Press Alt + R to read the document text or Alt + P to download or print.

No preview available

The URL can be used to link to this page

Home My WebLink About2020 Consolidated Annual Report0801.0024: 1123631 - 1 - VAIL SQUARE METROPOLITAN DISTRICT NOS. 1-3 2020 CONSOLIDATED ANNUAL REPORT Pursuant to the Consolidated Service Plan for Vail Square Metropolitan District Nos. 1-3 (the “Districts”), the Districts shall be responsible for submitting an annual report to the Town Manager of the Town of Vail (the “Town”) each year. For the year ending December 31, 2020, the Districts make the following report: 1. Boundary changes made to the Districts’ boundaries as of December 31 of the prior year. No boundary changes were made to the Districts’ boundaries in 2020. 2. Intergovernmental Agreements with other governmental entities entered into as of December 31 of the prior year. No Intergovernmental Agreements were entered into during 2020. 3. A list of all facilities and improvements constructed by the Districts that have been dedicated to and accepted by the Town as of December 31 of the prior year. No facilities or improvements constructed by the Districts were dedicated to the Town in 2020. 4. The assessed valuation of the Districts for the current year. The 2020 gross total assessed valuation for each District is as follows: District No. 1 - $370 District No. 2 - $27,762,620 District No. 3 - $29,729,500 5. Current year budget including a description of the Public Improvements to be construct in such year. Copies of the Districts’ 2021 Budgets are attached hereto as Exhibit A. 6. Audit of the District’s financial statements, for the year ending December 31 of the previous year, prepared in accordance with generally accepted accounting principles or audit exemption, if applicable. The Districts’ 2020 Audits are attached as Exhibit B. 0801.0024: 1123631 - 2 - 7. Notice of any uncured events of default by the Districts, which continue beyond a ninety (90) day period, under any debt instrument. There were no uncured events of default by the Districts, which continued beyond a ninety (90) day period, under any debt instrument. 0801.0024: 1055471 EXHIBIT A 2021 Budgets VAIL SQUARE METROPOLITAN DISTRICT No. 1 2021 BUDGET MESSAGE Vail Square Metropolitan District No. 1 is a quasi-municipal corporation organized and operated pursuant to provisions set forth in the Colorado Special District Act. The District was established to supply the necessary services of roads, drainage facilities, streetscape, water and sewer utilities mains. The District has no employees and all operations and administrative functions are contracted. The following budget is prepared on the modified accrual basis of accounting, which is consistent with the basis of accounting used in presenting the District's financial statements. 2021 BUDGET STRATEGY Vail Square Metropolitan District No.1 was formed in late 2005. The District has joined with Vail Square Metropolitan District No. 2 and Vail Square Metropolitan District No.3 in adopting a consolidated service plan. Under this consolidated service plan, Vail Square Metro District No.1 is the “service district” and Vail Square Metro District Nos. 2 and 3 are the “financing districts.” As such, Vail Square Metro District No. 1 will be responsible for managing the construction, maintenance and operation of facilities and improvements needed for the Vail Square Metro District Nos. 2 and 3 areas. In 2008 the District issued a $16 Million Tax Supported Loan Facility. The District used the net proceeds from the loan facility to finance the cost of the infrastructure improvements. As stated under the Joint Funding Agreement and the District Facilities Joint Financing, Construction and Service Agreement between the District and Vail Square Metro District Nos. 2 and 3, Districts Nos. 2 and 3 will be responsible for providing the funding and tax bases needed to support the financing plan for capital improvements. Vail Square Metropolitan District Nos. 2 and 3 anticipate utilizing the property taxes they collect to pay for a portion of their obligations to the District. Page 1 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 1 TO ADOPT 2021 BUDGET A RESOLUTION SUMMARIZING EXPENDITURES AND REVENUES FOR EACH FUND AND ADOPTING A BUDGET FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO.1, COLORADO, FOR THE CALENDAR YEAR BEGINNING ON THE FIRST DAY OF JANUARY 2021 AND ENDING ON THE LAST DAY OF DECEMBER 2021. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 1 (the “District”) has appointed a budget committee to prepare and submit a proposed 2021 budget at the proper time; and WHEAREAS, such committee has submitted a proposed budget to this governing body at the proper time, for its consideration, and; WHEREAS, upon due and proper notice, published or posted in accordance with the law, said proposed budget was open for inspection by the public at a designated place, and a public hearing was held on October 19, 2020 and interested taxpayers were given the opportunity to file or register any objections to said proposed budget; and; WHEREAS, whatever increases may have been made in the expenditures, like increases were added to the revenues or planned to be expended from reserves/fund balances so that the budget remains in balance, as required by law. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District: Section 1. That the budget as submitted, amended, and summarized by fund, hereby is approved and adopted as the budget of the District for the year stated above, as adjusted for immaterial changes in the final certified assessed value of the District as certified by the county assessor and corresponding adjustments resulting from such changes to the assessed value. In the event there are material changes to the assessed value then a subsequent meeting of the Board shall be called to consider such changes. Furthermore, to the extent capital or significant operating expenditures forecasted for the current year are anticipated to be extended into the following year, the expenditures and offsetting change in the budgeted beginning fund balance shall be updated to reflect management’s best estimate at the time the budget is to be filed with the Colorado Division of Local Affairs. Section 2. That the budget hereby approved and adopted shall be certified by any officer or the District Administrator of the District and made a part of the public records of the District. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) Page 2 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 1 (CONTINUED) TO SET MILL LEVIES A RESOLUTION LEVYING PROPERTY TAXES FOR THE YEAR 2020, TO HELP DEFRAY THE COSTS OF GOVERNMENT FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO. 1, TOWN OF VAIL, EAGLE COUNTY, COLORADO, FOR THE 2021 BUDGET YEAR. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 1 (the “District”), has adopted the annual budget in accordance with the Local Government Budget Law of Colorado, on October 19, 2020 and; WHEREAS, the amount of money necessary to balance the budget for general operating expenses and capital expenditure purposes from property tax revenue is $0.00 and; WHEREAS, the Board of Directors of the District finds that it is required to temporarily lower the general operating mill levy to render a refund for $0.00, and; WHEREAS, the amount of money necessary to balance the budget for capital expenditure purposes from property tax revenue approved by voters or at public hearing is $ 0.00, and; WHEREAS, the amount of money necessary to balance the budget for contractual obligations from property tax revenue as approved by voters is $ 0.00 and; WHEREAS, the amount of money necessary to balance the budget for voter approved bonds and interest is $0.00, and; WHEREAS, the 2021 net valuation for assessment for the District, as certified by the County Assessor is $200. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District: Section 1. That for the purposes of meeting all general operating expenses of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 2. That for the purposes of rendering a refund to its constituents during budget year 2021 there is hereby levied a temporary tax credit/mill levy reduction of 0.000 mills. Section 3. That, for the purpose of meeting all capital expenditures of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Page 3 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 1 (CONTINUED) TO SET MILL LEVIES (CONTINUED) Section 4. That for the purpose of meeting all payments for contractual obligations of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 5 That for the purpose of meeting all payments for bonds and interest of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 6. That any officer of the District or the District Administrator is hereby authorized and directed to either immediately certify to the Board of County Commissioners of Eagle County, Colorado, the mill levies for the District as hereinabove determined and set, or be authorized and directed to certify to the Board of County Commissioners of Eagle County, Colorado, the mill levies for the District as hereinabove determined and set based upon the final (December) certification of valuation from the County Assessor. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) Page 4 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 1 (CONTINUED) TO APPROPRIATE SUMS OF MONEY (PURSUANT TO SECTION 29-1-108, C.R.S.) A RESOLUTION APPROPRIATING SUMS OF MONEY TO THE VARIOUS FUNDS AND SPENDING AGENCIES, IN THE AMOUNT AND FOR THE PURPOSE AS SET FORTH BELOW, FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO. 1, TOWN OF VAIL, EAGLE COUNTY, COLORADO, FOR THE 2021 BUDGET YEAR. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 1 (the “District”) has adopted the annual budget in accordance with the Local Government Budget Law of Colorado, on October 19, 2020, and; WHEREAS, the Board of Directors has made provision therein for revenues in an amount equal or greater to the total proposed expenditures as set forth in said budget, and; WHEREAS, it is not only required by law, but also necessary to appropriate the revenues and reserves or fund balances provided in the budget to and for the purposes described below, thereby establishing a limitation on expenditures for the operations of the District. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE DISTRICT: Section 1. That the following sums are hereby appropriated from the revenues of each fund, to each fund, for the purposes stated: GENERAL FUND: Current Operating Expenses $ 106,621 DEBT SERVICE FUND: Debt Service Expenditures $1,496,004 (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) VAIL SQUARE METROPOLITAN DISTRICT #1STATEMENT OF NET POSITION Printed: 12/28/20September 30, 2020FIXEDGENERALDEBT ASSETSASSETSFUND SERVICE& LT DEBTTOTALCSafe 1,044,206 16,580 1,060,785Compass - Operating 0 0Compass - Project Fund 355,406 355,406Compass - Pledged Revenue 1,100,586 1,100,586Compass - Loan Payment 10,010 10,010Compass - D/S Reserve 505,776 505,776Accounts Receivable - VSQ #2 & #3 4,500 0 4,500Prepaid Insurance 0 0Assets 1,863,895 1,863,895Accum Depreciation/Amort(905,749) (905,749)Net Capital & Service Oblig - VSQ 2 & VSQ 3 10,492,425 10,492,425TOTAL ASSETS 1,048,706 1,988,358 11,450,571 14,487,634DEFERRED OUFLOWSSwap Interest Rate Deferred Inflow823,421 823,421TOTAL DEFERRED OUFLOWS 0 0 823,421 823,421OTAL ASSETS AND DEFERRED OUTFLOWS 1,048,706 1,988,358 12,273,992 15,311,055LIABILITIES Accounts Payable 5,948 0 5,948Accrued Interest Payable44,091 44,091Long Term Obligations 12,745,000 12,745,000Interest Rate Swap823,421 823,421TOTAL LIABILITIES 5,948 0 13,612,512 13,618,460NET POSITIONNet Investment in Capital Assets(1,338,520) (1,338,520)Unrestricted Net Position 1,042,757 1,988,357.74 3,031,115TOTAL NET POSITION 1,042,757 1,988,358 (1,338,520) 1,692,595TOTAL LIABILITIES ANDNET POSITION 1,048,706 1,988,358 12,273,992 15,311,055= = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.PAGE 1 VAIL SQUARE METROPOLITAN DISTRICT #1STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCEPrinted: 12/28/20BUDGET, ACTUAL AND FORECAST FOR THE PERIODS INDICATEDGENERAL FUNDCal year9 Months 9 Months Cal Year2020 Cal yearEnded EndedVariance 20212019 Adopted 2020 09/30/20 09/30/20 Favorable Adopted BudgetAuditedBudgetForecast ActualBudget(Unfav)Budget CommentsAssessed ValuationVail Square Metro Dist # 1 50 200 200 200Nov 2020 final AV Vail Square Metro Dist # 1 - TIF AV 40 170 170 170Nov 2020 final AV Vail Square Metro Dist # 2 12,926,060 14,747,380 14,747,380 14,734,340Nov 2020 final AV Vail Square Metro Dist # 2 - TIF AV 11,386,730 13,077,490 13,077,490 13,028,280Nov 2020 final AV Vail Square Metro Dist # 3 7,442,030 15,787,780 15,787,780 15,778,220Nov 2020 final AV Vail Square Metro Dist # 3 - TIF AV 6,555,780 14,000,070 14,000,070 13,951,280Nov 2020 final AV 38,310,690 57,613,090 57,613,090 57,492,490REVENUES Xfer VSQ #2 Prop Tax.-Serv 37,702 42,915 42,915 38,799 42,915 (4,115) 42,877 AV x Mill levy Xfer VSQ #2 TIF TOV Prop Tax.-Serv 33,173 38,055 38,055 20,414 20,400 14 37,912 AV x Mill levy Xfer VSQ #3 Prop Tax.-Serv 21,658 47,363 47,363 45,928 47,363 (1,435) 47,335 AV x Mill levy Xfer VSQ #3 TIF TOV Prop Tax.-Serv 19,076 40,740 40,740 0 40,740 (40,740) 40,598 AV x Mill levy Interest Income 21,597 13,980 13,980 6,010 10,485 (4,475) 5,366 .5% of fund balTOTAL REVENUES 133,205183,054183,054111,151 161,903 (50,752) 174,088EXPENDITURES Accounting 15,020 15,000 15,000 10,105 11,250 1,145 15,500 based on prior year Audit 8,500 8,500 8,500 8,500 8,500 0 8,800 ' " Elections 0 2,000 1,450 1,449 2,000 551 0 ' " Insurance 2,732 3,250 2,765 2,761 3,250 489 2,850 ' " Legal 6,497 15,000 15,000 6,495 11,250 4,755 15,500 ' " Miscellaneous 77 500 100 22 380 358 100 ' " Snowmelt Energy 19,428 20,000 20,000 12,454 14,000 1,546 20,600 ' " Snowmelt Repairs & Maintenance 9,280 10,000 10,000 1,630 1,650 20 10,500 ' " Operations Expenses - AVS 12,155 15,000 15,000 4,996 7,200 2,204 15,000 ' " Direct District Operating Expenses 0 5,300 5,300 0 0 0 5,200 ' " General Engineering 0000000 ' " Contingency 0 10,000000010,000 ' "TOTAL EXPENDITURES 73,690 104,550 93,115 48,412 59,480 11,068 104,050REVENUE OVER (UNDER) EXPEND. 59,516 78,504 89,939 62,739 102,423 39,684 70,038OTHER FINANCING SOURCES/(USES) Interdistrict Contirb - VSQ MD 3 (2,400) (995) (2,545) (5,846) (995) 4,851 (2,571)TOTAL OTHER FINANCING SOURCES(2,400) (995) (2,545) (5,846) (995) 4,851 (2,571)FUND BALANCE - BEGINNING 928,748 932,022 985,864 985,864 932,022 (53,842) 1,073,258FUND BALANCE - ENDING985,8641,009,531 1,073,258 1,042,757 1,033,450 (9,307) 1,140,726= = = = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.PAGE 2Components of Fund Balance Assigned for Capital Costs - Reserves 860,000 870,000Unassigned 213,258 270,726Total 1,073,258 1,140,726 VAIL SQUARE METROPOLITAN DISTRICT #1 Printed: 12/28/20STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCETO JOBUDGET, ACTUAL AND FORECAST FOR THE PERIODS INDICATEDPDEBT SERVICE FUNDCal year9 Months 9 Months Cal Year2020 Cal yearEnded EndedVariance 2,0212019 Adopted 2020 09/30/20 09/30/20 Favorable Adopted BUDGETAudited Budget Forecast Actual Budget (Unfav) Budget ASSUMPTIONSAssessed ValuationVail Square Metro Dist # 1 50 200 200 200Nov 2020 final AV Vail Square Metro Dist # 1 - TIF AV 40 170 170 170Nov 2020 final AV Vail Square Metro Dist # 2 12,926,060 14,747,380 14,747,380 14,734,340Nov 2020 final AV Vail Square Metro Dist # 2 - TIF AV 11,386,730 13,077,490 13,077,490 13,028,280Nov 2020 final AV Vail Square Metro Dist # 3 7,442,030 15,787,780 15,787,780 15,778,220Nov 2020 final AV Vail Square Metro Dist # 3 - TIF AV 6,555,780 14,000,070 14,000,070 13,951,280Nov 2020 final AV Total Assessed Value38,310,690 57,613,090 57,613,090 57,492,490Change 2% -32%0%Mill Levy RatesIGA Services Mill Levy Rate #2 3.000 3.000 3.000 3.000Capital Pledge Mill Levy Rate #232.000 32.000 32.000 32.000Total Mill Levy Rate #2 35.000 35.000 35.00061.54%35.00061.54%IGA Services Mill Levy Rate #33.000 3.000 3.000 3.000Capital Pledge Mill Levy Rate #318.875 18.875 18.875 18.875Total Mill Levy Rate #3 21.875 21.875 21.87538.46%21.87538.46%REVENUES Xfer IGA D/S - VSQ # 2 402,156 457,759 457,759 413,859 457,759 (43,899) 457,354 AV x Mill levy Xfer IGA D/S - VSQ # 2 TIF TOV 353,841 405,925 405,925 217,747 217,750 (3) 404,398 AV x Mill levy Xfer IGA D/S - VSQ # 3 136,265 289,055 289,055 288,963 289,054 (91) 288,879 AV x Mill levy Xfer IGA D/S - VSQ # 3 TIF TOV 120,017 256,324 256,324 0 0 0 255,430 AV x Mill levy Xfer IGA D/S - VSQ # 3 Potential Abateme 0 0 0 (367,500) Xfer Spec Own Tax - VSQ 2 42,005 43,892 43,892 20,452 29,261 (8,810) 25,387 Xfer Spec Own Tax - VSQ 3 14,258 20,166 27,716 12,877 8,500 4,377 12,336 Interest income - Cap Int/DS Res Fund 2,100 1,285 550 366 413 (46) 8,988 based on .5%TOTAL REVENUES 1,070,642 1,474,4051,481,220 954,2641,002,737 (48,473) 1,085,273EXPENDITURES Swap - $14M @ Fixed Interest Rate Paid 519,324 587,058 520,687 250,424 293,529 43,105 502,224 4.61% interest Loan - $14M Hedged Principal 395,000 415,000 415,000 0 0 0 435,000 Loan - $2M Unhedged @ Floating Interest 56,134 58,000 57,771 26,283 28,886 2,603 57,780 min of 2.84941% or (65% LIBOR Loan - $2M Unhedged Principal 0 500,0000000500,000 6/1/2023 entire amt Agent/Bank Fees 0 1,000 1,000 0 0 0 1,000TOTAL EXPENDITURES 970,457 1,561,058 994,458 276,707 322,41545,708 1,496,004REVENUE OVER (UNDER) EXPEND. 100,184(86,653) 486,762 677,557 680,322 (2,765) (410,731)FUND BALANCE - BEGINNING 1,210,616 1,284,967 1,310,801 1,310,801 1,284,967 25,834 1,797,563FUND BALANCE - ENDING1,310,801 1,198,3151,797,563 1,988,358 1,965,289 23,068 1,386,832= = = = = = Components of Fund Balance Debt Service Reserve Fund 505,607 505,587 505,599 505,587 Restricted for Future Debt Service 805,193 692,728 1,291,964 881,245 Total 1,310,801 1,198,315 1,797,563 1,386,832Principal Outstanding on 2008 Loan 10,745,000 10,330,000 10,330,000 9,895,000 June 1 2023 balloon Pmt Principal Outstanding on 2008A Loan 2,000,000 1,500,000 2,000,000 1,500,000 June 1 2023 balloon Pmt Total Debt Outstanding 12,745,000 11,830,000 12,330,000 11,395,000Debt to Assessed Value Ratio33% 21% 21% 20%No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.PAGE 3 114 County Tax entity code DOLA LGID/SID 65508 TO: County Commissioners1 of Eagle County , Colorado. On behalf of the Vail Square Metropolitan District No. 1 the Board of Directors of the Vail Square Metropolitan District No. 1 $370 $200 Submitted:12/8/2020 for budget/fiscal year 2021 . (not later than Dec 15) (mm/dd/yyyy)(yyyy) PURPOSE (see end notes for definitions and examples)LEVY2 REVENUE2 1.General Operating ExpensesH 0.000 mills -$ 2.(0.000) mills -$ SUBTOTAL FOR GENERAL OPERATING: (0.000)mills -$ 3.General Obligation Bonds and InterestJ 0.000 mills -$ 4.Contractual ObligationsK 0.000 mills -$ 5.Capital ExpendituresL 0.000 mills -$ 6.Refunds/AbatementsM 0.000 mills -$ 7.OtherN (specify): 0.000 mills -$ 0.000 mills -$ TOTAL:[]0.000 mills -$ Daytime phone: (970) 926-6060 x8 Signed: Title: District Administrator (local government)C Include one copy of this tax entity's completed form when filing the local government's budget by January 31st, per 29-1-113 C.R.S. with the Division of Local Government (DLG), Room 521, 1313 Sherman Street, Denver, Colorado 80203. Questions? Call DLG (303) 864-7720. 1 If the taxing entity's boundaries include more than one county, you must certify the levies to each county. Use a separate form for each county and certify the same levies uniformly to each county per Article X, Section 3 of the Colorado Constitution. 2 Levies must be rounded to three decimal places and revenue must be calculated from the total NET assessed valuation (Line 4 of Form DLG57 on the County Assessor's FINAL certification of valuation). USE VALUE FROM FINAL CERTIFICATION OF VALUATION PROVIDED BY ASSESSOR NO LATER THAN DECEMBER 10 <Minus> Temporary General Property Tax Credit/ Temporary Mill Levy Rate ReductionI (GrossD assessed valuation, Line 2 of the Certification of Valuation From DLG 57 E) (NETG assessed valuation, Line 4 of the Certification of Valuation Form DLG 57) Hereby officially certifies the following mills to be levied against the taxing entity's GROSS assessed valuation of: Contact person: (print) Kenneth J. Marchetti Sum of General Operating Subtotal and Lines 3 to 7 Note: If the assessor certified a NET assessed valuation (AV) different than the GROSS AV due to a Tax Increment Financing (TIF) AreaF the tax levies must be calculated using the NET AV. The taxing entity's total property tax revenue will be derived from the mill levy multiplied against the NET assessed valuation of: CERTIFICATION OF TAX LEVIES for NON-SCHOOL Governments (taxing entity)A (governing body)B Form DLG 70 (rev 6/16)Page 1 of 4 VAIL SQUARE METROPOLITAN DISTRICT No. 2 2021 BUDGET MESSAGE Vail Square Metropolitan District No.2 is a quasi-municipal corporation organized and operated pursuant to provisions set forth in the Colorado Special District Act. The District was established to supply the necessary services of roads, drainage facilities, streetscape, water and sewer utilities mains. The District has no employees and all operations and administrative functions are contracted. The following budget is prepared on the modified accrual basis of accounting, which is consistent with the basis of accounting used in presenting the District's financial statements. 2021 BUDGET STRATEGY Vail Square Metropolitan District No. 2 was formed in late 2005. The District has joined with Vail Square Metropolitan District No.1 and Vail Square Metropolitan District No.3 in adopting a consolidated service plan. Under this consolidated service plan, Vail Square Metro District No. 1 will be the “service district” and Vail Square Metro District Nos. 2 and 3 will be the “financing districts.” As such, Vail Square Metro District No.1 will be responsible for managing the construction, maintenance and operation of facilities and improvements needed for the Vail Square Metro District Nos. 2 and 3 areas. The District and Vail Square Metro District No.3 will be responsible for providing the funding and tax bases needed to support the financing plan for capital improvements. Vail Square Metropolitan District Nos. 2 and 3 anticipate utilizing the property taxes they collect to pay for a portion of their obligations under the Joint Funding Agreement and the District Facilities Joint Financing, Construction and Service Agreement with Vail Square Metropolitan District No.1. Page 1 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 2 TO ADOPT 2021 BUDGET A RESOLUTION SUMMARIZING EXPENDITURES AND REVENUES FOR EACH FUND AND ADOPTING A BUDGET FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO.2, COLORADO, FOR THE CALENDAR YEAR BEGINNING ON THE FIRST DAY OF JANUARY 2021 AND ENDING ON THE LAST DAY OF DECEMBER 2021. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 2 (the “District”) has appointed a budget committee to prepare and submit a proposed 2021 budget at the proper time; and WHEAREAS, such committee has submitted a proposed budget to this governing body at the proper time, for its consideration, and; WHEREAS, upon due and proper notice, published or posted in accordance with the law, said proposed budget was open for inspection by the public at a designated place, and a public hearing was held on October 19, 2020 and interested taxpayers were given the opportunity to file or register any objections to said proposed budget; and; WHEREAS, whatever increases may have been made in the expenditures, like increases were added to the revenues or planned to be expended from reserves/fund balances so that the budget remains in balance, as required by law. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District: Section 1. That the budget as submitted, amended, and summarized by fund, hereby is approved and adopted as the budget of the District for the year stated above, as adjusted for immaterial changes in the final certified assessed value of the District as certified by the county assessor and corresponding adjustments resulting from such changes to the assessed value. In the event there are material changes to the assessed value then a subsequent meeting of the Board shall be called to consider such changes. Furthermore, to the extent capital or significant operating expenditures forecasted for the current year are anticipated to be extended into the following year, the expenditures and offsetting change in the budgeted beginning fund balance shall be updated to reflect management’s best estimate at the time the budget is to be filed with the Colorado Division of Local Affairs. Section 2. That the budget hereby approved and adopted shall be certified by any officer of the District or the District Administrator of the District and made a part of the public records of the District. Page 2 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 2 (CONTINUED) TO SET MILL LEVIES A RESOLUTION LEVYING PROPERTY TAXES FOR THE YEAR 2020, TO HELP DEFRAY THE COSTS OF GOVERNMENT FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO. 2, TOWN OF VAIL, EAGLE COUNTY, COLORADO, FOR THE 2021 BUDGET YEAR. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 2 (the “District”), has adopted the annual budget in accordance with the Local Government Budget Law of Colorado, on October 19, 2020 and; WHEREAS, the amount of money necessary to balance the budget for general operating expenses and capital expenditure purposes from property tax revenue is $0.00 and; WHEREAS, the Board of Directors of the District finds that it is required to temporarily lower the general operating mill levy to render a refund for $0.00, and; WHEREAS, the amount of money necessary to balance the budget for capital expenditure purposes from property tax revenue approved by voters or at public hearing is $0.00, and; WHEREAS, the amount of money necessary to balance the budget for contractual obligations from property tax revenue as approved by voters is $44,203.02 and; WHEREAS, the amount of money necessary to balance the budget for voter approved general obligation debt and interest is $471,498.88 and; WHEREAS, the 2020 net valuation for assessment for the District, as certified by the County Assessor is $14,734,340. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District: Section 1. That for the purposes of meeting all general operating expenses of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 2. That for the purposes of rendering a refund to its constituents during budget year 2021 there is hereby levied a temporary tax credit/mill levy reduction of 0.000 mills. Section 3. That for the purpose of meeting all capital expenditures of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Page 3 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 2 (CONTINUED) TO SET MILL LEVIES (CONTINUED) Section 4. That for the purpose of meeting all payments for contractual obligations of the District during the 2021 budget year, there is hereby levied a tax of 3.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 5 That for the purpose of meeting all payments for general obligation debt and interest of the District during the 2021 budget year, there is hereby levied a tax of 32.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 6. That any officer of the District or the District Administrator is hereby authorized and directed to either immediately certify to the Board of County Commissioners of Eagle County, Colorado, the mill levies for the District as hereinabove determined and set, or be authorized and directed to certify to the Board of County Commissioners of Eagle County, Colorado, the mill levies for the District as hereinabove determined and set based upon the final (December) certification of valuation from the county assessor. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) Page 4 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 2 (CONTINUED) TO APPROPRIATE SUMS OF MONEY (PURSUANT TO SECTION 29-1-108, C.R.S.) A RESOLUTION APPROPRIATING SUMS OF MONEY TO THE VARIOUS FUNDS AND SPENDING AGENCIES, IN THE AMOUNT AND FOR THE PURPOSE AS SET FORTH BELOW, FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO. 2, TOWN OF VAIL, EAGLE COUNTY, COLORADO, FOR THE 2021 BUDGET YEAR. WHEREAS, the Board of Directors of the Vail Square Metropolitan District (the “District”) has adopted the annual budget in accordance with the Local Government Budget Law of Colorado, on October 19, 2020, and; WHEREAS, the Board of Directors has made provision therein for revenues in an amount equal or greater to the total proposed expenditures as set forth in said budget, and; WHEREAS, it is not only required by law, but also necessary to appropriate the revenues and reserves or fund balances provided in the budget to and for the purposes described below, thereby establishing a limitation on expenditures for the operations of the District. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE DISTRICT: Section 1. That the following sums are hereby appropriated from the revenues of each fund, to each fund, for the purposes stated: GENERAL FUND: Current Operating Expenses $ 8,500 DEBT SERVICE FUND: Debt Service Expenditures $993,937 Fund Transfers $14,185 TOTAL DEBT SERVICE FUND: $1,008,122 (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) VAIL SQUARE METROPOLITAN DISTRICT # 2STATEMENT OF NET POSITION Printed: 28-Dec-20September 30, 2020GENERALGENERALDEBTFIXED ASSETSFUND SERVICE& LT DEBTTOTALASSETS Csafe 20,871 230,208 0 251,079 Property Tax Receivable 0 17,449 0 17,449 Accounts Receivable 0 0 0 0 Prepaid Expenses 0000TOTAL ASSETS 20,871 247,657 0 268,528LIABILITIES Accounts Payable 4,500 0 0 4,500 Deferred Property Tax Revenue 0 17,449 0 17,449 Accrued Interest Payable 0 0 0 0 Net Service and Capital Oblig - VSQ No. 1 8,708,713 8,708,713TOTAL LIABILITIES 4,500 17,449 8,708,713 8,730,662DEFERRED INFLOWS Deferred Property Tax Revenue 0 0 0 0TOTAL DEFERRED INFLOWS 0 0 0 0NET POSITION Net of Capital and Service Obligation 0 0 (8,708,713) (8,708,713) Fund Balance 16,371 230,208 0 246,579TOTAL NET POSITION 16,371 230,208 (8,708,713) (8,462,134)TOTAL LIABILITIES, DEFERRED INFLOWS ANDNET POSITION 20,871 247,657 0 268,528= = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.PAGE 1 VAIL SQUARE METROPOLITAN DISTRICT # 2Printed: 12/28/20 ModifiedSTATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCEAccrual BUDGET, ACTUAL AND FORECAST FOR THE PERIODS INDICATEDBasisCal Yr 9 Months 9 Months GENERAL FUND Cal Yr 2020 Cal Yr Ended EndedVariance 20212019 Adopted 2020 09/30/20 09/30/20 Favorable Adopted BUDGETAudited BudgetForecast ActualBudget(Unfav)Budget ASSUMPTIONSAssessed Valuation - Net 12,926,060 14,747,380 14,747,38014,734,340 Nov 2020 final AV Assessed Valuation - TIF 11,386,730 13,077,490 13,077,49013,028,280 Nov 2020 final AV Total Gross AV 24,312,790 27,824,870 27,824,870 27,762,620-2.8% 14.4%0%Percent changeREVENUES Vail Sq # 1 Interdstrict Contrib 0 0 0 0 0 0 0 Interest Income 0 0 0 0 0 0 0TOTAL REVENUES 0 0 0 0 0 0 0EXPENDITURES Audit 4,500 4,500 4,500 4,500 4,500 0 4,500 Insurance 2,595 3,000 2,650 2,648 3,000 352 3,000 VSQ 1 Interdistrict Advance repayment 0 0 0 0 0 0 0 Contingency Allowance 0 1,000 1,000 0 0 0 1,000TOTAL EXPENDITURES 7,095 8,500 8,150 7,148 7,500 352 8,500REVENUE OVER (UNDER) EXPEND. (7,095) (8,500) (8,150) (7,148) (7,500) 352 (8,500)OTHER SOURCES AND (USES) Xfer Net Int & SO tax fr DS Fund 8,500 11,115 9,140 0 0 0 14,185TOTAL OTHER SOURCES & (USES) 8,500 11,115 9,140 0 0 0 14,185FUND BALANCE - BEGINNING 22,115 26,372 23,519 23,519 26,372 (2,853) 24,509FUND BALANCE - ENDING23,519 28,987 24,509 16,371 18,872 (2,501) 30,194= = = = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.Page 2 VAIL SQUARE METROPOLITAN DISTRICT # 2Printed: 12/28/20 ModifiedSTATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCEAccrual BUDGET, ACTUAL AND FORECAST FOR THE PERIODS INDICATEDBasisCal Yr 9 Months 9 Months DEBT SERVICE FUND Cal Yr 2020 Cal Yr Ended EndedVariance2019 Adopted 2020 09/30/20 09/30/20 Favorable 2021 BUDGETAudited BudgetForecast ActualBudget(Unfav)Forecast ASSUMPTIONSAssessed Valuation -Net12,926,060 14,747,380 14,747,380 14,734,340Nov 2020 final AV Assessed Valuation - TIF TOV URA11,386,730 13,077,490 13,077,490 13,028,280Nov 2020 final AV Total Gross AV 24,312,790 27,824,870 27,824,870 27,762,620-0.1% 14.4%0%Percent changeMill Levy RatesIGA Services Mill Levy Rate 3.000 3.000 3.000 3.000Capital Pledge Mill Levy Rate 32.000 32.000 32.000 32.000Total Mill Levy Rate 35.000 35.000 35.000 35.000REVENUES Prop Taxes-IGA Serv 38,873 44,242 44,242 42,747 44,242 (1,496) 44,203 AV x Mill levy Prop Taxes-TIF IGA Serv 33,173 38,055 38,055 34,407 34,400 7 37,912 AV x Mill levy Prop Taxes-D/S Oblig 414,644 471,916 471,916 455,963 471,916 (15,953) 471,499 AV x Mill levy Prop Taxes-TIF D/S Oblig 353,841 405,925 405,925 367,007 367,050 (43) 404,398 AV x Mill levy Specific Ownership Taxes 45,943 48,007 48,007 31,793 32,005 (212) 43,111 4.5% of Prop tax Interest Income 5,587 7,000 2,000 1,517 5,250 (3,733) 7,000TOTAL REVENUES 892,060 1,015,146 1,010,146 933,433 954,863 (21,430) 1,008,123EXPENDITURES Xfer Prop Taxes to VSQ #1 - Serv Oblig 37,702 42,915 42,915 38,799 42,915 4,115 42,877 Service mills less Treas Fee Xfer Prop Taxes to VSQ #1 - Serv TIF TOV 33,173 38,055 38,055 20,414 20,400 (14) 37,912 TOV URA Xfer Prop Taxes to VSQ #1 - D/S Oblig 402,156 457,759 457,759 413,859 457,759 43,899 457,354 DS mills less Treas Fee Xfer Prop Taxes to VSQ #1 - D/S TIF TOV 353,841 405,925 405,925 217,747 217,750 3 404,398 TOV URA Xfer Specific Ownership Tax - D/S 42,005 43,892 43,892 20,452 29,261 8,810 35,925 IGA DS % of SO tax Treasurer's Fees 13,658 15,485 15,485 14,979 15,485 506 15,471 3% of Prop. Taxes Contingency 0TOTAL EXPENDITURES 882,5351,004,031 1,004,031 726,250 783,569 57,320 993,937REVENUE OVER (UNDER) EXPEND. 9,525 11,115 6,115 207,183 171,293 35,890 14,185OTHER SOURCES/(USES) Xfer Net Int & SO tax to Gen Fund (8,500) (11,115) (9,140) 0 0 0 (14,185) TOTAL OTHER FINANCING SOURCES (8,500) (11,115) (9,140) 0 0 0 (14,185)FUND BALANCE - BEGINNING 22,000 20,000 23,025 23,025 20,000 3,025 20,000 Reverse contingency 0FUND BALANCE - ENDING23,025 20,000 20,000 230,208 191,293 38,915 20,000= = = = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.Page 3 115 County Tax entity code DOLA LGID/SID 65509 TO: County Commissioners1 of Eagle County , Colorado. On behalf of the Vail Square Metropolitan District No. 2 the Board of Directors of the Vail Square Metropolitan District No. 2 $27,762,620 $14,734,340 Submitted:12/8/2020 for budget/fiscal year 2021 (not later than Dec 15) (mm/dd/yyyy)(yyyy) PURPOSE (see end notes for definitions and examples)LEVY2 REVENUE2 1.General Operating ExpensesH 0.000 mills -$ 2.(0.000) mills -$ SUBTOTAL FOR GENERAL OPERATING: (0.000)mills -$ 3.General Obligation Bonds and InterestJ 32.000 mills 471,498.88$ 4.Contractual ObligationsK 3.000 mills 44,203.02$ 5.Capital ExpendituresL 0.000 mills -$ 6.Refunds/AbatementsM 0.000 mills -$ 7.OtherN (specify): 0.000 mills -$ 0.000 mills -$ TOTAL:[]35.000 mills 515,701.90$ Daytime phone: (970) 926-6060 x8 Signed: Title: District Administrator (local government)C Include one copy of this tax entity's completed form when filing the local government's budget by January 31st, per 29-1-113 C.R.S. with the Division of Local Government (DLG), Room 521, 1313 Sherman Street, Denver, Colorado 80203. Questions? Call DLG (303) 864-7720. 1 If the taxing entity's boundaries include more than one county, you must certify the levies to each county. Use a separate form for each county and certify the same levies uniformly to each county per Article X, Section 3 of the Colorado Constitution. 2 Levies must be rounded to three decimal places and revenue must be calculated from the total NET assessed valuation (Line 4 of Form DLG57 on the County Assessor's FINAL certification of valuation). USE VALUE FROM FINAL CERTIFICATION OF VALUATION PROVIDED BY ASSESSOR NO LATER THAN DECEMBER 10 <Minus> Temporary General Property Tax Credit/ Temporary Mill Levy Rate ReductionI (GrossD assessed valuation, Line 2 of the Certification of Valuation From DLG 57 E) (NETG assessed valuation, Line 4 of the Certification of Valuation Form DLG 57) Hereby officially certifies the following mills to be levied against the taxing entity's GROSS assessed valuation of: Contact person: (print) Kenneth J. Marchetti Sum of General Operating Subtotal and Lines 3 to 7 Note: If the assessor certified a NET assessed valuation (AV) different than the GROSS AV due to a Tax Increment Financing (TIF) AreaF the tax levies must be calculated using the NET AV. The taxing entity's total property tax revenue will be derived from the mill levy multiplied against the NET assessed valuation of: CERTIFICATION OF TAX LEVIES for NON-SCHOOL Governments (taxing entity)A (governing body)B Form DLG 70 (rev 6/16)Page 1 of 4 THIS SECTION APPLIES TO TITLE 32, ARTICLE 1 SPECIAL DISTRICTS THAT LEVY TAXES FOR PAYMENT OF GENERAL OBLIGATION DEBT (32-1-603 C.R.S.). Taxing entities that are Special Districts or Subdistricts of Special Districts must certify separate mill levies and revenue to the Board of County Commissioners, one each for the funding requirements of each debt (32-1-603, C.R.S.) Use additional pages as necessary. The Special District's or Subdistrict's total levies for general obligation bonds and total levies for contractual obligations should be recorded on Page 1, Lines 3 and 4 respectively. CERTIFY A SEPARATE MILL LEVY FOR EACH BOND OR CONTRACT: BONDSJ: 1. Purpose of Issue:The District entered into a Joint Funding Agreement to facilitate the provision of the Facilities in a timely, efficient and cost-effective manner sufficient to serve the anticipated development within the Financing Districts, the District determined that the Operating District (VSQMD No. 1) enter into a Loan Agreement dated as of July 23, 2008. In order to facilitate the borrowing of the Loan proceeds and in exchange for the Lender making the Loan (the proceeds of which are to be applied, in accordance with the Loan Agreement, to the provision of Facilities), the Financing Districts have entered into the Loan Agreement as additional obligors, and, by the terms of this Agreement, pledged certain revenues to the Lender and covenanted to take certain actions with respect to generating such revenues, for the benefit of the Lender; Series: 2008 Date of Issue: July 23, 2008 Coupon rate: Variable Maturity Date:December 1, 2023 Levy: 32.000 Mills Revenue: $471,498.88 2. Purpose of Issue: Series: Date of Issue: Coupon rate: Maturity Date: Levy: Revenue: CONTRACTSK: 3. Purpose of Contract: The District entered into an agreement for the implementation of principles and objectives set forth in the Service Plan regarding financing, construction, operation and maintenance of the facilities, and administration of the District's affairs pursuant to voter authorization approved at election in November 2005. Title: District Facilities Joint Financing, Construction and Service Agreement Date: July 21, 2008 Principal Amount: $20,000,000 Maturity Date: December 1, 2023 Levy: 3.000 Mills Revenue: $44,203.02 4. Purpose of Contract: Title: Date: Principal Amount: Maturity Date: Levy: Revenue: Use multiple copies of this page as necessary to separately report all bond and contractual obligations per 32-1-1603, C.R.S. CERTIFICATION OF TAX LEVIES, continued Vail Square Metropolitan District No. 2 Form DLG 70 (rev 6/16)Page 2 of 4 VAIL SQUARE METROPOLITAN DISTRICT No. 3 2021 BUDGET MESSAGE Vail Square Metropolitan District No.3 is a quasi-municipal corporation organized and operated pursuant to provisions set forth in the Colorado Special District Act. The District was established to supply the necessary services of roads, drainage facilities, streetscape, water and sewer utilities mains. The District has no employees and all operations and administrative functions are contracted. The following budget is prepared on the modified accrual basis of accounting, which is consistent with the basis of accounting used in presenting the District's financial statements. 2021 BUDGET STRATEGY Vail Square Metropolitan District No.3 was formed in late 2005. The District has joined with Vail Square Metropolitan District No.1 and Vail Square Metropolitan District No. 2 in adopting a consolidated service plan. Under this consolidated service plan, Vail Square Metro District No.1 will be the “service district” and Vail Square Metro District Nos. 2 and 3 will be the “financing districts.” As such, Vail Square Metro District No.1 will be responsible for managing the construction, maintenance, and operation of facilities and improvements needed for the Vail Square Metro District Nos. 2 and 3 areas. The District and Vail Square Metro District No. 2 will be responsible for providing the funding and tax bases needed to support the financing plan for capital improvements. Vail Square Metropolitan District Nos. 2 and 3 anticipate utilizing the property taxes they collect to pay for a portion of their obligations under the Joint Funding Agreement and the District Facilities Joint Financing, Construction and Service Agreement with Vail Square Metropolitan District No. 1. Page 1 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 3 TO ADOPT 2021 BUDGET A RESOLUTION SUMMARIZING EXPENDITURES AND REVENUES FOR EACH FUND AND ADOPTING A BUDGET FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO.3, COLORADO, FOR THE CALENDAR YEAR BEGINNING ON THE FIRST DAY OF JANUARY 2021 AND ENDING ON THE LAST DAY OF DECEMBER 2021. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 3 (the “District”) has appointed a budget committee to prepare and submit a proposed 2021 budget at the proper time; and WHEAREAS, such committee has submitted a proposed budget to this governing body at the proper time, for its consideration, and; WHEREAS, upon due and proper notice, published or posted in accordance with the law, said proposed budget was open for inspection by the public at a designated place, and a public hearing was held on October 19, 2020 and interested taxpayers were given the opportunity to file or register any objections to said proposed budget; and; WHEREAS, whatever increases may have been made in the expenditures, like increases were added to the revenues or planned to be expended from reserves/fund balances so that the budget remains in balance, as required by law. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District: Section 1. That the budget as submitted, amended, and summarized by fund, hereby is approved and adopted as the budget of the District for the year stated above, as adjusted for immaterial changes in the final certified assessed value of the District as certified by the county assessor and corresponding adjustments resulting from such changes to the assessed value. In the event there are material changes to the assessed value then a subsequent meeting of the Board shall be called to consider such changes. Furthermore, to the extent capital or significant operating expenditures forecasted for the current year are anticipated to be extended into the following year, the expenditures and offsetting change in the budgeted beginning fund balance shall be updated to reflect management’s best estimate at the time the budget is to be filed with the Colorado Division of Local Affairs. Section 2. That the budget hereby approved and adopted shall be certified by any officer of the District or the District Administrator of the District and made a part of the public records of the District. Page 2 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 3 (CONTINUED) TO SET MILL LEVIES A RESOLUTION LEVYING PROPERTY TAXES FOR THE YEAR 2020, TO HELP DEFRAY THE COSTS OF GOVERNMENT FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO. 3, TOWN OF VAIL, EAGLE COUNTY, COLORADO, FOR THE 2021 BUDGET YEAR. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 3, (the “District”) has adopted the annual budget in accordance with the Local Government Budget Law of Colorado, on October 19, 2020 and; WHEREAS, the amount of money necessary to balance the budget for general operating expenses and capital expenditure purposes from property tax revenue is $0.00 and; WHEREAS, the Board of Directors of the District finds that it is required to temporarily lower the general operating mill levy to render a refund for $0.00, and; WHEREAS, the amount of money necessary to balance the budget for capital expenditure purposes from property tax revenue approved by voters or at public hearing is $0.00, and; WHEREAS, the amount of money necessary to balance the budget for contractual obligations from property tax revenue as approved by voters is $ 47,334.66 and; WHEREAS, the amount of money necessary to balance the budget for voter approved general obligation debt and interest is $297,813.90 and; WHEREAS, the 2020 net valuation for assessment for the District, as certified by the County Assessor is $15,778,220. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District: Section 1. That for the purposes of meeting all general operating expenses of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 2. That for the purposes of rendering a refund to its constituents during budget year 2021 there is hereby levied a temporary tax credit/mill levy reduction of 0.00 mills. Section 3. That for the purpose of meeting all capital expenditures of the District during the 2021 budget year, there is hereby levied a tax of 0.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Page 3 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 3 (CONTINUED) TO SET MILL LEVIES (CONTINUED) Section 4. That for the purpose of meeting all payments for contractual obligations of the District during the 2021 budget year, there is hereby levied a tax of 3.000 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 5 That for the purpose of meeting all payments for general obligation debt and interest of the District during the 2021 budget year, there is hereby levied a tax of 18.875 mills upon each dollar of the total valuation for assessment of all taxable property within the District for the year 2020. Section 6. That any officer of the District or the District Administrator is hereby authorized and directed to either immediately certify to the Board of County Commissioners of Eagle County, Colorado, the mill levies for the District as hereinabove determined and set, or be authorized and directed to certify to the Board of County Commissioners of Eagle County, Colorado, the mill levies for the District as hereinabove determined and set based upon the final (December) certification of valuation from the county assessor. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) Page 4 of 5 RESOLUTIONS OF VAIL SQUARE METROPOLITAN DISTRICT NO. 3 (CONTINUED) TO APPROPRIATE SUMS OF MONEY (PURSUANT TO SECTION 29-1-108, C.R.S.) A RESOLUTION APPROPRIATING SUMS OF MONEY TO THE VARIOUS FUNDS AND SPENDING AGENCIES, IN THE AMOUNT AND FOR THE PURPOSE AS SET FORTH BELOW, FOR THE VAIL SQUARE METROPOLITAN DISTRICT NO. 3, TOWN OF VAIL, EAGLE COUNTY, COLORADO, FOR THE 2021 BUDGET YEAR. WHEREAS, the Board of Directors of the Vail Square Metropolitan District No. 3 (the “District”) has adopted the annual budget in accordance with the Local Government Budget Law of Colorado, on October 19, 2020, and; WHEREAS, the Board of Directors has made provision therein for revenues in an amount equal or greater to the total proposed expenditures as set forth in said budget, and; WHEREAS, it is not only required by law, but also necessary to appropriate the revenues and reserves or fund balances provided in the budget to and for the purposes described below, thereby establishing a limitation on expenditures for the operations of the District. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE DISTRICT: Section 1. That the following sums are hereby appropriated from the revenues of each fund, to each fund, for the purposes stated: GENERAL FUND: Current Operating Expenses $ 9,200 DEBT SERVICE FUND: Debt Service Expenditures $ 300,607 Fund Transfers $ 6,629 TOTAL DEBT SERVICE FUND $ 307,236 (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) VAIL SQUARE METROPOLITAN DISTRICT # 3STATEMENT OF NET POSITION Printed: 28-Dec-20September 30, 2020GENERALGENERAL DEBTFIXED ASSETSFUND SERVICE& LT DEBTTOTALASSETS Csafe200 305,611 0 305,811 Property Tax Receivable 0 0 0 0 Accounts Receivable 0 0 0 0 Prepaid Expenses 0000TOTAL ASSETS 200 305,611 0 305,811LIABILITIES Accounts Payable 0000 Accrued Interest Payable 0 0 0 0 Net Service & Capital Oblig - VSQ No. 1 0 1,783,712 1,783,712TOTAL LIABILITIES 0 0 1,783,712 1,783,712DEFERRED INFLOWS Deferred Property Tax Revenue00TOTAL DEFERRED INFLOWS 0 0 0 0NET POSITION Net Capital and Service Obligation 0 0 (1,783,712) (1,783,712) Fund Balance 200 305,611 0 305,811TOTAL NET POSITION 200 305,611 (1,783,712) (1,477,901)TOTAL LIABILITIES, DEFERRED INFLOWS ANDNET POSITION 200 305,611 0 305,811= = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.PAGE 1 VAIL SQUARE METROPOLITAN DISTRICT # 3 Printed: 1/18/21 STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE Modified BUDGET, ACTUAL AND FORECAST FOR THE PERIODS INDICATED Accrual Cal Yr 9 Months 9 Months Cal Yr GENERAL FUND Cal Yr 2020 Cal Yr Ended Ended Variance 2021 2019 Adopted 2020 09/30/20 09/30/20 Favorable Adopted BUDGET Audited Budget Forecast Actual Budget (Unfav)Budget ASSUMPTIONS Assessed Valuation - Net 7,442,030 15,787,780 15,787,780 15,778,220 Nov 2020 Final AV Assessed Valuation - TIF 6,555,780 14,000,070 14,000,070 13,951,280 Nov 2020 Final AV Total Gross AV 13,997,810 29,787,850 29,787,850 29,729,500 -1%112%0%Percent change REVENUES Vail Sq # 1 InterDistrict Contrib 2,400 995 2,545 5,846 2,600 3,246 2,571 Interest Income 0 0 0 0 0 0 0 TOTAL REVENUES 2,400 995 2,545 5,846 2,600 3,246 2,571 EXPENDITURES Audit 3,200 3,200 3,200 3,200 3,200 0 3,200 Insurance 2,594 3,000 3,000 2,646 3,000 354 3,000 Contingency Allowance 0 1,000 1,000 0 0 0 3,000 allow for abate so xfer TOTAL EXPENDITURES 5,794 7,200 7,200 5,846 6,200 354 9,200 REVENUE OVER (UNDER) EXPEND.(3,394)(6,205)(4,655)(0)(3,600)3,600 (6,629) OTHER SOURCES AND (USES) Xfer Net Int & SO tax fr DS Fund 3,394 6,205 4,655 0 2,450 (2,450)6,629 TOTAL OTHER SOURCES & (USES) 3,394 6,205 4,655 0 2,450 (2,450)6,629 FUND BALANCE - BEGINNING 200 200 200 200 200 0 200 FUND BALANCE - ENDING 200 200 200 200 (950)1,150 200 = = = = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.Page 2 VAIL SQUARE METROPOLITAN DISTRICT # 3 Printed: 1/18/21 Modified STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE Accrual BUDGET, ACTUAL AND FORECAST FOR THE PERIODS INDICATED Basis Cal Yr 9 Months 9 Months DEBT SERVICE FUND Cal Yr 2020 Cal Yr Ended Ended Variance 2021 2019 Adopted 2020 09/30/20 09/30/20 Favorable Adopted BUDGET Audited Budget Forecast Actual Budget (Unfav)Budget ASSUMPTIONS Assessed Valuation - Net 7,442,030 15,787,780 15,787,780 15,778,220 Nov 2020 Final AV Assessed Valuation - TIF 6,555,780 14,000,070 14,000,070 13,951,280 Nov 2020 Final AV Total Gross AV 13,997,810 29,787,850 29,787,850 29,729,500 -1%112%0%Percent change Mill Levy Rates IGA Services Mill Levy Rate 3.000 3.000 3.000 3.000 Capital Pledge Mill Levy Rate 18.875 18.875 18.875 18.875 Total Mill Levy Rate 21.875 21.875 21.875 21.875 REVENUES Prop Taxes-IGA Serv 22,328 47,363 47,363 47,363 47,363 (0)47,335 AV x Mill levy Prop Taxes-TIF IGA Serv 19,076 40,740 40,740 40,728 40,740 (12)40,598 AV x Mill levy Prop Taxes - D/S Oblig 140,480 297,994 297,994 297,990 297,994 (4)297,814 AV x Mill levy Prop Taxes - TIF D/S Oblig 120,017 256,324 256,324 256,250 256,324 (74)255,430 AV x Mill levy Allowance for potential abatements (175,000)0 0 (367,500) Specific Ownership Taxes 16,524 23,371 32,121 21,229 15,581 5,648 32,059 5% of Prop tax Interest Income 1,127 3,000 250 179 2,250 (2,071)1,500 TOTAL REVENUES 319,551 493,793 674,793 663,739 660,252 3,487 307,236 EXPENDITURES Xfer Prop Taxes to VSQ #1 - Serv Oblig 21,658 45,942 45,942 45,928 45,942 14 45,915 Service mills less treas fee Xfer Prop Taxes to VSQ #1 - Serv TIF 19,076 40,740 40,740 0 0 0 40,598 TOV URA Xfer Prop Taxes to VSQ #1 - D/S Oblig 136,265 289,055 289,055 288,963 289,054 91 288,879 DS mills less treas fee Xfer Prop Taxes to VSQ #1 - D/S TIF 120,017 256,324 256,324 0 0 0 255,430 TOV URA Allowance for potential abatements (175,000)0 0 0 (367,500) Xfer Specific Ownership Tax - D/S 14,258 20,166 27,716 12,877 8,500 (4,377)26,929 IGA D/S % of SO Treasurer's Fees 4,884 10,361 10,361 10,361 10,361 0 10,354 3% of Prop. Taxes Contingency 30,000 0 0 0 to allow for abate variance TOTAL EXPENDITURES 316,158 517,588 670,138 358,128 353,857 (4,271)300,607 REVENUE OVER (UNDER) EXPEND.3,394 (23,795)4,655 305,611 306,395 (784)6,629 OTHER SOURCES/(USES) Xfer Int & Net SO tax to Gen Fund (3,394)(6,205)(4,655)0 (2,450)2,450 (6,629) TOTAL OTHER FINANCING SOURCES (3,394)(6,205)(4,655)0 (2,450)2,450 (6,629) FUND BALANCE - BEGINNING 0 0 (0)(0)0 (0)(0) Reverse Contingency 30,000 0 0 0 FUND BALANCE - ENDING (0)0 (0)305,611 303,945 1,666 (0) = = = = = No assurance is provided on these financial statements and substantially all disclosures required by GAAP have been omitted.Page 3 116 County Tax entity code DOLA LGID/SID 65510 TO: County Commissioners1 of Eagle County , Colorado. On behalf of the Vail Square Metropolitan District No. 3 the Board of Directors of the Vail Square Metropolitan District No. 3 $29,729,500 $15,778,220 Submitted:12/8/2020 for budget/fiscal year 2021 (not later than Dec 15) (mm/dd/yyyy)(yyyy) PURPOSE (see end notes for definitions and examples)LEVY2 REVENUE2 1.General Operating ExpensesH 0.000 mills -$ 2.(0.000) mills -$ SUBTOTAL FOR GENERAL OPERATING: (0.000)mills -$ 3.General Obligation Bonds and InterestJ 18.875 mills 297,813.90$ 4.Contractual ObligationsK 3.000 mills 47,334.66$ 5.Capital ExpendituresL 0.000 mills -$ 6.Refunds/AbatementsM 0.000 mills -$ 7.OtherN (specify): 0.000 mills -$ 0.000 mills -$ TOTAL:[]21.875 mills 345,148.56$ Daytime phone: (970) 926-6060 x8 Signed: Title: District Administrator (local government)C Include one copy of this tax entity's completed form when filing the local government's budget by January 31st, per 29-1-113 C.R.S. with the Division of Local Government (DLG), Room 521, 1313 Sherman Street, Denver, Colorado 80203. Questions? Call DLG (303) 864-7720. 1 If the taxing entity's boundaries include more than one county, you must certify the levies to each county. Use a separate form for each county and certify the same levies uniformly to each county per Article X, Section 3 of the Colorado Constitution. 2 Levies must be rounded to three decimal places and revenue must be calculated from the total NET assessed valuation (Line 4 of Form DLG57 on the County Assessor's FINAL certification of valuation). USE VALUE FROM FINAL CERTIFICATION OF VALUATION PROVIDED BY ASSESSOR NO LATER THAN DECEMBER 10 <Minus> Temporary General Property Tax Credit/ Temporary Mill Levy Rate ReductionI (GrossD assessed valuation, Line 2 of the Certification of Valuation From DLG 57 E) (NETG assessed valuation, Line 4 of the Certification of Valuation Form DLG 57) Hereby officially certifies the following mills to be levied against the taxing entity's GROSS assessed valuation of: Contact person: (print) Kenneth J. Marchetti Sum of General Operating Subtotal and Lines 3 to 7 Note: If the assessor certified a NET assessed valuation (AV) different than the GROSS AV due to a Tax Increment Financing (TIF) AreaF the tax levies must be calculated using the NET AV. The taxing entity's total property tax revenue will be derived from the mill levy multiplied against the NET assessed valuation of: CERTIFICATION OF TAX LEVIES for NON-SCHOOL Governments (taxing entity)A (governing body)B Form DLG 70 (rev 6/16)Page 1 of 4 THIS SECTION APPLIES TO TITLE 32, ARTICLE 1 SPECIAL DISTRICTS THAT LEVY TAXES FOR PAYMENT OF GENERAL OBLIGATION DEBT (32-1-603 C.R.S.). Taxing entities that are Special Districts or Subdistricts of Special Districts must certify separate mill levies and revenue to the Board of County Commissioners, one each for the funding requirements of each debt (32-1-603, C.R.S.) Use additional pages as necessary. The Special District's or Subdistrict's total levies for general obligation bonds and total levies for contractual obligations should be recorded on Page 1, Lines 3 and 4 respectively. CERTIFY A SEPARATE MILL LEVY FOR EACH BOND OR CONTRACT: BONDSJ: 1. Purpose of Issue:The District entered into a Joint Funding Agreement to facilitate the provision of the Facilities in a timely, efficient and cost-effective manner sufficient to serve the anticipated development within the Financing Districts, the District determined that the Operating District (VSQMD No. 1) enter into a Loan Agreement dated as of July 23, 2008. In order to facilitate the borrowing of the Loan proceeds and in exchange for the Lender making the Loan (the proceeds of which are to be applied, in accordance with the Loan Agreement, to the provision of Facilities), the Financing Districts have entered into the Loan Agreement as additional obligors, and, by the terms of this Agreement, pledged certain revenues to the Lender and covenanted to take certain actions with respect to generating such revenues, for the benefit of the Lender; Series: 2008 Date of Issue: July 23, 2008 Coupon rate: Variable Maturity Date:December 1, 2023 Levy: 18.875 Mills Revenue: $297,813.90 2. Purpose of Issue: Series: Date of Issue: Coupon rate: Maturity Date: Levy: Revenue: CONTRACTSK: 3. Purpose of Contract: The District entered into an agreement for the implementation of principles and objectives set forth in the Service Plan regarding financing, construction, operation and maintenance of the facilities, and administration of the District's affairs pursuant to voter authorization approved at election in November 2005. Title: District Facilities Joint Financing, Construction and Service Agreement Date: July 21, 2008 Principal Amount: $20,000,000 Maturity Date: December 1, 2023 Levy: 3.000 Mills Revenue: $47,334.66 4. Purpose of Contract: Title: Date: Principal Amount: Maturity Date: Levy: Revenue: Use multiple copies of this page as necessary to separately report all bond and contractual obligations per 32-1-1603, C.R.S. CERTIFICATION OF TAX LEVIES, continued Vail Square Metropolitan District No. 3 Page 2 of 4Form DLG 70 (rev 9/15) EXHIBIT B 2020 Audits VAIL SQUARE METROPOLITAN DISTRICT NO. 1 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS December 31, 2020 C O N T E N T S Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ............................. 1 MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................ 3 FINANCIAL STATEMENTS STATEMENT OF NET POSITION .................................................................................... 6 STATEMENT OF ACTIVITIES ......................................................................................... 7 BALANCE SHEET – GOVERNMENTAL FUNDS ........................................................... 8 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS ................................................ 9 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND ........................ 10 NOTES TO FINANCIAL STATEMENTS ........................................................................ 11 SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – DEBT SERVICE FUND ................................................................................................ 27 2499 Hwy. 6&50 www.csdcpa.com 970-245-3000 Grand Junction, CO 81505 e-mail info @ csdcpa.com FAX 970-242-4716 TOLL FREE 877-245-8080 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS May 25, 2021 The Board of Directors Vail Square Metropolitan District No. 1 We have audited the accompanying financial statements of the governmental activities and each major fund of Vail Square Metropolitan District No. 1 as of and for the year ended December 31, 2020, 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 generally 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 of 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 District’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 District’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 that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 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 Vail Square Metropolitan District No. 1, as of December 31, 2020, and the respective changes in financial position thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 5 be presented to supplement the basic financial statements. Such 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. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Vail Square Metropolitan District No. 1’s basic financial statements. The Debt Service Fund budgetary schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements. The Debt Service Fund budgetary schedule is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Debt Service Fund budgetary schedule is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 3 Vail Square Metropolitan District No. 1 Management’s Discussion and Analysis December 31, 2020 As management of Vail Square Metropolitan District No. 1 (the “District”), we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended December 31, 2020. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are composed of three components: 1) government- wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains additional supplementary information after the notes to the financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the District’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the District’s assets, deferred outflows, liabilities, and deferred inflows with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The governmental activity of the District is primarily financing the construction, operation, and maintenance of the basic public infrastructure within the District. There are no business-type activities within the District. The government-wide financial statements can be found on pages 6 and 7 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The District currently has two funds, the General Fund and the Debt Service Fund both of which are governmental funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of expendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. A reconciliation of the 4 fund balance as reported in the governmental funds to the net position reported in the government-wide financial statements and a reconciliation of the net change in fund balance to the change in net position has been provided to facilitate the comparison between governmental funds and governmental activities. The fund financial statements are contained on pages 8 and 9 of the report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 11 through 26 of this report. Condensed Financial Information A condensed comparative summary of the District’s government-wide assets, deferred outflows, liabilities, deferred inflows, net position, revenues and expenditures follows: 2020 2019 ASSETS & DEFERRED OUTFLOWS: Current assets 2,927,805$ 2,318,338$ Non-current assets 10,297,784 11,384,492 Total Assets 13,225,589 13,702,830 Deferred outflows of resources 821,253 823,421 LIABILITIES: Current liabilities 504,601 480,764 Non-current liabilities 12,716,253 13,153,421 Total Liabilities 13,220,854 13,634,185 NET POSITION: Net Investment in capital assets 825,988 892,067 Restricted for emergencies 5,204 3,996 Unrestricted (5,204) (3,997) Total Net Position 825,988$ 892,066$ REVENUES: Operating grants and contributions 1,643,784$ 1,180,151$ Interest and other revenue 7,092 23,696 Total Revenues 1,650,876 1,203,847 EXPENSES: General government 1,057,833 589,012 Public works 104,261 106,942 Interest on long-term debt 554,860 573,973 Total Expenses 1,716,954 1,269,927 Change in Net Position (66,078) (66,080) Net Position - Beginning 892,066 958,146 Net Position - Ending 825,988$ 892,066$ Governmental Activities 5 The District is the operating district in a triple district structure whereby the District is coordinating the financing and constructing public infrastructure for Vail Square Metropolitan District Nos. 2 and 3. Such functions are furnished through a District Facilities Joint Financing Construction and Service Agreement among the District and Vail Square Metropolitan District Nos. 2 and 3. Vail Square Metropolitan District Nos. 2 & 3 are the “financing districts” and as such, have and will continue to pay “capital and service obligations” to the District for construction and operation of the infrastructure in the Districts. The District’s revenues consisted primarily of funds received from the financing Districts and the Vail Reinvestment Authority, as defined in agreements between the District and those entities. Government-wide Financial Analysis. The District’s primary activity has been the construction and acquisition of infrastructure. The infrastructure has been funded through proceeds received from the issuance of the 2008 Tax Exempt Loan Facilities in the amount of $16,000,000. The District received intergovernmental receipts from Vail Square Metropolitan District Nos. 2 & 3 and the Vail Reinvestment Authority. The Vail Reinvestment Authority has agreed to transfer to the District the Districts Tax Increment Revenues, to which the Authority would otherwise be entitled under the Urban Renewal Plan. Financial Analysis of the District’s Funds As mentioned earlier, the District uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds. The focus of the District’s governmental funds is to provide information on near- term inflows, outflows, and balances of expendable resources. Such information is useful in assessing the District’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the District’s governmental funds reported a combined ending fund balance of $2,902,221, an increase of $605,556 in comparison with the prior year. These funds are held by the District for spending in future years. The District adopts budgets for each fund on an annual basis. Budgetary comparisons have been provided on page 10 for the General Fund, page 27 for the Debt Service Fund. Capital assets. The District’s capital assets consist primarily of infrastructure in the Districts. During 2020 the District recognized depreciation expense of $66,079. Details can be seen in Note C on page 17 of this report. Long-term debts. The District issued $16,000,000 of tax-exempt loans during 2008. Loan 2008A consists of $2,000,000 in a variable rate loan facility. Loan 2008B consists of $14,000,000 in a variable rate loan facility which is subject to an interest rate swap to effectively convert the 2008B loan from a variable-rate loan to a hedged loan with a synthetic fixed interest rate of 4.61 percent. Additional information can be found in the Notes to the Financial Statement in Notes D and E on pages 18 to 21 of this report. Economic Factors and Next Year’s Budget. It is anticipated COVID-19 will have impacts on the economy as a whole which will include financial impacts to the District, however the extent of such impact continues to be unknown at this time. Request for Information This financial report is designed to provide a general overview of the District’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Marchetti & Weaver LLC, 28 Second Street, Suite 213, Edwards, CO 81632 or you may call (970) 926-6060. Governmental Activities ASSETS Cash and investments 2,896,790$ Due from other governments, VSMD Nos. 2 & 3 23,598 Prepaid expenses 7,417 Non-current assets Capital assets Depreciable 825,988 Net capital and service obligations from/to VSMD No. 2, non-current 7,861,591 Net capital and service obligations from/to VSMD No. 3, non-current 1,610,205 Total Assets 13,225,589 DEFERRED OUTFLOW OF RESOURCES Deferred swap 821,253 Total Deferred Outflow of Resources 821,253 Total Assets and Deferred Outflow of Resources 14,046,842 LIABILITIES Accounts payable 25,584 Accrued interest 44,017 Long-term obligations due in one year 435,000 Long-term obligations 11,895,000 Swap Mark to Market 821,253 Total Liabilities 13,220,854 NET POSITION Net investment in capital assets 825,988 Restricted for emergencies 5,204 Unrestricted (5,204) Total Net Position 825,988$ Vail Square Metropolitan District No. 1 STATEMENT OF NET POSITION December 31, 2020 The accompanying notes are an integral part of this statement. - 6 - Total Operating Capital Governmental Expenses Contributions Contributions Activities Governmental activities: General government 1,057,833$ 88,801$ -$ (969,032)$ Public works 104,261 78,422 - (25,839) Interest 554,860 1,476,561 - 921,701 Total governmental activities 1,716,954$ 1,643,784$ -$ (73,170) General revenues (expenses): Interest 7,092 Total general revenues 7,092 Change in net position (66,078) Net position - beginning 892,066 Net position - ending 825,988$ Check - Vail Square Metropolitan District No. 1 STATEMENT OF ACTIVITIES Year ended December 31, 2020 The accompanying notes are an integral part of this statement. Function/Programs Program Revenues - 7 - Total Debt Governmental General Service Funds ASSETS Equity in pooled cash and investments 1,093,470$ 1,803,320$ 2,896,790$ Due from other governments, VSMD Nos. 2 & 3 8,644 14,954 23,598 Prepaid expenses 7,417 - 7,417 Total Assets 1,109,531 1,818,274 2,927,805 LIABILITIES Accounts payable 25,584 - 25,584 Total Liabilities 25,584 - 25,584 FUND BALANCES 7,417 - 7,417 5,204 - 5,204 Restricted for debt service - 1,818,274 1,818,274 Unassigned 1,071,326 - 1,071,326 Total Fund Balances 1,083,947$ 1,818,274$ 2,902,221$ Fund balance (as reported above) 2,902,221$ Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets are not current assets and are therefore not reported in the funds 825,988 Long-term Tax-Exempt Loan obligations are not payable in the current period and are therefore not reported in the funds (12,330,000) Net capital and service obligations due from VSMD Nos.2 & 3 are not receivable in the current period and are therefore not reported in the funds 9,471,796 Accrued interest is not payable in the current period and is therefore not reported in the funds (44,017) Net position of governmental activities 825,988$ The accompanying notes are an integral part of this statement. December 31, 2020 Vail Square Metropolitan District No. 1 BALANCE SHEET - GOVERNMENTAL FUNDS Restricted for emergencies Nonspendable - 8 - Total Debt Governmental General Service Funds Revenues Interest 6,246$ 846$ 7,092$ Intergovernmental agreement 167,223 1,476,561 1,643,784 Total revenues 173,469 1,477,407 1,650,876 Expenditures Current - general government 37,204 - 37,204 Current - public works 38,182 - 38,182 Debt service - principal - 415,000 415,000 Debt service - interest - 554,934 554,934 Total expenditures 75,386 969,934 1,045,320 Excess of Revenues Over (Under) Expenditures 98,083 507,473 605,556 Fund Balance - January 1 985,864 1,310,801 2,296,665 Fund Balance - December 31 1,083,947$ 1,818,274$ 2,902,221$ 605,556$ Amounts reported as governmental activities in the Statement of Activities are different because: Change in capital and service obligations from VSMD Nos. 2 & 3 (1,020,629) Depreciation expense is not reported in the funds (66,079) Change in accrued interest 74 Payments on long-term debt 415,000 (66,078)$ Check Vail Square Metropolitan District No. 1 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Year ended December 31, 2020 IN FUND BALANCES - GOVERNMENTAL FUNDS The accompanying notes are an integral part of this statement. Net Change in Fund Balance (above) Change in net position of governmental activities - 9 - Variance Original &Final Favorable Budget Actual (Unfavorable) Revenues Intergovernmental agreement 169,073$ 167,223$ (1,850)$ Interest 13,981 6,246 (7,735) Total revenues 183,054 173,469 (9,585) Expenditures General government Accounting and audit 23,500 23,124 376 Insurance 3,250 2,761 489 Legal and other professional services 15,000 8,457 6,543 Other 3,495 2,862 633 Public works Operations expenses 20,300 8,758 11,542 Snowmelt 30,000 29,424 576 Contingency 10,000 - 10,000 Total expenditures 105,545 75,386 30,159 Excess of Revenues Over (Under) Expenditures 77,509 98,083 20,574 Fund Balance - January 1 932,022 985,864 53,842 Fund Balance - December 31 1,009,531$ 1,083,947$ 74,416$ The accompanying notes are an integral part of this statement. Vail Square Metropolitan District No. 1 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND Year ended December 31, 2020 BALANCE - BUDGET AND ACTUAL - GENERAL FUND - 10 - Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 11 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Organization The Vail Square Metropolitan District No. 1 (the District) was established December 5, 2005, as a quasi-municipal corporation and political subdivision of the State of Colorado. The District was established as part of a triple district structure with Vail Square Metropolitan District Nos. 2 and 3. The District is considered the Operating District, and was formed to coordinate the financing and construction of all public improvements which will be constructed for the use and benefit of all anticipated inhabitants and taxpayers of Vail Square Metropolitan District Nos. 1-3. Vail Square Metropolitan District Nos. 2 and 3 are the Financing Districts and as such have paid and will continue to pay capital and service obligations to the District for the infrastructure in the Districts. The financial statements of the District have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the District’s accounting policies are described below. 2. Reporting Entity The reporting entity consists of (a) the primary government; i.e., the District, and (b) organizations for which the District is financially accountable. The District is considered financially accountable for legally separate organizations if it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the District. Consideration is also given to other organizations which are fiscally dependent; i.e., unable to adopt a budget, levy taxes, or issue debt without approval by the District. Organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete are also included in the reporting entity. Based on the criteria above, the District is not financially accountable for any other entity, nor is the District a component unit of any other government. 3. Government-wide and Fund Financial Statements The District’s basic financial statements include both government-wide (reporting the District as a whole) and fund financial statements (reporting the District’s major funds). Both the government-wide and fund financial statements categorize primary activities as either governmental or business type. Currently, the District has only governmental activities. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 12 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Government-wide Financial Statements In the government-wide Statement of Net Position, the governmental activities columns are reported on a full accrual, economic resource basis, which recognizes all long-term assets, receivables and deferred outflows of resources as well as long-term debt, obligations and deferred inflows of resources. The District’s net position is reported in three parts: net investment in capital assets, net position restricted for emergencies and unrestricted. The government-wide focus is on the sustainability of the District as an entity and the change in the District’s net position resulting from the current year’s activities. Fund Financial Statements The financial transactions of the District are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, fund equity, revenues and expenditures. The fund focus is on current available resources and budget compliance. 4. Fund Accounting The District uses funds to maintain its financial records during the year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. At this time the District only uses governmental funds. Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental funds reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purpose for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets, deferred outflows of resources, liabilities, and deferred inflows of resources is reported as fund balance. The District reports the following major governmental funds: General Fund – The General Fund is used to account for all financial resources of the District except those required to be accounted for in another fund. The general fund balance is available to the District for any purpose provided it is expended or transferred according to the general laws of Colorado. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 13 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Debt Service Fund – The Debt Service Fund accounts for the servicing of long-term debt including bonds, loans, developer notes, and long-term contractual obligations approved by the District’s electorate and revenues generated by property taxes that are required to be used in payment of long- term debt and contractual obligations. 5. Measurement Focus and Basis of Accounting Measurement focus refers to whether financial statements measure changes in current resources only (current financial focus) or changes in both current and long-term resources (long-term economic focus). Basis of accounting refers to the point at which revenues, expenditures, or expenses are recognized in the accounts and reported in the financial statements. Long-Term Economic Focus and Accrual Basis Governmental activities in the government-wide financial statements use the long-term economic focus and are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of the related cash flows. Current Financial Focus and Modified Accrual Basis The governmental fund financial statements use the current financial focus and are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. “Available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are generally recognized when the related liability is incurred. The exception to this general rule is that principal and interest on general long-term debt, if any, is recognized when due. When an expense is incurred that can be paid using either restricted or unrestricted resources (net position), the District's policy is to first apply the expense toward restricted resources and then toward unrestricted resources. In governmental funds, the District's policy is to first apply the expenditure toward restricted fund balance and then to other, less-restrictive classifications—committed and then assigned fund balances before using unassigned fund balances. 6. Intergovernmental Revenues For governmental funds, intergovernmental revenues, such as contributions awarded on a non- reimbursement basis, are recorded as receivables and revenues when measurable and available. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 14 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 7. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows, liabilities, and deferred inflows, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 8. Interfund Transactions Quasi-external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. All other interfund transactions, except quasi-external transactions and reimbursements, are reported as transfers. 9. Stewardship, Compliance, and Accountability Budgets and Budgetary Accounting In the fall of each year, the District’s Board of Directors formally adopts a budget with appropriations by fund for the ensuing year pursuant to the Colorado Local Budget Law. The budgets for the governmental funds are adopted on a basis consistent with generally accepted accounting principles (“GAAP”). As required by Colorado statutes, the District followed the following timetable in approving and enacting a budget for the ensuing year: (1) For the 2020 budget year, prior to August 25, 2019, the County Assessor sent the District the assessed valuation of all taxable property within the District’s boundaries. (2) On or before October 15, 2019, the District’s accountant submitted to the District’s Board of Directors a recommended budget which detailed the necessary property taxes needed along with other available revenues to meet the District’s operating requirements. (3) For the 2020 budget, prior to December 15, 2019, the District computed and certified to the County Commissioners a rate of levy that derived the necessary property taxes as computed in the proposed budget. (4) For the 2020 budget, the final budget and appropriating resolution was adopted prior to December 31, 2019. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 15 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED (5) After adoption of the budget resolution, the District may make the following changes: a) it may transfer appropriated monies between funds or between spending agencies within a fund, as determined by the original appropriation level; b) supplemental appropriations to the extent of revenues in excess of those estimated in the budget; c) emergency appropriations; and d) reduction of appropriations for which originally estimated revenues are insufficient. The level of control in the budget at which expenditures exceed appropriations is at the fund level. All appropriations lapse at year-end. 10. Capital Assets Capital assets, which include construction in progress, are reported in the applicable governmental activities columns in the Government-wide Financial Statements. The District defines capital assets 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 estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are completed. Depreciation is computed using the straight-line method over estimated useful lives, as follows: Estimated Lives Buildings and improvements 20 to 40 years Infrastructure 30 to 40 years Equipment and machinery 5 to 15 years 11. Fund Balances GASB Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions" provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government's fund balances more transparent. In the fund financial statements the following classifications describe the relative strength of the spending constraints.  Non-spendable fund balance - The portion of fund balance that cannot be spent because it is either not in spendable form (such as inventory) or is legally or contractually required to be maintained intact.  Restricted fund balance - The portion of fund balance constrained to being used for a specific purpose by external parties (such as grantors or bondholders), constitutional provisions or enabling legislation. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 16 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED  Committed fund balance - The portion of fund balance constrained for specific purposes according to limitations imposed by the District’s highest level of decision making authority, the Board, prior to the end of the current fiscal year. The constraint may be removed or changed only through formal action of the Board.  Assigned fund balance - The portion of fund balance set aside for planned or intended purposes. The intended use may be expressed by the Board or other individuals authorized to assign funds to be used for a specific purpose. Assigned fund balances in special revenue funds will also include any remaining fund balance that is not restricted or committed. This classification is necessary to indicate that those funds are, at a minimum intended to be used for the purpose of that particular fund.  Unassigned fund balance - The residual portion of fund balance that does not meet any of the above criteria. The District will only report a positive unassigned fund balance in the General Fund. NOTE B – EQUITY IN POOLED CASH AND INVESTMENTS The District maintains a cash pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the statement of net assets as "Equity in pooled cash and investments." Cash Deposits 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 equal to 102 percent of the aggregate uninsured deposits. As of December 31, 2020, the District had cash deposits of $1,786,710 all of which is collateralized as explained above. Investments Colorado state statutes authorize the District to invest in U.S. Treasury bills, obligations of any other U.S. agencies, obligations of the World Bank, general obligation bonds of any state or any of their subdivisions, revenue bonds of any state or any of their subdivisions, bankers acceptance notes, commercial paper, repurchase agreements, money market funds and guaranteed investment contracts. All investments must be held by the District, in its name, or in custody of a third party on behalf of the local government. As of December 31, 2020, the District had $1,110,080 invested in the Colorado Surplus Asset Fund (CSafe), an investment vehicle established for local government entities in Colorado to pool surplus funds. CSafe operates similarly to a money market fund and each share is equal in value to $1.00. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 17 - NOTE B – EQUITY IN POOLED CASH AND INVESTMENTS – CONTINUED A designated custodial bank provides safekeeping and depository services to CSafe in connection with the direct investment and withdrawal functions of CSafe. Substantially all securities owned by CSafe are held by the Federal Reserve Bank in the account maintained for the custodial bank. The custodian’s internal records identify the investments owned by CSafe. CSafe funds carry a Standard & Poor’s AAAm rating. There is no custodial, interest rate or foreign currency risk exposure. CSafe operates like a 2a7-like external investment pool in the fair value hierarchy established by GASB 72. The underlying investments held by CSafe, and the District’s investment in CSafe, are valued at amortized cost which approximates fair value. There are no limitations on withdrawals. A reconciliation of the carrying value of deposits and investments reported above to the Statement of Net Position is as follows: Deposits $ 1,786,710 CSafe 1,110,080 Equity in pooled cash and investments $ 2,896,790 NOTE C – CAPITAL ASSETS Capital asset activity for the year ended December 31, 2020 was as follows: Balance Balance January 1, December 31, 2020 Increases Decreases Transfers 2020 Governmental Activities Capital assets being depreciated Infrastructure: Land improvements $ 1,428,437 $ – $ – $ – $ 1,428,437 Signage 211,913 – – – 211,913 Utilities 223,545 – – – 223,545 Total assets being depreciated 1,863,895 – – – 1,863,895 Less accumulated depreciation for Infrastructure: Land improvements 657,084 57,137 – – 714,221 Signage 211,912 – – – 211,912 Utilities 102,832 8,942 – – 111,774 Total accumulated depreciation 971,828 66,079 – – 1,037,907 Capital assets being depreciated, net 892,067 (66,079) – – 825,988 Governmental activities capital assets, net $ 892,067 $ (66,079) $ – $ – $ 825,988 Depreciation expense of $66,079 was all charged to the “Public works” function. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 18 - NOTE D – LONG-TERM OBLIGATIONS 2008A Tax-Exempt Loan The District obtained a $2,000,000 tax-exempt loan on July 23, 2008. Interest is payable semiannually on June 1 and December 1, commencing December 1, 2008. The loan is due and payable June 1, 2023 and bears interest equal to 65% of the 1-month LIBOR rate plus 125 basis points with a minimum rate of 2.85%. The loan is a general obligation of the District and is supported by a Joint Funding Agreement between the District and Vail Square Metropolitan District Nos. 2 and 3 (the Financing Districts). The Joint Funding Agreement generally provides that the Financing Districts will assess mill levies to collect property taxes which will be paid to the District to be used to pay the principal and interest payments required by the loans and interest rate swaps. See Note E for more information. The loan was obtained to finance the design, acquisition, construction, relocation, installation, completion and provision of public improvements and facilities. The District also used loan proceeds to repay a portion of the long-term obligation to the Developer. The 2008A loan may be prepaid, in whole or in part, on any date upon payment of the principal amount of the Loan so prepaid plus accrued interest thereon to the date of prepayment, without penalty. Debt service requirements are as follows: (the interest payments presented below assume that the interest rate will remain at the minimum rate noted above; the rate is subject to monthly adjustment) Year Ending December 31 Principal Interest Total 2021 $ – $ 57,000 $ 57,000 2022 – 57,000 57,000 2023 2,000,000 23,750 2,023,750 Total $ 2,000,000 $ 137,750 $ 2,137,750 2008B Tax-Exempt Loan The District obtained a $14,000,000 tax-exempt loan on July 23, 2008. Interest is payable semiannually on June 1 and December 1, commencing December 1, 2008. The loan matures in various amounts through 2023 and bears interest equal to 65% of the 1-month LIBOR rate plus 125 basis points. The loan is a general obligation of the District and supported by a Joint Funding Agreement between the District and the Financing Districts. The Joint Funding Agreement generally provides that the Financing Districts will assess mill levies to collect property taxes which will be paid to the District to be used to pay the principal and interest payments required by the loans and interest rate swaps. See Note F for more information. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 19 - NOTE D – LONG-TERM OBLIGATIONS – CONTINUED The loan was obtained to finance the design, acquisition, construction, relocation, installation, completion and provision of public improvements and facilities. The District also used loan proceeds to repay a portion of the long-term obligation to the Developer. The 2008B loan may be prepaid, in whole or in part, on any date prior to July 23, 2013 upon payment of the principal amount so prepaid plus accrued interest thereon to the date of prepayment, together with a prepayment penalty in an amount equal to three percent of the principal amount prepaid. The District entered into a $14,000,000 interest rate swap to effectively convert the 2008B loan from a variable-rate loan to a hedged loan with a synthetic fixed interest rate of 4.61%. See Note E for more information on the District’s interest rate swap. Debt service requirements are as follows: (the interest payments presented below assume that the interest rate will remain at the 4.61% per the swap documents; the rate is subject to monthly adjustment) Year Ending December 31 Principal Interest Total 2021 $ 435,000 $ 482,827 $ 917,827 2022 455,000 462,495 917,495 2023 9,440,000 220,010 9,660,010 Total $ 10,330,000 $ 1,165,332 $ 11,495,332 The following is a summary of long-term non-developer debt transactions of the District for the year ended December 31, 2020: Balance Balance January 1, December 31, 2020 Issues Reductions 2020 2008A General Obligation Loan $ 2,000,000 $ – $ – $ 2,000,000 2008B General Obligation Loan 10,745,000 – 415,000 10,330,000 Total $ 12,745,000 $ – $ 415,000 $ 12,330,000 Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 20 - NOTE E – HEDGING ACTIVITIES Assumptions Background information At December 31, 2020, the District has the following derivative instruments outstanding: Item Type Objective Notional Amount Effective Date Maturity Date Terms 12/31/2020 Fair Value A Pay-fixed interest rate swap Hedge of changes in cash flows on the 2008B Loan $14,000,000 7/23/08 6/1/2023 Pay 4.61%, receive 65% 1- month LIBOR + 125 bp ($821,253) Derivative instrument A (the interest rate swap) hedges changes in cash flows due to changes in LIBOR interest rates associated with the District’s $14,000,000 2008B hedged tax-exempt loan. The fair value of the interest rate swap was estimated by the counterparty based on a LIBOR yield curve constructed using cash LIBOR rates, Eurodollar futures, and term swap rates from brokers. The yield curve is then used to estimate the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. Risks Credit risk. As of December 31, 2020, the District was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change and the fair value of the swap become positive, the District would be exposed to credit risk in the amount of the derivative's fair value. The swap counterparty was rated BBB+ by Standard & Poor's and Baa2 by Moody's Investors Service as of December 31, 2020. To mitigate the potential for credit risk, if the counterparty's credit quality falls below Baa2 as determined by Moody’s Investors Service or BBB as determined by Standard & Poor’s Ratings Service, the counterparty agrees to cooperate with the District in having the swap assigned to a new swap provider acceptable to the District and the counterparty. Interest rate risk. The District is exposed to interest rate risk on its pay-fixed, receive-variable interest rate swap. As the LIBOR rate decreases, the District’s net payment on the swap increases. Basis risk. The District is not exposed to basis risk, as the counterparty pays the District 65% of LIBOR plus 125 basis points per the swap agreement, which is equal to the tax-exempt loan payment made by the District. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 21 - NOTE E – HEDGING ACTIVITIES – CONTINUED Termination risk. The derivative contract uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The Schedule to the Master Agreement includes an "additional termination event." That is, the swap may be terminated by the District if the counterparty's credit quality rating falls below "BBB" as issued by Standard & Poor's or "Baa2" as issued by Moody's Investors Service. The District agrees not to terminate the swap unless it shall have sufficient funds to pay any Settlement Amount to the counterparty. If the counterparty’s credit quality falls below these levels, the swap may be assigned to a new swap provider acceptable to the District and the counterparty. No termination events have occurred as of December 31, 2020. The District or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If the swap is terminated, the variable-rate tax-exempt loan would no longer carry a synthetic interest rate. Also, at the time of termination, a Settlement Amount will be calculated according to section 6(e)(i) of the Swap Master Agreement entered into by Compass Bank and the District on July 23, 2008. Rollover risk. The District is not exposed to rollover risk, as the effective and termination dates are the same for the tax-exempt loan and the interest rate swap. Foreign currency risk. The District is not exposed to foreign currency risk, as the interest rate swap payments and receipts will be settled in US dollars. Contingent features. There are no contingent features to the District’s interest rate swap. Swap payments and associated debt. As of December 31, 2020, debt service requirements of the variable- rate debt and net swap/loan interest payments are as shown in Note D. Method of evaluating effectiveness of interest rate swap. The District utilized the Synthetic Instrument Method to evaluate the effectiveness of the interest rate swap. This method calculated the synthetic rate equal to 100% of the swap fixed rate. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 22 - NOTE F – INTERGOVERNMENTAL AGREEMENTS The District has entered into the following intergovernmental agreements: Joint Funding Agreement The Operating District obtained two loans in the aggregate principal amount of $16,000,000 on July 23, 2008 for the purpose of constructing certain public infrastructure (the Facilities) for the benefit of the Districts. Concurrent with obtaining the loans the Operating District entered into a Joint Funding Agreement with the Financing Districts to provide funding to the Operating District for the repayment of the loans. The Joint Funding Agreement generally provides that the Financing Districts will assess mill levies to collect property tax revenues which will be paid to and used by the Operating District to pay Financing Costs related to the loans. Financing Costs are defined as the principal and interest payments required by debt and interest rate swaps obtained or entered into by the Districts, including replenishment of debt reserve funds. In 2020, the mill levy assessed for collection in 2021 was 35 mills in Vail Square Metropolitan District No. 2, with 32 mills allocated for the Joint Funding Agreement and 3 mills for the District Facilities Joint Financing, Construction and Service Agreement; and, 21.875 mills in Vail Square Metropolitan District No. 3, with 18.875 mills allocated for the Joint Funding Agreement and 3 mills for the District Facilities Joint Financing, Construction and Service Agreement. The portion of the annual bond costs to be paid by each Financing District will remain in the same proportion in future years. District Facilities Joint Financing, Construction and Service Agreement The Agreement generally provides an obligation for the Financing Districts to pay for the acquisition and construction of the Facilities (defined above), to the extent not funded by the Joint Funding Agreement (the Capital Obligation), and operation and maintenance of the Facilities and administrative expenses incurred by the Operating District (the Service Obligation). The Financing Districts are obligated to generate and pay to the Operating District certain tax and other revenues to fund the Capital Obligation and the Service Obligation. The Operating District has recorded a capital and service obligation receivable from the Financing Districts as of December 31, 2020 in the amount of $9,471,796 which represents unreimbursed costs incurred through that date for infrastructure construction and costs related to issuance of and debt service on the loans. This receivable has been allocated between the Financing Districts based on the District’s forecast of the future annual bond costs to be paid by each Financing District. However, each Financing District is responsible to pay Financing Costs until the District’s loans have been fully repaid and the ultimate allocation of the Financing Costs between the Financing Districts will be dependent on the assessed value and mill levy of each Financing District over the life of the District’s loans. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 23 - NOTE F – INTERGOVERNMENTAL AGREEMENTS – CONTINUED In any given year the Financing Districts are obligated to fund such portion of the Capital and Service Obligations as may be funded with the District taxes available from imposition of a subordinate mill levy, together with other charges imposed by the Financing Districts. The Agreement specifies certain termination rights on the part of the Districts. Various limitations and conditions to such termination rights exist and reference to the text of the Agreement should be made for specific terms. Pledge Agreement The Districts entered into an Intergovernmental Agreement with the Vail Reinvestment Authority. Under this agreement and in consideration for the Districts’ commitment to undertake construction of certain public improvements, the Vail Reinvestment Authority agrees to transfer to the Districts the District Tax Increment Revenues, to which the Authority would otherwise be entitled under an Urban Renewal Plan relating to the project. NOTE G – COMMITMENTS AND CONTINGENCIES During the normal course of business, the District may incur claims and other assertions against it from various agencies and individuals. Management of the District and its legal representatives have disclosed that they are not aware of any material outstanding claims against the District at December 31, 2020. NOTE H – RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; injuries to employees, or acts of God. The District has elected to participate in the Colorado Special District Property and Liability Pool (the Pool) which is sponsored by the Special District Association of Colorado. The Pool provides property and general liability, automobile physical damage and liability, public official’s liability and machinery coverage to its members. Members of the Pool are required to make additional surplus contributions. 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. During the year ended December 31, 2020 the Pool made no distributions to the District. Condensed financial statement data for the Colorado Special Districts Property and Liability Pool as of December 31, 2019 (latest information available) is as follows: Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 24 - NOTE H – RISK MANAGEMENT - CONTINUED Assets $ 55,602,023 Liabilities $ 33,163,342 Surplus 22,438,681 $ 55,602,023 Revenue $ 22,436,944 Investment income and other 1,173,628 Total revenue 23,610,572 Expenses 25,355,739 Excess of revenues over (under) expenses $ (1,745,167) NOTE I – TABOR AMENDMENT In November 1992, Colorado voters amended Article X of the Colorado Constitution by adding Section 20, commonly known as the Taxpayer’s Bill of Rights (“TABOR”). TABOR contains revenue, spending, tax and debt limitations which apply to the State of Colorado and local governments. TABOR requires, with certain exceptions, advance voter approval for any new tax, tax rate increase, mill levy above that of the prior year, extension of any expiring tax, or tax policy change directly causing a new tax revenue gain to any local government. Except for refinancing bonded debt at a lower interest rate or adding new employees to existing pension plans, TABOR requires advance voter approval for the creation of any multiple fiscal year or other financial obligation unless adequate present cash reserves are pledged irrevocable and held for payments in future years. TABOR also requires local governments to establish emergency reserves to be used for declared emergencies only. Emergencies, as defined by TABOR, exclude economic conditions, revenue shortfalls, or salary or fringe benefit increases. These reserves are required to be 3% or more of the fiscal year spending (excluding bonded debt service) for fiscal years ended after December 31, 1994. At December 31, 2020, the District’s emergency reserve was $5,204. Under TABOR, the initial base for local government spending and revenue limits is December 31, 1992 fiscal year spending. The District’s first year of operations ended December 31, 2006. Future spending and revenue limits are determined based on the prior year’s fiscal year spending adjusted for inflation in the prior calendar year plus annual local growth. Fiscal year spending is generally defined as expenditures and reserve increases with certain exceptions. Revenue, if any, in excess of the fiscal year spending limit must be refunded in the next fiscal year unless voters approve retention of such revenue. The electorate of the District authorized property taxes to be increased up to $1,500,000 in 2005, plus up to an additional $3,000,000 in 2007, and each year thereafter to pay the Districts operations, maintenance, and other expenses, such amounts to increase annually in an amount not to exceed the applicable limitations of Article X, Section 20 of the Colorado Constitution and Colorado Law. Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 25 - NOTE I – TABOR AMENDMENT – CONTINUED The District’s electorate further approved that the District’s taxes be increased $120,000,000 annually, or by such lesser annual amount as may be necessary to pay the District’s general or special obligation bonds, revenue bonds or other multiple fiscal year financial obligations, including contracts, issued for the purpose of refunding, paying or defeasing, in whole or in part, bonds, notes or other financial obligations of the District. Such taxes may consist of an ad valorem property tax mill levy imposed without limitation of rate and in amounts sufficient to produce the annual increase set forth above or such lesser amount as may be necessary. The revenue from such taxes and any other monies used to pay such general or special obligation bonds, revenue bonds or other multiple fiscal year financial obligations costs, and investment income thereon, may be collected and spent by the District without regard to any expenditure, revenue raising, or other limitation contained within Article X, Section 20 of the Colorado Constitution. The District’s management believes it is in compliance with the financial provisions of TABOR. However, TABOR is complex and subject to interpretation. Many of its provisions, including the interpretation of how to calculate fiscal year spending limits, will require judicial interpretation. On November 1, 2005 and November 6, 2007 the voters of the District authorized increases in debt as follows: Date of Authorization Authorization Authorization Purpose Amount Used Remaining 11/1/2005 Street Facilities $ 20,000,000 $ 8,785,393 $ 11,214,607 11/1/2005 Drainage Facilities 2,000,000 – 2,000,000 11/1/2005 Security Facilities 1,000,000 – 1,000,000 11/1/2005 Traffic/Safety Protection Facilities 2,000,000 851,532 1,148,468 11/6/2007 Water Facilities 5,000,000 1,795,410 3,204,590 11/6/2007 Sanitary Sewer Facilities 5,000,000 1,795,410 3,204,590 11/6/2007 Parks and Recreation 5,000,000 2,532,490 2,467,510 11/6/2007 Public Transportation 5,000,000 – 5,000,000 11/6/2007 Mosquito Control 1,000,000 – 1,000,000 11/6/2007 Fire Protection 5,000,000 – 5,000,000 11/6/2007 Television Relay 1,000,000 239,765 760,235 11/1/2005 Refunding 40,000,000 – 40,000,000 Total $ 92,000,000 $ 16,000,000 $ 76,000,000 Vail Square Metropolitan District No. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 26 - NOTE J – RELATED PARTIES The developer of the property which constitutes the District is Arrabelle at Vail Square, LLC. The members of the District’s Board of Directors are officers, employees, or others associated with the Developer and may have conflicts of interest in dealing with the District. $38,182 was paid to Arrabelle at Vail Square, LLC for snowmelt and other operations costs during 2020. As of December 31, 2020, the District owed Arrabelle at Vail Square, LLC $19,102 for these services, which is included in general fund accounts payable. NOTE K – SIGNIFICANT TAXPAYER The hotel complex located within the boundaries of District No. 3 represents substantially all of the assessed valuation of that District. The County Assessor increased the assessed valuation of the hotel from $12,706,140 in 2018 to $28,646,250 in 2019 and 2020. The hotel owner has protested the 2019 and 2020 assessed valuation (which are the basis for taxes paid in 2020 and to be paid in 2021). This protest is currently being litigated in District Court. A portion of the property taxes for the hotel received in 2020 and the property taxes receivable in 2021 are subject to abatement if the District court rules in favor of the hotel. To the extent that property taxes are abated to the taxpayer, the District will be required to rebate its share of those abated taxes to District No. 3. The District has budgeted an allowance for this potential abatement in the District’s 2021 budget but has not deferred recognition of the tax revenue received in 2020. NOTE L – DESIGNATED FUND BALANCE During 2018 the board, based on a reserve study, designated $850,000 of fund balance for the purpose of major capital expenses in 2030. The board intends, as funds are available, to have, by 2030, a reserve of $1.1 million. The reserve is budgeted to increase by $10,000 each year. At December 31, 2020 designated fund balance was $870,000. SUPPLEMENTARY INFORMATION Variance Final Favorable Budget Actual (Unfavorable) Revenues Intergovernmental agreement 1,473,121$ 1,476,561$ 3,440$ Interest income 1,285 846 (439) Total revenues 1,474,406 1,477,407 3,001 Expenditures Debt service - principal 915,000 415,000 500,000 Debt service - interest 646,058 554,934 91,124 Total expenditures 1,561,058 969,934 591,124 Excess of Revenues Over (Under) Expenditures (86,652) 507,473 594,125 Fund Balance - January 1 1,284,967 1,310,801 25,834 Fund Balance - December 31 1,198,315$ 1,818,274$ 619,959$ Vail Square Metropolitan District No. 1 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - DEBT SERVICE FUND Year ended December 31, 2020 - 27 - VAIL SQUARE METROPOLITAN DISTRICT NO. 2 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS December 31, 2020 C O N T E N T S Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ...................... 1 MANAGEMENT’S DISCUSSION AND ANALYSIS .................................................... 3 FINANCIAL STATEMENTS STATEMENT OF NET POSITION ................................................................................ 6 STATEMENT OF ACTIVITIES ..................................................................................... 7 BALANCE SHEET – GOVERNMENTAL FUNDS ...................................................... 8 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS ............................................ 9 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND ................... 10 NOTES TO FINANCIAL STATEMENTS ................................................................... 11 SUPPLEMENTAL INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – DEBT SERVICE FUND ............................................................................................ 22 OTHER INFORMATION SUMMARY OF ASSESSED VALUATION, MILL LEVY AND PROPERTY TAXES COLLECTED .............................................................................................. 23 2499 Hwy. 6&50 www.csdcpa.com 970-245-3000 Grand Junction, CO 81505 e-mail info @ csdcpa.com FAX 970-242-4716 TOLL FREE 877-245-8080 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS May 25, 2021 The Board of Directors Vail Square Metropolitan District No. 2 We have audited the accompanying financial statements of the governmental activities and each major fund of Vail Square Metropolitan District No. 2 as of and for the year ended December 31, 2020, 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 generally 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 of 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 District’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 District’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 that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 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 Vail Square Metropolitan District No. 2, as of December 31, 2020, and the respective changes in financial position thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 5 be presented to supplement the basic financial statements. Such 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. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Vail Square Metropolitan District No. 2’s basic financial statements. The Debt Service Fund budgetary schedule and property tax statistical schedule are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Debt Service Fund budgetary schedule is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, such information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The property tax statistical schedule has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. - 3 - Vail Square Metropolitan District No. 2 Management’s Discussion and Analysis December 31, 2020 As management of Vail Square Metropolitan District No. 2 (the “District”), we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended December 31, 2020. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are composed of three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains additional other information after the notes to the financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the District’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the District’s assets, liabilities, and deferred inflows with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The governmental activity of the District is primarily financing the Intergovernmental Service Costs and Capital Costs due to Vail Square Metropolitan District No. 1. There are no business-type activities within the District. The government-wide financial statements can be found on pages 6 and 7 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The District currently has two funds, the General Fund and the Debt Service Fund, both of which are governmental funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of expendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. - 4 - Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. A reconciliation of the fund balance as reported in the governmental funds to the net position reported in the government-wide financial statements and a reconciliation of the net change in fund balance to the change in net position has been provided to facilitate the comparison between governmental funds and governmental activities. The fund financial statements are contained on pages 8 and 9 of the report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found starting on page 11 of this report. Condensed Financial Information A condensed comparative summary of the District’s government-wide assets, liabilities, deferred inflows, net position, revenues and expenditures follows: 2020 2019 ASSETS: Current assets 573,044$ 618,635$ Total Assets 573,044 618,635 LIABILITIES & DEFERRED INFLOWS: Current liabilities 11,926 55,933 Non-current liabilities 7,861,591 8,708,713 Total Liabilities 7,873,517 8,764,646 Deferred inflows of resources 515,702 516,158 NET POSITION: Restricted 20,271 23,280 Unrestricted (7,836,446) (8,685,449) Total Net Position (7,816,175)$ (8,662,169)$ REVENUES: Property and other taxes 1,003,477$ 886,474$ Interest and other revenue 1,877 5,585 Total Revenues 1,005,354 892,059 EXPENSES: General government 159,360 429,988 Total Expenses 159,360 429,988 Change in Net Position 845,994 462,071 Net Position - Beginning (8,662,169) (9,124,240) Net Position - Ending (7,816,175)$ (8,662,169)$ Governmental Activities - 5 - The District is one of the “financing districts” in a triple district structure whereby the District is supporting the financing of the construction of public infrastructure being coordinated by Vail Square Metropolitan District No. 1. The District consists of residential properties. Such functions are furnished through a District Facilities Joint Financing Construction and Service Agreement among the District and Vail Square Metropolitan District Nos. 1 and 3. Vail Square Metropolitan District No. 1 is the “operating district” and as such, has and will continue to receive “capital and service obligation payments” from the District and District No. 3 to fund the financing of construction and operation of infrastructure in the Districts. District No. 2 funds such costs with property taxes. Government-wide Financial Analysis. During 2020 the District’s primary activity was to collect property taxes to pay capital and service obligations to District No. 1 for the infrastructure in the Districts. Financial Analysis of the District’s Funds As mentioned earlier, the District uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds. The focus of the District’s governmental funds is to provide information on near- term inflows, outflows, and balances of expendable resources. Such information is useful in assessing the District’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the District’s governmental funds reported a combined ending fund balance of $45,416 an decrease of ($1,128) in comparison with the prior year. The District adopts budgets for each fund on an annual basis. A budgetary comparison has been provided on page 10 for the General Fund and on page 22 for the Debt Service Fund. Capital assets. All capital assets inside of the District boundaries are constructed and operated by District No.1. Therefore, no capital assets are reported by the District. Long-term debts. District No. 2 is an additional obligor for the annual financing costs related to the District No. 1 2008 Tax Exempt Loan Facility as more fully described in the Joint Funding Agreement between the Districts. More details and information related to the District’s long-term debts can be found in the Notes to the Financial Statement in Note C on page 17 of this report. Economic Factors and Next Year’s Budget. It is anticipated COVID-19 will have impacts on the economy as a whole which will include financial impacts to the District, however the extent of such impact continues to be unknown at this time. Request for Information This financial report is designed to provide a general overview of the District’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Marchetti & Weaver LLC, 28 Second Street, Suite 213, Edwards, CO 81632 or you may call (970) 926-6060. Governmental Activities ASSETS Cash and investments 48,833$ Due from other governments 8,509 Property tax receivables 515,702 Total Assets 573,044 LIABILITIES Accounts payable 11,926 Net capital and service obligations to VSMD No. 1, non-current 7,861,591 Total Liabilities 7,873,517 DEFERRED INFLOW OF RESOURCES Property taxes 515,702 Total Deferred Inflow of Resources 515,702 Total Liabilities and Deferred Inflow of Resources 8,389,219 NET POSITION Restricted for emergencies 271 Restricted for debt service 20,000 Unrestricted (7,836,446) Total Net Position (7,816,175)$ Vail Square Metropolitan District No. 2 STATEMENT OF NET POSITION December 31, 2020 The accompanying notes are an integral part of this statement. - 6 - Total Operating Capital Governmental Expenses Contributions Contributions Activities Governmental activities: General government 159,360$ -$ -$ (159,360)$ Total governmental activities 159,360$ -$ -$ (159,360) General revenues: Property taxes 1,003,477 Interest 1,877 Total general revenues 1,005,354 Change in net position 845,994 Net position - beginning (8,662,169) Net position - ending (7,816,175)$ Vail Square Metropolitan District No. 2 STATEMENT OF ACTIVITIES Year ended December 31, 2020 The accompanying notes are an integral part of this statement. Function/Programs Program Revenues - 7 - Total Debt Governmental General Service Funds ASSETS Equity in pooled cash and investments 25,416$ 23,417$ 48,833$ Property taxes receivable - 515,702 515,702 Due from other governments - 8,509 8,509 Total Assets 25,416 547,628 573,044 LIABILITIES Accounts payable - 11,926 11,926 Total Liabilities - 11,926 11,926 DEFERRED INFLOW OF RESOURCES Property taxes - 515,702 515,702 Total Deferred Inflow of Resources - 515,702 515,702 Total Liabilities and Deferred Inflows - 527,628 527,628 FUND BALANCES Restricted for emergencies 271 - 271 Restricted for debt service - 20,000 20,000 Unassigned 25,145 - 25,145 Total Fund Balances 25,416$ 20,000$ 45,416$ 45,416$ Amounts reported for governmental activities in the Statement of Net Position are different because: Net capital and service obligations are not payable/receivable in the current period and are therefore not reported in the funds (7,861,591) (7,816,175)$ Check - The accompanying notes are an integral part of this statement. December 31, 2020 Net position of governmental activities Vail Square Metropolitan District No. 2 BALANCE SHEET - GOVERNMENTAL FUNDS Fund balances (as reported above) - 8 - Total Debt Governmental General Service Funds Revenues Interest -$ 1,877$ 1,877$ Taxes - 1,003,477 1,003,477 Total revenues - 1,005,354 1,005,354 Expenditures Current General government 7,148 - 7,148 Property taxes to VSMD No.1 - 983,841 983,841 Treasurer's fees - 15,493 15,493 Total expenditures 7,148 999,334 1,006,482 Excess of Revenues Over (Under) Expenditures (7,148) 6,020 (1,128) Transfers in (out) 9,045 (9,045) - Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses 1,897 (3,025) (1,128) Fund Balance - January 1 23,519 23,025 46,544 Fund Balance - December 31 25,416$ 20,000$ 45,416$ (1,128)$ Amounts reported as governmental activities in the Statement of Activities are different because: Net change in capital and service obligations to VSMD No.1 847,122 845,994$ Vail Square Metropolitan District No. 2 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Year ended December 31, 2020 IN FUND BALANCES - GOVERNMENTAL FUNDS The accompanying notes are an integral part of this statement. Change in fund balance (above) Change in net position of governmental activities Other financing sources (uses) - 9 - Variance Original and Favorable Final Budget Actual (Unfavorable) Expenditures General government Audit 4,500$ 4,500$ -$ Insurance 3,000 2,648 352 Contingency 1,000 - 1,000 Total expenditures 8,500 7,148 1,352 Excess of Revenues Over (Under) Expenditures (8,500) (7,148) 1,352 Transfers in (out) 11,115 9,045 (2,070) Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses 2,615 1,897 (718) Fund Balance - January 1 26,372 23,519 (2,853) Fund Balance - December 31 28,987$ 25,416$ (3,571)$ The accompanying notes are an integral part of this statement. Vail Square Metropolitan District No. 2 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND Year ended December 31, 2020 BALANCE - BUDGET AND ACTUAL - GENERAL FUND Other financing sources (uses) - 10 - Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 11 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Organization The Vail Square Metropolitan District No. 2 (the District) was established December 5, 2005, as a quasi-municipal corporation and political subdivision of the State of Colorado. The District was established as part of a triple district structure with Vail Square Metropolitan District Nos. 1 and 3. The District is the Financing District which encompasses residential development and was established to provide funding and tax base for the capital improvements constructed by VSMD No. 1. Vail Square Metropolitan District No. 3 is the Financing District which encompasses non-residential development. Together, the Financing Districts have paid and will continue to pay capital and service obligations to Vail Square Metropolitan District No. 1, the Operating District. The financial statements of the District have been prepared in accordance with generally accepted accounting principles (“GAAP”) as applied to governmental units. The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the District’s accounting policies are described below. 2. Reporting Entity The reporting entity consists of (a) the primary government; i.e., the District, and (b) organizations for which the District is financially accountable. The District is considered financially accountable for legally separate organizations if it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the District. Consideration is also given to other organizations which are fiscally dependent; i.e., unable to adopt a budget, levy taxes, or issue debt without approval by the District. Organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete are also included in the reporting entity. Based on the criteria above, the District is not financially accountable for any other entity, nor is the District a component unit of any other government. 3. Government-wide and Fund Financial Statements The District’s basic financial statements include both government-wide (reporting the District as a whole) and fund financial statements (reporting the District’s major funds). Both the government-wide and fund financial statements categorize primary activities as either governmental or business type. Currently, the District has only governmental activities. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 12 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Government-wide Financial Statements In the government-wide Statement of Net Position, the governmental activities columns are reported on a full accrual, economic resource basis, which recognizes all long-term assets, receivables and deferred outflows of resources as well as long-term debt, obligations and deferred inflows of resources. The District’s net position is reported in three parts: net position restricted for emergencies, restricted for debt service and unrestricted. The government-wide focus is on the sustainability of the District as an entity and the change in the District’s net position resulting from the current year’s activities. Fund Financial Statements The financial transactions of the District are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, deferred inflows, fund balances, revenues and expenditures. The fund focus is on current available resources and budget compliance. 4. Fund Accounting The District uses funds to maintain its financial records during the year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. At this time the District only uses governmental funds. Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental funds reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purpose for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference among governmental fund assets, liabilities, and deferred inflows is reported as fund balance. The District reports the following major governmental funds: General Fund – The General Fund is used to account for all financial resources of the District except those required to be accounted for in another fund. The general fund balance is available to the District for any purpose provided it is expended or transferred according to the general laws of Colorado. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 13 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Debt Service Fund – The Debt Service Fund accounts for the servicing of long-term debt including bonds, loans, developer notes, and long-term contractual obligations approved by the District’s electorate and revenues generated by property taxes that are required to be used in payment of long- term debt and contractual obligations. 5. Measurement Focus and Basis of Accounting Measurement focus refers to whether financial statements measure changes in current resources only (current financial focus) or changes in both current and long-term resources (long-term economic focus). Basis of accounting refers to the point at which revenues, expenditures, or expenses are recognized in the accounts and reported in the financial statements. Long-Term Economic Focus and Accrual Basis Governmental activities in the government-wide financial statements use the long-term economic focus and are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of the related cash flows. Current Financial Focus and Modified Accrual Basis The governmental fund financial statements use the current financial focus and are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. “Available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are generally recognized when the related liability is incurred. The exception to this general rule is that principal and interest on general long-term debt, if any, is recognized when due. When an expenditure is incurred that can be paid using either restricted or unrestricted resources (net position), the District's policy is to first apply the expenditure toward restricted resources and then toward unrestricted resources. In governmental funds, the District's policy is to first apply the expenditure toward restricted fund balance and then to other, less-restrictive classifications— committed and then assigned fund balances before using unassigned fund balances. 6. Intergovernmental Revenues For governmental funds, intergovernmental revenues, such as contributions awarded on a non- reimbursement basis, are recorded as receivables and revenues when measurable and available. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 14 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 7. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, deferred inflows, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 8. Property Taxes Property taxes are not due and payable until after the assessment year has ended, and are not included in the budget or Statement of Revenues, Expenditures, and Changes in Fund Balance of the assessment year. Property taxes are recorded as deferred inflows in the year they are levied and measurable. Property tax revenues are recorded as revenue in the year they are available or collected. Property taxes are levied on or before December 15 of each year and attach as an enforceable lien on the property on January 1. Taxes are payable in full on April 30 or in two installments on February 28 and June 15. 9. Interfund Transactions Quasi-external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. All other interfund transactions, except quasi-external transactions and reimbursements, are reported as transfers. 10. Stewardship, Compliance, and Accountability Budgets and Budgetary Accounting In the fall of each year, the District’s Board of Directors formally adopts a budget with appropriations by fund for the ensuing year pursuant to the Colorado Local Budget Law. The budgets for the governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP). As required by Colorado statutes, the District followed the following timetable in approving and enacting a budget for the ensuing year: (1) For the 2020 budget year, prior to August 25, 2019, the County Assessor sent the District the assessed valuation of all taxable property within the District’s boundaries. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 15 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED (2) On or before October 15, 2019, the District’s accountant submitted to the District’s Board of Directors a recommended budget which detailed the necessary property taxes needed along with other available revenues to meet the District’s operating requirements. (3) For the 2020 budget, prior to December 15, 2019, the District computed and certified to the County Commissioners a rate of levy that derived the necessary property taxes as computed in the proposed budget. (4) For the 2020 budget, the final budget and appropriating resolution was adopted prior to December 31, 2019. (5) After adoption of the budget resolution, the District may make the following changes: a) it may transfer appropriated monies between funds or between spending agencies within a fund, as determined by the original appropriation level; b) supplemental appropriations to the extent of revenues in excess of those estimated in the budget; c) emergency appropriations; and d) reduction of appropriations for which originally estimated revenues are insufficient. The level of control in the budget at which expenditures exceed appropriations is at the fund level. All appropriations lapse at year-end. 11. Fund Balances GASB Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions" provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government's fund balances more transparent. In the fund financial statements the following classifications describe the relative strength of the spending constraints.  Non-spendable fund balance - The portion of fund balance that cannot be spent because it is either not in spendable form (such as inventory) or is legally or contractually required to be maintained intact.  Restricted fund balance - The portion of fund balance constrained to being used for a specific purpose by external parties (such as grantors or bondholders), constitutional provisions or enabling legislation.  Committed fund balance - The portion of fund balance constrained for specific purposes according to limitations imposed by the District’s highest level of decision making authority, the Board, prior to the end of the current fiscal year. The constraint may be removed or changed only through formal action of the Board. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 16 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED  Assigned fund balance - The portion of fund balance set aside for planned or intended purposes. The intended use may be expressed by the Board or other individuals authorized to assign funds to be used for a specific purpose. Assigned fund balances in special revenue funds will also include any remaining fund balance that is not restricted or committed. This classification is necessary to indicate that those funds are, at a minimum intended to be used for the purpose of that particular fund.  Unassigned fund balance - The residual portion of fund balance that does not meet any of the above criteria. The District will only report a positive unassigned fund balance in the General Fund. NOTE B – EQUITY IN POOLED CASH AND INVESTMENTS The District maintains a cash pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the statement of net position as "Equity in pooled cash and investments." Cash Deposits 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 equal to 102 percent of the aggregate uninsured deposits. As of December 31, 2020, the District had no cash deposits. Investments Colorado state statutes authorize the District to invest in U.S. Treasury bills, obligations of any other U.S. agencies, obligations of the World Bank, general obligation bonds of any state or any of their subdivisions, revenue bonds of any state or any of their subdivisions, bankers acceptance notes, commercial paper, repurchase agreements, money market funds and guaranteed investment contracts. All investments must be held by the District, in its name, or in custody of a third party on behalf of the local government. As of December 31, 2020, the District had $48,833 invested in the Colorado Surplus Asset Fund (CSafe), an investment vehicle established for local government entities in Colorado to pool surplus funds. CSafe operates similarly to a money market fund and each share is equal in value to $1.00. A designated custodial bank provides safekeeping and depository services to CSafe in connection with the direct investment and withdrawal functions of CSafe. Substantially all securities owned by CSafe are held by the Federal Reserve Bank in the account maintained for the custodial bank. The custodian’s internal records identify the investments owned by CSafe. CSafe funds carry a Standard & Poor’s AAAm rating. There is no custodial, interest rate or foreign currency risk exposure. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 17 - NOTE B – EQUITY IN POOLED CASH AND INVESTMENTS – CONTINUED CSafe operates like a 2a7-like external investment pool in the fair value hierarchy established by GASB 72. The underlying investments held by CSafe, and the District’s investment in CSafe, are valued at amortized cost which approximates fair value. There are no limitations on withdrawals. A reconciliation of the carrying value of deposits and investments reported above to the Statement of Net Position is as follows: Deposits $ – CSafe 48,833 Equity in pooled cash and investments $ 48,833 NOTE C – INTERGOVERNMENTAL AGREEMENTS The District has entered into the following intergovernmental agreements: Joint Funding Agreement The Joint Funding Agreement generally provides that the Financing Districts will assess mill levies to collect property tax revenues which will be paid to the Operating District. The property tax revenues will be used by the Operating District to pay Financing Costs, which are defined as the principal and interest payments required by debt and interest rate swaps obtained or entered into by the Districts, including replenishment of debt reserve funds. In 2020, the mill levy assessed for collection in 2021 was 35 mills in Vail Square Metropolitan District No. 2, with 32 mills allocated for the Joint Funding Agreement and 3 mills for the District Facilities Joint Financing, Construction and Service Agreement; and, 21.875 mills in Vail Square Metropolitan District No. 3, with 18.875 mills allocated for the Joint Funding Agreement and 3 mills for the District Facilities Joint Financing, Construction and Service Agreement. The portion of the annual bond costs to be paid by each Financing District will remain in the same proportion in future years. District Facilities Joint Financing, Construction and Service Agreement The Agreement generally provides an obligation for the Financing Districts to pay for the acquisition and construction of the Facilities (defined above), to the extent not funded by the Joint Funding Agreement (the Capital Obligation), and operation and maintenance of the Facilities and administrative expenses incurred by the Operating District (the Service Obligation). The Financing Districts are obligated to generate and pay to the Operating District certain tax and other revenues to fund the Capital Obligation and the Service Obligation. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 18 - NOTE C – INTERGOVERNMENTAL AGREEMENTS – CONTINUED The Operating District has recorded a capital and service obligation receivable from the Financing Districts as of December 31, 2020 in the amount of $9,471,796 which represents unreimbursed costs incurred through that date for infrastructure construction and costs related to issuance of and debt service on the loans. This obligation payable to the Operating District has been allocated between the Financing Districts based on the Operating District’s forecast of the future annual bond costs to be paid by each financing District. Based upon this forecast, the amount of $7,861,591 has been allocated to Vail Square Metropolitan District No. 2. However, each Financing District is responsible to pay Financing Costs until the Operating District’s loans have been fully repaid and the ultimate allocation of the Financing Costs between the Financing Districts will be dependent on the assessed value and mill levy of each Financing District over the life of the Operating District’s loans. In any given year the Financing Districts are obligated to fund such portion of the Capital and Service Obligations as may be funded with the District taxes available from imposition of a subordinate mill levy, together with other charges imposed by the Financing Districts. The Agreement specifies certain termination rights on the part of the Districts. Various limitations and conditions to such termination rights exist and reference to the text of the Agreement should be made for specific terms. Pledge Agreement The Districts entered into an Intergovernmental Agreement with the Vail Reinvestment Authority. Under this agreement and in consideration for the Districts’ commitment to undertake construction of certain public improvements, the Vail Reinvestment Authority agrees to transfer to the Districts the District Tax Increment Revenues, to which the Authority would otherwise be entitled under an Urban Renewal Plan relating to the project. NOTE D – COMMITMENTS AND CONTINGENCIES During the normal course of business, the District may incur claims and other assertions against it from various agencies and individuals. Management of the District and its legal representatives have disclosed that they are not aware of any material outstanding claims against the District at December 31, 2020. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 19 - NOTE E – RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; injuries to employees, or acts of God. The District has elected to participate in the Colorado Special District Property and Liability Pool (the Pool) which is sponsored by the Special District Association of Colorado. The Pool provides property and general liability, automobile physical damage and liability, public official’s liability and machinery coverage to its members. Members of the Pool are required to make additional surplus contributions. 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. During the year ended December 31, 2020 the Pool made no distributions to the District. Condensed financial statement data for the Colorado Special Districts Property and Liability Pool as of December 31, 2019 (latest information available) is as follows: Assets $ 55,602,023 Liabilities $ 33,163,342 Surplus 22,438,681 $ 55,602,023 Revenue $ 22,436,944 Investment income and other 1,173,628 Total revenue 23,610,572 Expenses 25,355,739 Excess of revenues over (under) expenses $ (1,745,167) NOTE F – TABOR AMENDMENT In November 1992, Colorado voters amended Article X of the Colorado Constitution by adding Section 20, commonly known as the Taxpayer’s Bill of Rights (“TABOR”). TABOR contains revenue, spending, tax and debt limitations which apply to the State of Colorado and local governments. TABOR requires, with certain exceptions, advance voter approval for any new tax, tax rate increase, mill levy above that of the prior year, extension of any expiring tax, or tax policy change directly causing a new tax revenue gain to any local government. Except for refinancing bonded debt at a lower interest rate or adding new employees to existing pension plans, TABOR requires advance voter approval for the creation of any multiple fiscal year or other financial obligation unless adequate present cash reserves are pledged irrevocable and held for payments in future years. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 20 - NOTE F – TABOR AMENDMENT – CONTINUED TABOR also requires local governments to establish emergency reserves to be used for declared emergencies only. Emergencies, as defined by TABOR, exclude economic conditions, revenue shortfalls, or salary or fringe benefit increases. These reserves are required to be 3% or more of the fiscal year spending (excluding bonded debt service) for fiscal years ended after December 31, 1994. At December 31, 2020, the District’s emergency reserve was $271. Under TABOR, the initial base for local government spending and revenue limits is December 31, 1992 fiscal year spending. The District’s first year of operations ended December 31, 2006. Future spending and revenue limits are determined based on the prior year’s fiscal year spending adjusted for inflation in the prior calendar year plus annual local growth. Fiscal year spending is generally defined as expenditures and reserve increases with certain exceptions. Revenue, if any, in excess of the fiscal year spending limit must be refunded in the next fiscal year unless voters approve retention of such revenue. The electorate of the District authorized property taxes to be increased up to $1,500,000 in 2005, plus up to $3,000,000 in 2007, and each year thereafter to pay the Districts operations, maintenance, and other expenses, such amounts to increase annually in an amount not to exceed the applicable limitations of Article X, Section 20 of the Colorado Constitution and Colorado Law. The District’s electorate further approved that the District’s taxes be increased $120,000,000 annually, or by such lesser annual amount as may be necessary to pay the District’s general or special obligation bonds, revenue bonds or other multiple fiscal year financial obligations, including contracts, issued for the purpose of refunding, paying or defeasing, in whole or in part, bonds, notes or other financial obligations of the District. Such taxes may consist of an ad valorem property tax mill levy imposed without limitation of rate and in amounts sufficient to produce the annual increase set forth above or such lesser amount as may be necessary. The revenue from such taxes and any other monies used to pay such general or special obligation bonds, revenue bonds or other multiple fiscal year financial obligations costs, and investment income thereon, may be collected and spent by the District without regard to any expenditure, revenue raising, or other limitation contained within Article X, Section 20 of the Colorado Constitution. The District’s management believes it is in compliance with the financial provisions of TABOR. However, TABOR is complex and subject to interpretation. Many of its provisions, including the interpretation of how to calculate fiscal year spending limits, will require judicial interpretation. Vail Square Metropolitan District No. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 21 - NOTE F – TABOR AMENDMENT – CONTINUED On November 1, 2005 and November 6, 2007 the voters of the District authorized increases in debt as follows: Date of Authorization Authorization Authorization Purpose Amount Used Remaining 11/1/2005 Street Facilities $ 20,000,000 $ 5,446,944 $ 14,553,056 11/1/2005 Drainage Facilities 2,000,000 – 2,000,000 11/1/2005 Security Facilities 1,000,000 – 1,000,000 11/1/2005 Traffic/Safety Protection Facilities 2,000,000 527,950 1,472,050 11/6/2007 Water Facilities 5,000,000 1,113,154 3,886,846 11/6/2007 Sanitary Sewer Facilities 5,000,000 1,113,154 3,886,846 11/6/2007 Parks and Recreation 5,000,000 1,570,144 3,429,856 11/6/2007 Public Transportation 5,000,000 – 5,000,000 11/6/2007 Mosquito Control 1,000,000 – 1,000,000 11/6/2007 Fire Protection 5,000,000 – 5,000,000 11/6/2007 Television Relay 1,000,000 148,655 851,345 11/1/2005 Refunding 40,000,000 – 40,000,000 Total $ 92,000,000 $ 9,920,000 $ 82,080,000 NOTE G – RELATED PARTIES The developer of the property which constitutes the District is Arrabelle at Vail Square, LLC. The members of the District’s Board of Directors are officers, employees, or others associated with the Developer and may have conflicts of interest in dealing with the District. SUPPLEMENTAL INFORMATION Variance Original and Favorable Final Budget Actual (Unfavorable) Revenues Property taxes 960,138$ 955,120$ (5,018)$ Specific ownership taxes 48,007 48,357 350 Interest income 7,001 1,877 (5,124) Total revenues 1,015,146 1,005,354 (9,792) Expenditures Intergovernmental agreement Transfer to VSMD No. 1 988,546 983,841 4,705 Treasurer's fees 15,485 15,493 (8) Total expenditures 1,004,031 999,334 4,697 Excess of Revenues Over (Under) Expenditures 11,115 6,020 (5,095) Transfers in (out) (11,115) (9,045) 2,070 Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses - (3,025) (3,025) Fund Balance - January 1 20,000 23,025 3,025 Fund Balance - December 31 20,000$ 20,000$ -$ Vail Square Metropolitan District No. 2 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - DEBT SERVICE FUND Year ended December 31, 2020 Other financing sources (uses) - 22 - OTHER INFORMATION Prior Year Net Assessed Valuation for Current Percent Year Ending Year Property Mills Collected December 31, Tax Levy Levied Levied Collected to Levied 2007 11,853,149$ - -$ -$ 0.0% 2008 16,353,210 40 654,128 537,760 82.2% 2009 13,226,870 40 529,075 528,264 99.8% 2010 17,296,530 40 691,861 689,913 99.7% 2011 15,395,900 40 615,836 614,914 99.9% 2012 10,834,910 40 433,396 432,592 99.8% 2013 10,623,290 40 424,932 424,932 100.0% 2014 12,424,980 40 496,999 496,999 100.0% 2015 12,279,120 40 491,165 491,165 100.0% 2016 14,014,620 35 490,512 490,502 100.0% 2017 13,935,230 35 487,733 486,670 99.8% 2018 13,182,060 35 461,372 461,083 99.9% 2019 12,926,060 35 452,412 453,517 100.2% 2020 14,747,380 35 516,158 515,509 99.9% 2021 14,734,340 35 515,702 Notes: Tax collections in 2008 were less than taxes levied because of a valuation protest by the sole owner of property in the District that was not resolved until after the taxes were levied. Property taxes collected in any one year include collection of delinquent property taxes assessed in prior years. Information received from the County Treasurer does not permit identification of specific year of levy. Total Property Tax Vail Square Metropolitan District No. 2 SUMMARY OF ASSESSED VALUATION, MILL LEVY AND PROPERTY TAXES COLLECTED Year Ended December 31, 2020 - 23 - VAIL SQUARE METROPOLITAN DISTRICT NO. 3 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS December 31, 2020 C O N T E N T S Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ............................. 1 MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................ 3 FINANCIAL STATEMENTS STATEMENT OF NET POSITION .................................................................................... 6 STATEMENT OF ACTIVITIES ......................................................................................... 7 BALANCE SHEET – GOVERNMENTAL FUNDS ........................................................... 8 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS ................................................ 9 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND ........................ 10 NOTES TO FINANCIAL STATEMENTS ........................................................................ 11 SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – DEBT SERVICE FUND ................................................................................................ 22 OTHER INFORMATION SUMMARY OF ASSESSED VALUATION, MILL LEVY AND PROPERTY TAXES COLLECTED ................................................................................................... 23 2499 Hwy. 6&50 www.csdcpa.com 970-245-3000 Grand Junction, CO 81505 e-mail info @ csdcpa.com FAX 970-242-4716 TOLL FREE 877-245-8080 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS May 25, 2021 The Board of Directors Vail Square Metropolitan District No. 3 We have audited the accompanying financial statements of the governmental activities and each major fund of Vail Square Metropolitan District No. 3 as of and for the year ended December 31, 2020, 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 generally 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 of 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 District’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 District’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 that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 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 Vail Square Metropolitan District No. 3, as of December 31, 2020, and the respective changes in financial position thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 5 be presented to supplement the basic financial statements. Such 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. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Vail Square Metropolitan District No. 3’s basic financial statements. The Debt Service Fund budgetary schedule and property tax statistical schedule are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Debt Service Fund budgetary schedule is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Debt Service Fund budgetary schedule is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The property tax statistical schedule has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. - 3 - Vail Square Metropolitan District No. 3 Management’s Discussion and Analysis December 31, 2020 As management of Vail Square Metropolitan District No. 3 (the “District”), we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended December 31, 2020. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are composed of three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains additional other information after the notes to the financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the District’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all the District’s assets, liabilities, and deferred inflows with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The governmental activity of the District is primarily financing the Intergovernmental Service Costs and Capital Costs due to Vail Square Metropolitan District No. 1. There are no business-type activities within the District. The government-wide financial statements can be found on pages 6 and 7 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The District currently has two funds, the General Fund and the Debt Service Fund, both of which are governmental funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of expendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better - 4 - understand the long-term impact of the government’s near-term financing decisions. A reconciliation of the fund balance as reported in the governmental funds to the net position reported in the government-wide financial statements and a reconciliation of the net change in fund balance to the change in net position has been provided to facilitate the comparison between governmental funds and governmental activities. The fund financial statements are contained on pages 8 and 9 of the report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found starting on page 11 of this report. Condensed Financial Information A condensed comparative summary of the District’s government-wide assets, liabilities, deferred inflows, net position, revenues and expenditures follows: 2020 2019 ASSETS: Current assets 357,161$ 352,358$ Total Assets 357,161 352,358 LIABILITIES & DEFERRED INFLOWS: Current liabilities 11,671 7,049 Non-current liabilities 1,610,205 1,783,712 Total Liabilities 1,621,876 1,790,761 Deferred inflows of resources 345,149 345,358 NET POSITION: Restricted 316 174 Unrestricted (1,610,180) (1,783,686) Total Net Position (1,609,864)$ (1,783,512)$ REVENUES: Program Revenues Operating contributions 1,361$ 2,400$ General Revenues Property and other taxes 674,733 318,426 Interest and other revenue 195 1,126 Total Revenues 676,289 321,952 EXPENSES: General government 502,641 227,808 Total Expenses 502,641 227,808 Change in Net Position 173,648 94,144 Net Position - Beginning (1,783,512) (1,877,656) Net Position - Ending (1,609,864)$ (1,783,512)$ Governmental Activities - 5 - The District is one of the “financing districts” in a triple district structure whereby the District is supporting the financing of the construction of infrastructure being coordinated by Vail Square Metropolitan District No. 1. The District consists of commercial properties. Such functions are furnished through a District Facilities Joint Financing Construction and Service Agreement among the District and Vail Square Metropolitan District Nos. 1 and 2. Vail Square Metropolitan District No. 1 is the “operating district” and as such, has and will continue to receive “capital and service obligation payments” from the District and District No. 2 to fund the financing construction and operation of infrastructure in the Districts. District No. 3 funds such costs with property taxes. Government-wide Financial Analysis. During 2020 the District’s primary activity was to collect property taxes to pay capital and service obligations to District No. 1 for the infrastructure in the Districts. Financial Analysis of the District’s Funds As mentioned earlier, the District uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds. The focus of the District’s governmental funds is to provide information on near- term inflows, outflows, and balances of expendable resources. Such information is useful in assessing the District’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the District’s governmental funds reported a combined ending fund balance of $341. The District adopts budgets for each fund on an annual basis. A budgetary comparison has been provided on page 10 for the General Fund and on page 22 for the Debt Service Fund. Capital assets. All capital assets inside of the District boundaries are constructed and operated by District No.1. Therefore, no capital assets are reported by the District. Long-term debts. District No. 3 is an additional obligor for the annual financing costs related to the District No. 1 2008 Tax Exempt Loan Facility as more fully described in the Joint Funding Agreement between the Districts. More details and information related to the District’s long-term debts can be found in the Notes to the Financial Statement in Note C on page 17 of this report. Economic Factors and Next Year’s Budget. It is anticipated COVID-19 will have impacts on the economy as a whole which will include financial impacts to the District, however the extent of such impact continues to be unknown at this time. Request for Information This financial report is designed to provide a general overview of the District’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Marchetti & Weaver, LLC, 28 Second Street, Suite 213, Edwards, CO 81632 or you may call (970) 926-6060. Governmental Activities ASSETS Cash and invesments 9,402$ Due from other governments 2,610 Property taxes receivable 345,149 Total Assets 357,161 LIABILITIES Accounts payable 11,671 Net Capital and Service obligations to VSMD No. 1, non-current 1,610,205 Total Liabilities 1,621,876 DEFERRED INFLOW OF RESOURCES Property taxes 345,149 Total Deferred Inflow of Resources 345,149 Total Liabilities and Deferred Inflow of Resources 1,967,025 (345,149) NET POSITION Restricted for emergencies 175 Restricted for debt service 141 Unrestricted (1,610,180) Total Net Position (1,609,864)$ Vail Square Metropolitan District No. 3 STATEMENT OF NET POSITION December 31, 2020 The accompanying notes are an integral part of this statement. - 6 - Total Operating Capital Governmental Expenses Contributions Contributions Activities Governmental activities: General government 502,641$ 1,361$ -$ (501,280)$ Total governmental activities 502,641$ 1,361$ -$ (501,280) General revenues: Property taxes 674,733 Interest 195 Total general revenues 674,928 Change in net position 173,648 Net position- beginning (1,783,512) Net position- ending (1,609,864)$ Check - Vail Square Metropolitan District No. 3 STATEMENT OF ACTIVITIES Year ended December 31, 2020 The accompanying notes are an integral part of this statement. Function/Programs Program Revenues - 7 - Total Debt Governmental General Service Funds ASSETS Equity in pooled cash and investments 4,685$ 4,717$ 9,402$ Due from other governments - 2,610 2,610 Property tax receivables - 345,149 345,149 Total Assets 4,685 352,476 357,161 LIABILITIES Accounts payable 4,485 7,186 11,671 Total Liabilities 4,485 7,186 11,671 DEFERRED INFLOW OF RESOURCES Property taxes - 345,149 345,149 Total Deferred Inflow of Resources - 345,149 345,149 Total Liabilities and Deferred Inflows 4,485 352,335 356,820 FUND BALANCES Restricted for emergencies 175 - 175 Restricted for debt service - 141 141 Unassigned 25 - 25 Total Fund Balances 200$ 141$ 341$ 341$ Amounts reported for governmental activities in the Statement of Net Position are different because: Net capital and service obligations are not payable/receivable in the current period and are therefore not reported in the funds (1,610,205) (1,609,864)$ The accompanying notes are an integral part of this statement. December 31, 2020 Net position of governmental activities Vail Square Metropolitan District No. 3 BALANCE SHEET - GOVERNMENTAL FUNDS Fund balances (as reported above) - 8 - Total Debt Governmental General Service Funds Revenues Taxes -$ 674,733$ 674,733$ Intergovernmental - VSMD No.1 1,361 - 1,361 Interest income - 195 195 Total revenues 1,361 674,928 676,289 Expenditures Current General government 5,846 - 5,846 Property taxes to VSMD No.1 - 659,943 659,943 Treasurer's fees - 10,359 10,359 Total expenditures 5,846 670,302 676,148 Excess of Revenues Over (Under) Expenditures (4,485) 4,626 141 Other financing sources (uses) Transfers in (out) 4,485 (4,485) - Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses - 141 141 Fund Balance - January 1 200 - 200 Fund Balance - December 31 200$ 141$ 341$ 141$ Amounts reported as governmental activities in the Statement of Activities are different because: Net change in capital and service obligations to VSMD No. 1 173,507 173,648$ Vail Square Metropolitan District No. 3 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES Year ended December 31, 2020 IN FUND BALANCES - GOVERNMENTAL FUNDS The accompanying notes are an integral part of this statement. Change in fund balance (above) Change in net position of governmental activities - 9 - Variance Original Final Favorable Budget Budget Actual (Unfavorable) Revenues VSMD No. 1 expense reimbursement 995$ 2,545$ 1,361$ (1,184)$ Total revenues 995 2,545 1,361 (1,184) Expenditures General government Audit 3,200 3,200 3,200 - Insurance expense 3,000 3,000 2,646 354 Contingency 1,000 1,000 - 1,000 Total expenditures 7,200 7,200 5,846 1,354 Excess of Revenues Over (Under) Expenditures (6,205) (4,655) (4,485) 170 Other financing sources (uses) Transfers in (out) 6,205 4,655 4,485 (170) Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses - - - - Fund Balance - January 1 200 200 200 - Fund Balance - December 31 200$ 200$ 200$ -$ Vail Square Metropolitan District No. 3 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND The accompanying notes are an integral part of this statement. Year ended December 31, 2020 BALANCE - BUDGET AND ACTUAL - GENERAL FUND - 10 - Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 11 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Organization The Vail Square Metropolitan District No. 3 (the District) was established December 5, 2005, as a quasi-municipal corporation and political subdivision of the State of Colorado. The District was established as part of the triple district structure with Vail Square Metropolitan District Nos. 1 and 2. The District is the Financing District which encompasses non-residential development and was established to provide funding and tax base for the capital improvements constructed by VSMD No. 1. VSMD No. 2 is the Financing District which encompasses residential development. Together, the Financing Districts have paid and will continue to pay capital and service obligations to VSMD No. 1, the Operating District. The financial statements of the District have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the District’s accounting policies are described below. 2. Reporting Entity The reporting entity consists of (a) the primary government; i.e., the District, and (b) organizations for which the District is financially accountable. The District is considered financially accountable for legally separate organizations if it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the District. Consideration is also given to other organizations which are fiscally dependent; i.e., unable to adopt a budget, levy taxes, or issue debt without approval by the District. Organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete are also included in the reporting entity. Based on the criteria above, the District is not financially accountable for any other entity, nor is the District a component unit of any other government. 3. Government-wide and Fund Financial Statements The District’s basic financial statements include both government-wide (reporting the District as a whole) and fund financial statements (reporting the District’s major funds). Both the government-wide and fund financial statements categorize primary activities as either governmental or business type. Currently, the District has only governmental activities. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 12 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Government-wide Financial Statements In the government-wide Statement of Net Position, the governmental activities columns are reported on a full accrual, economic resource basis, which recognizes all long-term assets, receivables and deferred outflows of resources as well as long-term debt, obligations and deferred inflows of resources. The District’s net position is reported in three parts: net position restricted for emergencies, restricted for debt service, and unrestricted. The government-wide focus is on the sustainability of the District as an entity and the change in the District’s net position resulting from the current year’s activities. Fund Financial Statements The financial transactions of the District are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund balances, revenues and expenditures. The fund focus is on current available resources and budget compliance. 4. Fund Accounting The District uses funds to maintain its financial records during the year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. At this time the District only uses governmental funds. Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental funds reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purpose for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference among governmental fund assets, liabilities, and deferred outflows/inflows is reported as fund balance. The District reports the following major governmental funds: General Fund – The General Fund is used to account for all financial resources of the District except those required to be accounted for in another fund. The general fund balance is available to the District for any purpose provided it is expended or transferred according to the general laws of Colorado. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 13 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Debt Service Fund – The Debt Service Fund accounts for the servicing of long-term debt including contractual obligations approved by the District’s electorate and revenues generated by property taxes that are required to be used in payment of long-term debt and contractual obligations. 5. Measurement Focus and Basis of Accounting Measurement focus refers to whether financial statements measure changes in current resources only (current financial focus) or changes in both current and long-term resources (long-term economic focus). Basis of accounting refers to the point at which revenues, expenditures, or expenses are recognized in the accounts and reported in the financial statements. Long-Term Economic Focus and Accrual Basis Governmental activities in the government-wide financial statements use the long-term economic focus and are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of the related cash flows. Current Financial Focus and Modified Accrual Basis The governmental fund financial statements use the current financial focus and are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. “Available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are generally recognized when the related liability is incurred. The exception to this general rule is that principal and interest on general long-term debt, if any, is recognized when due. When an expenditure is incurred that can be paid using either restricted or unrestricted resources (net position), the District's policy is to first apply the expenditure toward restricted resources and then toward unrestricted resources. In governmental funds, the District's policy is to first apply the expenditure toward restricted fund balance and then to other, less-restrictive classifications— committed and then assigned fund balances before using unassigned fund balances. 6. Intergovernmental Revenues For governmental funds, intergovernmental revenues, such as contributions awarded on a non- reimbursement basis, are recorded as receivables and revenues when measurable and available. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 14 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 7. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and deferred inflows, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 8. Property Taxes Property taxes are not due and payable until after the assessment year has ended, and are not included in the budget or Statement of Revenues, Expenditures, and Changes in Fund Balance of the assessment year. Property taxes are recorded as deferred inflows in the year they are levied and measurable. Property tax revenues are recorded as revenue in the year they are available or collected. Property taxes are levied on or before December 15 of each year and attach as an enforceable lien on the property on January 1. Taxes are payable in full on April 30 or in two installments on February 28 and June 15. 9. Interfund Transactions Quasi-external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. All other interfund transactions, except quasi-external transactions and reimbursements, are reported as transfers. 10. Stewardship, Compliance, and Accountability Budgets and Budgetary Accounting In the fall of each year, the District’s Board of Directors formally adopts a budget with appropriations by fund for the ensuing year pursuant to the Colorado Local Budget Law. The budgets for the governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP). As required by Colorado statutes, the District followed the following timetable in approving and enacting a budget for the ensuing year: (1) For the 2020 budget year, prior to August 25, 2019, the County Assessor sent the District the assessed valuation of all taxable property within the District’s boundaries. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 15 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED (2) On or before October 15, 2019, the District’s accountant submitted to the District’s Board of Directors a recommended budget which detailed the necessary property taxes needed along with other available revenues to meet the District’s operating requirements. (3) For the 2020 budget, prior to December 15, 2019, the District computed and certified to the County Commissioners a rate of levy that derived the necessary property taxes as computed in the proposed budget. (4) For the 2020 budget, the final budget and appropriating resolution was adopted prior to December 31, 2019. (5) After adoption of the budget resolution, the District may make the following changes: a) it may transfer appropriated monies between funds or between spending agencies within a fund, as determined by the original appropriation level; b) supplemental appropriations to the extent of revenues in excess of those estimated in the budget; c) emergency appropriations; and d) reduction of appropriations for which originally estimated revenues are insufficient. The level of control in the budget at which expenditures exceed appropriations is at the fund level. All appropriations lapse at year-end. 11. Fund Balances GASB Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions" provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government's fund balances more transparent. In the fund financial statements the following classifications describe the relative strength of the spending constraints.  Non-spendable fund balance - The portion of fund balance that cannot be spent because it is either not in spendable form (such as inventory) or is legally or contractually required to be maintained intact.  Restricted fund balance - The portion of fund balance constrained to being used for a specific purpose by external parties (such as grantors or bondholders), constitutional provisions or enabling legislation.  Committed fund balance - The portion of fund balance constrained for specific purposes according to limitations imposed by the District’s highest level of decision making authority, the Board, prior to the end of the current fiscal year. The constraint may be removed or changed only through formal action of the Board. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 16 - NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED  Assigned fund balance - The portion of fund balance set aside for planned or intended purposes. The intended use may be expressed by the Board or other individuals authorized to assign funds to be used for a specific purpose. Assigned fund balances in special revenue funds will also include any remaining fund balance that is not restricted or committed. This classification is necessary to indicate that those funds are, at a minimum intended to be used for the purpose of that particular fund.  Unassigned fund balance - The residual portion of fund balance that does not meet any of the above criteria. The District will only report a positive unassigned fund balance in the General Fund. NOTE B – EQUITY IN POOLED CASH AND INVESTMENTS The District maintains a cash pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the balance sheet as "Equity in pooled cash and investments." Cash Deposits 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 equal to 102 percent of the aggregate uninsured deposits. As of December 31, 2020, the District had no cash deposits. Investments Colorado state statutes authorize the District to invest in U.S. Treasury bills, obligations of any other U.S. agencies, obligations of the World Bank, general obligation bonds of any state or any of their subdivisions, revenue bonds of any state or any of their subdivisions, bankers acceptance notes, commercial paper, repurchase agreements, money market funds and guaranteed investment contracts. All investments must be held by the District, in its name, or in custody of a third party on behalf of the local government. As of December 31, 2020, the District had $9,402 invested in the Colorado Surplus Asset Fund (CSafe), an investment vehicle established for local government entities in Colorado to pool surplus funds. CSafe operates similarly to a money market fund and each share is equal in value to $1.00. A designated custodial bank provides safekeeping and depository services to CSafe in connection with the direct investment and withdrawal functions of CSafe. Substantially all securities owned by CSafe are held by the Federal Reserve Bank in the account maintained for the custodial bank. The custodian’s internal records identify the investments owned by CSafe. CSafe funds carry a Standard & Poor’s AAAm rating. There is no custodial, interest rate or foreign currency risk exposure. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 17 - NOTE B – EQUITY IN POOLED CASH AND INVESTMENTS – CONTINUED CSafe operates like a 2a7-like external investment pool in the fair value hierarchy established by GASB 72. The underlying investments held by CSafe, and the District’s investment in CSafe, are valued at amortized cost which approximates fair value. There are no limitations on withdrawals. A reconciliation of the carrying value of deposits and investments reported above to the Statement of Net Position is as follows: Deposits $ – CSafe 9,402 Equity in pooled cash and investments $ 9,402 NOTE C – INTERGOVERNMENTAL AGREEMENTS The District has entered into the following intergovernmental agreements: Joint Funding Agreement The Joint Funding Agreement generally provides that the Financing Districts will assess mill levies to collect property tax revenues which will be paid to the Operating District. The property tax revenues will be used by the Operating District to pay Financing Costs, which are defined as the principal and interest payments required by debt and interest rate swaps obtained or entered into by the Districts, including replenishment of debt reserve funds. In 2020, the mill levy assessed for collection in 2021 was 35 mills in Vail Square Metropolitan District No. 2, with 32 mills allocated for the Joint Funding Agreement and 3 mills for the District Facilities Joint Financing, Construction and Service Agreement; and, 21.875 mills in Vail Square Metropolitan District No. 3, with 18.875 mills allocated for the Joint Funding Agreement and 3 mills for the District Facilities Joint Financing, Construction and Service Agreement. The portion of the annual bond costs to be paid by each Financing District will remain in the same proportion in future years. District Facilities Joint Financing, Construction and Service Agreement The Agreement generally provides an obligation for the Financing Districts to pay for the acquisition and construction of the Facilities (defined above), to the extent not funded by the Joint Funding Agreement (the Capital Obligation), and operation and maintenance of the Facilities and administrative expenses incurred by the Operating District (the Service Obligation). The Financing Districts are obligated to generate and pay to the Operating District certain tax and other revenues to fund the Capital Obligation and the Service Obligation. The amounts of these Obligations are offset with one another on the Statement of Net Position. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 18 - NOTE C – INTERGOVERNMENTAL AGREEMENTS – CONTINUED The Operating District has recorded a capital and service obligation receivable from the Financing Districts as of December 31, 2020 in the amount of $9,471,796 which represents unreimbursed costs incurred through that date for infrastructure construction and costs related to issuance of and debt service on the loans. This obligation payable to the Operating District has been allocated between the Financing Districts based on the Operating District’s forecast of the future annual bond costs to be paid by each Financing District. Based upon this forecast, the amount of $1,610,205 has been allocated to Vail Square Metropolitan District No. 3. However, each Financing District is responsible to pay Financing Costs until the Operating District’s loans have been fully repaid and the ultimate allocation of the Financing Costs between the Financing Districts will be dependent on the assessed value and mill levy of each Financing District over the life of the Operating District’s loans. In any given year the Financing Districts are obligated to fund such portion of the Capital and Service Obligations as may be funded with the District taxes available from imposition of a subordinate mill levy, together with other charges imposed by the Financing Districts. The Agreement specifies certain termination rights on the part of the Districts. Various limitations and conditions to such termination rights exist and reference to the text of the Agreement should be made for specific terms. Pledge Agreement The Districts entered into an Intergovernmental Agreement with the Vail Reinvestment Authority. Under this agreement and in consideration for the Districts’ commitment to undertake construction of certain public improvements, the Vail Reinvestment Authority agrees to transfer to the Districts the District Tax Increment Revenues, to which the Authority would otherwise be entitled under an Urban Renewal Plan relating to the project. NOTE D – COMMITMENTS AND CONTINGENCIES During the normal course of business, the District may incur claims and other assertions against it from various agencies and individuals. Management of the District and its legal representatives have disclosed that they are not aware of any material outstanding claims against the District at December 31, 2020. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 19 - NOTE E – RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; injuries to employees, or acts of God. The District has elected to participate in the Colorado Special District Property and Liability Pool (the Pool) which is sponsored by the Special District Association of Colorado. The Pool provides property and general liability, automobile physical damage and liability, public official’s liability and machinery coverage to its members. Members of the Pool are required to make additional surplus contributions. 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. During the year ended December 31, 2020 the Pool made no distributions to the District. Condensed financial statement data for the Colorado Special Districts Property and Liability Pool as of December 31, 2019 (latest information available) is as follows: Assets $ 55,602,023 Liabilities $ 33,163,342 Surplus 22,438,681 $ 55,602,023 Revenue $ 22,436,944 Investment income and other 1,173,628 Total revenue 23,610,572 Expenses 25,355,739 Excess of revenues over (under) expenses $ (1,745,167) NOTE F – TABOR AMENDMENT In November 1992, Colorado voters amended Article X of the Colorado Constitution by adding Section 20, commonly known as the Taxpayer’s Bill of Rights (“TABOR”). TABOR contains revenue, spending, tax and debt limitations which apply to the State of Colorado and local governments. TABOR requires, with certain exceptions, advance voter approval for any new tax, tax rate increase, mill levy above that of the prior year, extension of any expiring tax, or tax policy change directly causing a new tax revenue gain to any local government. Except for refinancing bonded debt at a lower interest rate or adding new employees to existing pension plans, TABOR requires advance voter approval for the creation of any multiple fiscal year or other financial obligation unless adequate present cash reserves are pledged irrevocable and held for payments in future years. TABOR also requires local governments to establish emergency reserves to be used for declared emergencies only. Emergencies, as defined by TABOR, exclude economic conditions, revenue shortfalls, or salary or fringe benefit increases. These reserves are required to be 3% or more of the fiscal year spending (excluding bonded debt service) for fiscal years ended after December 31, 1994. At December 31, 2020, the District’s emergency reserve was $175. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 20 - NOTE F – TABOR AMENDMENT – CONTINUED Under TABOR, the initial base for local government spending and revenue limits is December 31, 1992 fiscal year spending. The District’s first year of operations ended December 31, 2006. Future spending and revenue limits are determined based on the prior year’s fiscal year spending adjusted for inflation in the prior calendar year plus annual local growth. Fiscal year spending is generally defined as expenditures and reserve increases with certain exceptions. Revenue, if any, in excess of the fiscal year spending limit must be refunded in the next fiscal year unless voters approve retention of such revenue. The electorate of the District authorized property taxes to be increased up to $1,500,000 in 2005, plus up to $3,000,000 in 2007, and each year thereafter to pay the Districts operations, maintenance, and other expenses, such amounts to increase annually in an amount not to exceed the applicable limitations of Article X, Section 20 of the Colorado Constitution and Colorado Law. The District’s electorate further approved that the District’s taxes be increased $120,000,000 annually, or by such lesser annual amount as may be necessary to pay the District’s general or special obligation bonds, revenue bonds or other multiple fiscal year financial obligations, including contracts, issued for the purpose of refunding, paying or defeasing, in whole or in part, bonds, notes or other financial obligations of the District. Such taxes may consist of an ad valorem property tax mill levy imposed without limitation of rate and in amounts sufficient to produce the annual increase set forth above or such lesser amount as may be necessary. The revenue from such taxes and any other monies used to pay such general or special obligation bonds, revenue bonds or other multiple fiscal year financial obligations costs, and investment income thereon, may be collected and spent by the District without regard to any expenditure, revenue raising, or other limitation contained within Article X, Section 20 of the Colorado Constitution. The District’s management believes it is in compliance with the financial provisions of TABOR. However, TABOR is complex and subject to interpretation. Many of its provisions, including the interpretation of how to calculate fiscal year spending limits, will require judicial interpretation. Vail Square Metropolitan District No. 3 NOTES TO FINANCIAL STATEMENTS December 31, 2020 - 21 - NOTE F – TABOR AMENDMENT – CONTINUED On November 1, 2005 and November 6, 2007 the voters of the District authorized increases in debt as follows: Date of Authorization Authorization Authorization Purpose Amount Used Remaining 11/1/2005 Street Facilities $ 20,000,000 $ 3,338,449 $ 16,661,551 11/1/2005 Drainage Facilities 2,000,000 – 2,000,000 11/1/2005 Security Facilities 1,000,000 – 1,000,000 11/1/2005 Traffic/Safety Protection Facilities 2,000,000 323,582 1,676,418 11/6/2007 Water Facilities 5,000,000 682,256 4,317,744 11/6/2007 Sanitary Sewer Facilities 5,000,000 682,256 4,317,744 11/6/2007 Parks and Recreation 5,000,000 962,346 4,037,654 11/6/2007 Public Transportation 5,000,000 – 5,000,000 11/6/2007 Mosquito Control 1,000,000 – 1,000,000 11/6/2007 Fire Protection 5,000,000 – 5,000,000 11/6/2007 Television Relay 1,000,000 91,111 908,889 11/1/2005 Refunding 40,000,000 – 40,000,000 Total $ 92,000,000 $ 6,080,000 $ 85,920,000 NOTE G – RELATED PARTIES The developer of the property which constitutes the District is Arrabelle at Vail Square, LLC. The members of the District’s Board of Directors are officers, employees, or others associated with the Developer and may have conflicts of interest in dealing with the District. NOTE H – SIGNIFICANT TAXPAYER The hotel complex located within the boundaries of District No. 3 represents all of the assessed valuation of that District. The County Assessor increased the assessed valuation of the hotel from $12,706,140 in 2018 to $28,646,250 in 2019 and 2020. The hotel owner has protested the 2019 and 2020 assessed valuations (which are the basis for taxes paid in 2020 and to be paid in 2021). The protest is currently being litigated in District Court. A portion of the property taxes for the hotel received in 2020 and the property taxes receivable in 2021 are subject to abatement if the District Court rules in favor of the hotel. The District has budgeted an allowance for this potential abatement in the District’s 2021 budget but has not deferred recognition of the tax revenue received in 2020. SUPPLEMENTARY INFORMATION Vail Square Metropolitan District No. 3 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - DEBT SERVICE FUND Year ended December 31, 2020 Variance Original Final Favorable Budget Budget Actual (Unfavorable) Revenues Property taxes 642,421$ 642,421$ 642,422$ 1$ Allowance for potential abatements (175,000) - - Specific ownership taxes 23,372 32,122 32,311 189 Interest income 3,000 250 195 (55) Total revenues 493,793 674,793 674,928 135 Expenditures Intergovernmental agreement Transfer to VSMD No. 1 682,227 659,777 659,943 (166) Allowance for potential abatements (175,000) - - - Treasurer's fees 10,361 10,361 10,359 2 Contingency (30,000) - - - Total expenditures 487,588 670,138 670,302 (164) Excess of Revenues Over (Under) Expenditures 6,205 4,655 4,626 (29) Other financing sources (uses) Transfers in (out) (6,205) (4,655) (4,485) 170 Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses - - 141 141 Fund Balance - January 1 - - - - Fund Balance - December 31 -$ -$ 141$ 141$ - 22 - OTHER INFORMATION Prior Year Net Assessed Valuation for Current Percent Year Ending Year Property Mills Collected December 31, Tax Levy Levied Levied Collected to Levied 2008 180$ 25 5$ 5$ 100.0% 2009 8,951,400 25 223,785 160,379 71.7% 2010 7,421,000 25 185,525 185,513 100.0% 2011 6,319,180 25 157,980 157,972 100.0% 2012 4,531,910 25 113,298 113,283 100.0% 2013 4,443,210 25 111,080 111,080 100.0% 2014 4,897,360 25 122,434 122,234 99.8% 2015 4,635,620 25 115,891 116,107 100.2% 2016 5,448,760 21.875 119,192 119,176 100.0% 2017 5,139,910 21.875 112,436 112,436 100.0% 2018 7,626,730 21.875 166,835 166,835 100.0% 2019 7,442,030 21.875 162,794 162,808 100.0% 2020 15,787,780 21.875 345,358 345,353 100.0% 2021 15,778,220 21.875 345,149 Notes: Tax collections in 2009 were less than taxes levied because of a valuation protest by the sole owner of property in the District that was not resolved until after the taxes were levied. Property taxes collected in any one year include collection of delinquent property taxes assessed in prior years. Information received from the County Treasurer does not permit identification of specific year of levy. Vail Square Metropolitan District No. 3 SUMMARY OF ASSESSED VALUATION, MILL LEVY AND PROPERTY TAXES COLLECTED Year Ended December 31, 2020 Total Property Tax - 23 -