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This Quarterly Financial Report covers the period from July 2012 through September 2012. Summary of Cash and Investments This summary is intended to give the reader an understanding of changes in the City’s cash position across funds and investment types. The city-wide cash balance has increased $7,166,342 between fiscal years, September to September.

1. The CIP fund still has $1.4 million cash in hand from the $3.0 million in bond proceeds for fire station #2 and was also paid for outstanding, reimbursable costs held as a receivable last September.

Material changes in cash balances between fiscal years: The major increases were in the Capital Improvement Program (CIP) and the Equipment funds for a total of $4.2 million. Five other funds accounted for the remaining $3.0 million increase.

2. The Equipment Fund had a $1.5 million infusion of cash due to inter-fund loan repayments

and sinking payments for future replacements. Under-spending on replacements, or delaying replacements, also contributes to the growth in cash. (Equipment replacements for the last two years were $1.2 million and are scheduled to be $3.3 million in the next two years based on equipment retirement schedules.)

3. The cash increases in the other funds relate to operations and addressed latter in this narrative.

Changes in cash and investment balances: Total cash is $26.0 million with 97% held in the local government investment pool, down from 87% the prior September. Investment opportunities are limited so last September’s $1.0 million in other investments have all been moved to the pool. A minimal cash balance is being held in bank accounts to pay bills.

Quarterly Financial ReportFirst Quarter of FY 2012-2013

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$20,124,575

$16,838,684 $17,225,130

$20,484,422 $18,855,341

$26,021,685

City of Ashland First Quarter Cash Balances

9/30/2007 9/30/2008 9/30/2009 9/30/2010 9/30/2011 9/30/2012

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Statement of Revenues and Expenditures – City Wide This schedule is intended to provide an overall sense of the City’s financial activity for the first three months of this fiscal year, compared to budget and to prior year actual information. City-wide revenues, operating expenditures and capital outlay increased in the first quarter between years:

1. There was a 10% increase in revenues and other resources from $13.2 million at the end of the first quarter last year to $14.5 million for the first quarter of this year. a. The major increases were intergovernmental revenue (39%), charges for services

(6%) and System Development Charges or SDC (155%). b. Intergovernmental revenue increased in the Street Fund from grants for the

Hersey/Wimer project and the Laurel/Hersey railroad crossing project. The Equipment Fund had a grant for Fire Department equipment.

c. Charges for services revenue increased in the General Fund, Water Fund and Electric Fund. The General Fund recorded fees for the university’s dorm project and the budgeted payment from Parks. The utilities increased revenue from rate increases and selling more water and electricity.

d. SDC revenue increases included the SOU expansion.

2. Operating expenditures increased two percent from $14.4 million at the end of the quarter last year to $14.7 million for the first quarter of this year. a. Materials and services increased four percent. Personal services and debt service

decreased slightly for the combined two percent impact. b. The increases in materials and services were mostly in the Electric Fund and in Parks. c. The Electric Fund had an increase in supply costs, and the Parks’ increase was from

the transfer to the General fund.

3. Capital expenditures increased 150% from $1.0 million to $2.5 million. a. This is netted amount with the CIP and Street funds doing more in projects and capital

outlay offset by the Equipment Fund buying less equipment.

Schedule of Budgetary Compliance The Schedule of Budgetary Compliance presents expenditures on a budget basis by fund, consistent with the resolution adopting appropriation levels for the year.

1. There were no budget violations for the first quarter of fiscal year 2012-13.

2. Total City-wide expenditures (in aggregate) are below the prorated 25% level anticipated for the first quarter.

3. The exceptions to the anticipated 25% level expended for first quarter were the normal exceptions for economic and cultural grants, debt service payment, intergovernmental loans payments, and capital outlay.

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FINANCIAL ANALAYSIS OF THE CITY OF ASHLAND’S FUNDS Governmental Funds Governmental funds are generally used to account for tax-supported activities. There are four categories of governmental funds, general purpose funds, special revenue funds, debt services funds, and capital improvement funds. Governmental funds for the City of Ashland include the General Fund, Street Fund, Capital Improvement Fund, Debt Service Fund, Reserve Fund, CBDG Fund, and the Airport Fund. The analyses of the Governmental Funds below are limited to the funds with the major changes in revenue and expenditures between first quarters of this year and last year. The major changes in revenues and expenditures are in the General Fund, the Street Fund and the Capital Improvements Fund.

The General Fund’s shortfall between revenues and expenditures in the first quarter of this year of $1.4 million is 23% less than last year’s first quarter shortfall of $1.8 million.

General Fund

1. This year the fund recorded more revenue in charges for service, primarily due to the

agreed upon $263,000 payment from Parks, electric user taxes and franchise fees.

2. Operating expenditures decreased about 1%. Street FundThe Street Fund went from a net increase of $184,646 in the prior year to an equivalent shortfall this first quarter. More capital project expenditures in the Street Division contributed to the shortfall.

1. A 36% increase in revenue from $1.1 million in the prior year’s first quarter to $1.5 million

(mostly from grants for the Hersey/Wimer realignment and the Laurel/Hersey railroad crossing projects) did not fully compensate for the increase in project costs.

2. Although operating expenditures were down from the discontinuance of the transit fare

subsidy and less spent on repairs, the increase in capital outlay on street projects outpaced the revenue to the extent of an $182,301 deficit.

Last year the fund recorded a net increase of $89,359. This year it has a shortfall of $886,076 this first quarter. Elements of such a large change include a $63,880 increase in grant and SDC revenue and operating expenditures held flat but $1 million more expended in capital projects and other requirements.

Capital Improvements Fund

1. The increase in capital outlay was for the fire station, police station remodel, and golf

course.

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2. The other increase in requirements included an interfund loan repayment to the Equipment Fund the first quarter of this fiscal year which was paid later in the year in the previous fiscal year.

Business type funds Generally speaking, these are enterprise funds and are established to account for operations. These funds are financed and conducted in a manner similar to operations of private business enterprises, where the intent is to have the expenses of providing goods or services on a continuing basis to the general public, financed or recovered primarily thru charges to the user. Water FundAn increase in revenue (sales) and less expense resulted in a 30% rise in net income for the first quarter of this year compared to the prior year. Due to the weather, the Water Fund typically records a “profit” in first and last quarters of each fiscal year and losses in the second and third quarters due to fluctuation in sales of water.

1. The 14% increase in charges for services resulting from increased rates and units sold;

and increased SDC revenue for the first quarter of this year compared to last year’s first quarter. The June, 2012 rate increase included a base rate increase of 19% and the usage rate increase of eight percent.

2. Results in the first quarter of this fiscal year showed a ten percent increase in revenue from rates and two percent increase in units sold.

3. There was also a seven percent decrease in materials and services primarily from reduced spending in the fire resilience program and from an additional expense for a software upgrade in the previous year’s first quarter.

Wastewater FundThe Wastewater Fund also showed an increase in revenue and a decrease in expenses for a positive impact in the first quarter. Net income in the first quarter of this year was $238,404 compared to the first quarter of the prior year of $73,163.

1. The 10% increase in charges for services from rates and increased SDC revenue

resulted in 11% more revenue for this first quarter compared to last year’s. There was a ten percent rate increase in June, 2012.

2. There was a seven percent decrease in materials and services primarily from a reduction in repairs and from an additional expense for consulting fees for the wastewater master plan in the previous year’s first quarter.

Electric FundA larger increase in expenses than the increase in revenue for this first quarter resulted in an increased net loss as compared to the prior year’s first quarter from a loss.

1. The four percent increase in electric rates in October 2011 softened the blow of the 12%

increase in Bonneville Power Administration rates. There was also a slight (1%) increase in electricity sold in this first quarter.

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2. The increase in revenue resulted in a corresponding increase in the franchise tax paid to

the General Fund from the Electric Fund.

Changes in revenue and expenditures in the first quarter of this fiscal year compared to the prior year were favorable, resulting in a reduction of this fund’s shortfall for the first quarter from $86,065 to $53,299 this year.

Telecommunications Fund

1. There was a seven percent decrease in charges for services revenue from $509,423 for

the first quarter of the last fiscal year compared to $460,858 for this quarter.

2. The decrease in rate revenue was primarily from the change in the cable television contract.

3. There were decreases in both personal services and materials & services between the first

quarters of the fiscal years, in part relating to the change in the contract. a) Restructuring of the personnel resulted in a 28% reduction in personal services.

b) Although there was a 16% increase for more internet bandwidth there was a seven percent decrease in other materials and services, first quarter to first quarter.

Internal Services Funds These funds account for providing support between departments and they are funded on a cost allocation basis. The internal services funds had a deficit in the first quarter of the last fiscal year. In the current fiscal year there is a surplus. An interfund loan repayment and reductions in both operating expenditures and capital outlay contributed to this improvement. Central Service FundCentral Service Fund’s revenues-over-expenditures for this first quarter is higher than the amount posted for the first quarter of the prior year. Elements are:

1. $34,000 more in internal service fees charged to the Street, Water and Wastewater

Funds to fund positions added to Public Works.

2. Software licensing fees were down in the Computer Services Division, and bank fees were down in the City Recorder’s department.

3. Less in capital purchases for software and equipment were made in the first quarter this year, as compared to last year.

Insurance FundInsurance Fund increased the deficit in the current first quarter from the prior year first quarter.

1. Less money received in departmental contributions for worker compensation and

restitution from claims.

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2. Materials & services increased $64,774 (24%). Last year the City’s insurance provider gave distribution credits against insurance premiums (Ashland’s was $84,000) for recognition of good loss experience that was not available this year.

Total revenues, first quarter to first quarter, increased $320,000 while expenditures decreased $220,000. This resulted in $40,000 more revenue over expenditures. The prior year had a $118,000 shortfall the first quarter.

Equipment Fund

1. Intergovernmental revenue increased $121,000 from federal grants for breathing

apparatus and hoses this first quarter.

2. $208,000 in an inter-fund loan repayment was posted this year, none last year at this time.

3. Materials and services’ increase in repairs from outside services was surpassed by the decrease in equipment purchased in that the previous year’s first quarter included $207,000 for fire apparatus.

Park Funds

Changes in revenue and expenditures in the first quarter of this fiscal year compared to the prior year were favorable for the Parks & Recreation fund resulting in a reduction of the deficit.

Parks & Recreation Fund

1. Total revenue is consistent with less property tax revenues received the first quarter but

more miscellaneous revenue from restitution for unauthorized tree removal.

2. Total expenditures decreased $30,000, primarily due to the reduction in the amount paid to the City from Parks surplus ending fund balance. a) This year a payment of $263,000 was made from Parks to the General Fund out of

Parks contract services to the General Fund charges for services. b) Last year a transfer of $360,500 was made from Parks to the City’s Reserve Fund. c) Other changes include a one percent increase in revenue, a five percent increase in

personal services, and three percent increase in materials and services.

The Parks Capital Fund incurred a deficit this year in the first quarter resulting from the purchase of a mower and a chipper.

Parks Capital Fund

Unaudited, detailed balance sheets, revenue and expenditure reports, and fund statements are available for your review in the Administrative Services Department office at City Hall should you require any additional information.