Disclosure of Cash Flow Information - Interest Paid

$

$

(94,208) $

4,370 $

(733,447)

6.440


26

NOTES TO FINANCIAL STATEMENTS

27


Notes to Financial Statements

Introduction

The City of Covington, Louisiana, (the City) adopted the Home Rule Charter on November 7, 1978, under the provisions of Article VI, Section 5, ofthe Louisiana Constitution of 1974. The City operates under a Mayor-Council form of government and provides the following services as authorized by its charter: public safety, highways and streets, sanitation and utilities, health and social services, culture and recreation, public improvements, planning and zoning, and general administrative services.

The accounting and reporting policies of the City conform to generally accepted accounting principles as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Such accounting and reporting procedures also conform to the requirements of Louisiana Revised Statutes 24:517 and to the guides set forth in the Louisiana Govemmental Audit Guide, and to the industry audit guide, Audits of State and Local Governmental Units.

Note 1. Summary of Significant Accounting Policies

Reporting Entity The City's basic financial statements include the accounts of all City operations. The criteria for including organizations as component units within the City's reporting entity, as set forth in Section 2100 of GASB's Codification of Govemmental Accounting and Financial Reporting Standards, include whether:

• The organization is legally separate (can sue and be sued in their own name). • The City holds the corporate powers ofthe organization. • The City appoints a voting majority ofthe organization's board. • The City is able to impose its will on the organization. • The organization has the potential to impose a financial benefit/burden on the

City. • There is a fiscal dependency by the organization on the City.

Based on the aforementioned criteria, the City has no component units.

Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all ofthe non-fiduciary activities ofthe City. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

28



Note 1. Summary of Significant Accounting Policies (Continued)

Government-Wide and Fund Financial Statements (Continued) The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not property included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds and the City's proprietary fund. Most individual governmental funds are reported as separate columns in the fund financial statements.

Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences are recorded only when payment is due.

The City reports the following major governmental funds:

General Fund - The General Fund is the general operating fund of the City. This fund is used to account for all financial transactions and resources except those that are required to be accounted for in another fund. Revenues are derived primarily from property and other local taxes, state and federal grants, licenses, permits, charges for service, and interest income.

29




Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

1982 Sales Tax Special Revenue Fund - The 1982 Sales Tax Special Revenue Fund is used to account for the proceeds of the 1982 sales tax. The 1% 1982 sales tax is used to retire the 1997 Sales Tax Refunding Bonds and the 2002" Sales Tax Bonds. Any proceeds remaining in the 1982 Sales Tax Fund on the last day of each month after satisfying all sinking and reserve fund requirements are dedicated as follows:

Capital Improvements 60% Recreation Facilities and Equipment 15% Street and Drainage Maintenance 10% Central Business District Municipal Services and Capital Improvements 10%

Police Facilities and Equipment 5%

1957 Sales Tax Special Revenue Fund - The 1957 Sales Tax Special Revenue Fund is used to account for the receipt and use of proceeds of the City's 1957 1% sales and use tax. This tax is dedicated for the purpose of constructing, improving, extending and maintaining playgrounds and recreational facilities, public roads, streets, bridges and crossings, sewer, garbage disposal, waterworks, and other works of permanent public improvement in the City, title to which shall be in the public's name.

2007 Capital Projects Fund - The 2007 Capital Projects Fund is used to account for the receipt and use of proceeds of the 2007 general obligation bond issuance. These funds are restricted for the purpose of retirement of general obligation bonds, as well as, operation ofthe City of Covington, the City of Covington Fire Department, and the constructing, acquiring, improving, and extending the City's sewers and sewerage disposal works, including the necessary sites and furnishings therefore, title to which shall be in the public.

The City has one proprietary fund to account for the water, sewer, and garbage services it provides to the residents and businesses ofthe City.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance ofthe Govemmental Accounting Standards Board. Govemments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance.

30




Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

As a general rule, the effect of interfund activity has been eliminated from the govemment-wide financial statements. Exceptions to this general rule are payments in-lieu-of taxes and other charges between the govemment's enterprise operations. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Principal operating revenues for the City's proprietary fund consist of charges to customers and users of its water, sewer and garbage services. Operating expenses for the City's proprietary fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed.

Budgets and Budgetary Accounting The City follows these procedures in establishing the budgetary data reflected in the financial statements:

A. Prior to December V \ the Mayor submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1^'. The operating budget includes proposed expenditures and the means of financing them.

B. Public hearings are conducted at City Hall.

C. Prior to the last meeting of the current fiscal year, the budget is legally enacted through passage of an ordinance.

D. The Mayor may transfer part or all of any unencumbered appropriation balance among programs within a department, office or agency. An unencumbered appropriation balance may be transferred from one department, office, or agency to another only upon action of the City Council by ordinance.

31




Budgets and Budgetary Accounting (Continued)

E. Formal budgetary integration is employed as a measurement control device during the year for the General Fund, Special Revenue Fund, Enterprise Fund, and the Debt Service Funds.

F. Budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds, except the Debt Service Funds. Budgeted amounts are as originally adopted, or as amended by the City Council.

G. Budgets are amended as necessary throughout the year.

H. All appropriations, except for capital outlay, lapse at year end.

Deposits and Investments Cash includes amounts in demand deposits, interest-bearing demand deposits, and money market accounts. Cash equivalents include amounts in time deposits and those investments with original maturities of 90 days or less. Under state law, the municipality may deposit funds in demand deposits, interest-bearing demand deposits, money market accounts, or time deposits with state banks organized under Louisiana law and national banks having their principal offices in Louisiana.

Under state law, the municipality may invest in United States bonds, treasury notes, or certificates. These are classified as investments if their original maturities exceed 90 days; however, if the original maturities are 90 days or less, they are classified as cash equivalents. Investments are stated at fair value using published market quotes.

Property Taxes Property taxes are due on January 1** and delinquent if not paid by February 1^*. Property taxes are recorded as revenues when levied. Tax liens are filed on all unpaid bills. The City bills property taxes using the assessed values determined by the tax assessor of St. Tammany Parish. The St. Tammany Parish Sheriff collects property taxes and remits taxes to the City as collected. Total property tax revenue for the year ended December 31, 2008, was $2,289,053 and is recorded in the funds as follows:

General Fund $ 1,739,719 Debt Service Fund 549.334

Total $ 2.289053

32




Accumulated Unpaid Vacation Leave and Sick Pay City employees are not allowed to carry over vacation time past May 1 *̂ of the next fiscal year and are allowed to carry over sick time up to a maximum of 720 hours. Civil service employees of the city are allowed to accrue both vacation and sick time up to a maximum of 500 hours of each. Sick time is only paid out to employees if they retire or pass away while still employed. At termination, employees are paid for any accumulated annual leave. The amount of accumulated annual leave payable in the government-wide financial statements at December 31, 2008, is $717,293.

Accounts Receivable Uncollectible amounts due for customers' utility receivables are recognized as bad debts through the establishment of an allowance account at the time information becomes available, which would indicate the uncollectibility of the particular receivable. The allowance is $112,834 at December 31. 2008.

At December 31, 2008, the aging of utility receivables is as follows:

Cun-ent $ 179,950 Over 1 under 30 45,337 Over 31 under 60 22,507 Over 61 under 90 13,132 Over 90 126,871 Less Allowance (112.834)

Total S 274.963

Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable govemmental or business-type activities columns in the government-wide financial statements. Capital assets are capitalized at historical cost or estimated cost, if historical costs are not available. Donated assets are recorded as capital assets at their estimated fair market value at the date of donation. The City maintains a threshold level of $2,500 or more for capitalizing capital assets.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized.

33




Capital Assets (Continued) Capital outlays are recorded as expenditures of the General, Special Revenue, and Capital Projects Funds and as assets in the government-wide financial statements, to the extent that the City's capitalization threshold is met. In accordance with GASB Statement No. 34, the City has elected to not capitalize infrastructure retroactively. Interest incurred during construction will be capitalized on a government-wide basis. Interest attributable to capitalized assets as of December 31, 2008, was immaterial to the financial statements. Depreciation is recorded on capital assets on a government-wide basis. Capital outlays of the Proprietary Funds are recorded as capital assets and depreciated over their estimated useful lives on a straight-line basis on both the fund basis and the government-wide basis.

All capital assets, other than land, are depreciated using the straight-line method over the following useful lives:

Description Estimated Lives

Roads, Bridges, and Infrastructure 20 - 40 Years Utility System 30 - 40 Years Buildings and Buildings Improvements 20 - 40 Years Furnitures and Fixtures 5 -10 Years Vehicles 5-10 Years Equipment 5 -15 Years

Long-Term Obligations In the govemment-wide financial statements, debt principal payments of both government and business-type activities are reported as decreases in the balance ofthe liability on the Statement of Net Assets. In the fund financial statements, however, debt principal payments of governmental funds are recognized as expenditures when paid.

Fund Equity

Government-Wide Statements

Equity is classified as net assets and displayed in three components:

1. Invested in capital assets, net of related debt - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any borrowings that are attributable to the acquisition, construction, or improvement of those assets.

34




Fund Equity (Continued)

Government-Wide Statements (Continued)

2. Restricted net assets - Net assets with constraints placed on the use either by:

a. external groups such as creditors, grantors, contributors, or laws or regulations of other governments, or

b. law through constitutional provisions or enabling legislation.

3. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "Invested in capital assets, net of related debt."

Fund Statements

Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved. Reserved fund balances are the portion of the governmental fund's net assets which is not available for appropriation.

Interfund Transactions Permanent re-allocation of resources between funds ofthe reporting entity are classified as interfund transfers. For the purposes of the Statement of Activities, all interfund transfers between individual governmental funds have been eliminated.

Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenditures, and expenses during the reporting period. Actual results could differ from those estimates.

Encumbrance Accounting The City does not utilize encumbrance accounting.

Note 2. Stewardship, Compliance, and Accountability

Deposits and Investment Laws and Regulations In accordance with state law, all uninsured deposits of municipal funds in financial institutions must be secured with acceptable collateral valued at the lower of market or par. The City was in compliance with the deposit and investment laws and regulations as of December 31. 2008.

Deficit Fund Balance As of December 31, 2008, the 1957 Sales Tax Special Revenue fund had a deficit fund balance.

35



Note 2. Stewardship, Compliance, and Accountability (Continued)

Compliance with Debt Covenants

1. Compliance with Sales Tax Bond Covenants -

As of December 31, 2008, the City was in compliance with all Sales Tax Bond Covenants.

2. Compliance with Water and Sewer Revenue Bond Covenants -

As of December 31, 2008, the City was not In compliance with the Water and Sewer Revenue Bond Covenants, which require it to annually update its rates to meet its financial obligations and it also requires the City to cut off service to any customer more than 10 days past due.

Note 3. Cash and Cash Equivalents

The City's deposits, including restricted cash of $84,191, are categorized as follows at December 31, 2008:

Carrying Amount Bank Balance

Demand Deposits $ 6,970,639 $ 7,326,183 Certificates of Deposit 3,084,246 3,084,246

Total $ 10,054.885 $10,410,429

These deposits are stated at cost, which approximates market.

Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City does not have a deposit policy for custodial credit risk. As of December 31. 2008, $9,604,584 of the City's bank balance of $10,410,429 was exposed to custodial credit risk. $805,845 of deposits were secured by federal deposit insurance coverage, which was not exposed to custodial credit risk. The remaining deposits, which were exposed to custodial credit risk, were secured by the pledge of securities owned by the fiscal agent bank.

Under state law, these deposits (or the resulting bank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value ofthe pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. These securities are held in the name of the pledging fiscal agent bank in a holding or custodial bank that is mutually acceptable to both parties.

36



Note 4. Investments

Investments of $1,763,435, which are stated at market using published market quotes of December 31, 2008, consist of shares in the Louisiana Asset Management Pool, Inc. (LAMP), a local government investment pool.

LAMP is administered by L^MP, Inc., a non-profit corporation organized under the laws of the State of Louisiana. Only local government entities having contracted to participate In LAMP have an investment interest in its pool of assets. The primary objective of LAMP is to provide a safe environment for the placement of public funds in short-term, high quality investments. The LAMP portfolio includes only securities and other obligations in which local governments in Louisiana are authorized to invest in accordance with LA-R.S. 33:2955.

GASB Statement No. 40, Deposit and Investment Risk Disclosure, requires disclosure of credit risk, custodial credit risk, concentration of credit risk interest rate risk and foreign currency risk for all public entity investments.

LAMP is a money market like investment pool. The following facts are relevant for money market-like investment pools:

• Credit risk: LAMP is rated AAAm by Standard &L Poor's.

• Custodial credit risk: LAMP participants' investments in the pool are evidenced by shares of the pool. Investments In pools should be disclosed, but not categorized because they are not evidenced by securities that exist in physical or book-entry form. The public entity's investment is with the pool, not the securities that make up the pool; therefore, no disclosure is required.

• Concentration of credit risk: Pooled investments are excluded from the 5 percent disclosure requirement.

• Interest rate risk: Money market-like investment pools are excluded from this disclosure requirement, per paragraph 15 ofthe GASB 40 statement.

• Foreign currency risk: Not applicable to money market-like pools.

The dollar weighted average portfolio maturity of LAMP assets is restricted to not more than 90 days, and consists of no securities with a maturity in excess of 397 days. LAMP is designed to be highly liquid to give its participants immediate access to their account balances. The investments in LAMP are stated at fair value based on quoted market rates. The fair value is determined on a weekly basis by LAMP and the value of the position in the external investment pool is the same as the value ofthe pool shares.

LAMP, Inc. is subject to the regulatory oversight of the state treasurer and the board of directors. LAMP is not registered with the SEC as an investment company.

If you have any questions, please feel free to contact the LAMP administrative office at 800-249-5267.

37



Note 5. Interfund Receivables/Payabtes

The primary purpose of interfund receivables/payables is to loan monies from the General Fund to individual funds to cover current expenditures. Individual fund balances due from/to other funds at December 31, 2008, are as follows:

Interfund Interfund Fund Receivables Payables

General Fund Debt Service Fund

General Obligation Bond Redemption Fund

Sales Tax Bond Fund Proprietary Fund Capital Projects Fund

2002 Capital Projects Fund LCDBG Capital Projects Fund 2007 Capital Projects Fund

Total

$ 409,301

--

.22,000

---

$ 431,301

$

22,060 6,827 1.298

52,542 100

348,474

$ 431,301

The City's General Fund cash includes cash which is held for other funds. Pooled cash is as follows;

Equity in Pooled Cash Pooled Cash In Other Funds

General Fund $ 1,440 $ 923,515 Special Revenue

A3 Sales Tax 299,087 1957 Sales Tax - 1,440 1982 Sales Tax 61,584

Utility Fund Unrestricted 293,415 Restricted 269,429 -__

Total $ 924,955 $ 924,955

38



Note 6. Deferred Revenues

At December 31, 2008, the City has deferred unearned revenues, a liability, as follows:

General Fund

Business Licenses and Other Deferred Revenues Sewer Assessments to be Collected Paving Assessments to be Collected

Total

$ 133,781 27,816 20,655

$ 182,252

Note 7. Capital Assets

The following is a summary of the changes in capital assets for the fiscal year ended December 31, 2008:


Capital Assets Not Depreciated Land Construction in Process

Total Capital Assets Not Depreciated

Capital Assets Being Depreciated Buildings Improvements Veliicles Tools and Equipment Leased Assets Infrastructure

Total Capital Assets Being Depreciated

Less Accumulated Depreciation for. Buildings Improvements Vehicles Tools and Equipment Leased Assets Infrastmcture

Total Accumulated Depreciation

Total Capital Assets Being Depreciated, Net

Totals

Balance January 1,

2008

$ 557,597 3,963,330 4,520,927

3,670,369 2,065,057 2,329,002 1,977,702

96,650 3,704,140

13,842,920

(1,140,872) (1,349,466) (1,367,341) (1,333,439)

(27,738) (172,198)

(5,391.054)

8,451,866

$12,972,793

Increases

$ --

4,816,878 1,130,589

398,307 167,417

-1,211,975 7,725,166

(167,510) (115.623) (232,673) (157,984)

(19,330) (147,780) (840,900)

6.884,266

$ 6.884,266

Decreases

$ 3,963,330 3,963,330

400 11.568

-87,678

--

99,646

(373) (11,084)

-(83.758)

--

(95,215)

4,431

$ 3.967,761

Balance December 31,

2008

$ 557,597

-557,597

8,486,847 3,184,078 2,727,309 2,057,441

96,650 4.916,115

21,468,440

(1,308,009) (1,454,005) (1,600,014) (1,407,665)

(47,068) (319,978)

(6.136,739)

15,331.701

$ 15.889,298

39



Note 7. Capital Assets (Continued)

Depreciation was charged to governmental functions as follows:

General Government Public Safety - Police Public Safety - Fire Public Works Culture and Recreation

Total

$ 54,020 202,112 90.345

250,769 243,654

$ 840,900

The following is a summary of changes in capital assets for business-type activities for the fiscal year ended December 31, 2008:

Business-Type Activities

Balance January 1,

2008 Increases Decreases

Balance December 31

2008

Capital Assets Not Depreciated Construction in Progress

Capital Assets Being Depreciated Sewer Plant and Lines Water Wells, Tanks, and Lines

Total Capital Assets Being Depreciated

Less Accumulated Depreciation for: Sewer Plant and Lines Water Wells, Tanks, and Lines

Total Accumulated Depreciation

Total Capital Assets Being Depreciated, Net

Totals

$ 3,056,597

15,883,612 7,554,871

23,438,483

(4,607,477) (2.018,435) (6.625.912)

16,812,571

$2,914,941 $

636,976 621,455

1,258,431

(861,997) (333,933)

(1.195,930)

62,501

$

7.945 33,538 41,483

(7.945) (33,538) (41,483)

5,971,538

16,512.643 8,142.788

24,655.431

(5.461,529) (2,318,830) (7,780.359)

16,875.072

$19,869,168 $2.977.442 $ $ 22,846,610

The City has active construction projects as of December 31, 2008. The projects include a street overlay and an expansion of the wastewater treatment plant. At year end the City's commitments with contractors are as follows:

Project Spent-to-Date Remaining

Commitment

Street Overlay WWTP Expansion

$ 474,304 $ 5,971,538

1,222,774 295,890

$ 6,445,842 $ 1,518,664

40



Note 8. Restricted Assets

Proprietary Restricted Assets An ordinance authorizing the issuance of a $1,200,000 Water Revenue Bond dated November 4, 1980, and an ordinance authorizing the issuance of a $368,000 Water Revenue Bond dated June 20, 1996, which was used to retire the outstanding balance on a 1985 bond, together provide for certain restrictions on assets of the Enterprise Fund.

Revenue Bond Sinking Fund The ordinances called for the establishment and maintenance of a Revenue Bond Sinking Fund sufficient in amount to pay promptly and in full the principal and interest on the bonds authorized as they become due and payable. This requirement has been met as of December 31, 2008.

Revenue Bond Reserve Fund The ordinances called for the establishment of a Revenue Bond Reserve Fund by depositing with the regularly designated fiscal agent bank ofthe City 5% ofthe amount to be deposited into the Sinking Fund until such time as there has been accumulated an amount equal to the highest combined debt service payable. The 1996 refunding ordinance called for an initial deposit of $20,976, which was paid from the 1980 reserve funds and, thereafter, monthly payments of $190 until an amount attributable to the 1996 issuance of $36,000 Is on hand in the Revenue Bond Reserve Fund. The sole purpose of this fund Is to pay the principal of and the interest on the bonds payable from the Revenue Bond Sinking Fund, as to which these would otherwise be in default. This requirement has been met as of December 31, 2008.

Capital Additions and Contingencies Fund The ordinances called for the establishment and maintenance of a Capital Additions and Contingencies Fund to care for extensions, additions, improvements, renewals, and replacements necessary to properly operate the system. Monthly deposits of $571 are to be made, provided such sum is available after certain other provisions are met. This requirement has been met as of December 31, 2008.

Sales Tax Restricted Assets An ordinance authorizing the issuance of a $3,200,000 Sales Tax Refunding Bonds dated January 1, 1987, and an ordinance authorizing the issuance of a $4,450,000 Sales Tax Bonds dated February 1, 2002, together provide for certain restrictions on assets of the General Fund. The bond funding requirements provide that the issuer deposit the daily receipts of sales tax in a designated fund for the maintenance of the Sales Tax Bonds. The remainder of the balance of the revenues of tax shall constitute a dedicated fund of the Issuer from which appropriations and expenditures by the Issuer shall be made solely for the purposes designated in the proposition authorizing the levy of the tax. The 1982 Sales Tax Special Revenue Fund In Note 1 gives a description of how the remaining levy can be used.

41



Note 8. Restricted Assets (Continued)

General Obligation Bond Restricted Assets An ordinance authorizing the issuance of a $600,000 General Obligation Bonds dated January 20, 1995, an ordinance authorizing the issuance of a $1,930,000 General Obligation Bonds dated January 1, 1996, and an ordinance authorizing the Issuance of a $1,240,000 General Obligation Bonds dated February 1, 2002, together provide for certain restrictions on assets of the General Fund. The bond funding requirements provide that upon receipt of the proceeds of the Ad Valorem tax, the Issuer has the responsibility for the deposit of such receipts in a debt service fund and such proceeds will be used to pay the principal and interest ofthe bonds' payments.

Garden of Pines The ordinance calls for the establishment of a trust responsible for the general maintenance and care of the mausoleum. The original deposit of $24,955, must be kept intact in an income earning trust and the income can be used to make disbursements of $100 per month to the City for the care and maintenance ofthe mausoleum.

Capital Outlay

2002 Capital Projects Fund The ordinance calls for the use of the Public Improvement Sales Tax Bonds, Series 2002 for the use in construction by the City in accordance with the stipulations ofthe original 1982 Sales Tax Special Revenue Fund.

2007 Capital Projects Fund The ordinance calls for the use of the 2007 General Obligation Bonds for the purpose of constructing, acquiring, improving and extending the City's sewers and sewerage disposal works, including necessary sites and furnishings.

Notes. Pension Plan

Substantially all employees ofthe City are members ofthe following statewide retirement systems: Municipal Employees Retirement System of Louisiana, Municipal Police Employees Retirement System of Louisiana, and the Firefighters Retirement System of Louisiana. These systems are cost-sharing multiple-employer, defined benefit pension plans administered by separate boards of trustees. Pertinent information relative to each plan follows:

A. Municipal Employees Retirement System of Louisiana (the Svstem) - The System is composed of two distinct plans. Plan A and Plan B, with separate assets and benefit provisions. All employees ofthe municipality are members of Plan A.

42



Note 9. Pension Plan (Continued)

A. Municipal Employees Retirement Svstem of Louisiana (the Svstem) (Continued)

Plan Description All permanent employees working at least 35 hours per week who are not covered by another pension plan and are paid wholly or in part from municipal funds and all elected municipal officials are eligible to participate in the System. Under Plan A, employees who retire at or after age 60 with at least 10 years of creditable service, at or after age with at least 25 years of creditable service are entitled to a retirement benefit, payable monthly for life, equal to 3% of their final-average salary for each year of creditable service. Final-average salary is the employee's average salary over the 36 consecutive or joined months that produce the highest average. Employees who terminate with at least the amount of creditable service stated above, and do not withdraw their employee contributions, may retire at the ages specified above and receive the benefit accrued to their date of termination. The System also provides death and disability benefits. Benefits are established by state statute.

The System issues an annual publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to the Municipal Employees Retirement System of Louisiana, 7937 Office Park Boulevard, Baton Rouge, Louisiana 70809, or by calling (225) 925-4810.

Funding Policy Under Plan A, members are required by state statute to contribute 9.25% of their annual covered salary and the City is required to contribute at an actuarially determined rate. The current rate is 13.50% of annual covered payroll. Contributions to the System also include one-fourth of one percent (except in Orieans and East Baton Rouge Parishes) of the taxes shown to be collectible by the tax rolls of each parish. These tax dollars are divided between Plan A and Plan B proportionately on the salaries of the active members of each plan. The contribution requirements of plan members and the City are established and may be amended by state statute. As provided by Louisiana Revised Statute 11:103, the employer contributions are determined by actuarial valuation and are subject to change each year based on the results of the valuation for the prior fiscal year. The City required contributions to the System under Plan A for the years ending December 31, 2008, 2007, and 2006, of $548,002, $355,427, and $366,304, respectively, equal to the required contributions for each year.

43




B. Municipal Police Employees Retirement Svstem of Louisiana (the Police Svstem)

Plan Description All full-time police department employees engaged in law enforcement are required to participate in the Police System. Employees who retire at or after age 50 with at least 20 years of creditable service or at or after age 55 with at least 12 years of creditable service are entitled to a retirement benefit, payable monthly for life, equal to 3%% of their final-average salary for each year of creditable service. Final-average salary Is the employee's average salary over the 36 consecutive or joined months that produce the highest average. Employees who terminate with at least the amount of creditable service stated, and do not withdraw their employee contributions, may retire at the ages specified previously and receive the benefit accrued to their date of termination. The Police System also provides death and disability benefits. Benefits are established by state statute.

The Police System issues an annual publicly available financial report that includes financial statements and required supplementary information for the Police System. That report may be obtained by writing to the Municipal Police Employees Retirement System of Louisiana, 8401 United Plaza Boulevard, Baton Rouge, Louisiana 70809-2250, or by calling (225) 929-7411.

Funding Policy Members are required by state statute to contribute 7.5% of their annual covered salary and the City is required to contribute at an actuarially determined rate. The current rate is 9.50% of annual covered payroll. The contribution requirements of plan members and the City are established and may be amended by state statute. As provided by Louisiana Revised Statute 11:103, the employer contributions are determined by actuarial valuation and are subject to change each year based on the results of the valuation for the prior fiscal year. The City required contributions to the Police System for the years ending December 31, 2008, 2007, and 2006, were $294,023, $215,503, and $210,326, respectively, equal to the required contributions for each year.

C. Firefighters Retirement Svstem of Louisiana (the Firefighters' Svstem)

All full-time fire department employees are members ofthe Firefighters' Retirement System. The Firefighters' System is a cost sharing, multiple-employer, non-qualified defined benefit pension plan covering firefighters employed by any municipality, parish, or fire protection district of the State of Louisiana, under the provisions of Louisiana Revised Statutes 11:2251 - 2269, effective January 1, 1990. The Firefighters' System is not a qualified plan as defined by the Intemal Revenue Code, nor is it subject to the Employee Retirement Income Security Act of 1984.

44




C. Firefighters Retirement Svstem of Louisiana (the Firefighters' Svstem) (Continued)

Employees with 20 or more years of service who have attained age 50, or employees who have 12 years of service who have attained age 55, or 25 years of service at any age are entitled to annual pension benefits equal to 3% of their average final compensation based on the 36 consecutive months of highest pay multiplied by their total years of service, not to exceed 100%. Employees may elect to receive their pension benefits in the fonm of a joint and survivor annuity.

If employees terminate before rendering 12 years of service, they forfeit the right to receive the portion of their accumulated Plan benefits attributable to their employer's contributions. Benefits are payable over the employees' lives In the form of a monthly annuity. Employees may elect an unreduced benefit or any of four options at retirement.

The Firefighters' System issues an annual publicly available financial report that includes financial statements and required supplementary information for the Firefighters' System. That report may be obtained by writing to the Firefighters' Retirement System, P.O. Box 94095, Capital Station, Baton Rouge, Louisiana 70804-9095, or by calling (225) 925-4060 or online at www.lafirefightersret.com.

Members are required by statute to contribute 8% of their covered compensation, and the City is required to contribute at an actuarially determined rate. The rate at December 31, 2008, was 12.50%. The City required contributions to the Firefighters' System for the years ending December 31, 2008, 2007, and 2006, were $94,940, $63,400, and $14,128, respectively, equal to the required contributions for each year. In 2007, the City converted its firefighters to the Firefighters Retirement System of Louisiana. In order to do this, the City had to make two catch up payments into the system for the firefighters. On October 7, 2008, the City paid $254,446 and another payment on January 11, 2009, of $75,537.

Note 10. Contingent Liabilities

The City is a defendant in several lawsuits, which are currently pending. The City persists In its vigorous defense of these lawsuits and maintains that the defenses available should shield the City from liability or, at a minimum, preclude the amount of damages sought by the plaintiffs. The majority of the cases are covered by insurance and, in the opinion of legal counsel for the City, the ultimate resolutions of these cases will not result in a significant liability to the City. Two Issues have been settled in 2009, resulting in the following liabilities:

45

http://www.lafirefightersret.com



Note 10. Contingent Liabilities (Continued)

The St. Tammany Parish Sheriffs Office (the Sheriff) placed the City on notice on November 29, 2007, of a potential tax overpayment to the City of sales taxes by certain taxpayers in St. Tammany Parish. On March 3, 2009, the City and the Parish reached an agreement which would repay the Parish $600,000 over the next three years in equal annual installments of $200,000. The conclusion of this agreement resolves the matter and no further liability will be assessed. The schedule of payments to the Sheriff are as follows:

Payment Dates

Annual Principal Payments

Contingent liability to the Sheriff payable In three annual installments of $200,000 beginning March 3, 2009

3/3/2009 3/3/2010 3/3/2011

$ 200,000 200,000 200,000

Total $ 600,000

The City settled a lawsuit. Brown v. City of Covington, on February 27, 2009. Beginning February 26, 2009, the City must make ten annual payments of $30,000 resulting in a total payment of $300,000. If the City is delinquent in any payments, it will be responsible for the entire obligation at that point and interest will accrue at 8% per day until the obligation is paid in full. The schedule of payments is as follows:

Payment Dates

2/26/2009 2/26/2010 2/26/2011 2/26/2012 2/26/2013 2/26/2014 2/26/2015 2/26/2016 2/26/2017 2/26/2018


$ 30,000 30,000 30.000 30,000 30,000 30,000 30,000 30,000 30,000 30,000

$ 300.000

Contingent liability as a result of settlement of the lawsuit Brown v. City of Covington, payable in annual installments of $30,000 for ten years beginning on February 26, 2009

Total

46



Note 11. Long-Term Liabilities

The following is a summary of long-term liability transactions and total long-term liabilities of the City for the year ended December 31, 2008:

Bonds and Certrficates Payable at January 1,2008

Bonds Issued Bonds Retired

Bonds and Certificates Payable at December 31, 2008

General

Obligation

Bonds

$ 7,220,000

(340,000)

$ 6,880,000

Govemmental

Community

Disaster

Loan

$ 1,800,900

$ 1,800.900

Sales Tax

Bonds

$ 4,270,000

(520.000)

$ 3,750,000

Business-Type

Water

Revenue Bonds

$

$

112,000

(36,000)

76,000

Total

$ 13,402.900

(896,000)

$ 12,506,900

Bonds Retirement Schedule

Governmental Activities Payment

Dates Years Interest Rate


General Obligation Bonds 1995 General Obligation Bonds

issued March 1,1995, for $600,000 secured by Ad Valorem taxes.

March 1 and September 1

2009 2010

5.85 5.85

2002 General Obligation Bonds issued January 14, 2002, for $1,240,000 secured by Ad Valorem taxes.

$ 55,000 60,000

March 1 and Septem

Documents

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