The URL can be used to link to this page

Home My WebLink About2018 Financial Statement Report TRAER CREEK METROPOLITAN DISTRICT Eagle County, Colorado FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2018 TRAER CREEK METROPOLITAN DISTRICT TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2018 INDEPENDENT AUDITOR’S REPORT I BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET POSITION 1 STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS BALANCE SHEET – GOVERNMENTAL FUNDS 3 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS 4 RECONCILIATION OF THE STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 5 GENERAL FUND – STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL 6 SPECIAL REVENUE FUND – STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL 7 NOTES TO BASIC FINANCIAL STATEMENTS 8 SUPPLEMENTARY INFORMATION DEBT SERVICE FUND – SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL 28 CAPITAL PROJECTS FUND – SCHEDULE OF REVENUES, EXPENDITURES, AND CH ANGES IN FUND BALANCE – BUDGET AND ACTUAL 29 SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY 30 14143 Denver West Parkway, Suite 450 | Lakewood, Colorado 80401 | 303.988.1900 | StratagemCPA.com (I) Board of Directors Traer Creek Metropolitan District Eagle County, Colorado Independent Auditors’ Report Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of Traer Creek Metropolitan District (the “District”) as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards general accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. (II) Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Traer Creek Metropolitan District as of December 31, 2018, and the respective changes in financial position and the respective budgetary comparison for the general fund and special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Management has omitted the management’s discussion and analysis that accounting principles general accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District’s financial statements as a whole. The supplementary information as listed in the table of contents is presented for the purposes of legal compliance and additional analysis and is not a required part of the financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Stratagem PC Certified Public Accountants Lakewood, Colorado July 22, 2019 BASIC FINANCIAL STATEMENTS TRAER CREEK METROPOLITAN DISTRICT STATEMENT OF NET POSITION DECEMBER 31, 2018 See accompanying Notes to Basic Financial Statements. (1) ASSETS Cash and Investments 702,595$ Cash and Investments - Restricted 3,797,859 Accounts Receivable 46,817 PIF Receivable 545,690 Accrued Interest Receivable 6,677 Prepaid Expense 26,108 Capital Assets, Net: Construction in Progress 3,299,949 Lot 2 Garage 4,160,427 Parks and Recreation 2,165,214 Total Assets 14,751,336 DEFERRED OUTFLOWS OF RESOURCES Cost of Bond Refunding 66,029 Total Deferred Outflows of Resources 66,029 LIABILITIES Accounts Payable 27,068 Bond Interest Payable 61,409 Note Payable - Developer 4,011 Due to Wildlife Trust Fund 5,277 Noncurrent Liabilities: Due Within One Year 1,500,000 Due in More Than One Year 60,103,022 Total Liabilities 61,700,787 NET POSITION Net Investment in Capital Assets, Net of Related Debt (44,542,970) Restricted For: Debt Service 1,515,079 Emergency Reserves 15,500 Unrestricted (3,871,031) Total Net Position (46,883,422)$ TRAER CREEK METROPOLITAN DISTRICT STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2018 See accompanying Notes to Basic Financial Statements. (2) Net Revenue (Expense) and Change in Program Revenues Net Position Charges Operating Capital for Grants and Grants and Governmental Expenses Services Contributions Contributions Activities FUNCTIONS/PROGRAMS Primary Government: Government Activities: General Government 620,023$ -$ -$ -$ (620,023)$ Interest and Related Costs on Long-Term Debt 2,317,905 - 212,533 - (2,105,372) Public Works 363,836 - - - (363,836) Total Governmental Activities 3,301,764$ -$ 212,533$ -$ (3,089,231) GENERAL REVENUES Retail Sales Fees 4,190,113 Net Investment Income 82,243 Miscellaneous Income 14,526 Total General Revenues 4,286,882 CHANGE IN NET POSITION 1,197,651 Net Position - Beginning of Year (48,081,073) NET POSITION - END OF YEAR (46,883,422)$ TRAER CREEK METROPOLITAN DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2018 See accompanying Notes to Basic Financial Statements. (3) Total Special Debt Capital Governmental General Revenue Service Projects Funds ASSETS Cash and Investments 620,958$ 81,637$ -$ -$ 702,595$ Cash and Investments - Restricted 15,500 - 3,743,620 38,739 3,797,859 PIF Receivable - 28,728 516,962 - 545,690 Accrued Interest Receivable - - 6,677 - 6,677 Accounts Receivable 46,667 - 150 - 46,817 Prepaid Expense 26,108 - - - 26,108 Total Assets 709,233$ 110,365$ 4,267,409$ 38,739$ 5,125,746$ LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable 10,242$ 518$ 16,308$ -$ 27,068$ Bond Interest Payable - - 61,409 - 61,409 Note Payable - Developer - 4,011 - - 4,011 Due to Wildlife Trust Fund - 5,277 - - 5,277 Total Liabilities 10,242 9,806 77,717 - 97,765 FUND BALANCES Nonspendable For: Prepaid Expenses 26,108 - - - 26,108 Restricted For: Emergency Reserves 15,500 - - - 15,500 Debt Service - - 4,189,692 - 4,189,692 Assigned For: Capital Projects - - - 38,739 38,739 Special Revenue Fund - 100,559 - - 100,559 Unassigned, Reported in: General Fund 657,383 - - - 657,383 Total Fund Balances 698,991 100,559 4,189,692 38,739 5,027,981 Total Liabilities and Fund Balances 709,233$ 110,365$ 4,267,409$ 38,739$ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.9,625,590 The deferred loss on refunding is not a current financial resource, therefore not reported as a deferred outflow of resources in the fund financial statements.66,029 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in in the funds. Payable to Town (3,522,309) Bonds Payable (29,824,000) Developer Advance Payable (14,666,017) Letter of Credit Fee Payable (429,565) Accrued Interest Payable - Developer Advance (12,927,791) Accrued Interest Payable - Payable to Town (233,340) Net Position of Governmental Activities (46,883,422)$ TRAER CREEK METROPOLITAN DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2018 See accompanying Notes to Basic Financial Statements. (4) Total Special Debt Capital Governmental General Revenue Service Projects Funds REVENUES Intergovernmental Revenue - The Village -$ -$ 212,533$ -$ 212,533$ Retail Sales Fees 500,000 41,901 3,648,212 - 4,190,113 Net Investment Income - 3,629 78,614 - 82,243 Miscellaneous Income 14,526 - - - 14,526 Total Revenues 514,526 45,530 3,939,359 - 4,499,415 EXPENDITURES General and Administration: Accounting 41,382 5,392 - - 46,774 Audit Fees 5,800 - - - 5,800 District Management 18,697 - - - 18,697 Dues and Membership 670 - - - 670 Insurance and Bonds 25,179 - - - 25,179 Legal 20,634 4,682 - - 25,316 Election Costs 516 - - - 516 Miscellaneous 317 410 - - 727 Intergovernmental Expense - The Village 36,268 - - - 36,268 Operations and Maintenance:- - - Acquisition of Eagle Park Reservoir Stock 11,880 - - - 11,880 Asphalt overlay contribution 240,000 - - - 240,000 Flag Pole Maintenance 11,541 - - - 11,541 Landscape Maintenance 3,448 - - - 3,448 Engineering 2,200 - - - 2,200 Parking Garage Maintenance 50,582 - - - 50,582 Snow Removal 1,348 - - - 1,348 Tract E Park 13,035 - - - 13,035 Common Area Maintenance 110,120 - - - 110,120 Utilities 15,922 - - - 15,922 Debt Service:- - - - Bond Principal - - 1,500,000 - 1,500,000 Bond Principal - deferred - - 1,301,000 - 1,301,000 Interest Expense - Bonds - - 639,785 - 639,785 Legal - Special - - 11,109 - 11,109 LOC Fees - - 496,973 - 496,973 Paying Agent Fees - - 14,600 - 14,600 Remarketing Fees - - 35,350 - 35,350 Total Expenditures 609,539 10,484 3,998,817 - 4,618,840 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (95,013) 35,046 (59,458) - (119,425) OTHER FINANCING SOURCES (USES) Developer Advance 240,000 - 240,000 Total Other Financing Sources (Uses)240,000 - - - 240,000 NET CHANGE IN FUND BALANCES 144,987 35,046 (59,458) - 120,575 Fund Balances - Beginning of Year 554,004 65,513 4,249,150 38,739 4,907,406 FUND BALANCES - END OF YEAR 698,991$ 100,559$ 4,189,692$ 38,739$ 5,027,981$ TRAER CREEK METROPOLITAN DISTRICT RECONCILIATION OF THE STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2018 See accompanying Notes to Basic Financial Statements. (5) Net Change in Fund Balances - Total Governmental Funds 120,575$ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. In the statement of activities capital outlay is not reported as an expenditure. However, the statement of activities will report as depreciation expense the allocation of the cost of any depreciable asset over the estimated useful life of the asset. Depreciation Expense (363,836) The issuance of long-term debt (e.g., bonds, Developer advances) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long- term debt and related items. Developer Advances (240,000) Interest on Developer Advances (966,971) Interest on Payable to Town (52,834) Principal Payment 2,801,000 Letter of Credit Fees - Deferred (92,257) Amortization of Deferred Loss on Bond Refunding (8,026) Changes in Net Position of Governmental Activities 1,197,651$ TRAER CREEK METROPOLITAN DISTRICT GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2018 See accompanying Notes to Basic Financial Statements. (6) Variance with Final Budget Budget Amounts Actual Positive Original Final Amount (Negative) REVENUES Retail Sales Fees 500,000$ 500,000$ 500,000$ -$ Miscellaneous Income - - 14,526 14,526 Total Revenues 500,000 500,000 514,526 14,526 EXPENDITURES General and Administration: Accounting 56,000 56,000 41,382 14,618 Audit Fees 5,800 5,800 5,800 - Directors' Fees 1,600 1,600 - 1,600 District Management 40,000 25,000 18,697 6,303 Dues and Membership 1,300 1,300 670 630 Insurance and Bonds 30,000 30,000 25,179 4,821 Legal 50,000 25,000 20,634 4,366 Election Costs 2,000 2,000 516 1,484 Miscellaneous 2,612 612 317 295 Intergovernmental Expense - The Village 43,808 43,808 36,268 7,540 Operations and Maintenance: Acquisition of Eagle Park Reservoir Stock 11,880 11,880 11,880 - Asphalt Overlay Contribution 40,000 240,000 240,000 - Flag Pole Maintenance 10,000 10,000 11,541 (1,541) Landscape Maintenance 5,000 5,000 3,448 1,552 Engineering 5,000 5,000 2,200 2,800 Parking Garage Maintenance 32,000 32,000 50,582 (18,582) Snow Removal 20,000 1,350 1,348 2 Tract E Park 25,000 13,650 13,035 615 Common Area Maintenance 120,000 120,000 110,120 9,880 Utilities 20,000 20,000 15,922 4,078 Total Expenditures 522,000 650,000 609,539 40,461 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (22,000) (150,000) (95,013) 54,987 OTHER FINANCING SOURCES (USES) Developer Advance - 240,000 240,000 - Total Other Financing Sources (Uses)- 240,000 240,000 - NET CHANGE IN FUND BALANCE 90,000 144,987 54,987 Fund Balances - Beginning of Year 542,008 554,004 554,004 - FUND BALANCES - END OF YEAR 520,008$ 644,004$ 698,991$ 54,987$ TRAER CREEK METROPOLITAN DISTRICT SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BAL ANCE – BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2018 See accompanying Notes to Basic Financial Statements. (7) Variance with Original Final Budget and Final Actual Positive Budget Amounts (Negative) REVENUES Retail Sales Fees 40,000$ 41,901$ 1,901$ Net Investment Income 1,000 3,629 2,629 Total Revenues 41,000 45,530 4,530 EXPENDITURES General and Administration: Accounting 10,000 5,392 4,608 Legal 5,000 4,682 318 District Management 1,000 - 1,000 Miscellaneous - 410 (410) Contingency 4,020 - 4,020 Total Expenditures 20,020 10,484 9,536 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 20,980 35,046 14,066 OTHER FINANCING SOURCES (USES) Transfers to Other Funds (20,000) - 20,000 Total Other Financing Sources (Uses)(20,000) - 20,000 EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES 980 35,046 34,066 Fund Balances - Beginning of Year 7,372 65,513 58,141 FUND BALANCES - END OF YEAR 8,352$ 100,559$ 92,207$ TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (8) NOTE 1 DEFINITION OF REPORTING ENTITY Traer Creek Metropolitan District (District), a quasi-municipal corporation, was organized on February 3, 1999, concurrently with The Village Metropolitan District (The Village) and is governed pursuant to provisions of the Colorado Special District Act (Title 32, Article 1, Colorado Revised Statutes). The District’s service area is located entirely in the Town of Avon (Avon or Town) in Eagle County, Colorado. The District’s service plan was approved by the Town. The District was established to provide financing for the construction of streets, traffic and safety protection, water facilities, sanitary sewer, storm drainage, parks and recreation, television relay and translation, public transportation, fire protection and emergency medical services and mosquito control. Pursuant to its Service Plan, the District is intended to be the Service District related to The Village, serving as the Financing District, for the development of the service area which encompasses the area of both the District and The Village and is generally known as The Village at Avon (the Project). The District follows the Governmental Accounting Standards Board (GASB) accounting pronouncements which provide guidance for determining which governmental activities, organizations and functions should be included within the financial reporting entity. GASB pronouncements set forth the financial accountability of a governmental organization’s elected governing body as the basic criterion for including a possible component governmental organization in a primary government’s legal entity. Financial accountability includes, but is not limited to, appointment of a voting majority of the organization’s governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benefits or burdens and fiscal dependency. The District has no employees and all operations and administrative functions are contracted. On May 8, 2002, The Village (at Avon) Commercial Public Improvement Company (Commercial PIC) and The Village (at Avon) Mixed-Use Public Improvement Company (Mixed-Use PIC) were formed. Both the Commercial PIC and the Mixed-Use PIC are Colorado nonprofit corporations that were formed for the purpose of adopting and imposing Declarations and Covenants on property within the Village (at Avon) and for the purpose of imposing and collecting certain fees. The Commercial PIC and the Mixed-Use PIC have entered into an agreement with the District whereby the PICs have agreed to remit to the District certain revenue received from fees imposed by the PICs in consideration of the District’s financing, construction, and operation of public improvements which benefit the members of the PICs, the Town of Avon and the general public. The District is not financially accountable for any other organization, including The Village, nor is the District a component unit of any other primary governmental entity, including Avon. The more significant accounting policies of the District are described as follows: TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (9) NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Government-Wide and Fund Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These financial statements include all of the activities of the District. The effect of interfund activity has been removed from these statements. Governmental activities are normally supported by taxes and intergovernmental revenues. The statement of net position reports all financial and capital resources of the District. The difference between the sum of assets and deferred outflows and the sum of liabilities and deferred inflows is reported as net position. The statement of activities demonstrates the degree to which the direct and indirect 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 properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for the governmental funds. Major 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. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. 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 government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The major sources of revenue susceptible to accrual are retail sales fees and intergovernmental revenues. All other revenue items are considered to be measurable and available only when cash is received by the District. The District determined that Developer advances are not considered as revenue susceptible to accrual. Expenditures, other than interest on long - term obligations are recorded when the liability is incurred or the long-term obligation is due. The District reports the following major governmental funds: The General Fund is the District’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (10) NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The Special Revenue Fund is used to account for the revenues earned and expenditures incurred in connection with the Commercial PIC and the Mixed-Use PIC that benefit the District. It accounts for the portion of retail sales fee revenues that are used for the payment of administrative expenses for the PICs. The Debt Service Fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of the governmental funds. The Capital Projects Fund is used to account for financial resources to be used for the acquisition and construction of capital equipment and facilities. Budgets In accordance with the State Local Government Budget Law, the District’s Board of Directors holds public hearings in the fall each year to approve the budget and appropriate the funds for the ensuing year. The appropriation is at the total fund expenditures level and lapses at year-end. The District’s Board of Directors can modify the budget by line item within the total appropriation without notification. The appropriation can only be modified upon completion of notification and publication requirements. The budget includes each fund on its basis of accounting unless otherwise indicated. The District has amended its annual budget for the year ended December 31, 2018. Pooled Cash and Investments The District follows the practice of pooling cash and investments of all funds to maximize investment earnings. Except when required by trust or other agreements, all cash is deposited to and disbursed from a single bank account. Cash in excess of immediate operating requirements is pooled for deposit and investment flexibility. Investment earnings are allocated periodically to the participating funds based upon each fund’s average equity balance in the total cash. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), are reported in the government-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related fixed assets, as applicable. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (11) NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets (Continued) Depreciation expense has been computed using the straight-line method over the estimated economic useful lives: Infrastructure: Street Networks 30 Years Park Networks 30 Years Water and Sewer Improvements 30 Years Lot 2 Garage Improvements 30 Years Garage Doors 10 Years Tap Fees Tap fees are recorded as capital contributions when received. Cost of Bond Refunding In the government-wide financial statements, the deferred cost of bond refunding is being amortized using the interest method over the life of the new bonds. The amortization amount is a component of interest expense and the unamortized deferred cost is reflected as a deferred outflow of resources. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The District has one item that qualifies for reporting in this category. Accordingly, the item, cost of bond refunding, is deferred and recognized as an outflow of resources in the period that the amount is incurred. In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The District has no items that qualify for reporting in this category. Accordingly, no items are deferred and recognized as an inflow of resources in the period that the amount becomes available. Equity Net Position For government-wide presentation purposes when both restricted and unrestricted resources are available for use, it is the government’s practice to use restricted resources first, then unrestricted resources as they are needed. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (12) NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Equity (Continued) Fund Balance Fund balance for governmental funds should be reported in classifications that comprise a hierarchy based on the extent to which the government is bound to honor constraints on the specific purposes for which spending can occur. Governmental funds report up to five classifications of fund balance: nonspendable, restricted, committed, assigned, and unassigned. Because circumstances differ among governments, not every government or every governmental fund will present all of these components. The following classifications describe the relative strength of the spending constraints: Nonspendable Fund Balance – The portion of fund balance that cannot be spent because it is either not in spendable form (such as prepaid amounts or inventory) or legally or contractually required to be maintained intact. Restricted Fund Balance – The portion of fund balance that is constrained to being used for a specific purpose by external parties (such as bondholders), constitutional provisions, or enabling legislation. Committed Fund Balance – The portion of fund balance that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority, the Board of Directors. The constraint may be removed or changed only through formal action of the Board of Directors. Assigned Fund Balance – The portion of fund balance that is constrained by the government’s intent to be used for specific purposes, but is neither restricted nor committed. Intent is expressed by the Board of Directors to be used for a specific purpose. Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts that are classified as committed. Unassigned Fund Balance – The residual portion of fund balance that does not meet any of the criteria described above. If more than one classification of fund balance is available for use when an expenditure is incurred, it is the District’s practice to use the most restrictive classification first. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (13) NOTE 3 CASH AND INVESTMENTS Cash and investments as of December 31, 2018, are classified in the accompanying financial statements as follows: Statement of Net Position: Cash and Investments 702,595$ Cash and Investments - Restricted 3,797,859 Total Cash and Investments 4,500,454$ Cash and investments as of December 31, 2018, consist of the following: Deposits with Financial Institutions 656,112$ Investments 3,844,342 Total Cash and Investments 4,500,454$ Deposits with Financial Institutions The Colorado Public Deposit Protection Act (PDPA) requires that all units of local government deposit cash in eligible public depositories. Eligibility is determined by state regulators. Amounts on deposit in excess of federal insurance levels must be collateralized. The eligible collateral is determined by the PDPA. PDPA allows the institution to create a single collateral pool for all public funds. The pool for all the uninsured public deposits as a group is to be maintained by another institution or held in trust. The market value of the collateral must be at least 102% of the aggregate uninsured deposits. The State Commissioners for banks and financial services are required by statute to monitor the naming of eligible depositories and reporting of the uninsured deposits and assets maintained in the collateral pools. At December 31, 2018, the District’s cash deposits had a bank and a carrying balance of $656,112. Investments The District has not adopted a formal investment policy; however, the District follows state statutes regarding investments. The District generally limits its concentration of investments to those noted with an asterisk (*) below, which are believed to have minimal credit risk, minimal interest rate risk and no foreign currency risk. Additionally, the District is not subject to concentration risk or investment custodial risk disclosure requirements for investments that are in the possession of another party. Colorado revised statutes limit investment maturities to five years or less unless formally approved by the Board of Directors. Such actions are generally associated with a debt service reserve or sinking fund requirement. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (14) NOTE 3 CASH AND INVESTMENTS (CONTINUED) Investments (Continued) Colorado statutes specify investment instruments meeting defined rating and risk criteria in which local governments may invest which include: . Obligations of the United States, certain U.S. government agency securities and securities of the World Bank . General obligation and revenue bonds of U.S. local government entities . Certain certificates of participation . Certain securities lending agreements . Bankers’ acceptances of certain banks . Commercial paper . Written repurchase agreements and certain reverse repurchase agreements collateralized by certain authorized securities * Certain money market funds . Guaranteed investment contracts * Local government investment pools As of December 31, 2018, the District had the following investments: Investment Maturity Amount Colorado Liquid Asset Trust Weighted Average (COLOTRUST) Under 60 Days 117,806$ U.S. Treasury Money Market Fund Weighted Average Under 60 Days 3,726,536 Total 3,844,342$ COLOTRUST The District invested in the Colorado Local Government Liquid Asset Trust (COLOTRUST) (the Trust), an investment vehicle established for local government entities in Colorado to pool surplus funds. The State Securities Commissioner administers and enforces all State statutes governing the Trust. The Trust operates similarly to a money market fund and each share is equal in value to $1.00. The Trust offers shares in two portfolios, COLOTRUST PRIME and COLOTRUST PLUS+. Both portfolios may invest in U.S. Treasury securities and repurchase agreements collateralized by U.S. Treasury securities. COLOTRUST PLUS+ may also invest in certain obligations of U.S. government agencies, highest rated commercial paper and any security allowed under CRS 24-75-601. A designated custodial bank serves as custodian for the Trust’s portfolios pursuant to a custodian agreement. The custodian acts as safekeeping agent for the Trust’s investment portfolios and provides services as the depository in connection with direct investments and withdrawals. The custodian’s internal records segregate investments owned by the Trust. COLOTRUST is rated AAAm by Standard & Poor’s. COLOTRUST records its investments at fair value and the District records its investment in COLOTRUST at net asset value as determined by fair value. There are no unfunded commitments, the redemption frequency is daily, and there is no redemption notice period. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (15) NOTE 3 CASH AND INVESTMENTS (CONTINUED) U.S. Treasury Money Market Fund The debt service money that was included in the trust accounts at U.S. Bank was invested in the Fidelity Governmental Fund 57 (Class 1). The Fidelity Governmental Fund is a money market fund that is managed by Fidelity Investments and each share is equal in value to $1.00. The fund is AAAm rated and invests in high quality short-term obligations, with approximately 80% of assets invested in government securities. The average maturity of the underlying securities is 60 days or less. NOTE 4 PROPERTY AND EQUIPMENT An analysis of the changes in property and equipment for the year ended December 31, 2018, follows: Balance - Balance - December 31,December 31, 2017 Increases Decreases 2018 Governmental Activities Capital Assets, not Being Depreciated: Construction in Progress 3,299,949$ -$ -$ 3,299,949$ Total Capital Assets, Not Being Depreciated 3,299,949 - - 3,299,949 Capital Assets, Being Depreciated: Lot 2 Garage 6,477,336 - - 6,477,336 Phase I Park 1,240,420 - - 1,240,420 Tract E Park 2,849,419 - - 2,849,419 Flagpole 312,242 - - 312,242 Total Capital Assets, Being Depreciated 10,879,417 - - 10,879,417 Less Accumulated Depreciation For: Lot 2 Garage 2,099,810 217,099 - 2,316,909 Phase I Park 670,651 41,348 - 711,999 Tract E Park 1,278,974 94,980 - 1,373,954 Flagpole 140,505 10,409 - 150,914 Total Accumulated Depreciation 4,189,940 363,836 - 4,553,776 Total Capital Assets, Being Depreciated, Net 6,689,477 (363,836) - 6,325,641 Governmental Activities Capital Asset, Net 9,989,426$ (363,836)$ -$ 9,625,590$ Depreciation expense in the amount of $363,836 was charged to function/programs of the District as Public works. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (16) NOTE 5 LONG-TERM OBLIGATIONS The following is an analysis of changes in general long-term obligations for the year ended December 31, 2018: Balance at Retirement of Balance at Due December 31,Long-Term December 31,Within 2017 Additions Obligations 2018 One Year Series 2014 Refunding Bonds 32,625,000$ -$ 2,801,000$ 29,824,000$ 1,500,000$ Developer Advances*14,426,017 240,000 - 14,666,017 - Interest on Developer Advances 11,960,820 966,971 - 12,927,791 - Payable to Town (long-term)*3,522,309 - - 3,522,309 - Interest on Payable to Town 180,506 52,834 - 233,340 - Letter of Credit Fees - Deferred 337,308 92,257 - 429,565 - Total 63,051,960$ 1,352,062$ 2,801,000$ 61,603,022$ 1,500,000$ * Subject to annual budget and appropriation and subordinate to the Bonds. Repayment Principal Accrued Priority of Repayment of Developer Advances Party Amount Interest Total 2 Amended and Restated Funding and Reimbursement Agreement 1 Traer Creek, LLC 3,476,752$ 4,404,440$ 7,881,192$ Facilities Acquisition Agreement 3 See Note 3 Below 4,029,786 4,450,429 8,480,215 2003 Funding and Reimbursement Agreement, as Amended - 8%Traer Creek, LLC 1,018,889 2,562,087 3,580,976 2003 Funding and Reimbursement Agreement, as Amended - 1.5%Traer Creek, LLC 1,541,784 102,138 1,643,922 2006 Operation Funding Agreement Traer Creek, LLC 576,310 406,449 982,759 2007 Operation Funding Agreement Traer Creek, LLC 841,980 513,408 1,355,388 2008 Operation Funding Agreement (Noncash)Traer Creek, LLC 279,116 152,986 432,102 2009 Operations Advance (Noncash)Traer Creek, LLC 87,694 37,982 125,676 2010 Operations Advance (Noncash)Traer Creek, LLC 122,743 43,343 166,086 2011 Operations Advance (Noncash)Traer Creek, LLC 72,682 22,757 95,439 2018 Operations Advance and Repayment Agreement Traer Creek, LLC 240,000 43,827 283,827 2018 Advance and Repayment Agreement Traer Creek, LLC 2,378,281 187,945 2,566,226 Total 14,666,017$ 12,927,791$ 27,593,808$ Payable to Town 2008 Avon Receivable Town of Avon 482,642$ 31,973$ 514,615$ 2009 Avon Receivable Town of Avon 1,064,062 70,490 1,134,552 2010 Avon Receivable Town of Avon 1,126,649 74,637 1,201,286 2011 Avon Receivable Town of Avon 848,956 56,240 905,196 Total Avon Receivable 3,522,309$ 233,340$ 3,755,649$ 1 The net credit for amounts owed to the District by the Developer for Cable TV Filing 1; Utilities Filing 3; and the Parking Structure (645k) accumulated interest that were in excess of the additional developer advances not captured above for the Dirt Removal Agreement $417k with was applied against the accrued interest for the Amended and Restated Funding and Reimbursement Agreement, pursuant to a May 8, 2013 Letter Agreement. 2 All totals are as of December 31, 2018. 3 The District's records reflect that the amount outstanding at December 31, 2018 (exclusive of interest) is as follows: Traer Creek-RP, LLC 2,440,000$ Buffalo Ridge Affordable Housing Corporation, Buffalo Ridge II, LLP 1,589,786 Total amount outstanding at December 31, 2018 (exclusive of interest)4,029,786$ Repayment of amounts due under the Facilities Acquisition Agreement will be allocated equally (on a pari passu basis) as funds are available after reimbursement to Traer Creek, LLC under the Amended and Restated Funding and Reimbursement Agreement dated May 8, 2002, as amended. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (17) NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED) Revenue Bonds Payable The District issued $40,175,000 Taxable Variable Rate Revenue Refunding Bonds, Series 2014, dated August 1, 2014, to refund Series 2002 bonds and Series 2004 bonds. The interest rate of the bonds is a variable rate that is determined weekly by the remarketing agent payable on the first business day of the following month. The bonds are payable from net pledged revenue including all retail sales fees, tap fees, real estate transfer fees, accommodation fees, and other fees and taxes and all interest income or other revenues received by the District and all property taxes (after the first $500,000 – see Tank Project Financing Reimbursement and Pledge Agreement) and specific ownership taxes collected by The Village. The bonds are secured by an irrevocable, direct pay letter of credit issued by BNP Paribas (the Bank) in the stated amount of $40,551,434. The letter of credit expires on July 31, 2019, unless extended by the Bank at its sole discretion. The District is required to annually pay the Bank a fee of 1.50% based on the rating of the long-term unsecured senior debt of certain retail entities which have guaranteed certain fee payments to the District, as stipulated in the Reimbursement Agreement with the Bank. Until such time the District has a sufficient revenue stream, the Bank has agreed to defer a portion of the annual LOC fee. As of December 31, 2018, the balance of deferred fees is $429,565. Using the interest rate at December 31, 2018 of 2.55%, the estimated annual requirement to amortize the remaining Series 2014 Bonds is as follows: Year Ending December 31,Principal Interest Total 2019 1,500,000$ 793,688$ 2,293,688$ 2020 1,500,000 755,438 2,255,438 2021 1,750,000 717,188 2,467,188 2022 1,750,000 672,563 2,422,563 2023 1,750,000 627,938 2,377,938 2024-2028 11,000,000 2,393,815 13,393,815 2029-2030 10,574,000 541,876 11,115,876 Total 29,824,000$ 6,502,506$ 36,326,506$ Using the interest rate at December 31, 2018, of 3%, the estimated annual requirement to amortize the remaining Series 2014 Bonds is as follows: Year Ending December 31,Principal Interest Total 2019 1,500,000$ 933,750$ 2,433,750$ 2020 1,500,000 888,750 2,388,750 2021 1,750,000 843,750 2,593,750 2022 1,750,000 791,250 2,541,250 2023 1,750,000 738,750 2,488,750 2024-2028 11,000,000 2,816,250 13,816,250 2029-2030 10,574,000 637,500 11,211,500 Total 29,824,000$ 7,650,000$ 37,474,000$ TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (18) NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED) Funding and Reimbursement Agreements On January 16, 2002, the District and Traer Creek LLC (Developer) entered into a Funding and Reimbursement Agreement, which was amended and restated on May 8, 2002, by the Amended and Restated Funding and Reimbursement Agreement to set forth certain agreements between the parties concerning the funding of certain public improvements. On July 2, 2003, the District and the Developer entered into the 2003 Funding and Reimbursement Agreement, which was amended by the First Amendment to 2003 Funding and Reimbursement Agreement dated as of March 25, 2004 (as amended, the 2003 Funding and Reimbursement Agreement), to address the need for additional funds from the Developer due to an increase in the costs of construction of the public improvements. Under the 2003 Funding and Reimbursement Agreement, the District acknowledges certain amounts of outstanding prior advances made by the Developer which supersede and clarify amounts set forth in prior agreements, including the Amended and Restated Funding and Reimbursement Agreement. Under the 2003 Funding and Reimbursement Agreement, the District may require the Developer to advance additional funds for construction related expenses to complete the improvements up to a maximum amount of $7,166,769 plus unpaid prior advances of $3,476,752 for a total amount of $10,643,521. To the extent of revenues available and on a basis subordinate to any amounts due to the bank and on the bonds, the District will reimburse the Developer for amounts advanced pursuant to the 2003 Funding and Reimbursement Agreement, plus interest at 8.0% per annum. Pursuant to a settlement agreement on August 1, 2014, the interest rate was reduced to 1.5% on a portion of the outstanding amount of the 2003 obligation. The balance due to the Developer at December 31, 2018, was $13,106,090. Buffalo Ridge Facilities Acquisition Agreement A Facilities Acquisition Agreement was entered into on May 29, 2002, by and among the District, Buffalo Ridge Affordable Housing Corporation, a Colorado nonprofit corporation, Buffalo Ridge II, LLLP, a Colorado limited liability limited partnership (together, the Affordable Housing Developer), and Traer Creek - RP, LLC (Traer Creek - RP) (the Buffalo Ridge Facilities Acquisition Agreement). Pursuant to the Buffalo Ridge Facilities Acquisition Agreement, the Affordable Housing Developer has agreed to fund costs related to the construction of public improvements within the Buffalo Ridge affordable housing project (the Buffalo Ridge Improvements). As set forth in the Buffalo Ridge Facilities Acquisition Agreement, the Affordable Housing Developer has agreed to assign its rights to the reimbursement of $2,440,000 of the cost of Buffalo Ridge Improvements constructed to Traer Creek - RP. The District agrees to the extent of funds available therefore, to repay the Affordable Housing Developer and the Developer for the total costs of the Buffalo Ridge Improvements, including, but not limited to, all costs of design, testing, engineering, construction, and related consulting and construction management fees and costs, plus simple interest thereon at an annual interest rate of 8.0%. All parties agree that the interest TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (19) NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED) Buffalo Ridge Facilities Acquisition Agreement (Continued) accrual on such reimbursements is to commence on the date the cost is incurred by the Affordable Housing Developer. Under the Buffalo Ridge Facilities Acquisition Agreement, the District has agreed to reimburse the Affordable Housing Developer and Traer Creek - RP from the proceeds of bonds issued by the District in the future or from available revenues of the District, if appropriated for such purposes, on a basis subordinate to amounts owing on the bonds or to the Bank, and under the 2002 Amended and Restated Funding and Reimbursement Agreement. Under this agreement, the District acquired public improvements, and acknowledged that the obligation to acquire such improvements was in the principal amount of $4,029,786. The balance due, collectively, to the Affordable Housing Developer and Traer Creek – RP at December 31, 2018, was $8,480,215. 2006 Operation Funding Agreement On January 26, 2006, the District, The Village Metropolitan District, and the Developer entered into a 2006 Operation Funding Agreement (the 2006 Operation Funding Agreement). Pursuant to the 2006 Operation Funding Agreement, the Developer agreed to fund the ongoing operations and maintenance costs of the District, upon request, up to a maximum amount of $712,000. To the extent of revenues available and on a basis subordinate to any amounts due to the bank and on the bonds, the District will reimburse the Developer for amounts advanced pursuant to the 2006 Operation Funding Agreement, plus interest at 8.0% per annum from the date of the advance. On August 1, 2014 the interest rate was reduced to 1.5% pursuant to a settlement agreement. The balance due to the Developer at December 31, 2018, was $982,759. 2007 Operation Funding Agreement On November 30, 2006, the District, The Village Metropolitan District, and the Developer entered into a 2007 Operation Funding Agreement (the 2007 Operation Funding Agreement). Pursuant to the 2007 Operation Funding Agreement, the Developer agreed to fund the ongoing operations and maintenance costs of the District, upon request, up to a maximum amount of $712,000. To the extent of revenues available and on a basis subordinate to any amounts due to the bank and on the bonds, the District will reimburse the Developer for amounts advanced pursuant to the 2007 Operation Funding Agreement, plus interest at 8.0% per annum from the date of the advance. The 2007 Operation Funding Agreement was amended on December 14, 2007, to raise the maximum shortfall amount to $842,000 and to modify certain other provisions. On August 1, 2014 the interest rate was reduced to 1.5% pursuant to a settlement agreement. The balance due to the Developer at December 31, 2018, was $1,355,388. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (20) NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED) 2008 Operation Funding Agreement On December 14, 2007, the District, the Village Metropolitan District, and the Developer entered into a 2008 Operation Funding Agreement (the 2008 Operation Funding Agreement). Pursuant to the 2008 Operation Funding Agreement, the Developer agreed to fund the ongoing operations and maintenance costs of the District, upon request. During 2008, the Developer provided landscape maintenance services to the District’s public improvements and the District recognized these costs as noncash advances in the amount of $279,116. To the extent of revenues available and on a basis subordinate to any amounts due to the bank and on the bonds, the District will reimburse the Developer for amounts advanced, plus interest at 8% per annum from the date of the advance. On August 1, 2014 the interest rate was reduced to 1.5% pursuant to a settlement agreement. The balance due to the Developer at December 31, 2018, was $432,102. 2009 Operations Advance (Noncash) During the year ended December 31, 2009, EMD-CM LLC (EMD-CM) and Traer Creek Plaza LLC (TCP) provided maintenance services related to the District’s public improvements. Pursuant to the First Amendment to the Second Amended and Restated Phase II Construction Management and Maintenance Agreement, the Developer agreed to pay EMD-CM and TCP directly for these landscaping services, and the District agreed to reimburse the Developer for these amounts when funds become available, subject to budget and appropriation, with interest at a rate of 8%. The District recognized the Developer’s payments, on its behalf, as noncash advances. On August 1, 2014 the interest rate was reduced to 1.5% pursuant to a settlement agreement. The balance due to the Developer at December 31, 2018, was $125,676. 2010 Operations Advance (Noncash) During the year ended December 31, 2010, EMD-CM LLC (EMD-CM) and Traer Creek Plaza LLC (TCP) provided maintenance services related to the District’s public improvements. Pursuant to the First Amendment to the Second Amended and Restated Phase II Construction Management and Maintenance Agreement, the Developer agreed to pay EMD-CM and TCP directly for these landscaping services, and the District agreed to reimburse the Developer for these amounts when funds become available, subject to budget and appropriation, with interest at a rate of 8%. The District recognized the Developer’s payments, on its behalf, as noncash advances. On August 1, 2014 the interest rate was reduced to 1.5% pursuant to a settlement agreement. The balance due to the Developer at December 31, 2018, was $166,086. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (21) NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED) 2011 Operations Advance (Noncash) During the year ended December 31, 2011, EMD-CM LLC (EMD-CM) and Traer Creek Plaza LLC (TCP) provided maintenance services related to the District’s public improvements. Pursuant to the First Amendment to the Second Amended and Restated Phase II Construction Management and Maintenance Agreement, the Developer agreed to pay EMD-CM and TCP directly for these landscaping services, and the District agreed to reimburse the Developer for these amounts when funds become available, subject to budget and appropriation, with interest at a rate of 8%. The District recognized the Developer’s payments, on its behalf, as noncash advances. On August 1, 2014 the interest rate was reduced to 1.5% pursuant to a settlement agreement. The balance due to the Developer at December 31, 2018, was $95,439. Service Agreement for Maintenance Services On November 11, 2013, the District entered into the Service Agreement for Maintenance Services with EMD-CM, pursuant to which EMD–CM agreed to provide an agreed upon scope of maintenance services to the District. The District agrees to pay EMD–CM for such services subject to budget appropriation with interest of 10% if not paid within 45 days. Payable to the Town On August 1, 2014, in connection with the terms of a settlement agreement being fulfilled (see Note 8), the District became obligated to incur simple interest of 1.5% on the $3,522,309 obligation due to the Town for costs associated with years 2008 – 2011. 2018 Advance and Repayment Agreement On March 21, 2018, the District and Traer Creek LLC (“the Developer”) entered into an Advance and Repayment Agreement. The Developer has expended funds on behalf of the District previously, and intends to make future payments for costs related to the provision of public infrastructure in the nature of capital costs in furtherance of the District’s permitted purposes. The District and the Developer established the terms and conditions under which the District will reimburse the Developer for such costs and acquire Public Infrastructure that will either be owned by the District or dedicated to other government entities. The District agreed to reimburse the Developer for these amounts when funds become available, subject to budget and appropriation, at the Authorized Private Lending Interest Rate. The balance due to the Developer at December 31, 2018, was $2,850,053. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (22) NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED) Debt Authorization At December 31, 2018, the District had authorized but unissued indebtedness for capital and operational purposes in the following amounts: Amount Amount Amount Authorized on Authorized on Authorized on Authorized November 3,November 6,November 5,Series 2002 Series 2004 But 1998 2001 2002 Bonds Bonds Unissued Streets 125,000,000$ 158,000,000$ 158,000,000$ 31,611,000$ 12,333,000$ 397,056,000$ Safety protection 2,000,000 158,000,000 158,000,000 - - 318,000,000 Parks and recreation 27,000,000 158,000,000 158,000,000 950,000 501,000 341,549,000 Water 19,000,000 158,000,000 158,000,000 1,156,500 2,714,000 331,129,500 Sewer 11,000,000 158,000,000 158,000,000 426,000 1,252,000 325,322,000 Public transportation 18,000,000 158,000,000 158,000,000 - - 334,000,000 Mosquito control 500,000 10,000,000 10,000,000 - - 20,500,000 Fire protection 2,000,000 158,000,000 158,000,000 1,156,500 - 316,843,500 Television relay and Translation 1,000,000 158,000,000 158,000,000 - - 317,000,000 Refunding - 158,000,000 158,000,000 - - 316,000,000 Total 205,500,000$ 1,432,000,000$ 1,432,000,000$ 35,300,000$ 16,800,000$ 3,017,400,000$ Authorization Used Pursuant to the Service Plan, the District is permitted to issue bonded indebtedness of up to $158,000,000. In the future, the District may issue a portion or all of the remaining authorized but unissued general obligation debt for purposes of providing public improvements to support development as it occurs within the District’s service area, however, as of the date of this audit, the amount and timing of any debt issuances is not determinable. No additional authorization was used with the issuance of the 2014 Refunding Bonds. NOTE 6 NET POSITION The District has net position consisting of three components - net investment in capital assets, net of related debt, restricted, and unrestricted. Net investment in capital assets, net of related debt consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. As of December 31, 2018, the District had net investment in capital assets, net of related debt, calculated as follows: Governmental Activities Net Investment in Capital Assets, Net of Related Debt: Capital Assets, Net 9,625,590$ Current Portion of Long-Term Obligations (1,352,155) Noncurrent Portion of Long-Term Obligations (54,179,053) Portion of Debt Related to Restricted Cash and Investments 1,362,648 Net Investment in Capital Assets (44,542,970)$ TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (23) NOTE 6 NET POSITION (CONTINUED) Restricted assets include net position that are restricted for use either externally imposed by creditors, grantors, contributors, or laws and regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The District had restricted net position as of December 31, 2018, as follows: Restricted Net Position: Debt Service 1,515,079$ Emergency Reserves 15,500 Total Restricted Net Position 1,530,579$ The District had a deficit net position as of December 31, 2018. This deficit amount was a result of the District being responsible for the repayment of bonds issued and other debt obligations in excess of capital assets remaining with the District. NOTE 7 RELATED PARTIES The Developer of the property within the District and The Village is Traer Creek LLC and several affiliated limited liability companies (Developer). The members of the Board of Directors of the District are employees, owners or otherwise associated with the Developer and may have conflicts of interest in dealing with the District. The members of the Board also serve as the Board members of The Village and some members serve on the Boards for the Commercial PIC and Mixed-Use PIC. Pursuant to the Second Amended and Restated Phase II Construction Management and Maintenance Agreement, as amended: EMD-CM LLC (EMD-CM), an affiliate of the Developer, is the construction manager for the District. As construction manager, EMD-CM receives a construction management fee of 6% of the gross defined construction costs. EMD-CM is the landscape maintenance contractor for the District and custodial contractor for the parking garage located in the District. As the landscape maintenance contractor, EMD-CM performs tasks related to planting and maintaining several tracts and other areas in the District. As the custodial contractor for the parking garage, EMD-CM performs tasks related to maintenance inside and outside the parking garage area. Traer Creek Plaza LLC, an affiliate of the Developer, provides common area maintenance for the District. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (24) NOTE 8 AGREEMENTS The Village The District entered into a Facilities Funding, Construction and Operations Agreement on July 31, 2001, and later amended on March 4, 2002, with The Village, whereby the District will provide certain services and facilities, as described in the District’s Service Plan, to current and future residents and property owners of both the District and The Village. Additionally, the District will provide the operations, maintenance, and administrative services for The Village. The Village pledges all revenue it receives from ad valorem property taxes, specific ownership taxes and other rates, fees, tolls and charges that may be imposed and collected by The Village, if such revenue is not otherwise pledged, to assist in financing the facilities and services. Town of Avon On November 13, 2001, the District became a documented party to the First Amendment to the Annexation and Development Agreement (Annexation Agreement), initially entered into on October 13, 1998 (with Second and Third Amendments on May 27, 2003, and October 26, 2004, respectively), by the Town and several owners of certain real property in The Village (at Avon). The District has agreed to comply with the Town’s requirements, policies and codes in the construction of infrastructure improvements and public facilities, including streets, drainage facilities, water lines, parks and recreation facilities, which will serve the needs of both The Village (at Avon) and the Town. On October 22, 2013, the District entered into the Consolidated Amended and Restated Annexation and Development Agreement for the Village (at Avon) (CARADA) which became effective on August 1, 2014, as a result of the Series 2014 bond issuance. The CARADA outlines the new responsibilities for maintenance and ownership of infrastructure improvements within the development as well as the required contributions from the District. The District is required to provide $40,000 towards asphalt overlays on an annual basis. This obligation is due to the Town by November 1st of each year. The CARADA also assigns $500,000 of pledged revenue towards the repayment of the capital costs incurred to construct a water tank that is required for future development (discussed further under the Tank Project Financing Reimbursement and Pledge Agreement). Tap Fee Allocation Agreement On November 29, 2001, the District, by assignment, became a party to the Tap Fee Allocation Agreement dated May 15, 1997, as amended June 21, 1999, by and between Eagle Vail Metropolitan District, the Town of Avon, EMD Limited Liability Company, PVRT NOTT I LLC, PVRT NOTT II LLC, and PVRT NOTT III LLC (the Tap Fee Allocation Agreement). Pursuant to the terms of the Tap Fee Allocation Agreement, the District agreed to collect water tap fees and water development fees on the property subject to the Tap Fee Allocation Agreement. The District agreed to convey 20% of all tap fees collected to Eagle Vail Metropolitan District. In 2018 the District conveyed $-0- to Eagle Vail Metropolitan District under this Agreement. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (25) NOTE 8 AGREEMENTS (CONTINUED) Tank Project Financing Reimbursement and Pledge Agreement On August 1, 2014, the District entered into a reimbursement and pledge agreement with the Village Metropolitan District and Traer Creek-RP LLC to deposit into Escrow sixty (60) semi-annual payments for Tank Project Financing. The first $500,000 of property taxes received each year from the Village Metropolitan District will be pledged for Tank Project Financing and deposited into the Escrow account. In 2015, the Village transferred net proceeds to the District of $7,460,000, of which $7,264,500 was paid to the Developer to contribute to the overall cost of the water tank which is to be owned and maintained by Upper Eagle Regional Water Authority (UERWA). NOTE 9 RISK MANAGEMENT The District is exposed to various risks of loss related to torts; thefts of, damage to, or destruction of assets; errors or omissions; injuries to employees; or acts of God. The District is a member of the Colorado Special Districts Property and Liability Pool (Pool) as of December 31, 2018. The Pool is an organization created by intergovernmental agreement to provide property, liability, public officials’ liability, boiler and machinery and workers compensation coverage to its members. Settled claims have not exceeded coverage in any of the past three fiscal years. The District pays annual premiums to the Pool for liability, property, public officials’ liability, and workers compensation coverage. In the event aggregated losses incurred by the Pool exceed amounts recoverable from reinsurance contracts and funds accumulated by the Pool, the Pool may require additional contributions from the Pool members. Any excess funds which the Pool determines are not needed for purposes of the Pool may be returned to the members pursuant to a distribution formula. NOTE 10 TAX, SPENDING AND DEBT LIMITATIONS Article X, Section 20 of the Colorado Constitution, referred to as the Taxpayer’s Bill of Rights (TABOR), contains tax, spending, revenue and debt limitations which apply to the State of Colorado and all local governments. Spending and revenue limits are determined based on the prior year’s Fiscal Year Spending adjusted for allowable increases based upon inflation and local growth. Fiscal Year Spending is generally defined as expenditures plus reserve increases with certain exceptions. Revenue in excess of the Fiscal Year Spending limit must be refunded unless the voters approve retention of such revenue. On November 3, 1998, a majority of the District’s electors authorized the District to collect and spend or retain all revenues, from whatever source derived, without regard to any limitations under TABOR. TRAER CREEK METROPOLITAN DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2018 (26) NOTE 10 TAX, SPENDING AND DEBT LIMITATIONS (CONTINUED) TABOR requires local governments to establish Emergency Reserves. These reserves must be at least 3% of Fiscal Year Spending (excluding bonded debt service). Local governments are not allowed to use the Emergency Reserves to compensate for economic conditions, revenue shortfalls, or salary or benefit increases. The District’s management believes it is in compliance with the provisions of TABOR. However, TABOR is complex and subject to interpretation. Many of the provisions, including the interpretation of how to calculate Fiscal Year Spending limits, will require judicial interpretation. (27) SUPPLEMENTARY INFORMATION TRAER CREEK METROPOLITAN DISTRICT DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2018 (28) Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES Intergovernmental Revenue - The Village 199,779$ 212,533$ 212,533$ -$ Retail Sales Fees 3,343,000 3,648,212 3,648,212 - Net Investment Income 15,000 78,613 78,614 1 Total Revenues 3,557,779 3,939,358 3,939,359 1 EXPENDITURES Debt Service: Bond Principal 1,500,000 1,500,000 1,500,000 - Bond Principal - Deferred 843,000 1,301,000 1,301,000 - Interest Expense - Bonds 509,040 640,000 639,785 215 Legal 10,000 12,000 11,109 891 Contingency 200,960 - - - LOC Fees 545,000 497,000 496,973 27 Paying Agent Fees 15,000 15,000 14,600 400 Remarketing Fees 40,000 36,000 35,350 650 Total Expenditures 3,663,000 4,001,000 3,998,817 2,183 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (105,221) (61,642) (59,458) 2,184 OTHER FINANCING SOURCES (USES) Transfers from Other Funds 20,000 - - Total Other Financing Sources (Uses)20,000 - - - EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES (85,221) (61,642) (59,458) 2,184 Fund Balances - Beginning of Year 4,014,791 4,249,150 4,249,150 - FUND BALANCES - END OF YEAR 3,929,570$ 4,187,508$ 4,189,692$ 2,184$ TRAER CREEK METROPOLITAN DISTRICT CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2018 (29) Variance with Original Final Budget and Final Actual Positive Budget Amounts (Negative) REVENUES Net Investment Income 200$ -$ (200)$ Total Revenues 200 - (200) EXPENDITURES Current: Contingency 38,939 - 38,939 Total Expenditures 38,939 - 38,939 NET CHANGE IN FUND BALANCES (38,739) - 38,739 Fund Balances - Beginning of Year 38,739 38,739 - FUND BALANCES - END OF YEAR -$ 38,739$ 38,739$ TRAER CREEK METROPOLITAN DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY DECEMBER 31, 2018 (30) Year Ending December 31,Principal Interest*Total 2019 1,500,000$ 933,750$ 2,433,750$ 2020 1,500,000 888,750 2,388,750 2021 1,750,000 843,750 2,593,750 2022 1,750,000 791,250 2,541,250 2023 1,750,000 738,750 2,488,750 2024 2,000,000 686,250 2,686,250 2025 2,000,000 626,250 2,626,250 2026 2,000,000 566,250 2,566,250 2027 2,500,000 506,250 3,006,250 2028 2,500,000 431,250 2,931,250 2029 2,500,000 356,250 2,856,250 2030 8,074,000 281,250 8,355,250 Total 29,824,000$ 7,650,000$ 37,474,000$ * The variable interest rate on the Bonds is estimated at 3.00%. Principal Due October 1 $40,175,000 Taxable Variable Rate Revenue Refunding Bonds Series 2014, Dated August 1, 2014 Weekly Interest Rate Mode Assumed Payable 1st Business Day of the Month, TRAER CREEK METROPOLITAN DISTRICT SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY (CONTINUED) DECEMBER 31, 2018 (31) Year Ending December 31,Principal Interest*Total 2019 1,500,000$ 793,688$ 2,293,688$ 2020 1,500,000 755,438 2,255,438 2021 1,750,000 717,188 2,467,188 2022 1,750,000 672,563 2,422,563 2023 1,750,000 627,938 2,377,938 2024 2,000,000 583,313 2,583,313 2025 2,000,000 532,313 2,532,313 2026 2,000,000 481,313 2,481,313 2027 2,500,000 430,313 2,930,313 2028 2,500,000 366,563 2,866,563 2029 2,500,000 302,813 2,802,813 2030 8,074,000 239,063 8,313,063 Total 29,824,000$ 6,502,506$ 36,326,506$ * The variable interest rate on the Bonds is estimated at 2.55%. Principal Due October 1 $40,175,000 Taxable Variable Rate Revenue Refunding Bonds Series 2014, Dated August 1, 2014 Weekly Interest Rate Mode Assumed Payable 1st Business Day of the Month,