Annual Finance Report 07

CITY OF SOUTHEUCLID, OHIO

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEN{BER31,2O()7

ISSI'ED BY THE DEPARTMENTOF FINANCE G. Filippo,CPA Joseph FINANCEDIRECTOR

C i t l ' o f ' S o u t hE u c l i d ,O h i o C'ontprehensiv,eA nrruaI F inancia I Reporl For the YearEndedDecentber3 I, 2007 Tableof Contents

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o r g a n i z a t r ocnh a r t . . . . . . . . . . . . . .. . . CityofSouthEuclidElectedandAppointedCiry,officials..''.

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IL Financial Sectiorr Independent Accountants' Report

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Management's Discussion andAnalysis

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BasicFinancialStaten-rents: Co'u'ernment Wide FinancialStatements : Statementof Net Assets

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Statementof Activities

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Fund FinancialStatements: BalanceSheet- Go',,ernmental Funds Reconciiiationof Total GovemmentalFund Balancesto N e t A s s e t so f G o v e r n n i e n tA a cl t i v r t i e s . . . . . , . . . . . . . Statementof Revenues.Expenditur.es and Changesin FundBalances- Governmental Funds...

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Reconciliationof the Statementof Revenues. Expendituresand Changesin Fupcl B a l a n c eosf G o v e m n - r e n F t auln d st o t h e S t a t e m e notf A c t i v i t i e s . . . . . . . . . . . . . . . . . l. 7. . . . Statementof Revenues.Expendituresand Changesin Fund Balance- BudgetQrlon-GA{p Basis)aid Actual; G e n e r aFl u n d , . . .

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Statement of FiduciaryAssetsand Liabirities- AeencvFund

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N o t e st o t h eB a s i cF i n a n c i aSl t a t e m e n t s

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CombiningSrarements and IndividualFundSchedules: - NonmajorGovemmental CombiningStatements Funds: F u n dD e s c r i p t i o n s . . . . . . . . . CombiningBalanceSheet- NonmajorGo'ernmentaiFunds combinrng Statementof Rer.enues. Expenditures and changesin

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Cit1 of South Euclid, Ohio ive A nnual F inancial Report Comprehens For the YearEndedDecember3l , 2007 Tableof Contents(continued)

CombiningBalanceSheet- NonmajorSpecialRevenueFunds Expendituresand Changesin CombiningStatementof Revenues. - NonmajorSpecialRevenueFunds......... Fund Balances

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CombiningBalanceSheet- NonmajorDebt Sen,iceFunds.

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Expendituresand Changesin CombiningStatementof Revenues, Fund Balances- NonmajorDebt ServiceFunds.

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CombiningBalanceSheet- NonmajorCapitalProjectsFunds.........

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Combining Statementof Revenues,Expendituresand Changesin Fund Balances- NonmajorCapitalProjectsFunds

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Combining Statement- Agency Fund: F u n dD e s c r i p t i o n . . . . . . . . . . of Changesin AssetsandLiabilities- AgencyFund........... Statement lndividual Fund SchedulesofRevenues,Expendituresand Changesin Fund Balance- Budget [Non-GAAP Basis) and Actual: Major Funds: G e n e r aFl u n d . . . . . . . . . . F l o o dC o n t r o F l und.......... L a n dA q u i s i t i o nF u n d . . Nonmajor Funds: OperatioH n o m eI m p r o v e m e nFtu n d . . . . . . . . . C O P SG r a n tF u n d Maintenance andRepairFund........ StreetConstruction, S t a t eH i g h w a yF u n d P a r k i n gL o t s a n dM e t e r sF u n d . . . . . . . . . . S w i m m i n gP o o l sF u n d Motor VehicleLicenseFund.......... Permissive P o l i c eR a n g eF u n d . . . . . . . . . . . L a w E n f o r c e m e nFtu n d . . . . . . . . . . FEMA Firefighters GrantFund StreetLightingFund..... l und.......... S e r v eR r entaF P o l i c eP e n s i o nF u n d . . . . . . . . . . F i r eP e n s i o nF u n d . . . . , . . . . . . Fund. GeneralObiigationBond Retirement Bond RetirementFund.. SpecialAssessrnent t su n d . . . . . . . G e n e r aC l a p i t a Il m p r o v e m e n F S a f e t yF o r c e sV e h i c l eF u n d. . . . . . . . . . Recreation lmprovementFund........ R o a dI m p r o v e m e nFt u n d . . . . . . . . . . . Fund SidewalkImprovement S t a n h o pP e a r k i n gL o t F u n d . . . . I s s u eI I F u n d . . . . . . . . . . Fund SewerRehabilitation

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Ci$'of South Euclid. Ohio ArtrntaIFinancial Report Contprehettsir,e For the YearEndedDecember31' 200i Tabteof Contents/cotttirtued)

II L statisticul Sectiort StatisticalSectiotiDescnPtton Net Assetsb.vComponent Last Eight Years Changesin Net Assets Last SevenYears" """ Years Fund Balances,GovernmentalFunds Last Nine Funds- Last Nine Years" Changesin Fund Balances,Governmental Six Years IncomeTax RevenueBaseand Collections Last - One YearAgo and Six YearsAgo IncomeTax Statistics Four YearsAgo ""' ' PrincipallncomeTaxpayers CurrentYear and

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and Ratio of OutstandingDebt to Total PersonalIncome Years Nine Last Debt Per CaPita

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True values and Ratio of Generalobligation BondedDebt to Estimated BoncierlDebt Per Capita LastNine Years'

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Computationof Direct and OverlappingGovernmental ActivitiesDebt

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Legal Debt Margin - LastNine Years Ago"""" "' PrincipalEmployers- CunentYear andOne Year Years DemographicanclEconomicStatistics Last Ten - Last Six Years""' City GovernmentEmployeesby Function/Program Years ""' OperatingIndicatorsby FunctioilProgram l-ast Six Six Years' CapitalAssetsStatisticsby Function?rogram Last

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CITY OF SOUTHEUCLID

FINANCE DEPARTivIENT JosephG. Filippo,CPA l'r; -- -c,,- ^t v /

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J u n c4 . 2 0 0 8 Citizensof SouthEuclid and HonorableMembersof Cib- Council SouthEuclid,Ohio 44121

It is my privilege to presentto -vouthe Ciry"of South Euclid's (the Cit1,)Comprehensive Annual Financial Report (CAFR). This report enablesthe Ciry to comply u,ith Ohio AdministrativeCode Sectionl17-2-03 (B), which rcquires rcporting on a G.AAP (GenerallyAccepted Accounring Principles)basis, and Ohio RevisedCode SectionI17.38 rvhichrequiresthe citiesreportingon a CAAP basisto file an unauditedannual reportrvith the Auditor of Statewithin I 50 daysof year end. Managementassumesfull responsibilifS'forthe completeness and reliability of the informationcontainedin this report,basedupon a comprehensive frameq,orkof internalcontrolthat it hasestablished forthis purpose. Becausethe cost of internal control should not exceedanticipatedbenefits,the objective is to provide reasonable,rather than absolute, assurancethat the financial statcments are free of anv material misstatements. Under Ohio law, regularaudits are requiredto be performedon all financial relatedoperationsof the City'. These audits may be done by either the State Auditor's Office or, if the State Auditor permits, an independent public accountingfirm. For''.heiear 2007,the City of SouthEuclid rvasauclitedbi'James G. Zupk4 CPA lnc. Their unqualifiedopinion is includedin the financialsecrionof this report. Managernent'sdiscussionand analy'sis(MD&A) immediatelyfollows the independentauditor'sreport and provides a narrative introduction,overi'iew, and analysis of the basic financial slatements. N4D&A complementsthis lcttcr of transmittaland shouldbe readin coniunctionu'ith it. Reporting Entig' The Ciry of South Euclid, Ohio. is located in the nonheastportion of CuyahogaCountr,, l0 miles from downtown Cleveland,w'ith the cities of L1'ndhurstto the east.Cleveland Heightsto the west, UniversiN Heightsand Beachu,oodto the south,and Cleveland,Euclid, and Richmond Heightsto the north. The Cilv has23,537residents,accordingto the most recentdatafrom the United StatesCensusBureau. The City is in the Cleveland Prirnary Met''opolitanStatisticalArea. cornprisedof the four counties of Cuvahegn,Geauga,Lake and N{edin4 x,hich is the l6th largestof 7i in the United Stares.The Ciry is also in the Cleveland-Akron-Lorain Consolidatedlv{etropolitanStatisticalArea r.vhichis the I ith most oooulous of 20 in the country.

nsk pool In addition' Risk ManagementAssociation.a shared The ciry is a memberof the No'thern ohio Recreatron on Aging and the South Euclid-L1'ndhursr the Ciry particrpatesrn the Tri_ciry consortium ohio Public Energ,'" to be joint \.enruresand the Northeast detenrrined been e hal u'hich Commission and the Heights Area of Northeait ohio council of Go'ernments council. the First suuurt, consor-rium The sharedrisk pool. joint 'entures and the governedorganizations. specialRescueTeam ri.hrchareiointly ' statements in Notei 9, 19 and 20 to the basicfinancial jointll, gor,ernedorganizationsare discussed Form of Government in 1953 and rr.hichhas by,its Charterir'hich \'oters |rrst aclopted The Ciry operatesunder and is eol,erned The Citf is also amend'rent\\'asmade in 2005. effecti'e 2006 been amendedfrom time to time- The last the City_may to ail ohio cities. Under the ohio Constitution. srrbjectto certaing"n.,ul larr,sapplicable applicable *'ith conflict in are police poo,ersto the extent that none exercisea, rocai self-governmentand cerlainadministrativedepartments' iarvs.The Chaier also establishes ;;;; is vested in a form of government' Legislative authoritf The chaner provides for a may'or-council at-largeand four electedb1' of threecouncil memberserectecl consists council The council. seven-member memberhas a right to vote' The Council ,,r,ards.Councrlmembersare electedfo. u fo''t' yeal term' Each to the city and enactsordinancesand resolutionsrelating of city officialsand.employees fixes compensation and other trades and busine.sses licensingof regr-rlated sen,ices.tax levies.appropnationsand lnaeuteaness. a two-yearterrn' is the president*'ho is electedby council for municiparpurposes.ii,. ir.sicring officer

T h e C i r y , s c h i e f e x e c u t i v e a n d a d . r n i n i s t r . a t i r , e o f f i c e r i s t h e N l a y ocourt r w h o Judge, i s e l e c elected t e d b y tto l i eav six-year otersspecifica official is the Municipal that office for a four_yearterm. The otherelected telm. of Finance,Lall,, of the Ciry departments.including the Directors The Mayor appointsall of the cl.irectors Buildingizoning the center' Reiations and Communiry Senice. Economic Development,communitl' police and Policeand Fire and Maior also appointsthe chiefs of Administratorand the city Engineer.The to a number exarninations'The Mayor also appointsmembers Fire personnelafter competitivecivil sen'ice appointed all may remo'e r.r'ithcivil servicerequirements. of boardsand commissions.and in accordance passed and employees'The Muyot may veto any legislation officialsand employees.exceptCouncilofficers by a vote of five Councilmembers. by council, but Councilmay fvemde a veto

lnlgg4.theresponsibiiitiesofSafetyDirectorrr'ereffansfetredtotheMayor.Thismoveu'asmadeto estabiishaSflongerbon
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The City is primarily a residential community u'ith a preponderanceof single family homes. A major medical faciliry, University SuburbanHealth Care,provides qualiqvheaith care to South Euclid residentsas u'ell as to our neighboringcommunities. South Euclid is home to Notre Dame College.a private, four-year instituteof higher leaming. The following industr-iesare vital to the City's financial conditionand contribute to the stableeconomicconditionof the City: Aero Conffoiex,Division of Transdigm.Inc. is a Fortune500 company w'hich manufactures custom components for the aerospace industry; Glastic Corporation manufacturesthermosetpolymers used in appliances;Gent N{achineCompany manufacfuresautomotiveand aircraft components. Severalretail shoppingcentersin South Euclid are availablefor the City's residents. Theseshoppingcenters are among the major tax contributorsr,r,ithinthe City. In 2001, the City welcomed a new 14,000squarefoot shoppingcenterat the intersectionof Mayfield and Green,which is anchoredby CVS. This supplementsthe existing Mayfield Road-GreenRoad shoppingcenterthat housesnumerousretail stores. This shoppingarea includesMarc's discountstore and BlockbusterVideo. The second-largest shoppingarea in the City is locatedat Cedar Road betweenWarrensville and Fenwick Roads. The City has purchasedthe property and is currently planning for the center's conversion from a strip mall to a mixed-use residentialand retail project. Another small shopping center is located in the northern section of the City known as Glengate Shopping Center and housesthirteen retail stores. A smaller strip of storesis located on Cedar and Green Roads. During 2007, the Building Deparfment issued building permits for several commercial and educational schoolprojects. Two of the largerprojectsinvolved a 30,000squarefoot expansionof ciassroomspaceto the Greenview Elementary School and the addition of a new gl.mnasium and locker room facility to Memorial Junior High School. The City saw the completion of many projectsthat got underway during the calendaryear of 2006; these projects included the completion of a new Dunkin Donuts store and a new branch bank for Fifth Third Bank. One PlannedUnit ResidentialDevelopment(PLIRD) known as Novicky Court that began in 2006 completed its construction of 14 new dwelling units structuresby the end of August. Another PURD continuedbuilding out its developmentof eight new homes out of a total of eleven proposed housing units. Our newest development, Cutters Creek completed the installation of the infrastructureand began building six dwelling units out of a proposed forff eight during the later part of 2007. Notre Dame College experiencednumerousinterior alterationsthroughoutthe campusand begantheir approvalprocessfor new buildings that will begin constructionin 2008. For existing commercialbuildings, the City administersa BusinessMaintenanceinspectionprogram which identifies maintenancerelated issues that needto be brought into compliancewith our building codes. This program helps to maintain the values within our community. In residential areas, homeowners carefully maintain their properry, which increase properry value and enhancethe appearanceof the City's neighborhood. To encourageindividual upkeep,the City continuesto administer its exterior residential properly maintenanceprogram. This program establishesminimum standardsgoveming the maintenance of dwelling structures,which allows the City to work to create neighborhoodsthat are enjoyable to inhabit. Without the support of properfy owners who have a geiuine concem for the communify, the goals of the program could not be reached. Under the program, eachyear a specificareaof the City is selectedfor inspectionwith an annualaverageof 1500home inspections. With an increasein foreclosedproperriesthroughout our region, much of our efforts were focusedon vacant and abandonedproperties. Working with County grant fi.nds, the Building Departmentwas able to demolish a few condemnedpropertiesand fix violations on over eight homesin the community. During the past year. residentshave improved their homes by alterationsand additionsvalued at $5,288.766. A total of 890 permits were issuedin 2007, which included 63 commercialpermits for additionsor improvementstotaling $14,281,819. The Ciry is emphasizingenforcementof maintenancestandardson its populationof rental housingas well with a program goal of annual exterior inspectionsrvith interior inspectionsperformed every threevears.

Long term financialplanning The GeneralFund baianceincreasedover the previousyear in 2007. The net changein fund balancefor the Generalfund u'asS1.250.318ri'hichrepresents a 30.82percentincrease. The City income tax is the largestsourceof revenuefor funding of our governmentalactivities. The tax rate remainedconstantat 1.5percentfrom 198{ through2005. In Au-eust2005the citizensof SouthEuclid voted to raisethe incometax rateto 2.00percentbecomingeffectiveJanuary1.2006. The Citl' has a StreetLighting specialrevenuefund q'hich is usedto maintainand pay the expensesof the streetlights throughoutthe Ciq'. Revenueis collectedas a specialassessment paid b1' all properryo\ rrers basedon the fiont footageof their properfy. The expensesmainly representthe costof electricity.as u,ell as othernecessaryrepairsto providethe sffeetlighting. The City also usestwo fundsfor the maintenance and capitalimprovementsof the City sewersystem. Every person,including businesses, u'hosepremisein the Ciry is servedby a connection*'ith the seu,ersystemof the City, shall pay a sewerrental charge. A portion of the chargegoesinto the SewerRehabilitationcapital projectsfund u'hich is used to pay for the cost of the management,maintenanceand repair of the sewer system. The major portion of the revenuecollectedgets depositedinto the Flood Control capital projects fund. This fund is used for the cost of improving the Ciry's sewersystemby construction,renovationor replacement. The City aiso established a land bankto enhancethe City's appearance and r.vell-being. Relevant fi nancial policies The Ciry usesthe City income tax to run its daily operations.All of the incometax goesinto the General Fund. When neededthe GeneralFund u'ill subsidizeother fundsw'hererevenuecollectedis not enoughto covertheir expenses.Fundsthat may receivean operatingtransferincludethe ParkingLots and Metersand Su'imming Pools special revenue funds, and the Safety Forces Vehicle, Sewer Rehabilitation,General Capital Improvements. Road lmprovement and the Flood Control capital projects funds. All transfersare approvedby City Council. The City has a General Obligation bond retirementfund which is used to pay for the bond issued for recreational improvementsin the City. The sourceof revenueto pay this debtis collectedfrom the propeny ownerson their properrytax biils. The millagewas reducedfrom L3 mills to 1.1mills beginningin the 2007 tax collectionyear. N{ajor Initiatives For the Year In 2007. the Ciry of SouthEuclid continuedits commitmentto provide quality servicesand facilitiesto the City's residents.Emphasiscontinuedto be placedon the maintenanceand improvementof the Ciry's infrastmcture.specificallystreetsand seu'ers.The Ciq' also continuedits traditionalannualroad resurfacingprogmm. Throu-ehthe combinationof the Road ImprovementFund and the Flood Control Fund l3 streetswere able to be reconstmctedor resurfaced.S1,067.000ll'as spentfrom the Road Improvement Fundand over $7.500.000u'as spentfrom the Flood ControlFund.

or renovation of various There u,ere several major projects for 2007 starting u'ith the replacement Road project and the East infrasrrucrure assets u,iihin th; Ciry, including the Warrensville Center project. consisting.of Antisdale/GrosvenorInfrastmcrure Piojects and the Brookline Road infrastructure City Hall and the Community sewers,bridges and culvefts. The City also continuedto update an outdated for the safetyof the residents implemented was Centerreceiveda kitchen remodel. A reverse911 system any schedulechangesof Ciry. and has also been an effective tool in informing residentsof activities in the city servicesand any other pertinentinformation' one Planned Unit Residential consrmction of new housing continues to be a priority in the city. with 14 attached units August, last Development (pURD), calleJ Novicky Court reached completion other major housing developments' constnr;ted,and all have been sold. Constmctionhas begun at the City's completedand are selling well' At Cutter,sCreek, six attacheddwelling units out of a proposed48 have been development. Constructionaiso continuesat FrancisCourt Gables,a sixteenunit tou'nhouse the City completedthe processof The City continuesto improve communicationwith residents.In2007, This user-friendlyupgradeallows residents updatingthe website,www,cITyoFSourHEUCLID.coM. the ability to easily contactany of the City's respectivedeparfments. to the City's key employersby For the Future The Administration and City Council continueto reach out the City to prosper'The City also encouragingstimulating dialogue.Listening to businessconstituentsallows quality of life and createa stronger continuJsto look for oiportunities which will ensureour residentsa high senseof communitYPride. will be demolishedand The redevelopmentof the CedarCenterareais progressing.In 2008, the buildings 100,000squarefeet currentplans call for the Coral Company to reaeuelropthe property with approximately restaurantlocations' There will of anchor retail space, 100,000rqr.,ui. fiet of other ritail spaceand various of Warrensville Road and also be 10,000 squarefeet of office spaceand residentialunits. The intersection community' to our CedarRoad will b""o.n. a revitalizedshoppingareavital to allow the area to reachits The City continuesto analyzethe four quadrantsat Mayfield and Green Roads, which demonstratesthe full potential.The City continuesto atfractinterestin all of our commercialdistricts Cit/s successin winning over the developmentcommunily' The Ciry recognizesthat The Ciry continuesto explore other avenuesto encourageeconomic development. project' a successful our placein the regionalmarketpositionsSouthEuclid as an ideallocationto build Other Information Awards City of SouthEuclid ln December 200'/,lv1ary Taylor, CPA, the Auditor of the Stateof Ohio, recognizedthe the City of South for excellent financial accountability. Auditor of State Mary Taylor's office presented ,,Making your Tax Dollars count" au,ardfor their calendaryear 2005 audit. Fewer Euclid officials with the "It is an honor to recognize than five percent of all Ohio governmentagenciesare eligible for this award. Taylor. said SouthEuClidofficials for their commitmentto sffong financial accountabiiity," a Certificate of The Government Finance officers Association of the United States and Canada arvards an informative and Achievementfor Excellencein Financial Reportingto a governmentalunit that pubiishes to program conform contents (CAFR) u'hose efficiently organizedComprehensiveAnnuai Financial Report legal applicable and principles standards.Such reports must satisfy both generally acceptedaccounting 2006 Comprehensive requirements.The -iry or SouthEuciid receivedthe Certificate of Achievementfor its Annual Financial Report.

A Cerrificateof Achievementis valid for a periodof one -iearonll', lVe believeihat this CAFR for i and u'e arc:submittingit to Lrre continuesto meetthe Cerrificateof AchievementProgram'srcquiremcnts to dctermineits iligibiliii' for anothercertificate, FinanceOfficersAssociation Governmerlt Acknox,leCgentents of this repoi uould not be possiblen'ithoutthe diligentand extra work b1 our Finance The preparation to all City Hall DepartmeniHeads sralf. I appreciatetheir efforts.Appr;ciation is also expressed Depa-r-rrnent for their cooperationand assistance.In addition,m)' gratitudeand complimentsextend and Superintendents to tire Auditor of State'sSectionof Local GovernmentServicesu'ho helpedus u'ith this report.Finalll'. a thzurk1'ouro lvlavorGeorgine\\relo and the membersof Citi CounciI is in order for tireir continuedsupport AnnualFinancialReport. of preparinga Comprehensive

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JosephC. Filippo,CPA FinanceDirector