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Tarpon Point Marina Entrance

Direct Access Canal

Waterfront View Cape Harbor Boat House

Cover photos Photographer - Mary Kiss

FLORIDA

COMPREHENSIVE ANNUAL

FINANCIAL REPORT

City of Cape Coral, Florida For the Fiscal Year Ended

September 30, 2005

Prepared by:

Financial Services Department

FLORIDA

CITY OF CAPE CORAL, FLORIDA

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2005

TABLE OF CONTENTS

Page

I. INTRODUCTORY SECTION Letter of Transmittal.....................................................................................................................................I GFOA Certificate of Achievement ............................................................................................................ IX Organizational Chart.................................................................................................................................. X List of City Officials ................................................................................................................................... XI

II. FINANCIAL SECTION Independent Auditors’ Report.....................................................................................................................1

A. MANAGEMENT’S DISCUSSION AND ANALYSIS (unaudited)..............................................................3

B. BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets ....................................................................................................................17 Statement of Activities........................................................................................................................18 Fund Financial Statements

Balance Sheet – Governmental Funds..............................................................................................19

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund

Reconciliation of the Statement of Revenues, Expenses, and Changes in Fund

Reconciliation of the Balance Sheet to the Statement of Net Assets – Governmental Funds ..........20 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ....21

Balances of Governmental Funds to the Statement of Activities ................................................22 Statement of Net Assets – Proprietary Funds....................................................................................23 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds............25

Net Assets of Proprietary Funds to the Statement of Activities...................................................25 Statement of Cash Flows – Proprietary Funds ..................................................................................26 Statement of Fiduciary Net Assets – Fiduciary Funds.......................................................................28 Statement of Changes in Fiduciary Net Assets – Fiduciary Funds ...................................................28

Notes to the Financial Statements........................................................................................................29

C. REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule – General Fund...................................................................................74 Budgetary Comparison Schedule – Park Recreational Facilities Impact Fees Special Revenue Fund ..76 Notes to the Required Supplementary Information – Budget Comparisons ............................................77 Schedule of Funding Progress and Schedule of Contributions from Employer and Other

Contributing Entities – Municipal General Employees’ Pension Plan................................................78 Schedule of Funding Progress and Schedule of Contributions from Employer and Other

Contributing Entities – Municipal Police Officers’ Pension Plan ........................................................79 Schedule of Funding Progress and Schedule of Contributions from Employer and Other

Contributing Entities – Municipal Firefighters’ Officers’ Pension Plan ...............................................80

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TABLE OF CONTENTS

Page

D. COMBINING AND INDIVIDUAL NONMAJOR FUND FINANCIAL STATEMENTS AND BUDGET AND ACTUAL SCHEDULES

Combining Balance Sheet – Nonmajor Governmental Funds .................................................................84 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor

Budgetary Comparison Schedules Special Revenue Funds:

Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets – Nonmajor

Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets – Internal

Governmental Funds..........................................................................................................................88

Police Confiscation – Federal .........................................................................................................92 Police Confiscation – State.............................................................................................................93 Gas Tax ..........................................................................................................................................94 Fire, Rescue & EMS Impact Fee ....................................................................................................95 Road Impact Fee ............................................................................................................................96 Community Redevelopment Agency ..............................................................................................97 Community Development Block Grant............................................................................................98 Local Housing Assistance ..............................................................................................................98 Downtown Expansion District ........................................................................................................99 City Centrum ..................................................................................................................................99 Alarm Fee ................................................................................................................................... 100 Parks and Recreation ................................................................................................................. 100 Greenscape Donations ................................................................................................................ 101 All Hazards................................................................................................................................... 101

Debt Service Fund .......................................................................................................................... 102 Transportation Capital Projects Fund ............................................................................................. 103 Other Capital Projects Fund............................................................................................................ 104

Combining Statement of Net Assets – Nonmajor Enterprise Funds ..................................................... 106

Enterprise Funds............................................................................................................................. 107 Combining Statement of Cash Flows – Nonmajor Enterprise Funds.................................................... 108 Combining Statement of Net Assets – Internal Service Funds ............................................................. 109

Service Funds ................................................................................................................................. 110 Combining Statement of Cash Flows – Internal Service Funds............................................................ 111 Combining Statement of Changes in Assets and Liabilities – Agency Funds....................................... 113

III. STATISTICAL SECTION

Schedule 1: Net Assets by Component – Last Four Fiscal Years ......................................................... 116 Schedule 2: Changes in Net Assets – Last Four Fiscal Years .............................................................. 117 Schedule 3: Fund Balances of Governmental Funds – Last Four Fiscal Years .................................... 119 Schedule 4: Changes in Fund Balances of Governmental Funds – Last Four Fiscal Years................. 120 Schedule 5: Assessed Value and Estimated Actual Value of Taxable Property –

Last Ten Fiscal Years ..................................................................................................... 121 Schedule 6: Property Tax Rates - Direct and Overlapping Governments – Last Ten Fiscal Years ...... 122 Schedule 7: Principal Property Taxpayers – Current Year and Nine Years Ago................................... 123 Schedule 8: Property Tax Levies and Collections – Last Ten Fiscal Years .......................................... 124 Schedule 9: Ratios of Outstanding Debt by Type – Last Ten Fiscal Years........................................... 125 Schedule 10: Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years ............................. 126 Schedule 11: Direct and Overlapping Governmental Activities Debt – as of September 30, 2005......... 127

Schedule 12: Pledged-Revenue Coverage – Last Ten Fiscal Years....................................................... 128

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TABLE OF CONTENTS

Page

Schedule 13: Demographic and Economic Statistics – Last Ten Calendar Years .................................. 130 Schedule 14: Principal Employers – Current Year and Five Years Ago.................................................. 131 Schedule 15: Full-Time Equivalent City Government Employees by Function/Program –

Last Ten Fiscal Years ..................................................................................................... 132 Schedule 16: Operating Indicators by Function/Program – Last Ten Fiscal Years ................................. 133 Schedule 17: Capital Asset Statistics by Function/Program – Last Ten Fiscal Years............................. 134

IV. SINGLE AUDIT Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards.................................................................................................................. 136

Independent Auditors’ Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General ..................................................................................... 138

Schedule of Expenditures of Federal Awards and State Financial Assistance ........................................... 140

Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance............................. 142

Schedule of Findings and Questioned Costs............................................................................................... 144

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FLORIDA

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March 10, 2006

Honorable Mayor and Members of the City Council City of Cape Coral, Florida

Dear Mayor and Members of City Council:

We are pleased to present to you the Comprehensive Annual Financial Report (CAFR) of the City of Cape Coral, Florida (the City) for the fiscal year ended September 30, 2005. Chapter 218.39, Florida Statutes and the City Charter require that a complete set of financial statements be published within one year of fiscal year end and presented in conformance with accounting principles generally accepted in the United States of America (GAAP) and audited in accordance with auditing standards generally accepted in the United States of America and those standards applicable to audits performed in accordance with Government Auditing Standards by licensed independent certified public accountants.

Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the City. We believe the data, as presented, is accurate in all material respects and is presented in a manner designed to fairly set forth the financial position and the results of operations of the City, on a Government-wide and Fund basis. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been included.

Management of the City is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that sufficient, reliable, adequate accounting data is compiled for the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America. Internal accounting controls have been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. We believe that the City’s internal controls adequately safeguard assets and provide reasonable assurance of properly recorded financial transactions.

In addition, the City maintains budgetary controls. The objective of these controls is to ensure compliance with legal provisions embodied in the annual budget approved by the City Council. The City also maintains an encumbrance system that is employed as an extension of formal budgetary integration in all fund types. Encumbrances for governmental type funds outstanding at fiscal year-end are reported as reservations of fund balance.

In compliance with the laws of the State of Florida, the City’s financial statements have been audited by KPMG LLP, a firm of licensed certified public accountants. The independent auditor has issued an unqualified (“Clean”) opinion that the City’s financial statements for the fiscal year ended September 30, 2005 are fairly presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the financial section of this report.

Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it.

Gu[f Of Me.ii:ico

PROFILE OF THE CITY

In 1970, by referendum of the people of the City, a Council/City Manager form of government was adopted, and the City of Cape Coral was incorporated. The policy-making body of the City is a City Council composed of eight (8) members, seven (7) members elected at large on a nonpartisan basis from districts and the Mayor (the eighth member). A Mayor is elected at-large on a nonpartisan basis and has one (1) vote and no veto authority. All terms run for a four (4) year period with the Mayor and three (3) council members being elected at one election and two years later the remaining four (4) council members are elected. The City Council is responsible for all policy-making functions of the government and retains the services of a City Attorney, City Auditor and City Manager. The City Manager is responsible for the administration of the City.

The City provides a comprehensive range of municipal services including general government, public safety (police and fire), public works, community development, planning, utilities, transportation, and parks and recreation. In evaluating the City as a reporting entity, we have included all component units for which the City Council is financially responsible. The Community Redevelopment Agency is blended with the financial statements presented for the Primary Government because the component unit exclusively serves the City. The Cape Coral Charter School Authority is a discretely presented component unit. The City of Cape Coral Health Facilities Authority does not meet the criteria established by GAAP for inclusion in this report. Additional information on all three of these entities can be found in the notes to the financial statements (see Note I).

The City of Cape Coral is located on the southwest coast of Florida, in Lee County. The City is approximately 125 miles south of Tampa, at the mouth of the Caloosahatchee River. The City is principally a residential, recreational and vacation community. Two bridges connect to central and south Fort Myers and the commercial district, and one bridge to the north of the City connects it with Fort Myers, the county seat. This peninsular city lies between the scenic Caloosahatchee River, Charlotte Harbor and the Intra-coastal Waterway.

Cape Coral is one of the nation’s first master-planned communities. It is the third largest city in Florida in land area, encompassing 115 square miles. The most populated city in Southwest Florida, Cape Coral has a population of 147,011 as of September 30, 2005. Approximately 43% of the total land area of the City is presently developed.

In addition to broad boulevards and paved streets, the City is interlaced with over 400 miles of waterways, providing home sites with access to the Intra-coastal Waterway and the Gulf of Mexico. Recreational facilities are provided by a number of City-owned parks, municipal golf course, yacht club and community park and water park.

Strategically situated midway between Tampa and Miami, Cape Coral serves a major distribution role between the two cities. It has emerged as a secondary market for manufacturers who need to distribute goods throughout other parts of Florida, the southeastern United States and the world.

For additional information concerning the City, please visit our website at www.capegov.org.

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The City Council is required to adopt a final budget by no later than the close of the fiscal year. The annual budget serves as the foundation for the City of Cape Coral’s financial planning and control. The budget is prepared by fund, function (e.g. public safety), and department (e.g. police). The City Manager can authorize changes within a fund, but not between departments. Any other revisions require approval of the City Council.

LOCAL ECONOMY

• The U.S. Census Bureau identified the City as the fifth fastest-growing city in the nation for cities with populations greater than 100,000. This is the second straight year of this designation. The population is an active one and younger than many people realize with a median age of 42. What began as a traditional retirement community has become one of Florida’s most attractive areas for young families as well.

• The City continues to experience record-setting growth. Population is growing at a rate of about 12,000 new residents per year. Meeting the needs of our community as it continues to grow is still the City’s number one priority. While having a positive impact, growth also represents a challenge and has created pressure to improve, expand and diversify service delivery system needs.

• The total taxable assessed property value in Cape Coral increased 29.1% over last year, from $7,300,200,110 to $9,428,023,860. This increase results from new construction and changes in the value of existing property. The change in the value of existing property continues to be significant due to a strong resale market for residential homes as well as efforts to expand the commercial tax base. Cape Coral has a low percentage (8%) of commercial and industrial properties, thereby placing a high percentage (92%) of the ad valorem tax burden upon homeowners.

• Growth in the City of Cape Coral is expected to continue well into the next decade, primarily due to the following factors:

♦ Significant, remaining undeveloped residential property in the recently completed utility line extension areas.

♦ Utility line extensions in the Pine Island Road (State Road 78) commercial corridor and Southwest residential areas.

♦ Completed Mid-Point Bridge and Veterans Parkway, thereby creating a major east-west access through the City and connection to I-75 via Fort Myers.

♦ Completed Diplomat Parkway extension to State Road 41 through two commerce parks.

♦ Major transportation improvements along Cape Coral Parkway from Coronado to Chiquita, the Burnt Store Road extension connecting Veterans Parkway with Burnt Store Road, and major new commercial developments planned on Pine Island Road (State Road 78).

• The City established the Business Park at City Centrum, which provides classroom and office space for Nova Southeastern University and Florida Gulf Coast University Small Business Development Center; and space for additional City inspectors and engineers, and private sector engineering firms that are under contract for City public works projects.

• The City’s ability to expand and diversify its tax base will be a major factor in providing additional financial resources to fund an increasing demand for services. Our community is now drawing a trend of mixed-use, planned developments that will provide long-term economic value to our tax base. In addition, a trend of annexation requests from property owners has emerged as a positive opportunity for tax base diversification, commercial/industrial expansion and new public facility locations.

• The national and state economics are key factors in assessing the City’s future fiscal picture. Changes in the national, state and local economies can affect both revenues and expenditures, due to the impact on tax receipts and the costs of demand of providing City services. While economic

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changes at the state and national level can often translate into comparable changes locally, it is important to note that Cape Coral and Southern Florida region, often behave differently, displaying economic trends and reflecting experience that may lag or precede observed changes elsewhere.

• The real estate sector is a key to Florida’s economic outlook, which has been characterized by continued growth reflected in record-high home sales, rising home prices, and substantial increases in both residential and nonresidential construction activity. It is expected that these sectors will continue to climb in 2006. Though rising, low to moderate interest rates continue to be a positive factor in the outlook for both residential and nonresidential building. Strength in construction activity will boost related manufacturing industries and retail sales. Retail sales of household durable goods – furniture, appliances, floor and window coverings – also benefit significantly from sales of both new and existing homes.

• Vision 2020 – A young, progressive waterfront community becoming the urban center of Southwest Florida, offering economic and social opportunities, with unparalleled quality of life.

LONG-TERM FINANCIAL PLANNING

A significant measure of the City’s financial strength is the level of its fund balances (i.e. the accumulation of revenues exceeding expenditures). The City’s general fund balance has demonstrated positive trends over the past several years. This strong revenue growth has meant that the city has been able to transfer current-year revenues to designated accounts and accelerate spending on infrastructure projects. Encumbrances are brought forward from the previous fiscal year and re-encumbered.

The City Council takes the responsibility of being stewards of the public’s funds very seriously. The investment structure is sound and the responsible management of public funds has enabled the City to build general fund undesignated reserves at an amount above the minimum established policy levels leaving our City in solid financial position.

Mission Statement

We, the City of Cape Coral, will meet our community’s needs through the efficient and professional delivery of quality services, with pride and integrity, in an open, honest, spirit of teamwork, respecting the self-worth of the individual and the environment.

City Goals

1. Develop financial resources to the fullest potential. 2. Promote the safety of the community and a feeling of security among citizens and visitors. 3. Plan and assure infrastructure reliability and regulatory compliance. 4. Revitalize downtown Cape Coral as the economic, civic, and cultural center of the community. 5. Provide for maximum efficiency and effectiveness in delivery of City services. 6. Provide responsive customer service and fair and open public processes. 7. Promote confidence in the expenditure of public funds by informing, educating, and involving

citizens. 8. Serve as a leader to promote regional action to ensure effective, efficient and equitable delivery of

services for the residents of Cape Coral. 9. Plan growth which is sensitive to the environment and recognizes significant community resources.

10. Encourage a diversified economic base which provides for long-term economic health and improved quality of life.

Strategic Planning

Future spending plans need to emphasize a structured program approach to promote orderly growth patterns, as evidenced by the capital improvements element of the Comprehensive Plan, transportation improvements through the City’s utility line extension areas and commerce parks, planned unit developments, and the downtown redevelopment streetscape and parking improvements.

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Council is committed to being responsible for planned growth in our ever-changing community. The strong desire to stay on track has enabled the City to forge ahead and continue to grow into one of the largest cities on the Southwest Coast of Florida.

The City of Cape Coral Asset Improvements Program is a comprehensive program detailing future plans for City assets. Revenues and expenditures included in the Asset Improvements Program are integrated into the budget process, along with, program policy issues included in the City’s long-range planning process.

The funding requirements of the Asset Improvements Program for the next five years (FY 2006-2010) are summarized below:

Capital Improvements $1,069,750,984 Capital Maintenance 207,527,419 Capital Equipment 23,400,518 Capital Vehicle 18,951,692 Total $1,319,630,613

The Assets Improvements Program presents a structured plan to promote orderly growth patterns and capital improvements in the following manner:

Compliance with the capital improvements elements of the Comprehensive Plan.

Utility line extensions in the Southeast, Southwest and Northwest Areas in conjunction with results of the utility master plan update and the engineering and feasibility analyses.

Land acquisition costs for various fire stations and construction of Fire Stations #9, 10 and 11.

Land acquisition, design and construction of a new Public Safety Building and a stand alone Public Safety Training Facility.

Design and construction of Charter Elementary School North, Charter Middle School, and a Charter High School.

Design and construction of a permanent building at the City Centrum Business Park site.

Roadway improvements including resurfacing, lighting, median curbing and landscaping.

Santa Barbara Boulevard access management, signalization and roadway improvements.

Widening of Del Prado Boulevard (from State Road 78 to Kismet).

Roadway improvements along Chiquita Boulevard and within the Academic Village.

Land acquisition for Festival Park and Southwest Community Park.

Development of Festival Park, Neighborhood Park #1, Chantry Canal, and four Boat Access Parks.

Design and construction to expand the Southwest Water Reclamation Facility to a 14.0 MGD facility to include eight new raw water wells, and construction of a deep injection well for disposals of effluent.

Design and construction to expand the Everest Parkway Water Reclamation Facility to a 14.0 MGD facility.

Design and construct a new 12.0 MGD Reverse Osmosis Plant, incorporating a new wellfield and transmission piping, and construction of a deep injection well for brine reject water from the new RO plant.

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Design and construct a new 5.0 MGD Water Reclamation Facility (WRF), incorporating a force main interconnect between the future North WRF and the existing SW WRF, an irrigation water main, and a wastewater master pump station.

Master plan, land acquisition, design and construction of new Aquifer Storage Recovery (ASR) wells to provide additional water for irrigation supply.

The City’s ability to finance these programs and remain in compliance with the Comprehensive Plan will be a major factor in future City budgets.

The Asset Improvements Program integrates the Capital Improvements Program, Capital Equipment Program, Capital Vehicle Program and major maintenance projects and the funding required for these elements into an overall financial management plan.

The Capital Improvements element of the Asset Improvements Program, Comprehensive Plan, Utility Master Plan, and Engineering/Feasibility Studies, and various neighborhood plans are intended to be mutually supportive. The Comprehensive Plan/Utility Master Plan and Neighborhood Plans identify the areas of the City suitable for development and rehabilitation and the public facilities they will require. The Capital Program translates these requirements into capital projects designed to support the goals and policies of the aforementioned plans. In this way, neighborhood improvements and development projects are guided by the provision of adequate public facility capacities, and support is provided for recommended levels of development. By encouraging further development and rehabilitation in the directions indicated by the Comprehensive Plan/Utility Master Plan/Neighborhood Plans, the Capital Program can facilitate orderly growth and circulation patterns in the best interests of the citizens of Cape Coral.

RELEVANT FINANCIAL POLICIES

The City has adopted a comprehensive set of financial management policies in the areas of operating management, debt management, accounts management, financial planning and economic resources. At various times, City Council has conducted thorough reviews of such policies as part of an ongoing process of economic and financial analysis. These policies shall be in effect through the end of fiscal year 2007 unless otherwise amended.

Any downturns in the State and/or local economy will adversely affect the City’s ability to realize its budgeted revenues in the categories of franchise fees and state-shared revenues. Therefore, quarterly monitoring and conservatism (95% budgeting) should mitigate any unforeseen circumstances.

The annual budget should be maintained in such a manner as to avoid an operating fund deficit. Expenditures should be managed to create a positive cash balance (surplus) in each fund at the end of the fiscal year. The golf course has received support from the general fund in order to achieve a positive cash position at the end of the fiscal year. In fiscal year 2006, the golf course debt will be assumed by the general fund and the subsidy to the golf course will be eliminated. The debt service will end in the year 2012.

The City has exceeded its plan to enhance general fund balances and maintain sufficient reserves in accordance with established policy. An alternate measure of undesignated reserves at a minimum of 2 months operating expenditures in lieu of a percentage of expenditures is being evaluated.

The City shall maintain adequate protection from loss due to property damage or liabilities of the City. Each department director will insure that all safeguards are in place to minimize injury to personnel and damage to property. In fiscal year 2005, two internal service funds were created for Workers Compensation, and Property and Casualty Liability. Funds are transferred to these funds by the operating departments. The general fund insurance reserve of $1,620,000 was split equally and transferred to these two funds. Additionally, there is a disaster reserve in the amount of $1,000,000 and will be maintained at that level in fiscal year 2006 in accordance with adopted policies.

The City has not issued any short-term debt to finance current operations. The City has issued commercial paper to fund, in the short-term, acquisition of land and capital projects associated with the

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water and sewer capital expansion projects. This type of short-term financing does not constitute bond anticipation or revenue anticipation notes.

The budget continues to reserve significant taxing capacity for future needs and avoids one-time revenue sources to fund ongoing City services.

MAJOR INITIATIVES

Existing challenges involving public safety will continue to place great pressure on city services. The City has maintained the programs previously budgeted to combat health and safety issues, and are enhancing these programs where circumstances warrant and finances permit. The City has improved response and service delivery through the addition of police and fire personnel. In addition to personnel needs, funding options for the final design and construction of a public safety facility will need to be completed. Rebuilding of fire stations #3, #4, and construction of a new station #8 are underway. Funding has also been allocated for replacement of the current fire station #1 and station #9 will be a new station. The City will continue to fund land purchases for future fire station sites that will need to be built as growth demands.

A priority cited in the most recent citizen survey was enhanced road maintenance and stormwater management. The City is continuing with infrastructure maintenance and expansion. Our local option gas tax continues to fund road maintenance and sidewalk installations. The general fund budget supports sidewalks and street improvements, and the six cent gas tax helps fund a large portion of the four-lane road reconstruction/maintenance in order to minimize health and safety issues. In addition to the major roadway projects such as the six-laning of Cape Coral Parkway, access management on Santa Barbara Boulevard, improvements at Chiquita Boulevard and Gleason Parkway, and the Del Prado Widening between Kismet and Pine Island Road, the road resurfacing program has resulted in 146 miles of roadway resurfacing/reconstruction with an additional 44 miles schedule for FY2006, not including utility expansion areas.

In FY2003, a cost recovery study was approved to set the stormwater fees in support of the management of the stormwater system. The stormwater system is comprised of various components to include canal maintenance, street sweeping, swale maintenance, drainage maintenance, catch basin maintenance, and environmental resources. Over the past three years, over 56 miles of pipe have been cleaned, relined and/or replaced and an ongoing program of swale repairs continues to produce results in stormwater flow and retention.

Land acquisition is a priority to meet the future needs of the City. The City will continue to fund land acquisition to support the development of parks, utility systems, and infrastructure projects.

According to the 2000 Census, 18.3% of the Cape’s population is school-age children. The rise in population has impacted the ability of the Lee County School District to provide a sufficient number of seats for the District’s West Zone, which includes all of Cape Coral, Pine Island and parts of North Fort Myers and Fort Myers. The school district plans to build seventeen schools in Cape Coral alone during the next nine years. The City of Cape Coral developed a municipal charter school system which includes one elementary school that was opened in August 2005, and plans to open one elementary school and one middle school in August 2006 and a high school at a later date.

The City’s economic development mission is to diversify and expand its economic base in order to relieve the homeowner from the most significant share of the tax burden and to protect the community against economic downturns. This effort includes attracting new businesses, retaining existing businesses, and enticing new residents and tourism.

Promotion is a key component in the Economic Development Office’s (EDO) efforts to generate leads for new businesses. The EDO’s “Growth Engine of Southwest Florida” advertisement was selected by the Florida Economic Development Council as the best in Florida in 2005. In 2006, EDO promotional efforts will continue to build on the “Growth Engine” equity. Advertising and news media placements will focus on information on Cape Coral’s advantages for corporate headquarters, office industries, higher education, light industrial, destination retail and tourism. In addition, local campaigns will be created to

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encourage incumbent businesses to grow by using the City’s Economic Development Revolving Loan Program and other incentives.

The City faces several significant challenges for business attraction, most importantly land cost and scarcity. Incentives – both “off the shelf” and customized – will be much more significant as we accelerate our sales efforts. EDO will balance its sales efforts between growth and attraction. EDO continues to advocate for additional land to be mapped for business (non-residential) development; and for land use and zoning regulations that allow for increased business density as a strategy for increasing our business tax based on scarce land.

The EDO is mindful that 85% of new jobs come from existing Cape Coral businesses. Therefore, a great deal of its effort is focused on nurturing growth among incumbent businesses. The City’s investment in the Small Business Development Center has demonstrated its value as support to small businesses.

AWARDS

The Government Finance Officers Association of the United States and Canada (GFOA) has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Cape Coral for its comprehensive annual financial report for the fiscal year ended September 30, 2004. This was the 19th

consecutive year that the City has achieved this prestigious award.

In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such reports must satisfy both accounting principles generally accepted in the United States of America and applicable legal requirements.

A Certificate of Achievement for Excellence is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.

ACKNOWLEDGMENTS

The preparation of this report could not be accomplished without the efficient and dedicated service of the Financial Services Department staff. Their continuing effort toward improving the accounting and financial reporting systems improves the quality of information reported to the City Council, State and Federal Agencies, and the citizens of the City of Cape Coral. We sincerely appreciate and commend them for their contributions.

Respectfully submitted,

Mark C. Mason, CPA Financial Services Director

Linda C. Senne, CPA Controller

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Certificate of Achievement for Excellence

in Financial Reporting

Presented to

City of Cape Coral, Florida

For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

September 30, 2004

A Ce1tifica1<: of Achievement for Excellence iu l'iuancial Reporting is presented by the Government Finance Officers

Association of che United S1ates and Canada to government units and public employee retirement systems whose c.omprehensive annual financial

reports (CAFRs) achie\'e the highest standatds in government accounting

and financial reporting.

President

Executive Director

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ORGANIZATIONAL CHART

The People

City Council

City Attorney City Auditor City Manager Appointed Boards & Commissions

Financial Services

City Clerk

Information Technology

Human Resources

Community Development

Police

Public Works Fire, Rescue & Emergency

Parks & Recreation

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CITY OF CAPE CORAL, FLORIDA

List of City Officials

Mayor Eric P. Feichthaler

City Council James Jeffers, District No. 1

Richard L. Stevens, District No. 2

Alan J. Boyd, Jr., District No. 3

Dolores Bertolini, District No. 4

Alex LePera, District No. 5

Timothy Day, District No. 6

Mickey Rosado, District No. 7

City Administration Terrance (Terry) Stewart, MPA, City Manager

Carl Schwing, Assistant City Manager

Dan Alexander, Police Chief

Connie Barron, Public Information Director

Shirley Burns, Acting Community Development Director

Virginia Gladick, Acting City Clerk

Mike Jackson, Economic Development Director

John MacLean, Information Technology Services Director

Mark Mason, CPA, Financial Services Director

Dolores Menendez, City Attorney

Dona Newman, CPA, City Auditor

Charles Pavlos, Public Works Director

Steve Pohlman, Parks & Recreation Director

Bill Van Helden, Fire Chief

Bonnie Vent, Acting Human Resources Director

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KPMG LLP Suite 1700 100 North Tampa Street Tampa, FL 33602

Independent Auditors' Report

The Honorable Mayor and Members of the City Council City of Cape Coral, Florida:

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Cape Coral, Florida (the City) as of and for the year ended September 30, 2005, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Cape Coral, Florida as of September 30, 2005, and the respective changes in financial position, and where applicable, cash flows, thereof for the year then ended in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated March 10, 2006 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The management's discussion and analysis on pages 3 through 16, the budgetary comparison information for the general fund and the park recreational facilities impact fees fund on pages 7 4 through 77, and the schedule of funding progress and schedule of contributions from employer and other contributing entities on pages 78 through 80 are not a required part of the basic financial statements, but are supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement

KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative.

and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards and state financial assistance is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Nonprofit Organizations, and Chapter 10.550, Rules of the Auditor General, and is not a required part of the basic financial statements. The combining and individual fund statements and schedules and the schedule of expenditures of federal awards and state financial assistance have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and, accordingly, we express no opinion on them.

March 10, 2006 Certified Public Accountants

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MANAGEMENT’S DISCUSSION AND ANALYSIS (unaudited)

The City of Cape Coral’s (the “City”) discussion and analysis is a narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2005. It is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the City’s financial activity, (c) identify changes in the City’s financial position, (d) identify any material deviations from the financial plan (the approved budget), and (e) identify individual fund issues or concerns.

Since the Management’s Discussion and Analysis (MD&A) is designed to focus on the current year’s activities, resulting changes and current known facts, please read it in conjunction with the City’s financial statements (beginning on page 17) and letter of transmittal.

HIGHLIGHTS

Financial Highlights

• At the close of fiscal year 2005, the City’s assets exceeded its liabilities by $504.0 million (net assets). Governmental and business-type assets exceeded its liabilities by $190.0 million and $313.9 million, respectively.

• The City’s total net assets increased by $78.7 million, or 18.5%, in comparison to the prior year.

• The City had $88.0 million of unrestricted net assets.

• Total revenues increased $43.2 million, or 21.2%, in comparison to the prior year.

• Total expenses increased $8.2 million, or 5.1% in comparison to the prior year.

• The City’s governmental activities reported total net assets of $190.1 million, which is an increase of $42.9 million, or 29.1%, in comparison to the prior year. Approximately 35.1% of the total, or $66.7 million, is unrestricted.

• The City’s business-type activities reported total net assets of $313.9 million, which is an increase of $35.8 million, or 12.9%, in comparison to the prior year. Approximately 6.8% of the total, or 21.3 million, is unrestricted.

Government-wide Financial Statements

The government-wide financial statements (statement of net assets and statement of activities found on pages 17-18) are designed in a manner similar to a private-sector business in that all governmental and business-type activities are presented in separate columns which add to a total for the Primary Government. Fiduciary funds are not included in the government-wide statements.

The focus of the Statement of Net Assets (the “Unrestricted Net Assets”) is designed to be similar to a bottom line for the City and its governmental and business-type activities. This statement combines and consolidates governmental fund’s current financial resources (short-term spendable resources) with capital assets, including infrastructure, and long-term obligations. Net assets is the difference between the City’s assets and liabilities. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving.

The Statement of Activities reflects the expenses of a given function, which are offset by program revenues. Program revenues are defined as charges for services, operating grants and contributions, and capital grants and contributions directly associated with a given function.

Governmental activities are supported by taxes and intergovernmental revenues whereas the business-type activities are primarily supported by user fees and charges for services. The governmental activities of the City include general government, public safety, public works, community development, parks and recreation, and transportation. The business-type activities of the City reflect private sector type

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operations (water and sewer, building division, stormwater utility, yacht basin, golf course and water park), where the fee for service typically covers all or most of the cost of operation, including depreciation.

The government-wide financial statements include not only the City of Cape Coral itself (known as the primary government), but also a legally separate Charter School Authority. Financial information for this component unit is reported separately from the financial information presented for the primary government itself.

Fund Financial Statements

The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations for each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenue, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds, based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

The City’s funds are presented in separate fund financial statements. These funds are presented in a Governmental Fund Financial Statement and a Proprietary Fund (Business-type) Financial Statement. The City’s major funds are presented in separate columns on the fund financial statements. The funds that do not meet the criteria of a major fund are considered nonmajor funds and are combined into a single column on the fund financial statements.

The total columns on the Governmental Funds and Proprietary Funds (Business-type) Financial Statements (see pages 19-27) are not the same as the Governmental Activities column and the Business-type column on the Government-wide Financial Statement. The Governmental Funds Total column requires reconciliation because of the different measurement focus (current financial resources versus total economic resources) which is reflected on the page following each statement (see pages 20 and 22). The flow of current financial resources will reflect bond proceeds and interfund transfers as other financial sources as well as capital expenditures and bond principal payments as expenditures. The reconciliation will eliminate these transactions and incorporate the capital assets and long-term obligations (bonds and others) into the Governmental Activities column in the Government-wide Statements. The Proprietary Funds (Business-type) total column requires reconciliation because the internal service fund is consolidated as part of the governmental activities, but a portion of the internal service funds is for business-type activities. This reconciliation is the “cross-over” amount as a result of the surplus elimination (see page 25).

Governmental Fund Financial Statements

Governmental Fund Financial Statements (see pages 19-22) are prepared on the modified accrual basis using current financial resources measurement focus. Under the modified accrual basis, revenues are recognized when they become measurable and available as net current assets.

Four of the City’s governmental funds, the General Fund, Park Recreational Facilities Impact Fees Fund, Transportation Capital Projects Fund, and Hurricane Charley Disaster Improvement Fund are classified as major funds. All other governmental funds are combined into a single column on the governmental major-fund financial statements. Individual fund data for the nonmajor funds is found in the combining statements as supplemental financial data (see pages 84-91).

The City adopts an annual appropriated budget for the General Fund; the following Special Revenue Funds: park recreational facilities impact fees; police confiscation-federal; police confiscation-state; gas tax; fire, rescue & EMS impact fee; road impact fee; community redevelopment agency (CRA); community development block grant; local housing assistance; downtown expansion area; city centrum business park; alarm fee; parks and recreation programs; greenscape donations; and all hazards; and Debt Service. Capital Projects are budgeted over the length of the project except for the Hurricane Charley Disaster Improvement Fund. A budgetary comparison has been presented for these funds which compares not only actual results to budget (budgetary basis), but also the original adopted budget to final budget (see pages 74-76 and pages 92-102).

Proprietary Fund Financial Statements

The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s

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various functions. The City utilizes three internal service funds: 1) internal loan fund 2) workers compensation insurance fund and 3) property and casualty insurance fund. Because these internal service funds predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements.

Proprietary Fund Financial Statements (see pages 23-27), like government-wide financial statements, are prepared on the full accrual basis. Proprietary funds record both operating and non-operating revenues and expenses. Operating revenues are those that are obtained from the operations of the proprietary fund.

The proprietary fund financial statements provide separate information for the Water and Sewer Fund, and for the Building Division Fund, which are both classified as major funds. Conversely, all three internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. All other enterprise funds are combined into a single column on the proprietary major-fund financial statements. Individual fund data for the nonmajor enterprise funds and for the internal service funds is found in the combining statements as supplemental financial data (see pages 106-111).

Fiduciary Fund Financial Statement

The Fiduciary Fund Financial Statements (see page 28) are not presented as part of the Government-wide Financial Statements because the resources of these funds are not available to support the City’s programs. Fiduciary (Pension Trust, Private-Purpose Trust and Agency) Funds represent trust responsibilities of the government, however these assets are restricted in purpose and do not represent discretionary assets of the government.

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 29-71 of this report.

GOVERNMENT-WIDE STATEMENTS

The Government-wide Financial Statements were designed so that the user can determine if the City is in a better or worse financial condition from the prior year. The City’s overall financial position has improved from the prior year.

Summary of Net Assets

The following table reflects a Summary of Net Assets for fiscal years 2005 and 2004.

City of Cape Coral, Florida Summary of Net Assets

(in millions)

Governmental Business-type Activities Activities Total

2005 2004 2005 2004 2005 2004 Current and other assets $ 130.1 $ 83.1 $ 110.3 $ 128.3 $ 240.4 $ 211.4 Capital assets 161.2 119.0 389.3 359.2 550.5 478.2 Total assets 291.3 202.1 499.6 487.5 790.9 689.6

Current and other liabilities 14.9 19.3 18.8 7.4 33.7 26.7 Noncurrent liabilities 86.2 35.6 166.9 202.0 253.1 237.6 Total liabilities 101.1 54.9 185.7 209.4 286.8 264.3

Net assets: Invested in capital assets, net of related debt 103.8 88.5 201.9 159.8 305.7 248.3 Restricted 19.6 13.5 90.7 104.7 110.3 118.2 Unrestricted 66.7 45.2 21.3 13.6 88.0 58.8 Total net assets $ 190.1 $ 147.2 $ 313.9 $ 278.1 $ 504.0 $ 425.3

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The invested in capital assets, net of related debt is the largest portion of net assets. This represents capital assets (land, buildings, improvements, equipment, construction in progress and infrastructure), net of accumulated depreciation, and the outstanding related debt used to acquire the assets. The invested in capital assets, net of related debt balance of $305.7 million (60.6% of total net assets) increased $57.4 million or 23.1%, in comparison to prior year. The increase is due mainly to acquisition of land, construction of the Charter Elementary School South, design of Southwest Four and construction of Southeast One utility lines in the assessment areas, and redemption of debt in other assessment areas. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

The restricted net asset balance of $110.3 million (21.9% of total net assets), decreased $7.9 million or 6.7%, in comparison to prior year. This balance represents resources subject to external restrictions on their use.

The unrestricted net asset balance of $88.0 million (17.5% of total net assets), increased $29.2 million or 49.7%, in comparison to prior year.

The following is a chart by net assets of governmental activities.

Net Assets - Governmental Activities

0 20 40 60 80

100 120

Mill

ions

Invested in capital Restricted Unrestricted

FY 2005 FY 2004

assets, net of related debt

The following is a chart by net assets of business-type activities.

Net Assets - Business-type Activities

0 50

100 150 200 250

Mill

ions

FY 2005 FY 2004

Invested in capital Restricted Unrestricted assets, net of related

debt

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Summary of Changes in Net Assets

The following schedule compares the revenues and expenses for the current and previous fiscal year.

City of Cape Coral, Florida Summary of Changes in Net Assets

(in millions)

Governmental Business-type Activities Activities Total

2005 2004 2005 2004 2005 2004 REVENUES: Program Revenues:

Charges for Services $ 16.5 $ 16.0 $ 57.7 $ 47.2 $ 74.2 $ 63.2 Operating Grants and Contributions 3.4 17.9 9.2 7.7 12.6 25.6 Capital Grants and Contributions 29.1 20.6 43.0 19.3 72.1 39.9

General Revenues: Property Taxes 53.6 42.5 0.5 1.4 54.1 43.9 Sales Taxes 2.8 2.1 - - 2.8 2.1 Half-cent Sales Taxes 11.9 11.2 - - 11.9 11.2 Fuel Taxes 1.3 1.0 - - 1.3 1.0 Franchise Taxes 4.4 3.7 - - 4.4 3.7 Communication Taxes 4.4 4.0 - - 4.4 4.0 Gas Taxes 7.5 7.6 - - 7.5 7.6 Interest Income 1.4 0.6 - - 1.4 0.6 Gain on sale of capital assets 0.1 0.8 - - 0.1 0.8

Total Revenues 136.4 128.0 110.4 75.6 246.8 203.6

EXPENSES: Program Activities Governmental Activities: General Government 19.3 32.5 - - 19.3 32.5 Public Safety: Police 23.5 20.2 - - 23.5 20.2 Fire 17.9 14.3 - - 17.9 14.3

Public Works 5.3 4.2 - - 5.3 4.2 Community Development 4.0 3.1 - - 4.0 3.1 Parks and Recreation 9.4 9.5 - - 9.4 9.5 Transportation 12.7 11.5 - - 12.7 11.5 Interest and fiscal charges 2.7 1.4 - - 2.7 1.4

Business-type Activities: Water and Sewer - - 53.1 45.9 53.1 45.9 Building Division - - 7.4 5.1 7.4 5.1 Other Enterprise Funds - - 12.7 12.1 12.7 12.1

Total Expenses 94.8 96.7 73.2 63.1 168.0 159.8

Increase in Net Assets Before Transfers 41.5 31.3 37.2 12.5 78.7 43.8

Transfers 1.4 0.4 (1.4) (0.4) - -Increase in Net Assets 42.9 31.7 35.8 12.1 78.7 43.8 Net Assets - beginning 147.2 115.5 278.1 266.0 425.3 381.5 Net Assets - ending $ 190.1 $ 147.2 $ 313.9 $ 278.1 $ 504.0 $ 425.3

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□

Operating Grants & Contributions

Charges for Services

Capital Grants & Contributions

Property Taxes

Sales Taxes

Fuel Taxes

Franchise Taxes

Communication Taxes

Gas Taxes Other

Total revenues increased $43.2 million, or 21.2%, in comparison to prior year. Total expenses increased $8.2 million, or 5.1%, in comparison to prior year.

Governmental Activities

The governmental activities increased the City’s net assets by $42.9 million. This represents 54.5% of the total increase in net assets. The increase in the governmental activities’ invested in capital assets net of related debt is $15.3 million, or 17.3% in comparison to prior year.

The following is a chart of revenues by source of governmental activities by percent of total revenues.

Revenues by Source - Governmental Activities

Capital Grants and Property Taxes Contributions 39%

21% Sales Taxes 11%

Operating Grants and Contributions

Charges for Services Fuel Taxes 3% 12% 1%

Franchise Taxes Communication 3% Other Taxes Gas Taxes 1% 3% 6%

The following is a chart of revenues by source for governmental activities for fiscal years 2005 and 2004.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Mill

ions

Revenues by Source - Governmental Activities

FY 2005

FY 2004

Total revenues for governmental activities increased $8.4 million or 6.6%, in comparison to prior year.

Charges for services reported in the governmental activities increased $.5 million, or 3.1%, in comparison to prior year. This increase was primarily due to an increase in fines and forfeiture, and occupational licenses.

Operating grants and contributions reported in the governmental activities decreased $14.5 million, or 81.0%, in comparison to prior year. This decrease was primarily due to a decrease of $14.5 million in revenue (grant funds) due to Hurricane Charley.

Capital grants and contributions reported in the governmental activities increased $8.5 million, or 41.3%, in comparison to prior year. This increase was primarily due to the volume of residential construction permits being issued. There was a 30.8% increase in the number of residential construction permits issued (7,760 in fiscal year 2005 as opposed to 5,933 in fiscal year 2004) which resulted in a 56.4%

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t t ice re on on t ks rnmen

y Developmenm Debi

c WorF i il t tPo ea atr

Parks & Recr

Transpol Gove Teril

Pub -

t on Long

Genera ti

CommunesretIn

increase of road impact fee collections and an 82.1% increase of fire, rescue, and EMS impact fee collections.

Property taxes reported in the governmental activities increased $11.1 million, or 26.1%, in comparison to the prior year. Taxable assessed property valuation of $9,428,023,860 for fiscal year 2005 represents a 29.1% increase over the previous fiscal year. Although the millage rate was decreased, the resulting increase in property values provided additional revenue for ongoing operations.

Sales taxes reported in the governmental activities increased $.7 million, or 33.3% in comparison to the prior year and half-cent sales taxes increased $.7 million, or 6.3% in comparison to the prior year. This was a result of an increase in consumer spending and an increase in the City’s population.

Franchise taxes reported in the governmental activities increased $.7 million, or 18.9% in comparison to the prior year. This was due to an increase in the number of properties connecting to electric, this increases electric franchise fee revenue.

Interest income reported in the governmental activities increased $.8 million, or 133.3% in comparison to the prior year. This is due to an increase in the amount of funds that were invested and rising interest rates.

The following is a chart of expenses by program of governmental activities.

Expenses by Program - Governmental Activities

0.0 5.0

10.0 15.0 20.0 25.0 30.0 35.0

Mill

ions

FY 2005 FY 2004

Total expenses for governmental activities decreased $1.9 million, or 2.0% in comparison to the prior year.

General government expenses reported in governmental activities decreased $13.2 million, or 40.6%, in comparison to prior year due to a decrease in expenses related to Hurricane Charley.

Public Safety Police expenses reported in governmental activities increased $3.3 million, or 16.3%, in comparison to prior year due to an increase in the number of police personnel, and an increase in salaries, wages and pension contributions.

Public Safety Fire expenses reported in governmental actitivies increased $3.6 million, or 25.2%, in comparison to prior year due to an increase in the number of firefighters, and an increase in salaries, wages and pension contributions.

Public Works expenses reported in governmental activities increased $1.1 million, or 26.2%, in comparison to prior year due to an increase in salaries, wages and pension contributions, and contracting with an outside service for ground maintenance.

Community Development expenses reported in governmental activities increased $.9 million, or 29.0%, in comparison to the prior year due to an increase in salaries, wages and pension contributions, State

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■

■

Housing Initiatives Program expenses, and contracting with an outside service for construction of seawalls.

Transportation expenses reported in governmental activities increased $1.2 million, or 10.4%, in comparison to the prior year due to an increase in salaries, wages and pension contributions, and depreciation expense.

Interest and fiscal charges reported in governmental activities increased $1.3 million, or 92.9%, in comparison to the prior year due to interest expense on the commercial paper and issuance costs associated with the Capital Improvement and Refunding Revenue Bonds, Series 2005.

Business-type Activities

The business-type activities increased the City’s net assets by $35.8 million. This represents 45.5% of the total increase in net assets. The increase in the business-type activities’ unrestricted net assets is $7.7 million, or 56.6% in comparison to prior year.

The following is a chart of revenues by source for business-type activities.

Revenues by Source - Business-type Activities

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Mill

ions

FY 2005 FY 2004

Charges for Services Operating Grants & Capital Grants & Property Taxes Contributions Contributions

Charges for services reported in business-type activities increased $10.5 million, or 22.2%, in comparison to prior year. This increase is a direct result of additional customer connections to the water and sewer system as new construction occurs and line extension areas are completed. There was also a 30.8% increase in the number of residential construction permits issued (7,760 in fiscal year 2005 as opposed to 5,933 in fiscal year 2004) resulting in an increase in permit fees.

Operating grants and contributions reported in business-type activities increased $1.5 million, or 19.5%, in comparison to prior year. This increase was primarily due to a $1.3 million defeased debt service escrow refund received in fiscal year 2005.

Capital grants and contributions reported in business-type activities increased $23.7 million, or 122.8%, in comparison to prior year. This increase was primarily due to assessment collections that were received in fiscal year 2005 from benefited property owners in the Southeast One and Southwest Two utility line extension areas.

Property taxes reported in business-type activities decreased $.9 million, or 64.3%, in comparison to prior year. Property taxes levied are based on the general obligation outstanding debt. Since this was the final year of the debt oligation, one principal and interest payment was made during fiscal year 2005.

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Expenses by Program - Business-type Activities

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Mill

ions

Water & Sewer Building Division Other Enterprise

FY 2005 FY 2004

Water and sewer expenses reported in business-type activities increased $7.2 million, or 15.7%, in comparison to the prior year. This increase was primarily due to an increase in professional services, loan service fees, and interfund service payments. Also, due to depreciation expense associated with Southwest Three utility line extension area. There was no depreciation for this asset in fiscal year 2004.

Building division expenses reported in business-type activities increased $2.3 million, or 45.1%, in comparison to the prior year. This increase was due to an increase in salaries, wages and pension contributions, an increase in the number of personnel from 89 to 130, operating supplies, professional services, repairs and maintenance, and depreciation expense.

Other enterprise expenses reported in business-type activities increased $.6 million, or 5.0%, in comparison to the prior year. This increase was due to an increase in salaries, wages and pension contributions, advertising, repairs and maintenance, professional services, and interfund service payments.

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds

Governmental funds are comprised of the general fund, special revenue funds, debt service fund and capital projects funds. Governmental funds use the current financial resources measurement focus that provides information on near-term inflows, outflows, and balances of spendable resources. The following funds are the City’s major governmental funds.

The General fund is the chief operating fund of the City. It is used to account for all financial resources, except those required to be accounted for in another fund. At the end of the current fiscal year, unreserved fund balance of the general fund was $11.9 million, while total fund balance reached $16.4 million. The fund balance of the City’s general fund decreased by $4.9 million during the current fiscal year. The key factor for this decrease is due to transfers out for the public safety building, fire stations, parks and recreation programs, parks and recreation capital projects, debt service, and transfers to the internal service funds.

The Park Recreational Facilities Impact Fee fund is used to account for impact fees which are used to provide recreational park facilities. This fund has a total deficit fund balance of $11.5 million which is a result of a borrowing from the internal loan fund for the purpose of acquiring land which will be used for the development of parks. The deficit is anticipated to be recovered through issuance of long-term debt as well as an increase and collection of park recreational facilities impact fees.

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The Transportation Capital Projects fund is used to account for road improvements and related items. This fund has a total fund balance of $26.7 million. The fund balance increased by $6.9 million, or 34.9% in comparison to prior year. This increase was due to transfers from the gas tax fund and road impact fee fund to fund capital projects. The entire fund balance is designated for these improvements.

The Hurricane Charley Disaster Improvement fund is used to account for debris removal, repairs, and improvements to City parks and facilities as a result of Hurricane Charley. This fund has a total fund balance deficit of $4.3 million, which is a result of the revenue associated with accounts receivable being deferred until received from the Federal Emergency Management Agency (FEMA).

Proprietary Funds

The City’s proprietary funds are comprised of the enterprise funds and internal service funds. An enterprise fund is used to account for activities for which a fee is charged to external users for goods and services. These funds provide the same type of information found in the government-wide financial statements, but in more detail. The following are the major enterprise funds:

Water and Sewer Fund. The fund is used to account for the activities of the City’s water and sewer utility programs.

Building Division. This fund is used to account for the activities of the building and permitting services of the Department of Community Development as related to the construction of buildings and related structures within the City of Cape Coral.

Budgetary Highlights

The following is a brief review of the budgeting changes from the original budget to the final budget for the General Fund (see budgetary comparison schedule on pages 68-69). The final budget increased $5.2 million (includes transfers), or 5.4%, from the original budget, which can be briefly summarized as follows:

• $7,264,355 increase for encumbrances • $1,561,791 increase allocated for lease proceeds for fire trucks and police mobile command vehicle • $831,808 increase allocated to City Centrum Business Park • $350,000 increase allocated to the Charter Elementary School South • $330,123 increase allocated for Police and Fire grants • $310,650 increase allocated to debt service • $104,177 increase allocated for ground maintenance at the base of the Cape Coral Bridge • $5,698,209 decrease to move parks and recreation programs out of the general fund to a special

revenue fund • $140,208 increase for miscellaneous items

General Fund. Significant variances from final budget to actual amounts (budgetary basis) are summarized as follows:

Revenues: • Half-cent sales tax revenue was more than budgeted by $1,931,773. This is a result of an increase in

consumer spending and an increase in the City’s population as well as financial management policies limiting the budgeted amount to 95% of the maximum estimate.

• Franchise fees received exceeded budget by $547,997. The increase is a result of the combination of an increase in the power cost adjustment by the electric company, an increase in the City’s population, and an increase in solid waste accounts resulting in higher franchise fees collected as well as financial management policies limiting the budgeted amount to 95% of the maximum estimate.

• Communication taxes received exceeded budget by $546,588. This is a result of an increase in useage of communication devices as well as financial management policies limiting the budeted amount to 95% of the maximum estimate.

• Intergovernmental revenue was more than budgeted by $1,161,362. This is a result of grant funds received for reimbursement of police and fire labor costs related to Hurricane Charley.

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Expenditures: • Public safety fire expenses were more than budgeted by $747,437, including encumbrances. This is

due to salaries and wages for overtime hours and an increase in pension contributions. • Transportation expenses were less than budgeted by $2,916,426, including encumbrances. This is

due to various budgeted projects that were not completed and carried over to fiscal year 2006. • Capital outlay was less than budgeted by $3,334,613, including encumbrances. This is due to various

budgeted projects that were not completed and carried over to fiscal year 2006.

Transfers out were more than budgeted by $4,396,050 due to transfers to the Hurricane Charley Disaster Improvement fund and transfers to support the parks and recreation programs special revenue fund.

Park Recreational Facilities Impact Fee Special Revenue Fund. Significant variances from final budget to actual amounts (budgetary basis) are summarized as follows:

• Capital outlay was more than budgeted by $5,200,011. This is a result of land acquisitions. • Budgeted debt service payments were less than budgeted by $2,994,450. Due to escalating real

estate prices the City chose to acquire land versus paying the internal loan fund debt. • Transfers in were less than budgeted by $11,150,000. The borrowing from the internal loan fund to

the park recreational facilities impact fee fund was budgeted as a transfer.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

The City’s investment in capital assets, net of related debt, for its governmental and business-type activities as of September 30, 2005 amounts to $306.4 million (net of accumulated depreciation). The total increase in the City’s investment in capital assets, net of related debt, for the current fiscal year was 23.4%.

The following schedule reflects the City’s capital assets as of September 30, 2005 and 2004.

City of Cape Coral, Florida Capital Assets

(net of depreciation) (in millions)

Governmental Business-type Activities Activities Total

2005 2004 2005 2004 2005 2004 Land $56.9 $34.1 $13.8 $6.7 $70.7 $40.8 Buildings 35.3 26.4 15.7 16.4 51.0 42.8 Building Improvements 0.5 0.3 0.2 0.1 0.7 0.4 Improvements other than buildings 4.9 5.1 85.2 90.5 90.1 95.6 Equipment 11.1 9.6 6.1 4.7 17.2 14.3 Infrastructure 38.2 37.3 232.2 149.6 270.4 186.9 Construction in progress 14.3 6.2 36.1 91.2 50.4 97.4 Total capital assets $161.2 $119.0 $389.3 $359.2 $550.5 $478.2

Major capital asset purchases and projects during the current fiscal year included the following:

• Purchased police and support vehicles, fire rescue trucks, fire support vehicles and fire equipment. • Real estate acquisitions for the North Cape Government Complex, Festival Park, Lake Meade, Yacht

Club Expansion, Southwest Community Park and South Chiquita Well Sites. • Purchased modular buildings for the City Centrum Business Park and completed parking lot. • Purchased an entertainment stage, four trucks and various equipment for Parks and Recreation. • Completed the Skate Park. • Completed Yacht Club Playground Equipment Project. • Completed Coral Oaks Golf Course Entry Landscape. • Completed sidewalk construction within the Country Club Boulevard and Nicholas Parkway corridors. • Design, management, and land acquisition for Del Prado Widening.

13

• Completed Southwest Two utility line extension project. • Completed the Fleet Warehouse building. • Completed construction of the Charter Elementary School South.

Additional information on the City’s capital assets can be found on pages 44-45 of this report.

Long-Term Debt

During the period of January through June 2005, three major rating institutions (Moody’s, Fitch and Standard & Poor’s) evaluated the City’s financial management, economic conditions and administrative practices. Based on their evaluations, the following ratings were achieved:

Rating Agency Standard &

Moody’s Fitch Poor’s General Obligation

Insured Aaa AAA AAA Current Underlying Aa3 A+ A+

June 2003 Underlying A1 A+ A+

Capital Improvement (Revenue) Insured Aaa AAA AAA

Current Underlying A1 A+ A June 2003 Underlying - - -

Water & Sewer Revenue Insured Aaa AAA AAA

Current Underlying A2 A A June 2003 Underlying A1 A+ A

Utility Special Assessment Insured Aaa AAA AAA

Current Underlying Baa1 A- BBB+ June 2003 Underlying - - -

The insured rating is based on the credit worthiness of the company insuring the bonds, whereas an underlying rating is based upon the credit worthiness of the issuer or security which is actually pledged for the repayment of the bonds.

The Underlying ratings assigned by Standard & Poor’s has remained unchanged for both the general obligation and water & sewer revenue. Moody’s assigned new ratings to the City’s general obligation and water & sewer revenue bonds. In upgrading the City’s general obligation underlying ratings, Moody’s recognized the strength of the tax base at this time as a result of residential and commercial development and financial position with reserve levels. Declining net revenues and debt service coverage on a net revenue basis as well as the significant rate increases that were required to support the extensive utility system requirements resulted in Moody’s and Fitch lowering the rating for water and sewer revenue bonds.

In addition, the City has maintained the A1+ rating for the Commercial Paper Program that was authorized by City Council in June 2004. Commerical Paper is being used to fund, on a short-term basis, certain capital improvements that will ultimately be either financed with long-term debt or be paid off in a much shorter period due to low interest rates.

At September 30, 2005, the City had $246.1 million of outstanding debt (excluding compensated absences). The general obligation bonds, which are backed by the full-faith and credit of the City, had an outstanding balance of $5.9 million, or 2.4%, of the total outstanding debt. Revenue bonds, which are secured soley by specified revenue sources, had an outstanding balance of $60.1 million, or 24.4%, of the total outstanding debt. Commercial paper debt which has a covenant to budget and appropriate legally available non-ad valorem funds, had an outstanding balance of $45.2 million, or 18.4%, of the total outstanding debt. Special assessment debt which is collateralized by special assessments levied against the benefited property owners, had an outstanding balance of $96.7 million, or 39.3%, of the total outstanding debt. Notes payable, which are collateralized by the net revenues of the water and sewer

14

system, impact fees, and special assessment revenue, had an outstanding balance of $37.5 million, or 15.2%, of the total outstanding debt. Capital leases, which are collateralized by the related equipment, had an outstanding balance of $.7 million, or .3%, of the total outstanding debt.

The following is a schedule of outstanding debt as of September 30, 2005 and 2004.

City of Cape Coral, Florida Outstanding Debt

(in millions)

Governmental Business-type Activities Activities Total

2005 2004 2005 2004 2005 2004 General Obligation Bonds $ 5.9 $ 7.3 $ - $ 0.8 $ 5.9 $ 8.1 Revenue Bonds 29.5 22.5 30.6 32.3 60.1 54.8 Commercial Paper 45.2 - - 26.0 45.2 26.0 Special Assessment Debt with Governmental Commitment - - 96.7 30.3 96.7 30.3 Notes - - 37.5 110.9 37.5 110.9 Capital Leases 0.4 0.8 0.3 - 0.7 0.8 Total $ 81.0 $ 30.6 $ 165.1 $ 200.3 $ 246.1 $ 230.9

The City’s total debt increased by $15.2 million (6.6%) during the current fiscal year. The key factors in this increase were new debt issues to finance the cost of acquisition, construction and equipping of a new fire station, public art studio and the reconfiguration and renovation of a recreation park; commercial paper obligations; and a new capital lease for street sweepers The City also redeemed capital improvement revenue bonds, state revolving fund loans, and commercial paper.

The ratio of net bonded debt to assessed valuation and the amount of general bonded debt per capita are useful indicators of the City’s debt position to municipal management, citizens, and investors. This data for the City at September 30, 2005 was as follows:

Debt Per Capita (estimated population 147,011 as of September 30, 2005) $40 Debt to Assessed Taxable Value of Property as of September 30, 2005 ($9,428,023,860) .06% Debt Per Capita as a Percentage of Per Capita Income (estimated per capita income of $25,145 as of September 30, 2005) 12.07%

Additional information on the City’s long-term debt can be found in note 11 on pages 48-56 of this report.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET

The State of Florida operates primarily using sales, gasoline and corporate income taxes. Local governments (cities, counties, and school boards) primarily rely on property and a limited array of permitted other taxes (sales, gasoline, communication services, etc.) and fees (franchise, occupational licensing, impact, etc.) for their governmental activities. There are a limited number of state-shared revenues and recurring and non-recurring (one-time) grants from both the state and federal governments.

For the business-type and governmental activities (impact fees, etc.) the user pays a related fee or charge associated with the service. The following factors were considered in preparing the City’s budget for the 2006 fiscal year.

• The real estate sector is a key to the City’s economic outlook which has been characterized by continued growth throughout 2005. The City’s population increased by 13,016 residents to 147,011, an increase of 9.7% over the 2004 population.

15

• Increase in home sales, rising land and home prices and increases in both residential and nonresidential construction activity.

• The current year water, sewer, and irrigation rates were approved by City Council in February 2005 and replaced a rate structure that was originally established in FY1996. There were many factors that contributed to the need to change the rates. The City needs to advance the construction of a new reverse osmosis plant as well as expand the two existing wastewater treatment facilities due to growth. Major maintenance to existing systems is required as well. These plant expansion projects were accelerated from the FY2009-2010 timeframe into FY2005-2006.

• An increase in the stormwater utility rates was proposed and incorporated into the proposed budget. The rate increase of $50 to $75 per equivalent residential unit will generate an additional $3.6 million annually. The additional funding will allow the Public Works Department to create five additional swale maintenance crews and fund associated equipment in order to shrink the two year wait for swale repair. The additional revenue will also fund approximately $1.4 million of additional drainage improvements throughout the City in conjunction with major utility and roadway projects.

• Non-enterprise recreational programs are budgeted in a special revenue fund. Each program is supported by a certain level of user fees. Program costs and projected revenues are annually evaluated to ensure the program costs are being recovered while maintaining a fairly constant general fund support. Program fees will cover approximately 58% of the program expenditures in the proposed budget.

• An increase in road impact fees was recently approved and became effective September 2005. The forecasted revenues have been budgeted in continuing support of infrastructure projects such as Santa Barbara Roadway & Access Improvements and Del Prado Widening.

• Park recreational facilities impact fees are currently being reviewed by an outside consultant. It is anticipated that changes to the current fee schedule will be recommended to City Council for implementation during the course of FY2006. The FY2006 budget was developed using estimated revenues that are based on the current rates. Park recreational facilities impact fees are being used to fund land purchases for the expansion of Lake Kennedy and Festival Park as well as the development of Academic Village Soccer Fields and Chantry Canal.

• Fire, Rescue, and EMS impact fees currently support the construction of new fire stations and the equipment necessary to outfit the stations. The City is working with an outside consultant to develop a Law Enforcement Impact Fee, and Advanced Life Support (ALS) Nontransport Impact Fee. These new fees will be presented to City Council for implementation in FY2006 and is not included in the proposed budget.

• Water, sewer, and irrigation utility capital expansion fees (impact fees) were increased on January 1, 2005 and are used to pay for the expansion of the City’s utility system including the cost of transmission lines. These impact fees are also used to pay applicable debt service.

• Inclusion of wage increases in accordance with bargaining unit agreements as well as a continuation of pay-for performance plan for non-bargaining unit employees. Only step increases have been budgeted for the employees covered by the Police bargaining unit as the current contract expires on September 30, 2005. Additionally, the bargaining agreement with covered fire personnel will expire mid-year FY2006.

REQUEST FOR INFORMATION

The City’s financial statements are designed to present users (citizens, taxpayers, customers, investors and creditors) with a general overview of the City’s finances and to demonstrate the City’s accountability. Questions concerning any of the information provided in this report or requests for additional financial information should be directed to the Financial Services Department, 1015 Cultural Park Blvd., Cape Coral, FL 33990.

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City of Cape Coral, Florida

STATEMENT OF NET ASSETS September 30, 2005

Primary Government Compone Governmental Business-type Cape Coral

Activities Activities Total School Au ASSETS Cash and cash equivalents $ 56,754,775 $ 17,008,544 $ 73,763,319 $ Investments 33,868,537 7,595,186 41,463,723 Interest receivable 260,995 67,338 328,333 Accounts receivable, net 683,805 2,861,766 3,545,571 Notes receivable 591,851 - 591,851 Intergovernmental receivable 8,917,559 152,233 9,069,792 Internal balances 22,848,013 (22,848,013) -Inventories 162,638 851,176 1,013,814 Prepaid items 60,176 687 60,863 -Unamortized bond issue costs - 496,154 496,154 -Net pension asset 4,547,609 - 4,547,609 -Restricted:

Cash and cash equivalents - 58,817,185 58,817,185 -Investments - 15,201,107 15,201,107 -Interest receivable - 137,755 137,755 -Accounts receivable, net - 8,367,645 8,367,645 -Intergovernmental - 210,697 210,697 -Assessments receivable, net 518,154 19,171,491 19,689,645 -Unamortized bond issue costs 866,798 2,161,110 3,027,908 -

Capital Assets (net of accumulated depreciation): Land 56,902,334 13,793,799 70,696,133 -Buildings 35,253,854 15,715,652 50,969,506 -Building improvements 531,222 204,576 735,798 -Improvements other than buildings 4,927,340 85,197,621 90,124,961 -Equipment 11,096,520 6,068,827 17,165,347 -Infrastructure 38,180,026 232,246,398 270,426,424 -Construction in progress 14,318,331 36,086,954 50,405,285 -

Total assets 291,290,537 499,565,888 790,856,425 279,817

LIABILITIES Accounts payable and other accrued liabilities 11,652,223 9,722,081 21,374,304 117,417 Accrued payroll 1,279,579 502,893 1,782,472 -Deposits 135,757 1,964,043 2,099,800 -Accrued interest payable 50,322 1,089,542 1,139,864 -Unearned revenue 1,859,101 5,507,783 7,366,884 -Noncurrent liabilities: -

Due within one year 50,411,165 9,927,817 60,338,982 -Due in more than one year 35,753,503 156,988,196 192,741,699 -

Total liabilities 101,141,650 185,702,355 286,844,005 117,417

NET ASSETS Invested in capital assets, net of related debt 103,796,429 201,904,573 305,701,002 -Restricted for:

Debt service 444,491 28,451,061 28,895,552 -Transportation 16,250,634 - 16,250,634 -Fire public safety facilities 2,953,925 - 2,953,925 -Capital improvements - 58,533,651 58,533,651 -Renewal and replacement - 3,667,541 3,667,541 -

Unrestricted 66,703,408 21,306,707 88,010,115 162,400 Total net assets $ 190,148,887 $ 313,863,533 $ 504,012,420 $ 162,400

The accompanying notes to the financial statements are an integral part of this statement.

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nt Unit Charter thority

279,817 -------

City of Cape Coral, Florida

STATEMENT OF ACTIVITIES For the Year Ended September 30, 2005

Net (Expense) Revenue and Program Revenues Changes in Net Assets

Operating Capital Primary Government Component Unit Charges for Grants and Grants and Governmental Business-type Cape Coral Charter

Functions/Programs Expenses Services Contributions Contributions Activities Activities Total School Authority nmental activities: Gover neral Government Ge $ 19,331,574 $ 10,664,945 $ 295,870 $ 181,438 $ (8,189,321) $ - $ (8,189,321) $ -blic Safety: Pu Police 23,521,555 633,583 1,387,021 - (21,500,951) - (21,500,951) -Fire 17,912,944 673,631 1,092,746 3,018,561 (13,128,006) - (13,128,006) -blic Works Pu 5,250,495 - 296,894 - (4,953,601) - (4,953,601) -mmunity Development Co 4,033,497 1,935,331 316,229 1,983,625 201,688 - 201,688 -rks and Recreation Pa 9,417,001 2,525,275 69,565 10,100,820 3,278,659 - 3,278,659 -nsportation Tra 12,680,751 112,365 - 13,787,020 1,218,634 - 1,218,634 -rest on long-term debt Inte 2,680,674 - - - (2,680,674) - (2,680,674) -

Total governmental activities 94,828,491 16,545,130 3,458,325 29,071,464 (45,753,572) - (45,753,572) -

ess-type activities: Busin ter and Sewer Wa 53,051,285 33,666,825 8,896,049 42,751,598 - 32,263,187 32,263,187 -

ilding Division Bu 7,420,517 10,666,495 97,682 - - 3,343,660 3,343,660 -rmwaterSto 8,135,912 9,056,326 136,594 134,695 - 1,191,703 1,191,703 -

cht Basin Ya 242,962 295,985 23,008 150 - 76,181 76,181 -lf Course Go 1,961,159 1,731,592 16,682 - - (212,885) (212,885) -ter Park Wa 2,360,455 2,256,945 30,326 89,890 - 16,706 16,706 -

Total business-type activities 73,172,290 57,674,168 9,200,341 42,976,333 - 36,678,552 36,678,552 -Total ernment Gov $ 168,000,781 $ 74,219,298 $ 12,658,666 $ 72,047,797 $ (45,753,572) $ 36,678,552 $ (9,075,020) $ -

ent unit: Compon Cape Coral Charter School Authority $ 187,600 $ - $ 350,000 $ - $ - $ - $ - $ 162,400

General revenues: Taxes:

Property taxes, levied for general purpose $ 51,986,689 $ - $ 51,986,689 $ -Property taxes, levied for debt service 1,575,511 525,274 2,100,785 -Sales 2,804,348 - 2,804,348 -Half-cent sales 11,904,798 - 11,904,798 -Fuel 1,262,724 - 1,262,724 -Alcohol and beverage 43,557 - 43,557 -Mobile home 913 - 913 -Franchise 4,393,599 - 4,393,599 -Communication 4,396,046 - 4,396,046 -Gas 7,493,111 - 7,493,111 -

Interest income 1,386,539 - 1,386,539 -Gain on sale of capital assets 64,178 - 64,178 -Transfers 1,398,839 (1,398,839) - -

Total general revenues and transfers 88,710,852 (873,565) 87,837,287 - Change in net assets 42,957,280 35,804,987 78,762,267 162,400

Net assets - beginning 147,191,607 278,058,546 425,250,153 -Net assets - ending $ 190,148,887 $ 313,863,533 $ 504,012,420 $ 162,400

The accompanying notes to the financial statements are an integral part of this statement.

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City of Cape Coral, Florida

BALANCE SHEET GOVERNMENTAL FUNDS

September 30, 2005

Park Recreational Transportation Hurricane Other Total Facilities Capital Charley Disaster Governmental Governmental

General Impact Fees Projects Improvement Funds Funds ASSETS Cash and cash equivalents $ 6,667,497 1,920,199 $ 15,180,342 $ 249,907 $ 28,926,014 $ 52,943,959

Investments 8,292,885 - 12,578,260 - 12,997,392 33,868,537

Interest receivable 71,092 - 142,876 - 47,027 260,995

Accounts receivable, net 621,480 - - - 24,019 645,499

Notes receivable - - - - 591,851 591,851

Intergovernmental receivable 3,476,980 - - 4,343,133 1,097,446 8,917,559

Due from other funds 5,015,630 150,000 - 152,902 114,599 5,433,131

Advances to other funds 1,014,997 1,173,444 - - - 2,188,441

Inventories 98,902 - - - 63,736 162,638

Prepaid items 4,561 - - - 8,420 12,981

Restricted assessments receivable - - - - 518,154 518,154 Total assets 25,264,024 3,243,643 27,901,478 4,745,942 44,388,658 105,543,745

LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable and other accrued liabilities 4,777,876 1,570,989 1,117,817 - 2,985,195 10,451,877

Accrued payroll and compensated absences 2,160,677 - - - 147,680 2,308,357

Due to other funds - 13,140,000 - 4,745,942 9,428,360 27,314,302

Deposits 99,459 - 200 - 36,098 135,757

Unearned revenue 1,819,842 - - 4,343,133 541,832 6,704,807

Advances from other funds - - 95,034 - 779,487 874,521 Total liabilities 8,857,854 14,710,989 1,213,051 9,089,075 13,918,652 47,789,621

Fund balances: Reserved for:

Advances 1,014,997 1,173,444 - - - 2,188,441

Encumbrances 3,436,528 742,390 4,459,725 - 37,294,930 45,933,573

Debt service - - - - 444,491 444,491

Prepaid items 4,561 - - - 8,420 12,981

Transportation - - - - 5,218,169 5,218,169

Inventories 98,902 - - - 63,736 162,638

Unreserved, reported in:

General fund 11,851,182 - - - - 11,851,182

Capital projects funds - - 22,228,702 (4,343,133) (30,103,924) (12,218,355)

Special revenue funds - (13,383,180) - - 17,544,184 4,161,004

Total fund balances (deficit) 16,406,170 (11,467,346) 26,688,427 (4,343,133) 30,470,006 57,754,124 Total liabilities and fund balances $ 25,264,024 $ 3,243,643 $ 27,901,478 $ 4,745,942 $ 44,388,658 $ 105,543,745

The accompanying notes to the financial statements are an integral part of this statement.

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City of Cape Coral, Florida

RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS

September 30, 2005

Fund balance total $ 57,754,124

Amounts reported for governmental activities in the statement of net assets are different because:

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

Capital assets $ 204,439,886 Accumulated depreciation (43,230,259) 161,209,627

Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 502,573

Revenue related to existing expenditures following Hurricane Charley that is earned but unavailable is deferred in the funds. 4,343,133

Internal service funds are used by management to charge costs of workers compensation insurance, property and casualty insurance, and internal borrowings to individual funds. The net assets of internal service funds are included in governmental activities in the statement of net assets. 2,553,791

Internal service funds carry a cross-over liability with the enterprise funds, this liability is not reported in the funds. (1,251,045)

Unamortized bond issue costs are not current financial resources and, therefore, are not reported in the funds. 495,287

Net pension asset resulting from overfunding of the police and fire pension plans is not reported in the funds. 4,547,609

Debt interest payable that will not be liquidated with current financial resources is not reported in the funds. (50,322)

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

Bonds and notes payable $ (34,671,589) Capital leases (433,457) Compensated absences long-term (4,850,844) (39,955,890)

Net assets of governmental activities $ 190,148,887

The accompanying notes to the financial statements are an integral part of this statement.

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913

City of Cape Coral, Florida

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS

For the Year Ended September 30, 2005

Park Recreational Transportation Hurricane Other Total Facilities Capital Charley Disaster Governmental Governmental

General Impact Fees Projects Improvement Funds Funds REVENUES Taxes:

Property $ 50,816,153 $ - $ - $ - $ 2,746,047 $ 53,562,200 Sales 2,804,348 - - - - 2,804,348 Half-cent sales 11,904,798 - - - - 11,904,798 Fuel 1,262,724 - - - - 1,262,724 Alcohol and beverage 43,557 - - - - 43,557 Mobile home 913 - - - -Franchise 4,393,599 - - - - 4,393,599 Communication 4,396,046 - - - 4,396,046 Gas - - - - 7,493,111 7,493,111

Special assessments - - - - 126,121 126,121 Licenses and permits 1,213,991 - - - - 1,213,991 Intergovernmental 4,143,362 - - 10,599,031 2,766,306 17,508,699 Charges for services 9,205,603 - - - 2,702,464 11,908,067 Fines and forfeitures 1,118,273 - - - 4,493 1,122,766 Impact fees - 9,869,668 - - 16,476,766 26,346,434 Rent and royalties - - - - 73,430 73,430 Interest income 831,399 31,152 351,214 587 581,704 1,796,056 Contributions and donations 27,345 - - - - 27,345 Other revenue 605,689 53,274 18,423 785,993 883,158 2,346,537

Total revenues 92,767,800 9,954,094 369,637 11,385,611 33,853,600 148,330,742

EXPENDITURES Current:

General Government 17,104,714 - - 7,340,771 491,630 24,937,115 Public Safety:

Police 22,308,278 - - - 55,667 22,363,945 Fire 17,565,145 - - - 71,610 17,636,755

Public Works 4,773,700 - - - - 4,773,700 Parks and Recreation 3,605,000 308,143 - - 5,094,454 9,007,597 Community Development 1,463,757 - - - 2,545,662 4,009,419 Transportation 7,113,596 - 197,476 - 2,932,831 10,243,903

Capital outlay 12,542,779 17,667,869 3,947,056 375,172 15,525,021 50,057,897 Debt service:

Principal 378,256 - - - 3,535,102 3,913,358 Interest and fiscal charges 10,694 5,550 - - 1,805,913 1,822,157

Total expenditures 86,865,919 17,981,562 4,144,532 7,715,943 32,057,890 148,765,846 Excess revenues over (under) expenditures 5,901,881 (8,027,468) (3,774,895) 3,669,668 1,795,710 (435,104)

OTHER FINANCING SOURCES (USES) Transfers in 1,300,160 - 12,175,000 2,406,960 15,697,975 31,580,095 Transfers out (12,252,154) (4,669,510) (1,500,000) - (13,379,592) (31,801,256) Issuance of debt - - - - 20,550,000 20,550,000 Payment to escrow agent to refund bonds - - - - (12,049,294) (12,049,294) Gain on sale of capital assets 108,130 - 2,926 - 52,962 164,018

Total other financing sources (uses) (10,843,864) (4,669,510) 10,677,926 2,406,960 10,872,051 8,443,563 Net change in fund balances (4,941,983) (12,696,978) 6,903,031 6,076,628 12,667,761 8,008,459

Fund balances - beginning 21,348,153 1,229,632 19,785,396 (10,419,761) 17,802,245 49,745,665 Fund balances (deficit) - ending $ 16,406,170 $ (11,467,346) $ 26,688,427 $ (4,343,133) $ 30,470,006 $ 57,754,124

The accompanying notes to the financial statements are an integral part of this statement.

21

City of Cape Coral, Florida

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2005

Amounts reported for governmental activities in the statement of activities are different because:

Net change in Fund balance – total governmental funds $ 8,008,459

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period.

Capital outlay $ 50,057,897 Depreciation (7,576,420) 42,481,477

The net change in long-term compensated absences. (653,326)

The net effect of various miscellaneous transactions involving capital assets is to decrease net assets. (284,587)

Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (119,661)

Revenues related to Hurricane Charley in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 4,343,133

The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of the governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items.

Principal debt payments Issuance of debt Principal payment to escrow agent to refund bonds Premium, discount and deferred loss amortization

$ 3,913,358 (20,550,000) 11,415,000 1,005,621 (4,216,021)

Pension contributions exceeding the annual pension cost increases the net pension asset on the statement of net assets. 2,069,758

The City had recorded revenue associated with Hurricane Charley and other matters in FY 2004. This is the net effect of the reversal of those transactions. (9,924,033)

Internal service funds are used by management to charge costs of workers compensation insurance, property and casualty insurance, and internal commercial paper borrowings to individual funds. The net revenue of internal service funds is recorded within governmental activities. 2,553,448

The internal service fund is consolidated as part of governmental activities, but a portion of the internal service fund is for business-type activities. This is the "cross-over" amount as a result of the surplus elimination. (1,251,045)

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (50,322)

Change in net assets of governmental activities $ 42,957,280

The accompanying notes to the financial statements are an integral part of this statement.

22

City of Cape Coral, Florida

STATEMENT OF NET ASSETS PROPRIETARY FUNDS

September 30, 2005

Business-type Activities - Enterprise Funds Governmental

Activities -Other Internal

Water and Building Enterprise Service Sewer Division Funds Total Funds

ASSETS Current assets: Cash and cash equivalents $ 10,318,790 $ 5,499,362 $ 1,190,392 $ 17,008,544 $ 3,810,816 Investments 4,764,245 1,511,467 1,319,474 7,595,186 -Interest receivable 46,545 11,813 8,980 67,338 -Accounts receivable, net 2,508,883 328,103 24,780 2,861,766 38,306 Intergovernmental receivable - - 152,233 152,233 -Due from other funds - - - - 44,666,309 Inventories 806,076 - 45,100 851,176 -Prepaid items 687 - - 687 47,195 Restricted:

Cash and cash equivalents 10,848,781 788,517 227,163 11,864,461 -Interest receivable 106,155 - 3,975 110,130 -Accounts receivable, net 1,229,449 - - 1,229,449 -Intergovernmental receivable 210,697 - - 210,697 -

Total restricted assets 12,395,082 788,517 231,138 13,414,737 -Total current assets 30,840,308 8,139,262 2,972,097 41,951,667 48,562,626

Noncurrent assets: Unamortized bond issue costs 360,191 - 135,963 496,154 371,511 Restricted:

Cash and cash equivalents 44,560,312 - 2,392,412 46,952,724 -Investments 14,690,516 - 510,591 15,201,107 -Interest receivable 27,625 - - 27,625 -Accounts receivable, net 7,138,196 - - 7,138,196 -Assessments receivable, net 19,171,491 - - 19,171,491 -Unamortized bond issue costs 2,161,110 - - 2,161,110 -

Total restricted assets 87,749,250 - 2,903,003 90,652,253 -

Capital assets: Land 11,902,689 - 1,891,110 13,793,799 -Buildings 24,661,005 - 1,639,930 26,300,935 -Building improvements 136,943 64,519 55,247 256,709 -Improvements other than buildings 164,204,245 43,111 27,292,358 191,539,714 -Equipment 20,588,477 1,343,011 6,434,701 28,366,189 -Infrastructure 318,712,879 - - 318,712,879 -Construction in progress 33,463,489 - 2,623,465 36,086,954 -

Less accumulated depreciation (207,151,824) (432,758) (18,158,770) (225,743,352) -Total capital assets, net 366,517,903 1,017,883 21,778,041 389,313,827 -

Total noncurrent assets 454,627,344 1,017,883 24,817,007 480,462,234 371,511 Total assets $ 485,467,652 $ 9,157,145 $ 27,789,104 $ 522,413,901 $ 48,934,137

The accompanying notes to the financial statements are an integral part of this statement.

23

City of Cape Coral, Florida

STATEMENT OF NET ASSETS PROPRIETARY FUNDS (continued)

September 30, 2005

Governmental Business-type Activities - Enterprise Funds Activities -

Other Internal Water and Building Enterprise Service

Sewer Division Funds Total Funds LIABILITIES Current liabilities: Accounts payable and other accrued liabilities $ 5,938,625 $ 133,118 $ 230,270 $ 6,302,013 $ 1,200,346 Accrued payroll and compensated absences 372,336 185,302 184,129 741,767 -Due to other funds 15,417,072 - 426,982 15,844,054 -Unearned revenue 3,630,152 1,474,130 403,501 5,507,783 -Debt:

Revenue bonds 1,190,000 - 850,000 2,040,000 -Special assessment debt 4,292,069 - - 4,292,069 -Notes 3,268,806 - - 3,268,806 -Commercial paper obligations - - - - 45,180,000 Capital leases - - 88,068 88,068

Total debt 8,750,875 - 938,068 9,688,943 45,180,000 Total current liabilities 34,109,060 1,792,550 2,182,950 38,084,560 46,380,346

Current liabilities payable from restricted assets: Accounts payable and other accrued liabilities 3,321,330 - 98,738 3,420,068 -Due to other funds 6,941,084 - - 6,941,084 -Deposits 1,167,002 788,517 8,524 1,964,043 -Accrued interest payable 965,666 - 123,876 1,089,542 -

Total current liabilities payable from restricted assets 12,395,082 788,517 231,138 13,414,737 -

Noncurrent liabilities: Advances from other funds - - 1,313,920 1,313,920 -Compensated absences 841,929 417,896 366,219 1,626,044 -Debt:

Revenue bonds 22,656,146 - 5,942,447 28,598,593 -Special assessment debt 92,383,754 - - 92,383,754 -Notes 34,190,494 - - 34,190,494 -Capital leases - - 189,311 189,311 -

Total debt 149,230,394 - 6,131,758 155,362,152 -Total noncurrent liabilities 150,072,323 417,896 7,811,897 158,302,116 -

Total liabilities 196,576,465 2,998,963 10,225,985 209,801,413 46,380,346

NET ASSETS Invested in capital assets, net of related debt 186,178,475 1,017,883 14,708,215 201,904,573 -Restricted for:

Debt service 27,974,107 - 476,954 28,451,061 -Capital improvements 56,627,864 - 1,905,787 58,533,651 -Renewal and replacement 3,147,279 - 520,262 3,667,541 -

Unrestricted 14,963,462 5,140,299 (48,099) 20,055,662 2,553,791 Total net assets $ 288,891,187 $ 6,158,182 $ 17,563,119 $ 312,612,488 $ 2,553,791

The accompanying notes to the financial statements are an integral part of this statement.

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City of Cape Coral, Florida

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS

For the Year Ended September 30, 2005

Governmental Business-type Activities - Enterprise Funds Activities -

Other Internal Water and Building Enterprise Service

Sewer Division Funds Total Funds

OPERATING REVENUES Charges for services $ 32,953,035 $ 10,648,212 $ 13,049,823 $ 56,651,070 $ 5,141,602 Other revenue 713,790 18,283 291,025 1,023,098 -

Total operating revenues 33,666,825 10,666,495 13,340,848 57,674,168 5,141,602

OPERATING EXPENSES Salaries, wages and employee benefits 10,372,534 5,950,203 6,048,674 22,371,411 -Contractual services, materials and supplies 17,314,928 1,234,902 4,506,747 23,056,577 1,920,938 Claims and claims adjustments - - - - 1,514,289 Depreciation 20,794,233 252,509 1,885,797 22,932,539 -

Total operating expenses 48,481,695 7,437,614 12,441,218 68,360,527 3,435,227 Operating income (loss) (14,814,870) 3,228,881 899,630 (10,686,359) 1,706,375

NONOPERATING REVENUES (EXPENSES) Property taxes 525,274 - - 525,274 -Intergovernmental revenue - - 262,017 262,017 -Interest income 8,110,939 97,682 167,083 8,375,704 12,140 Interest expense and bond discount amortization (5,854,754) - (369,394) (6,224,148) (785,067) Debt service escrow refund 1,335,597 - - 1,335,597 -Gain on sale of capital assets 85,767 15,795 59,778 161,340 -

Total nonoperating revenues (expenses) 4,202,823 113,477 119,484 4,435,784 (772,927) Income (loss) before contributions

and transfers (10,612,047) 3,342,358 1,019,114 (6,250,575) 933,448

Capital contributions 42,201,111 - 2,245 42,203,356 -Transfers in - - 273,644 273,644 1,620,000 Transfers out (611,184) (58,503) (1,002,796) (1,672,483) -

Total contributions and transfers 41,589,927 (58,503) (726,907) 40,804,517 1,620,000 Change in net assets 30,977,880 3,283,855 292,207 34,553,942 2,553,448

Total net assets - beginning 257,913,307 2,874,327 17,270,912 278,058,546 343 Total net assets - ending $ 288,891,187 $ 6,158,182 $ 17,563,119 $ 312,612,488 $ 2,553,791

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS OF PROPRIETARY FUNDS TO THE STATEMENT OF ACTIVITIES

Amounts reported for business-type activities in the statement of activities are different because:

Net change in net assets - business-type activities

The internal service fund is consolidated as part of governmental activities, but a portion of the internal service fund is for business-type activities. This is the "cross-over" amount as a result of the surplus elimination.

Change in net assets - business-type activities

$

$

34,553,942

1,251,045

35,804,987

The accompanying notes to the financial statements are an integral part of this statement.

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City of Cape Coral, Florida

STATEMENT OF CASH FLOWS PROPRIETARY FUNDS

For the Year Ended September 30, 2005

Governmental Business-type Activities - Enterprise Funds Activities -

Other Internal Water and Building Enterprise Service

Sewer Division Funds Total Funds CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers (including other funds) $ 31,771,092 $ 11,748,331 $ 13,714,034 $ 57,233,457 $ 5,089,218

Cash payments to suppliers (10,598,422) (1,101,744) (3,331,700) (15,031,866) (1,787,869) Cash payments to employees (10,280,897) (5,755,117) (6,021,446) (22,057,460) (52,230) Interfund service payments (3,823,441) (410,532) (1,185,570) (5,419,543) -

Net cash provided by operating activities 7,068,332 4,480,938 3,175,318 14,724,588 3,249,119

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Intergovernmental revenue - - 262,017 262,017 -Collection of internal loan debt - - - - 2,835,241 Principal payments on debt - - - - (41,600,000) Interest paid - - - - (785,067) Issuance of debt - - - - 60,777,500 Transfers in - - 273,644 273,644 1,620,000 Transfers out (611,184) (58,503) (849,894) (1,519,581) (22,294,075)

Net cash provided (used) by noncapital financing activities (611,184) (58,503) (314,233) (983,920) 553,599

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition and construction of capital assets (47,167,450) (766,199) (1,834,606) (49,768,255) -Auction proceeds 85,767 15,795 59,778 161,340 -Issuance of debt 83,640,893 - - 83,640,893 -Principal payments on debt (94,169,467) - (911,677) (95,081,144) -Collection of special assessments 15,678,396 - - 15,678,396 -Capital contributions 39,201,906 - 2,245 39,204,151 -Collection of taxes for bond debt service 525,274 - - 525,274 -Interest paid (4,538,454) - (308,649) (4,847,103) -Repayment of advances to other funds - - (222,400) (222,400) -Repayment of commercial paper (2,835,241) - - (2,835,241) -

Net cash used by capital and related financing activities (9,578,376) (750,404) (3,215,309) (13,544,089) -

CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments (16,760,736) (1,511,467) (843,477) (19,115,680) -Proceeds from sales and maturities of investments 13,929,865 - - 13,929,865 -Interest income 2,770,270 85,869 172,570 3,028,709 12,140

Net cash provided (used) by investing activities (60,601) (1,425,598) (670,907) (2,157,106) 12,140 Net increase (decrease) in cash and cash equivalents (3,181,829) 2,246,433 (1,025,131) (1,960,527) 3,814,858 Cash and cash equivalents - beginning 68,909,712 4,041,446 4,835,098 77,786,256 430,823 Cash and cash equivalents - ending $ 65,727,883 $ 6,287,879 $ 3,809,967 $ 75,825,729 $ 4,245,681

CLASSIFIED AS: Cash and cash equivalents $ 10,318,790 $ 5,499,362 $ 1,190,392 $ 17,008,544 $ 3,810,816 Restricted cash and cash equivalents 55,409,093 788,517 2,619,575 58,817,185 -

Total cash and cash equivalents $ 65,727,883 $ 6,287,879 $ 3,809,967 $ 75,825,729 $ 3,810,816

The accompanying notes to the financial statements are an integral part of this statement.

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City of Cape Coral, Florida

STATEMENT OF CASH FLOWS PROPRIETARY FUNDS (continued)

For the Year Ended September 30, 2005

Governmental Business-type Activities - Enterprise Funds Activities -

Other Internal Water and Building Enterprise Service

Sewer Division Funds Total Funds

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

Operating income (loss) $ (14,814,870) $ 3,228,881 $ 899,630 $ (10,686,359) $ 2,141,240 Adjustments to reconcile operating income (loss)

to net cash provided by operating activities: Depreciation expense 20,794,233 252,509 1,885,797 22,932,539 -Provision for uncollectible accounts (1,598) - - (1,598) -(Increase) decrease in assets:

Accounts receivable (6,316,778) (325,618) 120,034 (6,522,362) (38,306) Intergovernmental receivable (165,893) - (57,474) (223,367) -Inventories 43,521 - (11,787) 31,734 -Prepaid items 3,731 - 104,830 108,561 (47,195) Assessment receivable 328,058 - - 328,058 -Loans from other funds - - - - (8,372) Unamortized bond issue costs 225,793 - 19,722 245,515 26,017

Increase (decrease) in liabilities: Accounts payable and other accrued liabilities 2,572,287 48,242 (130,592) 2,489,937 1,175,735 Accrued payroll and compensated absences 91,635 195,088 27,228 313,951 -Intergovernmental payable 1,418 9,354 7,303 18,075 -Deposits 598,063 369,333 3,971 971,367 -Unearned revenue 3,628,503 703,149 306,656 4,638,308 -Noncurrent debt 80,229 - - 80,229 -

Total adjustments 21,883,202 1,252,057 2,275,688 25,410,947 1,107,879 Net cash provided (used) by operating activities $ 7,068,332 $ 4,480,938 $ 3,175,318 $ 14,724,588 $ 3,249,119

Supplemental disclosure of noncash investing, capital and financing activities: Water and Sewer recognized $1,197,372 of restricted accounts receivable (loans created for impacts and betterments) through capital contributions. Water and Sewer accreted interest for revenue bonds of $264,469. Decrease in fair value of investments of $182,526. Other Enterprise Funds (Stormwater) recognized a liability for transfer out to Hurricane Charley Improvement Fund for removal of canal debris.

The accompanying notes to the financial statements are an integral part of this statement.

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City of Cape Coral, Florida

STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS September 30, 2005

ASSETS Cash and cash equivalents Accrued income Employee contributions receivable Accounts receivable

Private-Purpose Pension Trust Charter School

Funds Donation Trust

$ 17,984,868 $ 53,681 500,867 -

1,482,051 -- -

$

Agency Funds

2,616,299 --

7,207

Investments, at fair value: U.S. government and agencies Corporate bonds Corporate stocks Mutual funds

Total investments

15,645,876 37,260,296 87,069,245 28,133,853

168,109,270

-----

-----

Total assets 188,077,056 53,681 2,623,506

LIABILITIES Due to others - - 2,623,506

NET ASSETS $ 188,077,056 $ 53,681 $ -

City of Cape Coral, Florida

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS

For the Year Ended September 30, 2005

Private-Purpose Pension Trust Charter School

Funds Donation Trust ADDITIONS Contributions:

Employer $ 10,827,366 $ -Employee 4,462,753 -State 1,482,051 -Collections - 53,575

Total contributions 16,772,170 53,575

Interest income: Net increase in fair value of investments 14,151,907 -Interest 4,524,292 106

Total interest income 18,676,199 106 Less investment expenses (664,215) -

Net interest income 18,011,984 106 Total additions 34,784,154 53,681

DEDUCTIONS Benefits and refunds 6,092,777 -Administrative expenses 103,285 -

Total deductions 6,196,062 -

Changes in net assets 28,588,092 53,681 Net assets - beginning 159,488,964 -Net assets - ending $ 188,077,056 $ 53,681

The accompanying notes to the financial statements are an integral part of this statement.

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City of Cape Coral, Florida

NOTES TO THE FINANCIAL STATEMENTS September 30, 2005

Page

NOTE I. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Organization ...................................................................................................................30

2. Related Organization......................................................................................................30

3. Summary of Significant Accounting Policies..................................................................31

NOTE II. PROPERTY TAXES ................................................................................................................38

NOTE III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY .................................................38

NOTE IV. DETAILED NOTES 1. Deposits and Investments..............................................................................................38

2. Restricted Cash and Investments ..................................................................................44

3. Accounts and Assessments Receivable ........................................................................44

4. Accounts Payable and Other Accrued Liabilities ...........................................................45

5. Interfund Receivables, Payables, and Transfers ...........................................................46

6. Intergovernmental Revenue...........................................................................................48

7. Interest Income...............................................................................................................48

8. Capital Assets ................................................................................................................49

9. Construction Commitments............................................................................................51

10. Operating Leases ...........................................................................................................52

11. Long-term Debt ..............................................................................................................53

12. Defeased Debt Issues....................................................................................................62

13. Deficit Fund Balances or Net Assets of Individual Funds ..............................................62

14. Construction Project Interest Cost .................................................................................62

15. Other Revenue ...............................................................................................................63

16. Segment Information ......................................................................................................63

NOTE V. OTHER INFORMATION 1. Risk Management ..........................................................................................................64

2. Pension Plans ................................................................................................................65

3. Other Postemployment Benefits ....................................................................................71

4. Contingencies.................................................................................................................71

5. Subsequent Events ........................................................................................................71

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City of Cape Coral, Florida

NOTES TO THE FINANCIAL STATEMENTS September 30, 2005

NOTE I. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Organization

The City of Cape Coral, Florida (the City) was incorporated in 1970 pursuant to the laws of Florida, Chapter 70-623. The City operates under the Council-Manager form of government, which is comprised of an elected City Council (eight members) including an elected mayor, and a City Manager appointed by the City Council. The City provides the following services: public safety (police and fire), recreation, cultural, community development, transportation, planning and zoning, water and wastewater services, stormwater utility services, and general administrative services.

For financial reporting purposes, the accompanying financial statements include all the operations of the City for which the City is financially accountable. The City is financially accountable for organizations that make up its legal entity, as well as legally separate organizations that meet certain criteria. The criteria for inclusion in the reporting entity entails those cases where the City or its officials appoint a voting majority of an organization’s governing body and is able to impose its will on the organization or there is a potential for the organization to provide specific financial benefits or burdens to the City.

The blended component unit, although a legally separate entity, is, in substance, part of the government’s operations. The discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the government.

Blended component unit. The Cape Coral Community Redevelopment Agency (Agency) was created in 1986 by Ordinance 51-87 of the City of Cape Coral, Florida, pursuant to Section 163.356 of the Florida Statutes. The City Council appoints the Agency’s Board of Directors. The Agency provides services for the benefit of the City. The Agency’s projects result in capital assets (mainly infrastructure) being owned by the City. The Agency’s transactions are recorded and reported by the City. The Agency does not publish individual component unit financial statements.

Discretely presented component unit. The Cape Coral Charter School Authority (“Authority”) was created for the purpose of operating and managing, on behalf of the City, all charter schools for which a charter is held by the City. The powers of the Authority are exercised through a governing board, which is known as the Cape Coral Charter School Authority Board which provides governance of the charter schools. Six (6) members of the governing board are appointed by city council, three (3) parent members are chosen by and from the parent organizations from each school level (elementary, middle and high school), the city manager and the charter school administrator serve as “ex officio members” of the board. The charter school administrator is a non-voting member. The City Council approves the Charter School Authority’s budget and must approve any debt issuances. Separate financial statements are not prepared for the Cape Coral Charter School Authority.

2. Related Organization

The City’s officials are responsible for appointing the members of the Board of the City of Cape Coral Health Facilities Authority. The City’s accountability for this organization does not extend beyond making these appointments; therefore, there is no blended or discrete financial presentation for this entity.

30

3. Summary of Significant Accounting Policies

The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards, which along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units.

Basic Financial Statements

The basic financial statements include both government-wide (based on the City as a whole) and fund financial statements along with the notes to the financial statements. The focus of the financial statements is on either the City as a whole or major individual funds (within the fund financial statements). Both the government-wide and fund financial statements (within the basic financial statements) categorize primary activities as either governmental or business-type. In the Statement of Net Assets, both the governmental and business-type activities columns are reflected on a full accrual, economic resource basis, which incorporates long-term assets and receivables as well as long-term debt and obligations.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function (Public Safety, Parks and Recreation, etc.). Program revenues are defined as charges for services, operating grants and contributions, and capital grants and contributions directly associated with a given function. Taxes and other items not properly included among program revenues are reported instead as general revenues.

The Statement of Activities reflects both the gross and net costs per function (Public Safety, Parks and Recreation, etc.) which are otherwise being supported by general government revenues (property taxes, franchise taxes, gas taxes, etc.). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. The program revenues must be directly associated with the function.

As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government’s water and sewer, stormwater and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

This government-wide focus is more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period.

Separate fund financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. The emphasis of the fund financial statements is on the major funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns and the nonmajor funds are summarized into a single column.

Measurement Focus and Basis of Accounting

The Government-wide Financial Statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund and Fiduciary Fund financial statements. Since by definition the fiduciary funds’ assets are being held for the benefit of a third party (other local governments and other entities) and cannot be used to address activities

31

or obligations of the government, these funds are not incorporated into the government-wide statements. Since agency funds report only assets and liabilities they do not have a measurement focus. They do, however, use the accrual basis of accounting to recognize receivables and payables.

The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Since the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental column, a reconciliation is presented which briefly explains the adjustments necessary to transform the fund based financial statements into the governmental activities of the government-wide presentation.

The focus of the GASB No. 34 model is on the City as a whole and the fund financial statements. The focus of the Fund Financial Statements is on the major funds of the governmental and business-type activities. Each presentation provides valuable information that can be analyzed to enhance the usefulness of the information.

Basis of accounting refers to when revenue and expenditures/expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied.

The Government-wide Financial Statements and the Proprietary and Fiduciary Fund Financial Statements are presented on an accrual basis of accounting. The Governmental Funds in the Fund Financial Statements are presented on a modified accrual basis of accounting.

1. Accrual:

Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred.

Proprietary funds record both operating and non-operating revenues and expenses. Operating revenues are those that are obtained from the operations of the proprietary fund that include charges for services and user fees. Non-operating revenues are not related to the operations of the proprietary fund and include interest earnings and intergovernmental revenue. Operating expenses represent the cost of operations, which includes depreciation. Non-operating expenses are not related to operations such as interest expense.

The proprietary funds follow private-sector standards issued prior to December 1, 1989, to the extent those standards do not conflict with Governmental Accounting Standards Board statements. However, pursuant to Governmental Accounting Standards Board Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Funds Accounting, the City has elected not to apply Financial Accounting Standards Board Statements and interpretations issued after November 30, 1989 by the Financial Accounting Standards Board.

2. Modified Accrual:

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. The City considers all revenues available if they are collected within 60 days after year-end. Primary revenue sources that have been treated as susceptible to accrual include, where material, intergovernmental revenue, franchise fees, communication taxes and charges for services. Property taxes are accounted for when measurable and available as described in Note II. Grant revenue is considered earned and is accrued when all eligibility requirements are met.

32

In applying the “susceptible to accrual” concept to intergovernmental revenues pursuant to Governmental Accounting Standards Board (GASB) Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions (the City may act as either provider or recipient), the provider should recognize liabilities and expenses and the recipient should recognize receivables and revenue when the applicable eligibility requirements including time requirements, are met. Resources transmitted before the eligibility requirements are met should, under most circumstances, be reported as advances by the provider and deferred revenue by recipient.

Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, as under accrual accounting. Exceptions to this general rule include principal and interest on general obligation long-term debt, as well as expenditures related to compensated absences and claims and judgments which are recognized when due.

Basis of Presentation

The financial transactions of the City are recorded in individual funds. The operations for each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures/expenses. Resources are allocated to and accounted for in individual funds, based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

GASB No. 34 sets forth minimum criteria (percentage of assets, liabilities, revenues or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The City’s major funds are presented in separate columns on the governmental fund financial statement and the proprietary fund financial statement. The funds that do not meet the criteria of a major fund are considered nonmajor funds and are combined into a single column in the fund financial statements and detailed in the combining section.

The following major funds are used by the City:

1. Governmental Funds:

The focus of Governmental Fund measurement (in the Fund Financial Statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The following is a description of the major Governmental Funds of the City:

a. General Fund is the general operating fund of the City. It is used to account for all financial resources, except those required to be accounted for in another fund.

b. Park Recreational Facilities Impact Fees Fund is used to account for impact fees which are used to provide recreational park facilities.

c. Transportation Capital Projects Fund is used to account for the following projects: • Santa Barbara Access – improvements on roadway access and for intersection

improvements on Santa Barbara Boulevard. • Del Prado Widening – improvements of Del Prado Boulevard from State Road 78 to

Kismet Parkway. • Gleason Parkway Extension – roadway access and intersection improvements on

Gleason Parkway and Chiquita Boulevard. • Andalusia & Cultural Connection – connection of Andalusia Boulevard and Cultural Park

Boulevard. • Jacaranda/Averill Realignment – new Averill Extension to Del Prado Boulevard and road

improvements connecting Jacaranda Parkway and Averill Boulevard. • Downtown Circulation – initial improvements to Downtown Area and improve traffic

flowing east and west along Cape Coral Parkway.

33

• Del Prado Mall Parking Lot – drainage and overall condition of the City dedicated parking lot at the Del Prado Mall.

• SR 78 Parallel Access – series of roadway construction parallel to SR 78 to preserve the level of service standards along SR 78 by providing alternative access.

• Chiquita Boulevard Improvements – enhancement of the roadway to reduce congestion and provide efficient, safe access and circulation to neighboring communities.

• Skyline Boulevard Roadway – design and construction of roadway improvements to include six-laning when feasible.

• Transportation Capital Projects – various other transportation projects.

d. Hurricane Charley Disaster Improvement Fund is used to account for debris removal, repairs, and improvements to City parks and facilities as a result of Hurricane Charley.

2. Proprietary Funds:

The City of Cape Coral maintains two different types of proprietary funds. Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Three Internal Service Funds are utilized: 1) The Internal Loan Fund is used to account for loans recorded in the City’s commercial paper internal loan fund which are loaned to other funds to provide financing for capital projects on a short-term basis prior to securing long-term financing. 2) The Workers Compensation Insurance Fund is used to account for the self-insurance of workers compensation. 3) The Property and Casualty Insurance Fund is used to account for the self-insurance liability. The Internal Service Funds have been included within governmental-type activities in the government-wide financial statements because they primarily benefit governmental funds.

The focus of Proprietary Fund measurement is upon determination of operating income, changes in net assets, financial position, and cash flows, which is similar to businesses. The following is a description of the major Proprietary Funds of the City:

a. Water and Sewer Fund is used to account for the activities of the City’s water and sewer utility programs.

b. Building Division Fund is used to account for the activities of the building and permitting services of the Department of Community Development as related to the construction of buildings and related structures within the City of Cape Coral

3. Other Funds:

Additionally, the City reports the following Funds:

a. Private-Purpose Trust Fund is used to report donations that benefit other governments. The Charter School Donation Trust Fund is used to account for the City’s collection of donations for the Cape Coral Charter School Authority.

b. Agency Funds are used to account for the City’s collection of school impact fees, at the time of building permit issuance, for the Lee County School Board, and for the collection of solid waste fees for Waste Management Inc.

Assets, Liabilities and Net Assets or Equity, Revenues, and Expenditures/Expenses

1. Cash, Cash Equivalents and Investments

The City, for accounting and investment purposes, maintains a pooled cash and investments account. This gives the City the ability to invest large amounts of idle cash for short periods of time and to maximize earning potential. The pooled cash and investments consists of the Local Government Surplus Funds Trust Fund administered by the Florida State Board of Administration, U.S. securities and money market.

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Interest income is allocated based upon the proportionate balance of each fund’s equity in pooled cash and investments.

For purposes of the statement of cash flows, the City considers highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash and cash equivalents.

2. Investments

The City’s investments are reported at fair value which is the amount a financial instrument could be exchanged in a current transaction between willing parties. Investments, including restricted investments, consist of mutual funds, U.S. Government securities, corporate debt and equity securities, mortgage-backed securities, asset-backed securities and securities of governmental agencies unconditionally guaranteed by the U.S. Government.

3. Receivables and Payables

During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as “due from other funds” or “due to other funds”. Any balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.”

Assessments receivable – the City levies a special assessment against benefited property owners for construction of water, wastewater and irrigation utility extension in certain areas of the City.

Noncurrent portions of interfund loan receivables classified as advances between funds, as reported in the fund financial statements, are offset equally by a fund balance reserve account in applicable governmental funds which indicates that they do not constitute expendable available financial resources, and therefore, are not available for appropriation.

4. Inventories and Prepaid Items

Inventories, consisting primarily of expendable supplies held for consumption, are stated at cost (first-in, first-out method). The City utilizes the consumption method of accounting, which provides that expenditures are recognized when inventory is used.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

5. Capital Assets

Capital assets include property, plant, equipment, and infrastructure assets. Infrastructure assets are defined as public domain capital assets such as roads, bridges, sidewalks, traffic signals, and similar items that are immovable and of value only to the governmental unit. Capital assets are reported in the government-wide financial statements in the applicable governmental or business-type activities columns, as well as the proprietary fund financial statements. Capital assets are defined by the City as assets with an initial, individual cost of $1,000 or more and a useful life in excess of one year. Capital assets are recorded at historical cost or estimated historical cost, if actual historical cost is not available. Donated capital assets are recorded at estimated fair value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized, but are expensed as incurred.

Capital assets are depreciated using the straight-line method over the estimated useful lives of the related assets. The ranges of the useful lives are as follows:

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Assets Years Equipment 3-5 Traffic signals 15 Parking lots 20 Roads 30 Utility lines 20 Sidewalks 30 Bridges 40 Improvements other than buildings 5-40 Building improvements 10-20 Buildings 30-50

6. Compensated Absences

It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits, which will be paid to employees upon separation from City service if they meet certain criteria. The City’s policy requires the employees to receive a cash buyout on an annual basis once their unused leave reaches a certain level depending on the employee’s job classification. These benefits plus their related taxes are classified as compensated absences. The accumulated compensated absences are accrued when incurred in the government-wide financial statements and proprietary funds for both the current and long-term portions. For the Governmental Funds, the amounts normally liquidated with expendable available financial resources are accrued in the individual funds (general fund, gas tax fund, and parks and recreation programs fund) and the remaining portion (the amount estimated to be used in subsequent fiscal years) is maintained separately and represents a reconciling item between the fund and government-wide presentations.

7. Long-term Obligations

Long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets.

8. Bond Discount, Bond Premium, Issuance Costs, and Deferred Loss on Defeasance

In governmental funds the face amount of debt issued is reported as other financing sources. Issuance costs, bond premiums and discounts whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

In the government-wide financial statements and proprietary funds, bond premiums and discounts, issuance costs, and deferred loss on defeasance are amortized over the life of the bonds using the straight-line method, which does not result in a material difference from the effective interest method. The face amount of the debt issued is reported net of bond premiums and discounts whereas issuance costs are recorded as other assets.

9. Deferred Gain/Loss from Current Refunding or Advance Refunding of Debt

In the government-wide financial statements and enterprise funds, the difference between the re-acquisition price (new debt) and the net carrying value of the old debt on refunded debt transactions is deferred and amortized as a component of interest expense using the straight-line method over the shorter of the remaining life of the old debt or the life of the new debt. The deferred amount is offset against the new liability.

10. Utility Capital Expansion Fee (Impact Fee)

The City utilizes utility capital expansion fees as a means for funding capital expansion required to meet system demands resulting from growth. These fees are recorded as capital contribution revenue in the enterprise funds when charged.

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11. Special Assessments

The City levies a special assessment against benefited property owners for construction of water and wastewater utility extension in certain areas of the City.

The City also levies a special assessment against benefited property owners for construction of seawalls.

12. Unearned Revenue

Unearned revenue recorded in the General Fund relates to occupational licenses, lot mowing fees, and user fees that are not earned until the next fiscal year.

Unearned revenue recorded in the other governmental funds relates to seawall special assessments that are not billed and due in the current year. The special assessments revenue will be recognized when billed.

Unearned revenue in the enterprise funds relates to golf course memberships, rain checks and gift certificates that will be redeemed in the next fiscal year; fees collected at permit issue date for residential and commercial construction; planned development project fees; and planning and zoning fees collected at time of application that are not earned until next fiscal year.

13. Intergovernmental Allocation of Administrative Expenses

The General fund incurs certain administrative expenses for other funds, including accounting, legal, data processing, personnel administration, and other services. The governmental funds that receive these services were charged $667,351 for fiscal year 2005. These amounts are eliminated in the statement of activities. The enterprise funds that receive these services were charged $3,911,351 for fiscal year 2005. These amounts are recorded as revenue in the general fund and operating expenses in the enterprise funds.

14. Restricted Net Assets and Reservations of Fund Balance

In the government-wide and enterprise fund financial statements, when both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed.

In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted for a specific future use. Designations of fund balance represent tentative management plans that are subject to change. Unreserved, undesignated fund balance indicates funds that are available for current expenditure.

In the proprietary funds, restricted net assets are used to indicate segregation of a portion of net assets equal to certain assets that are restricted for meeting various covenants as may be specified and defined in the revenue bond indenture or other legal commitment.

15. Hurricane Charley

The President of the United States on August 13, 2004, declared Major Disaster No. FEMA-DR-1539-FL in all counties in the State of Florida as a result of Hurricane Charley. Federal Assistance in the wake of disasters is coordinated by the Federal Emergency Management Agency (FEMA). Under the Public Assistance program, FEMA provides assistance for debris removal, implementation of emergency protective measures and permanent restoration of infrastructure. This program is based on a partnership between FEMA, State and local officials.

For certain types of facilities or areas, disaster assistance is the responsibility of a Federal agency other than FEMA. The Federal Highway Administration (FHWA) administers the Emergency Relief Program to assist with sign replacement, and repairs of routes identified by FHWA. They include

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most public roads classified as arterial and collector routes. The Natural Resources Conservation Services, United States Department of Agriculture, administers the debris removal from canals and waterways.

The Hurricane Charley Disaster Improvement Fund is used to account for expenses, revenues, assets and liabilities for debris removal, repairs, and improvements to City parks and facilities related to Hurricane Charley. See pages 19-22 for amounts that have been recognized in the fund financial statements. Within the Hurricane Charley Disaster Improvement Fund the $4.3 million intergovernmental receivable is the expected reimbursement from FEMA. The total $4.3 million receivable amount has been earned but is unavailable therefore it is classified as unearned revenue. This unearned revenue from the fund statement has been reported as revenue on the government-wide financial statements.

16. Use of Estimates

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

NOTE II. PROPERTY TAXES

Property taxes are levied on November 1 of each year, and are due and payable upon receipt of the notice of levy. The Lee County, Florida Tax Collector’s office bills and collects property taxes on behalf of the City. The total tax rate of 5.7598 mils per $1,000 of assessed taxable property value consists of 5.5287 mils to finance general governmental services and 0.2311 mils to finance general obligation debt service for the fiscal year ended September 30, 2005. Property tax revenue is recognized in the fiscal year for which the taxes are levied. On May 1 of each year, unpaid taxes become a lien on the property. The past due tax certificates are sold at public auction prior to June 1, and the proceeds collected are remitted to the City.

No accruals for the property tax levy becoming due in November 2005 are included in the accompanying financial statements since such taxes are levied for the subsequent fiscal year and are not considered available at September 30, 2005.

NOTE III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

Compliance With Finance-Related Legal and Contractual Provisions

The City has no violations of finance-related legal and contractual provisions.

NOTE IV. DETAILED NOTES

1. DEPOSITS AND INVESTMENTS

Governmental and Business-type Activities:

A. Cash and Cash Equivalents

At September 30, 2005, the carrying amount of the City’s cash deposit accounts was $138,342,741. The City’s cash deposits are held by a bank that qualifies as a public depository under the Florida Security for Public Deposits Act as required by Chapter 280, Florida Statutes. The City’s cash deposits are fully insured by the Public Deposits Trust Fund.

Cash equivalents consist of amounts placed with the State Board of Administration (SBA) for participation in the Local Government Surplus Funds Trust Fund investment pool created by Section 218.405, Florida Statutes. This investment pool operates under investment guidelines established by Section 215.47, Florida Statutes. The City’s investment in the Local Government Surplus Funds Trust Fund, a Securities and Exchange Commission Rule

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2a7-like external investment pool, in the amount of $2,174,463 is reported at amortized cost. The investment pool had an average of 49 days to maturity as of September 30, 2005.

B. Investment Portfolio

On August 9, 2004, the City of Cape Coral adopted a comprehensive investment policy pursuant to Section 218.415, Florida Statutes that established permitted investments, asset allocation limits, issuer limits, credit rating requirements, and maturity limits to protect the City’s cash and investment assets. The City maintains a common cash and investment pool for the use of all funds.

Section 218.415, Florida Statutes, limits the types of investments that a government can invest in unless specifically authorized in an investment policy. The City’s investment policy allows for the following investments: The Florida State Board of Administration’s Local Government Surplus Funds Trust Fund, United States Government Securities, United States Government Agencies, Federal Instrumentalities, Non-Negotiable Interest Bearing Time Certificates of Deposit or Saving Accounts, Repurchase Agreements, Commercial Paper, Bankers’ Acceptances, State and/or Local Government Taxable and/or Tax-Exempt Debt, Money Market Mutual Funds, Intergovernmental Investment Pools, Corporate Obligations or Corporate Notes, Mortgage-Backed Securities (MBS), Asset-Backed Securities (ABS), and Bond Funds.

As of September 30, 2005, interest receivable on the City’s investment portfolio amounted to $466,088.

As of September 30, 2005, the City had the following investment types and effective duration presented in terms of years:

Weighted Average Security Type Fair Value Duration (Years) Corporate Notes $ 4,920,430 2.146 Federal Agencies - Bond/Note 18,315,252 1.579 Federal Agencies - Discount Notes 614,508 0.030 Federal Agencies - MBS 892,769 1.859 Municipal Bond/Note 1,282,533 2.697 US Treasuries - Bond/Note 22,661,563 1.405 Guaranteed Investment Contract 7,977,775 1.690 Total Fair Value $ 56,664,830 Portfolio Weighted Average Duration 1.587

C. Interest Rate Risk

The City’s investment policy sets limits for investment maturities to match known cash needs and anticipated cash flow requirements. Investments of current operating funds shall have maturities of no longer than twenty-four (24) months. Investments of bond reserves, construction funds, and other non-operating funds, “core funds”, shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall exceed five (5) years. The maturities of the underlying securities of a repurchase agreement will follow the requirements of the Master Repurchase Agreement.

The City utilizes “effective duration” as a measurement of interest rate risk and as of September 30, 2005, the investment portfolio had an effective duration of 1.587 years.

Included in the investment portfolio, the City has $8,551,638 in Federal Instrumentalities that have embedded options consisting of the option at the discretion of the issuer to call their obligation or pay a stated increase in the interest rate. These securities have various call dates, and mature on June 30, 2006, December 22, 2006, April 13, 2007, May 16, 2007, and October 20, 2007.

D. Credit Risk

The City’s investment policy permits the following investments, which are limited to credit quality ratings from nationally recognized rating agencies as follows.

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Commercial Paper of any United States company that is rated, at the time of purchase, “Prime-1” by Moody’s and “A-1” by Standard & Poor’s (prime commercial paper). If the commercial paper is backed by a letter of credit (“LOC”), the long-term debt of the LOC provider must be rated “A” or better by at least two nationally recognized rating agencies.

Bankers’ Acceptances which are issued by a domestic bank or a federally chartered domestic office of a foreign bank, which are eligible for purchase by the Federal Reserve System, at the time of purchase, the short-term paper is rated, at a minimum, “P-1” by Moody's Investors Services and “A-1” by Standard & Poor's.

State and/or local government taxable and/or tax-exempt debt, general obligation and/or revenue bonds, rated at least “Aa” by Moody’s and “AA” by Standard & Poor’s for long-term debt, or rated at least “MIG-2” by Moody’s and “SP-2” by Standard & Poor’s for short-term debt.

Mutual Fund shares in open-end, no-load provided such funds are registered under the Federal Investment Company Act of 1940 and operated in accordance with 17 C.F.R. § 270.2a-7. In addition, the Financial Services Director may investment in other types of mutual funds provided such funds are registered under the Federal Investment Company Act of 1940, invest exclusively in the securities specifically permitted under this investment policy, and are similarly diversified.

Intergovernmental Investment Pools that are authorized pursuant to the Florida Interlocal Cooperation Act, as provided in Section 163.01, Florida Statutes and provided that said funds contain no derivatives.

Corporate obligations or notes shall have two of the following 3 minimum ratings: A-, A3, or A-, as rated by Standard and Poor’s, and/or Moody’s, and/or Fitch Investors Services rating agencies. However, if such obligations are rated by only one rating agency, then such rating shall be at least AA-, Aa3, or AA- by Standard & Poor’s, or Moody’s, or Fitch.

Mortgage-backed securities (MBS) shall be Double-A rated or better by Standard & Poor’s, or the equivalent by another rating agency.

Asset-backed securities (ABS) shall be Double-A rated or better by Standard & Poor’s, or the equivalent by another rating agency.

Bond funds shall be Double-A rated or better by Standard & Poor’s, or the equivalent by another rating agency.

As of September 30, 2005, the City had the following credit exposure as a percentage of total investments:

Security Type Credit Rating % of Portfolio Federal Agencies - Discount Notes A-1+ 1% Corporate Notes AA- 9% Federal Agencies AAA 4% Federal Agencies - MBS AAA 1% Muncipal Bond/Note AAA 31% US Treasuries - Bond/Note TSY 40% Guranteed Investment Contract NR* 14%

Total 100%

* not rated

The City’s $2,174,463 investment deposit in the Florida State Board of Administration’s Local Government Surplus Funds Trust Fund investment pool was unrated as of September 30, 2005.

The City’s cash deposit balance of $138,342,741 was deposited in a qualified public depository, as required by Chapter 280, Florida Statutes.

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E. Custodial Credit Risk

The City’s investment policy, pursuant to Section 218.415(18), Florida Statutes, requires securities, with the exception of certificates of deposits, shall be held with a third party custodian; and all securities purchased by, and all collateral obtained by the City should be properly designated as an asset of the City. The securities must be held in an account separate and apart from the assets of the financial institution. A third party custodian is defined as any bank depository chartered by the Federal Government, the State of Florida, or any other state or territory of the United States which has a branch or principal place of business in the State of Florida, or by a national association organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in the State of Florida. Certificates of deposits will be placed in the provider’s safekeeping department for the term of the deposit.

As of September 30, 2005, the City’s investment portfolio was held with a third-party custodian as required by the City’s investment policy.

F. Concentration of Credit Risk

The City’s investment policy has established asset allocation and issuer limits on the following investments, which are designed to reduce concentration of credit risk of the City’s investment portfolio.

A maximum of 100% of available funds may be invested in the SBA and in United States Government Securities, 25% of available funds may be invested in United States Government Agencies with a 10% limit on individual issuers, 75% of available funds may be invested in Federal Instrumentalities with a 25% limit on individual issuers, 10% of available funds may be invested in non-negotiable interest bearing time certificates of deposit with a 5% limit on individual issuers, 25% of available funds may be invested in repurchase agreements excluding one (1) business day agreements and overnight sweep agreements with a 10% limit on any one institution, 25% of available funds may be directly invested in prime commercial paper with a 10% limit on individual issuers, 25% of available funds may be directly invested in Bankers’ acceptances with a 10% limit on individual issuers, 20% of available funds may be invested in taxable and tax-exempt debts with a limit of 5% on individual issuers, 25% of available funds may be invested in mutual funds with a limit of 10% with any one non-SEC Rule 2a-7 investment mutual fund, 25% of available funds may be invested in intergovernmental investment pools, 20% of available funds may be invested in corporate obligations or corporate notes of US corporations with a limit of 5% with any one corporate note, 15% of available funds may be invested in mortgage-backed securities with a limit of 5% invested with any one MBS, 10% of available funds may be invested in asset-backed securities with a limit of 5% with any one ABS, and 25% of available funds may be invested in bond funds with a limit of 10% invested with any one bond fund.

As of September 30, 2005, the City had the following issuer concentration based on fair value:

Percentage of Issuer Fair Value Portfolio CitiGroup Inc. $ 1,951,960 3% FFCB 944,834 2% FHLB 7,868,470 14% FHLMC 6,622,665 12% FNMA 4,386,560 8% Miami Beach Florida 1,282,533 2% US Treasury 22,661,563 40% US Bancorp 986,790 2% Wells Fargo 1,981,680 3% Guaranteed Investment Contract 7,977,775 14%

Total $ 56,664,830 100%

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Pension Trust Funds:

The City has three defined benefit single-employer pension plans: General, Police Officers, and Firefighters (Pension Funds).

A. Cash and Cash Equivalents

At September 30, 2005, the carrying amount of the Pension Funds’ cash and cash equivalents was $17,984,868.

Cash equivalents consists of $17,982,737 placed with Goldman Sachs Treasury Obligations FD and Goldman Sachs Fin Sq Prime Obligation “AAA” rated money market funds.

B. Investment Portfolio

On November 17, 2000, each Board of Trustees of the City’s Pension Funds adopted a comprehensive investment policy, pursuant to Florida Statutes Section 112.661, that established permitted investments, asset allocation limits, issuer limits, credit rating requirements, and maturity limits to protect the Pension Funds’ cash and investment assets.

As of September 30, 2005, interest receivable on the Pension Funds’ investment portfolio amounted to $500,867.

As of September 30, 2005, the City had the following investment types and effective duration presented in terms of years:

Weighted Average Security Type Fair Value Duration (Years) US Agencies $ 9,489,631 2.53 US Treasuries 6,156,245 3.61 Corporate Notes - ABS 5,574,328 2.67 Corporate Notes - MBS 15,697,795 3.22 Corporate Notes - CMBS 6,511,307 5.46 Corporate Notes 9,476,866 5.86 Total $ 52,906,172 Portfolio Weighted Average Duration 3.86 Mutual Funds 28,133,853 N/A Equity 87,069,245 N/A Total Fair Value $ 168,109,270

C. Interest Rate Risk

The Pension Funds utilize “effective duration” as a measurement of interest rate risk and as of September 30, 2005, the investment portfolio had an effective duration of 3.86 years.

D. Credit Risk

The Pension Funds’ investment policy permits the following investments, which are limited as described below.

Equity Securities

Foreign Equity Securities which are traded on a national exchange and/or American Depository Receipts.

Fixed Income Securities

The average credit quality of the bond portfolio shall be “A” or higher.

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Corporate fixed income securities rated “BAA or higher by Moody’s or “BBB” or higher by Standard & Poor’s rating agencies.

Collateralized Mortgage Obligations must be backed by mortgage securities issued, guaranteed, or fully insured by the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association or that are rated “Aaa” by Moody’s or “AAA” by Standard & Poor’s rating Agencies.

As of September 30, 2005 the Pension Funds had the following credit exposure as a percentage of total investments:

Security Type Credit Rating % of Portfolio US Agencies AAA 5.67% US Treasuries AAA 3.68% Corporate Notes - ABS AAA 2.50% Corporate Notes - ABS AA2 0.12% Corporate Notes - ABS AA- 0.10% Corporate Notes - ABS A2 0.50% Corporate Notes - ABS A+ 0.11% Corporate Notes - MBS AAA 9.38% Corporate Notes - CMBS AAA 3.89% Corporate Notes AAA 0.34% Corporate Notes AA1 0.05% Corporate Notes AA2 0.16% Corporate Notes AA3 0.72% Corporate Notes A1 0.97% Corporate Notes A2 1.16% Corporate Notes A3 0.35% Corporate Notes BAA1 1.00% Corporate Notes BAA2 0.36% Corporate Notes BAA3 0.14% Mutual Funds NR* 16.81% Equity NR* 51.99%

Total 100.00%

* not rated

E. Custodial Credit Risk

The Pension Funds’ investment policy, pursuant to Section 112.661(10), Florida Statutes, states that securities, should be held with a third party custodian; and all securities purchased by, and all collateral obtained by the Pension Funds should be properly designated as an asset of the Pension Fund.

As of September 30, 2005, the Pension Funds’ investment portfolio was held with a third-party custodian as required by Florida Statutes.

F. Concentration of Credit Risk

The Pension Funds’ investment policy has established asset allocation and issuer limits on the following investments, which are designed to reduce concentration of credit risk of the Pension Funds’ investment portfolio.

Equity Securities

A maximum of 60% at cost value or 70% at market value of the Funds’ total asset value may be invested in equity securities, 5% at cost value may be invested in a single corporate issuer, 10% at cost value may be invested in foreign equity securities, 25% of the total equity portfolio may be invested in equity securities whose market

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capitalization is less than $3 billion, 15% of the equity portfolio may be invested in those corporations whose stock has been publicly traded for less than one year

Fixed Income Securities

A maximum of 70% at market value of the Funds’ total asset value may be invested in fixed income securities.

A maximum of 10% at cost of the total fixed income portfolio may be invested in the securities of any single issuer, and 15% of the market value of investments may be invested in Collateralized Mortgage Obligations (CMOs). All CMO issues must pass the FFIEC High Risk Security Test on an annual basis.

As of September 30, 2005, the Pension Funds did not have a concentration of investments that are not direct governmental obligations or agency securities that exceed 5% or more of each individual pension fund net assets.

G. Foreign Currency Risk

As of September 30, 2005 the Pension Funds had $7,081,003 invested in American Euro Pacific and $5,756,046 in the ING International Value Fund.

2. Restricted Cash and Investments

Restricted cash and investments of the proprietary funds represent resources to be restricted for capital improvements, debt service, renewal and replacement, and deposits.

Water and Building Other Sewer Division Enterprise Total

Restricted for capital improvements $ 31,674,475 $ - $ 1,905,787 $ 33,580,262 Restricted for debt service 34,123,002 - 695,592 34,818,594 Restricted for renewal and replacement 3,147,279 - 520,262 3,667,541 Deposits 1,154,853 788,517 8,525 1,951,895

Total restricted cash and investments $ 70,099,609 $ 788,517 $ 3,130,166 $ 74,018,292

3. Accounts and Assessments Receivable

Governmental activities: Transportation Hurricane Other

General Capital Charley Disaster Governmental Fund Projects Improvement Funds Total

Unrestricted: Interest $ 71,092 $ 142,876 $ - $ 47,027 $ 260,995 Notes - - - 591,851 591,851 Intergovernmental: 3,476,980 - 4,343,133 1,097,446 8,917,559 Gross accounts receivable 1,207,768 - - 24,019 1,231,787 Less: allowance for uncollectibles (586,288) 1 - - - (586,288)

Total net unrestricted 4,169,552 142,876 4,343,133 1,760,343 10,415,904

Restricted: Assessments - - - 518,154 518,154

Total net receivables $ 4,169,552 $ 142,876 $ 4,343,133 $ 2,278,497 $ 10,934,058

1 The City lawfully requires that weeds, grass, or underbrush be kept at a height of not more than 12 inches. Where land owners in the City choose not to maintain their own vacant property in compliance with the ordinance, the City provides such service and bills the owner a fee. The city invokes the right to lien properties with unpaid lot mowing bills and has chosen not to write-off delinquent balances. Bills are sent out in December of each year. Before the end of each fiscal year the allowance for uncollectibles is adjusted to include all unpaid balances over 90 days past due.

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,.

Business-type activities:

Governmental Other Activities -

Water and Building Enterprise Internal Sewer Division Funds Total Service Funds

Unrestricted: Interest $ 46,545 $ 11,813 $ 8,980 $ 67,338 $ -Intergovernmental - - 152,233 152,233 -Gross accounts receivable 2,839,972 328,103 184,197 3,352,272 38,306 Less: allowance for uncollectibles (331,089) 2 - (159,417) 3,4 (490,506) -

Total net unrestricted 2,555,428 339,916 185,993 3,081,337 38,306

Restricted: Interest 133,780 - 3,975 137,755 -Intergovernmental 210,697 - - 210,697 -Assessments 19,171,491 4 - - 19,171,491 -Accounts receivable 8,367,645 - - 8,367,645 -

Total net restricted 27,883,613 - 3,975 27,887,588 -Total net receivables $ 30,439,041 $ 339,916 $ 189,968 $ 30,968,925 $ 38,306

2 The City bills users for water and sewer services monthly; before the end of each fiscal year the allowance for uncollectibles is adjusted to include all unpaid balances over 90 days past due.

3 The City by ordinance, bills each property owner within the City a fee to provide for and to make repairs to the stormwater runoff system designed to help alleviate standing water and provide water quality following heavy rains. The billing is done annually in October and before the end of the fiscal year the allowance for uncollectibles is adjusted to include all unpaid balances over 90 days past due. In fiscal year 2003, the billing for most properties in the City was transferred to the non ad-valorem portion of the tax bill.

4 The City has a law firm under contract to assist in collection of delinquent utility assessment and stormwater utility accounts. The firm specializes in such services and is working on foreclosing on delinquent utility assessment and stormwater accounts. The City monitors the accounts on a monthly basis. The City has not established an allowance for the utility assessments; ultimately through liens/foreclosures, the revenue is expected to be recovered.

4. Accounts Payable and Other Accrued Liabilities

Accounts payable and other accrued liabilities at September 30, 2005 is as follows:

Governmental activities: Park Recreational Transportation Other

Facilities Capital Governmental General Fund Impact Fees Projects Funds Total

Accounts and contracts payable $ 3,065,764 $ 1,570,989 $ 1,117,817 $ 828,295 $ 6,582,865 Intergovernmental payable 24,615 - - - 24,615 Accrued liabilities 1,687,497 - - 2,156,900 3,844,397

Total $ 4,777,876 $ 1,570,989 $ 1,117,817 $ 2,985,195 $ 10,451,877

Business-type activities: Governmental

Other Activities -Water and Building Enterprise Internal

Sewer Division Funds Total Service Funds

Accounts and contracts payable $ 7,783,095 $ 133,118 $ 249,349 $ 8,165,562 $ 1,191 Customer overpayments 114,978 - - 114,978 -Intergovernmental payable 1,229,735 - 69,440 1,299,175 -Incurred but not reported claims - - - - 764,290 Accrued liabilities 132,147 - 10,219 142,366 434,865

Total $ 9,259,955 $ 133,118 $ 329,008 $ 9,722,081 $ 1,200,346

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5. Interfund Receivables, Payables, and Transfers

The composition of interfund balances as of September 30, 2005 is as follows:

Due to/from other funds:

Receivable Fund Payable Fund Purpose for Balance Amount General Other governmental funds (Community

Development Block Grant) Awaiting grant reimbursement $ 145,608

Hurricane Charley Disaster Improvement Awaiting grant reimbursement 4,745,942 Golf Course Supporting operations 120,000 Water Park 1 Construction of water slide 4,080

5,015,630

Park Recreational Facilities Impact Fee Water Park2 Retire external debt 150,000

Hurricane Charley Disaster Improvement Stormwater Canal debris clean-up 152,902

Other governmental funds (Gas tax) Other governmental funds (Community Development Block Grant) Construction of sidewalk 55,815

Other governmental funds (Charter school construction fund) Other governmental funds (All Hazards)3 Construction of charter school buildings 58,784

114,599

Total Governmental Funds $ 5,433,131

Internal loan fund Water and Sewer Extension of utility lines in the Southeast 1 area $ 13,406,133 Water and Sewer Water and sewer capital projects 6,941,084 Water and Sewer Extension of utility lines in the Southwest 4 area 2,010,939 Other governmental funds (fire stations III, IV, VIII) Construction of fire stations III, IV, VIII 1,020,000 Other governmental funds (charter school construction fund) Construction of charter school buildings 8,148,153 Park Recreational Facilities Impact Fee Land purchases 13,140,000

$ 44,666,309

Advances to/from other funds:

Receivable Fund Payable Fund Purpose for Balance Amount

General Seawall Fund 4 Construction of seawalls $ 779,487

Del Prado Mall parking lot 5 Parking lot improvement 10,674

Transportation Capital Projects 5 Alley improvement 84,360

Golf Course 6 Clubhouse expansion project 140,476

1,014,997

Park Recreational Facilities Impact Fee Water Park 2 Retire external debt 1,173,444

Total Governmental Funds $ 2,188,441

1 Water Park operations provide funds to repay the advance. The advance is scheduled to mature in March 2006. 2 Water Park operations provide funds to repay the advance. The advance is scheduled to mature in September 2014. 3 Repayment from municipal service taxing unit (MSTU). 4 Seaw all assessment collections provide funds to repay the advances. Seaw all assessment loans are payable over a 10 year period. 5 Parking lot and alley assessment collections provide funds to repay the advance. 6 Golf Course operations provide funds to repay the advance. The advance is scheduled to mature in September 2009.

46

,, ,, ,,

,,

Interfund Transfers:

Transfers In

Transfers Out General Fund Recreational Facilities Impact Fees Transportation Capital Projects Other Governmental Water and Sewer Building Division Other Enterprise

Total Transfers Out

Hurricane

General Fund

$ ---

679,675 470,591

-149,894

1,3

5

7

Transportation Capital Projects

$ --

11 1,500,000 6 10,675,000

---

Charley Capital

Improvement $ 2,254,058

-----

152,902

13

7

Other Governmental

Funds 2,4,8 $ 8,128,096 2,12 4,669,510

-2,3 2,024,917 2,3 116,949 2 58,503 7 700,000

Other Enterprise

Funds $ 250,000

---

23,644 --

4

9

Internal Service Funds 1,620,000

------

10 $ Total

12,252,154 4,669,510 1,500,000

13,379,592 611,184 58,503

1,002,796 $ 1,300,160 $ 12,175,000 $ 2,406,960 $ 15,697,975 $ 273,644 $ 1,620,000 $ 33,473,739

1 Funds transferred to the general fund are for reimbursement at budgetary established levels for administrative services from other governmental funds. 2 Various funds transferred receipts restricted to the debt service fund. 3 Other governmental fund (fire, rescue & EMS impact fee) transferred $1,649,750 to other governmental fund (fire Stations III, IV, VIII) for construction.

Other governmental fund (all hazards) transferred $256,883 to other governmental fund (charter school construction) for construction. Other governmental fund (CDBG) transferred $55,815 to other governmental fund (gas tax) for construction of sidewalks. Other governmental funds (police evidence) transferred $4,968 to other governmental funds (police confiscation state) for resolved cases. Other governmental funds (police confiscation federal) transferred $12,324 to the general fund for federal grant matching portion.

4 The general fund transferred $458,157 to other governmental fund (fire stations III, IV, VIII) for construction. The general fund transferred $1,800,000 to other governmental fund (public safety building) for construction. The general fund transferred $818,758 to other governmental fund (parks capital projects) for construction. The general fund transferred $250,000 to a nonmajor enterprise fund (golf course) at budgetary established levels to support operations.

5 Water and sewer transferred $470,591 to the general fund for administrative billing services Stormwater transferred $149,894 to the general fund for administrative billing services.

6 Various special revenue funds made transfers to capital projects funds for construction. 7 Other enterprise funds (stormwater) transferred $700,000 to other governmental funds (gas tax fund) for reimbursement related to prior year drainage improvements on Santa Barbara

Boulevard. Other enterprise funds (stormwater) transferred $149,894 to the general fund for administrative billing services. Other enterprise funds (stormwater) transferred $152,902 to Hurricane Charley Capital Improvement for canal debris clean-up.

8 General fund transferred $2,664,044 to other governmental fund (parks and recreation) to support operations. 9 Water and sewer transferred $23,644 to other enterprise funds (stormwater) for purchase of equipment.

10 General fund transferred $810,000 to the internal service fund (workers compensation insurance fund) and $810,000 to the internal service fund (property and casualty insurance fund). 11 Transportation capital projects (Gleason Parkway extension) transferred $1,500,000 to transportation capital projects ($700,000 to Chiquita Boulevard improvements, $400,000 to

State Road 78 parallel access, and $400,000 to Skyline Boulevard roadway) for construction. 12 Park recreational facilities impact fee transferred $1,250,000 to other governmental fund (academic village) for construction.

Park recreational facilities impact fee transferred $2,569,152 to other governmental fund (parks capital projects) for construction. Park recreational facilities impact fee transferred $195,238 to other governmental fund (charter school construction) for construction.

13 The general fund transferred $2,254,057 to Hurricane Charley Capital Improvement fund for debris removal, repairs, and improvements to City parks and facilities as a result of Hurricane Charley.

47

6. Intergovernmental Revenue

Intergovernmental revenue at September 30, 2005 is as follows:

Hurricane Charley Other Disaster Governmental

General Fund Improvement Funds Total Operating Grants and State Shared Revenues

Community Development $ - $ - $ 275,838 $ 275,838 Parks and Recreation 69,465 - - 69,465 Public Safety: Police 620,454 - - 620,454 Public Works - - 241,894 241,894 Local shared revenue 500,120 - - 500,120 State shared revenue 1,542,602 - - 1,542,602 Federal shared revenue 1,651 - - 1,651 Federal disaster relief - Hurricane Charley 964,229 10,529,141 - 11,493,370 Federal disaster relief - Hurricane Frances 71,450 - - 71,450 State disaster relief - Hurricane Charley 23,299 14,573 - 37,872 State disaster relief - Hurricane Jeanne 35,092 - - 35,092

Capital Grants Community Development 10,000 - 1,938,985 1,948,985 Parks and Recreation 200,000 - - 200,000 Public Safety: Fire 50,000 - - 50,000 Federal disaster relief - Hurricane Charley - 52,421 - 52,421 State disaster relief - Hurricane Charley - 2,896 - 2,896

Inter-local Agreements Public Safety: Fire - - 309,589 309,589 Public Works 55,000 - - 55,000

Total $ 4,143,362 $ 10,599,031 $ 2,766,306 $ 17,508,699

Other Enterprise

Funds Operating Grants and State Shared Revenues

Federal disaster relief - Hurricane Charley $ 37,704 State disaster relief - Hurricane Charley 1,823

Capital Grants Federal disaster relief - Hurricane Charley 85,175 State disaster relief - Hurricane Charley 4,715

Inter-local Agreements Stormwater - Matlacha Isles 132,600

Total $ 262,017

7. Interest Income

Interest income as of September 30, 2005 is as follows: Governmental

Activities -Governmental Business-type Internal

Activities Activities Service Funds Total Investment income $ 1,663,715 $ 2,745,150 $ 12,140 $ 4,421,005 Interest on advances 41,580 17 - 41,597 Interest billed on assessment, betterment, and impact loans 5,580 5,620,361 - 5,625,941 Interest received from tax collector 66,896 10,176 - 77,072 Economic development revolving loan 18,285 - - 18,285

Total $ 1,796,056 $ 8,375,704 $ 12,140 $ 10,183,900

48

,..

,..

8. Capital Assets

Capital asset activity for the year ended September 30, 2005 was as follows:

Beginning Balance Increases Decreases

Ending Balance

Governmental activities: Capital assets, not being depreciated:

Land Construction in progress otal capital assets, not being depreciated

$ 34,103,020 $ 22,809,452 6,203,196 19,270,670

40,306,216 42,080,122

$ (10,138) (11,155,535) (11,165,673)

$ 56,902,334 14,318,331 71,220,665

Capital assets, being depreciated: BuildingsBuilding improvements Improvements other than buildings Equipment Infrastructure otal capital assets, being depreciated

33,029,967 370,136

9,118,698 25,081,580 47,843,938

115,444,319

10,105,645 408,432 440,911

5,436,347 2,651,546

19,042,881

(6,500) (156,307)

-(1,105,172)

-(1,267,979)

43,129,112 622,261

9,559,609 29,412,755 50,495,484

133,219,221

ess accumulated depreciation for: Buildings Building improvements Improvements other than buildings Equipment Infrastructure otal accumulated depreciation

(6,586,673) (38,377)

(4,060,764) (15,516,308) (10,535,676) (36,737,798)

(1,292,499) (52,662)

(571,505) (3,879,972) (1,779,782) (7,576,420)

3,914 --

1,080,045 -

1,083,959

(7,875,258) (91,039)

(4,632,269) (18,316,235) (12,315,458) (43,230,259)

otal capital assets, being depreciated, net 78,706,521 11,466,461 (184,020) 89,988,962

Governmental activities capital assets, net $ 119,012,737 $ 53,546,583 $ (11,349,693) $ 161,209,627

Business-type activities: Capital assets, not being depreciated:

Land Water and Sewer Other enterprise

Total land Construction in progress

Water and Sewer Building Division Other enterprise

Total construction in progress otal capital assets, not being depreciated

$ 4,827,652 $ 7,135,982 1,891,110 -6,718,762 7,135,982

89,996,587 37,245,839 14,225 16,695

1,230,518 1,512,080 91,241,330 38,774,614 97,960,092 45,910,596

$ (60,945) -

(60,945)

(93,778,937) (30,920)

(119,133) (93,928,990) (93,989,935)

$ 11,902,689 1,891,110

13,793,799

33,463,489 -

2,623,465 36,086,954 49,880,753

Capital assets, being depreciated: Buildings

Water and Sewer Other enterprise

Total buildings Building improvements

Water and Sewer Building Division Other enterprise

Total building improvements

24,601,278 1,639,930

26,241,208

116,917 55,994 17,527

190,438

59,727 -

59,727

20,026 8,525

37,720 66,271

---

----

24,661,005 1,639,930

26,300,935

136,943 64,519 55,247

256,709

49

,.

,.

,.

,.

,.

Beginning Balance Increases Decreases

Ending Balance

Improvements other than buildings Water and Sewer Building Division Other enterprise

Total improvements other than buildings Equipment

Water and Sewer Building Division Other enterprise

Total equipment Infrastructure

$ 162,740,477 $ 1,463,768 - 43,111

27,232,641 59,717 189,973,118 1,566,596

19,116,338 1,793,640 583,875 765,585

6,027,513 723,276 25,727,726 3,282,501

$ ----

(321,501) (6,449)

(316,088) (644,038)

$ 164,204,245 43,111

27,292,358 191,539,714

20,588,477 1,343,011 6,434,701

28,366,189

Water and Sewer 222,537,687 96,175,192 - 318,712,879

Total capital assets, being depreciated 464,670,177 101,150,287 (644,038) 565,176,426

Less accumulated depreciation for: Buildings

Water and Sewer Other enterprise

Total buildings Building improvements

Water and Sewer Building Division Other enterprise

Total building improvements Improvements other than buildings

Water and Sewer Building Division Other enterprise

Total improvements other than buildings Equipment

Water and Sewer Building Division Other enterprise

Total equipment Infrastructure

(9,243,456) (654,430)

(9,897,886)

(18,408) (5,364) (2,361)

(26,133)

(87,638,687) -

(11,840,280) (99,478,967)

(16,855,449) (144,537)

(4,091,990) (21,091,976)

(641,785) (45,612)

(687,397)

(16,551) (6,878) (2,571)

(26,000)

(5,647,239) (949)

(1,214,938) (6,863,126)

(944,546) (281,479) (622,676)

(1,848,701)

---

----

----

320,778 6,449

316,088 643,315

(9,885,241) (700,042)

(10,585,283)

(34,959) (12,242) (4,932)

(52,133)

(93,285,926) (949)

(13,055,218) (106,342,093)

(17,479,217) (419,567)

(4,398,578) (22,297,362)

Water and Sewer (72,915,316) (13,551,165) - (86,466,481)

Total accumulated depreciation (203,410,278) (22,976,389) 643,315 (225,743,352)

Total capital assets, being depreciated, net 261,259,899 78,173,898 (723) 339,433,074

Business-type activities capital assets, net $ 359,219,991 $ 124,084,494 $ (93,990,658) $ 389,313,827

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental activities: General Government Public Safety:

Police Fire

Public Works Community Development Parks and Recreation Transportation

Total depreciation expense - governmental activities

$

$

977,919

1,370,136 780,378 612,883

9,283 1,465,239 2,360,582 7,576,420

Business-type activities: Water and Sewer Building Division Other enterprise

Total depreciation expense - business-type activities

$

$

20,794,233 252,509

1,885,797 22,932,539

50

9. Construction Commitments

The City has active construction projects as of September 30, 2005. The projects include access to canal waterways, widening and reconstruction of existing streets, signalization improvements, construction of a new public safety building and fire stations, design of a new art studio, construction of charter schools, improvements to parks, water production enhancements, and utility expansions. At the end of the current fiscal year, the City’s commitments with contractors are as follows:

Total Spent to Remaining Contract Date Commitment

Governmental activities: Chantry canal launching facility/marina (permitting assistance)1 $ 20,000 $ - $ 20,000 Chiquita boat lock (continuing permitting assistance)1 42,854 (13,777) 29,077

Santa Barbara widening (design) 2 1,618,294 (601,530) 1,016,764 Andalusia extension (design)2 22,900 (22,052) 848 Jacaranda/Averill realignment (design)2 164,250 (21,456) 142,794 Traffic signal installation at Chiquita and Savona 2 121,664 (120,271) 1,393 Traffic signal installation at Chiquita and Gleason 2 94,189 (54,560) 39,629 Road resurfacing FY 20052 1,863,298 (762,237) 1,101,061 SR 78 parallel access study2 214,940 (95,955) 118,985 SW 32nd Street extension2 1,567,042 (318,619) 1,248,423

Public Safety Building (schematic design)3 975,206 (38,271) 936,935 Fire Stations 1, 9 and Pelican Soccer3 188,840 (5,875) 182,965 Fire Stations 3, 4 and 83 8,806,079 (1,999,865) 6,806,214

Academic Village4 577,304 (262,838) 314,466

City Centrum Business Park5 1,444,338 (1,150,453) 293,885 Jaycee Park, irrigation improvements5 51,959 - 51,959

Art Studio (design and administration services)6 171,290 - 171,290

Charter Elementary School North7 11,804,680 (852,169) 10,952,511 Charter Middle School7 13,688,733 (1,273,254) 12,415,479 Charter High School (preliminary design)7 288,000 - 288,000

Community Redevelopment Agency (CRA) traffic study8 354,446 (37,312) 317,134

Yacht Club lighting9 35,462 - 35,462 Yacht Club master plan (Task 1)9 31,826 - 31,826

Total governmental activities 44,147,594 (7,630,494) 36,517,100

Business-type activities: Water production enhancements10 32,616,366 (7,867,183) 24,749,183

Pump Station 363 relocation10 46,119 (40,790) 5,329

Utility line extensions:11

Southeast 1 53,178,892 (11,235,669) 41,943,223 Southwest 4 (design only) 3,845,565 (1,603,032) 2,242,533 Northeast Loop betterment (design only) 149,886 (141,192) 8,694

Total business-type activities 89,836,828 (20,887,866) 68,948,962 Total $ 133,984,422 $ (28,518,360) $ 105,466,062

1 The access to canal waterways is funded through the general fund, Park recreational facilities impact fees and stormwater fees.

2 The widening and reconstruction of existing streets and signalization improvements are funded from gas taxes and road impact fees.

3 The public safety improvements are funded by bond proceeds, transfers from general fund and fire, resue and EMS impact fees.

4 Academic village is funded by Park recreational facilities impact fees, betterment fees, gas taxes and stormwater fees. 5 The City Centrum Business Park and Jaycee Park irrigation improvements are funded through the general fund. 6 The Art Studio is financed by debt, to be repaid by the general fund. 7 The Charter Schools are financed by debt to be repaid by lease payments from the Charter School Authority. 8 CRA Traffic Study is financed by the CRA and road impact fees. 9 Yacht Club projects are funded by user fees, Park recreational facilities impact fees, and general fund.

10 The water production enhancements are funded by water and sewer user fees, water and sewer impact and betterment fees.

11 The utility line extensions are financed by special assessment debt, which will be repaid by the benefited property owners.

51

10. Operating Leases

The City has entered into various lease agreements for copiers, fax machines, police motorcycles, modular buildings and golf carts. These leases are accounted for as operating leases. The leases are generally for a 3 or 5-year term and include renewal options. The following schedule reflects the operating lease obligations for governmental activities and business-type activities for the next five years. There are no current leases extending beyond 2010.

Year Ending September 30,

2006

Governmental Activities

$ 186,993

Business-type Activities

$ 97,215 $ Total

284,208 2007 153,530 89,510 243,040 2008 137,474 42,106 179,580 2009 124,756 29,742 154,498 2010 88,385 6,994 95,379

Total $ 691,138 $ 265,567 $ 956,705

Remaining page intentionally left blank

52

...

11. Long-term Debt

The following is a summary of changes in the City’s bonded and other indebtedness for the year ended September 30, 2005:

General Capital Commercial Obligation Revenue Leases Paper

Bonds Bonds Payable Obligation Total Governmental Activities: Original amounts $ 8,705,000 $ 45,315,000 $ 1,430,769 $ 45,180,000 $ 100,630,769

Debt payable - beginning 7,350,000 22,485,207 811,712 26,000,000 56,646,919 Debt issued - 20,550,000 - 60,780,000 81,330,000 Debt retired (1,415,000) (13,535,103) (378,255) (41,600,000) (56,928,358) Debt payable - ending 5,935,000 29,500,104 433,457 45,180,000 81,048,561 Less amounts recorded as

current liabilities (1,435,000) (2,415,137) (352,250) (45,180,000) (49,382,387) Long-term debt - ending $ 4,500,000 $ 27,084,967 $ 81,207 $ - $ 31,666,174

General Special Capital Obligation Revenue Notes Assessment Leases

Bonds Bonds Payable Debt Payable Total Business-type Activities: Original amounts $ 11,710,000 $ 41,405,000 $ 164,167,165 $ 120,330,000 $ 235,579 $ 337,847,744

Debt payable - beginning 762,087 32,278,969 110,964,788 30,320,008 - 174,325,852 Debt issued - - - 84,005,523 379,055 84,384,578 Debt payments made (775,000) (1,965,000) (3,118,061) (4,101,629) (101,676) (10,061,366) Other additions/reductions 1 - - (70,387,427) (14,139,736) - (84,527,163) Accretion of capital appreciation bonds - 264,469 - - - 264,469 Amortization of discount (premium) (4,416) (115,956) - 65,419 - (54,953) Amortization of deferred gain (loss) on refunding 17,329 176,111 - 526,238 - 719,678 Debt payable - ending - 30,638,593 37,459,300 96,675,823 277,379 165,051,095 Less amounts recorded as

current liabilities - (2,040,000) (3,268,806) (4,292,069) (88,068) (9,688,943) Long-term debt - ending $ - $ 28,598,593 $ 34,190,494 $ 92,383,754 $ 189,311 $ 155,362,152

1 includes refunded debt, discount on new debt, and interest capitalization.

53

Long-term Debt at September 30, 2005 is comprised of the following:

General Long-term Debt

General Obligation Bonds

$8,705,000 General Obligation Bonds, Series 2003A, issued to refund the City’s General Obligation Bonds, Series 1993. Interest accrues at rates ranging from 2.00% to 2.75% collateralized by the full faith and credit of the City. Bond principal is payable annually through July 2009 with interest paid semiannually. $ 5,935,000

Revenue Bonds

$1,765,000 Special Revenue Refunding and Improvement Bonds, Series 2002 issued to refund the Series 1993, Franchise Fee Revenue Bonds. Interest accrues at rates ranging from 2.00% to 3.75%, collateralized by franchise fees and communication taxes. Bond principal is payable annually through December 2012 with interest paid semiannually (combined with $4,475,000 proprietary revenue bond).

$15,500,000 Capital Improvement Revenue Bonds, Series 1999, issued to finance the cost of acquisition, construction and equipping the new city hall complex and emergency operation center and a renovation of existing city hall. Interest accrues at rates ranging from 4.0% to 5.50%, collateralized by half-cent sales tax proceeds. Bond principal is payable annually through October 2009 with interest paid semiannual.

$ 1,460,000

1,860,000

$7,500,000 Taxable Capital Improvement Revenue Bonds, Series 2004 issued to finance the purchase of land for the Academic Village. Interest accrues at 3.89%, collateralized by half cent sales tax proceeds. Bond principal is payable annually through October 2009 with interest paid semiannually.

$20,550,000 Capital Improvement & Refunding Revenue Bonds, Series 2005 issued to refund a portion of the Capital Improvement Revenue Bonds, Series 1999 and to finance the cost of acquisition, construction and equipping of a new fire station, public art studio and the reconfiguration and renovation of a recreation park. Interest accrues at rates ranging from 2.50% to 4.375%, collateralized by half cent sales tax proceeds. Bond principal is payable annually through October 2022 with interest paid semiannually.

$

5,815,104

20,365,000

29,500,104

Capital Leases Payable

$73,827 capital lease payable to GE Capital for two Groundmaster 4500-D mowers with attachments. The lease is collateralized by the related equipment and is included as part of the capital assets of the City. The lease requires monthly debt service payments of $1,728 including principal and interest accruing at 6.25% through June 2007. $ 34,335

54

$112,000 capital lease payable to IBM Credit Corporation for an AS 400 Computer System. The lease is collateralized by the related equipment and included as part of the capital assets of the City. The lease requires monthly debt service payments of $3,511 including principal and interest accruing at 7.95% through January 2006. 10,966

$1,118,891 initial capital lease payable to OSSI Software Solutions for the Safety Network and $212,500 addition to this lease has increased the capital assets of the City The lease is collateralized by the related hardware and software and included as part of the capital assets of the City. The lease requires adjusted annual debt service principal payments of $291,389 through March 2006. There is no interest cost associated with this lease. 291,389

$126,051 capital lease payable to GE Capital for four Groundmaster 4500-D mowers with attachments. The lease is collateralized by the related equipment that is included as part of the capital assets of the City. The lease requires monthly debt service payments of $2,892 including principal and interest accruing at 4.80% through October 2008.

Commercial Paper Obligation $

96,767 433,457

Commercial Paper Notes up to $100,000,000 aggregate Principal Amount of Obligations Outstanding at any time. The Commercial Paper Resolution provides that the obligations will be issued as registered notes and will mature not later than 270 days from their respective dates of issuance. Principal and interest on the obligations is secured by the non-ad valorem funds budgeted and appropriated by City Council. Interest is variable and paid monthly. Principal is paid when debt is called. $ 45,180,000

Proprietary Funds - Long-term Debt

Revenue Bonds

$5,680,000 Water and Sewer Revenue Bonds, Series 1991(Series 1991), consisting of Capital Appreciation Bonds. The Bonds were partially defeased in the amount of $3,818,819, plus accreted interest of $663,129 by the Water and Sewer Refunding Revenue Bonds, Series 1993. The remaining bonds accrete to a value of $5,680,000 due between 2008 and 2012. The debt is collateralized by a lien upon the water and sewer system’s net revenues as defined by the bond resolution. Accreted interest at September 30, 2005 is $2,459,869 and has been added to the balance due. The Series 1991 bonds are issued in parity with the City’s Water and Sewer Refunding Revenue Bonds, Series 2000 and the Water and Sewer Refunding Revenue Bonds, Series 2003. $ 4,079,236

55

$12,595,000 Water and Sewer Refunding Revenue Bonds, Series 2000 (Series 2000), the bonds are secured by a pledge of and lien upon the water and sewer system’s net revenues as defined by the bond resolution. The bonds refunded all of the outstanding Series 1986 Water and Sewer Revenue Bonds and a portion of the principal amount of the City’s outstanding 1992 Wastewater Improvement Assessment Bonds (Green Area). Principal paid annually until 2013, with interest paid semiannually at rates ranging from 4.670% to 5.625%. The Series 2000 bonds are issued in parity with the City’s Water and Sewer Revenue Bonds, Series 1991 and the Water and Sewer Refunding Revenue Bonds, Series 2003. 6,035,000

$4,580,000 Florida Municipal Loan Council Revenue Bonds, Series 2002A. The bonds are secured by a pledge of and lien upon the net revenues of the Stormwater Utility System. The bonds refunded all of the outstanding Stormwater Utility Revenue Bonds, Series 1992. Principal paid annually until May 2012, with interest paid semiannually at rates ranging from 4.0% to 5.50%. 3,405,000

$4,475,000 Special Revenue Refunding and Improvements Bonds, Series 2002 issued to refund the Series 1993, Franchise Fee Revenue Bonds. Interest accrues at rates ranging from 2.00% and 3.75% collateralized by franchise fees and communication taxes. Bond principal is payable annually through December 2012 with interest paid semiannually (combined with $1,765,000 General long-term debt revenue bond). 3,685,000

$14,075,000 Water and Sewer Refunding Revenue Bonds, Series 2003 (Series 2003), the bonds are secured by a pledge of and lien upon the water and sewer system’s net revenues as defined by the Bond Resolution. The bonds refunded all of the outstanding Series 1993 Water and Sewer Refunding Revenue Bonds. Principal paid annually until 2018, with interest paid semiannually at rates ranging from 2.00% to 5.25%. The Series 2003 Bonds are issued in parity with the City’s Water and Sewer Revenue Bonds, Series 1991 and the Water and Sewer Refunding Revenue Bonds, Series 2000. 13,375,000

Less deferred loss on refunding Plus unamortized premium

$

(1,256,804) 1,316,161 30,638,593

Notes Payable

$13,880,310 State Revolving Fund revenue note #110 payable to the State with principal and interest payable semiannually at 2.59% until 2014. The note is collateralized by special assessment revenue and net revenues of the water and sewer system.

$29,910,686 State Revolving Fund revenue note #140 payable to the State with principal and interest payable semiannually at rates ranging from 2.63% to 3.79% until 2016. The note is collateralized by special assessment revenue and net revenues of the water and sewer system.

$ 7,469,676

1,814,315

56

$24,308,325 State Revolving Fund revenue note #090 (plant) payable to the State with principal and interest payable annually at a rate of 3.68% and 3.75% until 2014. The note is collateralized by water and sewer non-ad valorem revenue and impact fees.

$18,896,360 State Revolving Fund revenue note #100 (transmission) payable to the State with principal and interest payable semiannually at rates ranging from 2.89% to 3.57% until 2015. The note is collateralized by water and sewer non-ad valorem revenue and impact fees.

$13,856,923 State Revolving Fund Loan Agreement #7516P payable to the State with principal and interest payable semiannually at 3.19% beginning October 2004. The security is a lien on the net revenues of the water and sewer system and impact fees.

$7,224,652 State Revolving Fund Loan Agreement #7516L 01 payable to the State with principal and interest payable semiannually at 2.93% beginning December 2003. The security is a lien on the net revenues of the water and sewer system and impact fees.

$40,644,100 State Revolving Fund Loan Agreement #7516L 02 payable to the State with principal and interest payable semiannually at 2.93% beginning June 2005. The security is a lien on the net revenues of the water and sewer system and impact fees.

11,722,777

10,480,435

2,390,719

682,495

2,898,883

$ 37,459,300

Capital Leases Payable

$379,055 capital lease payable to GE Capital for two Street Sweepers. The lease is collateralized by the related equipment in the amount of the lease and included as part of the capital assets of the City. The lease requires annual debt service payments of $101,677 including principal and interest through December 2007. $ 277,379

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Special Assessment Debt with Government Commitment

In order to fund construction of the City’s water and wastewater utility expansion in certain areas of the City, the City has issued Special Assessment Improvement Debt. The City is acting as agent in the collection of the special assessments levied and in the payment of the Special Assessment Bonds outstanding. Such bonds are collateralized by special assessments levied against the benefited property owners. The City will assume responsibility in the event of default on the outstanding Special Assessment Bonds. Current year special assessment collections were sufficient to meet fiscal year 2005 debt service requirements.

Information regarding Special Assessment Debt outstanding at September 30, 2005 is as follows:

Final Original

Issue Interest Rates

Maturity Date

Balance Outstan ding

W astewater Assessment Refunding Bonds, S eries 2001 (Green Area) $ 9,325,000 4.25 - 4.5% 2012 $ 800, 000

W astewater Assessment Refunding Bonds, S eries 2002 (Green Area) 8,855,000 5.00% 2012 765, 000

W ater Improvement Assessment Bonds, S eries 2002 (Southwest 1) 6,140,000 1.5 - 4.40% 2015 5,400, 000

W ater Improvement Assessment Note, S eries 2003 (Pine Island) 2,750,000 3.71% 2018 2,482, 756

W ater Improvement Assessment Bonds, S eries 2003 (Southwest 3) 8,295,000 1.1 - 4.75% 2023 7,665, 000

W astewater and Irrigation Water Refunding A ssessment Bonds, Series 2005 53,285,000 2.2 - 4.25% 2022 49,890, 000

U tility Improvement Assessment Bonds, S eries 2005 (Southwest 2) 31,680,000 3.00 - 4.50% 2025 31,680, 000

$ 120,330,000 98,682, 756

L ess deferred loss on refunding L ess unamortized discount T otal Special Assessment Debt

(841, 330) (1,165, 603)

$ 96,675, 823

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Summary of Debt Service Requirements by Maturity

Governmental Activities Year ending Internal Service Fund

September 30, General Obligation Bonds Revenue Bonds Commercial Paper Program Principal Interest Principal Interest Principal Interest

2006 $ 1,435,000 $ 137,303 $ 2,415,137 $ 1,197,238 $ 45,180,000 $ 472,113 2007 1,465,000 108,603 2,507,654 1,105,022 - -2008 1,500,000 77,838 2,607,460 1,007,636 - -2009 1,535,000 42,213 2,389,853 905,950 - -2010 - - 1,120,000 811,307 - -

2011 - 2015 - - 5,850,000 3,406,989 - -2016 - 2020 - - 6,415,000 2,213,431 - -2021 - 2025 - - 6,195,000 706,300 - -

Total $ 5,935,000 $ 365,957 $ 29,500,104 $ 11,353,873 $ 45,180,000 $ 472,113

Business-type Activities Year Ending

September 30, Revenue Bonds Notes Payable Special Assessment Debt Principal Interest Principal Interest Principal Interest

2006 $ 2,040,000 $ 1,173,312 $ 3,268,806 $ 2,543,355 $ 4,292,069 $ 3,563,289 2007 2,090,000 1,115,337 3,425,266 3,182,678 4,372,710 3,473,625 2008 2,134,125 1,060,137 3,538,085 2,994,140 4,478,562 3,363,199 2009 2,185,573 988,777 3,654,690 2,799,343 4,599,630 3,242,978 2010 2,290,297 912,376 3,775,214 2,598,362 4,730,923 3,114,385

2011 - 2015 10,864,372 3,120,557 16,228,624 9,746,357 27,632,497 12,923,333 2016 - 2020 6,515,000 687,820 1,966,855 5,315,688 30,791,365 7,570,915 2021 - 2025 - - 1,601,760 2,117,717 17,785,000 1,826,995 2026 - 2030 - - - 25,896 - -

28,119,367 9,058,316 37,459,300 31,323,536 98,682,756 39,078,719 Deferred loss on refunding (1,256,804) - - - (841,330) -Unamortized bond (discount) / premium 1,316,161 - - - (1,165,603) -Accreted interest 2,459,869 - - - - -

Total $ 30,638,593 $ 9,058,316 $ 37,459,300 $ 31,323,536 $ 96,675,823 $ 39,078,719

59

,. ,.

Capital Leases – The capital leases are recorded at the total present value of future minimum lease payments. The following schedule shows the present value of these payments at September 30, 2005. There are no capital leases extending beyond 2008.

Year Ending September 30, 2006 2007 2008 Total payments Less imputed interest

Total present value of net minimum lease

Governmental Activities

$ 357,937 50,247 34,699

442,883 (9,426)

$ 433,457

Business-type Activities

$ 101,676 101,676 101,676 305,028 (27,649)

$ 277,379

$

$

Total 459,613 151,923 136,375 747,911 (37,075)

710,836

Changes in Long-Term Liabilities

Long-term liability activity for the year ended September 30, 2005, was as follows:

Governmental activities:1

Long-term debt 2

Compensated absences Total Governmental

Beginning Balance

$ 56,646,919 5,064,142

$ 61,711,061

Additions

$ 81,330,000 1,682,103

$ 83,012,103

Ending Reductions Balance

$ (56,928,358) $ 81,048,561 (866,623) 5,879,622

$ (57,794,981) $ 86,928,183

Due Within One Year

$ 49,382,387 1,028,778

$ 50,411,165

Business-type activities: Water and Sewer Long-term debt Compensated absences

Total Water and Sewer

$ 166,766,565 945,614

167,712,179

$ 84,762,613 176,833

84,939,446

$ (93,547,909) (131,838)

(93,679,747)

$ 157,981,269 990,609

158,971,878

$ 8,750,875 148,680

8,899,555

Building Division Compensated absences 328,627 154,793 (29,760) 453,660 35,764

Other Enterprise Long-term debt Compensated absences

Total Other Enterprise

7,559,287 423,618

7,982,905

379,055 55,024

434,079

(868,516) (57,993)

(926,509)

7,069,826 420,649

7,490,475

938,068 54,430

992,498

Total Business-type Long-term debt Compensated absences

Total Business-type

174,325,852 1,697,859

$ 176,023,711

85,141,668 386,650

$ 85,528,318 $

(94,416,425) (219,591)

(94,636,016)

165,051,095 1,864,918

$ 166,916,013 $

9,688,943 238,874

9,927,817

1

2 Includes $45,180,000 internal loan fund debt. Government-wide statements include deferred loss, premium, and discount on debt of $763,515.

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Bond Resolution – Resolutions for various debt obligations established certain funds and accounts and determined the order in which certain revenue is to be deposited into the funds and accounts. The City has also covenanted to budget and appropriate sufficient special revenue sources to pay the various debt obligations when due. All required balances at year end were maintained.

Any holder of bonds has the right to compel the performance of all duties required by the bond resolution, including the appointment of a receiver.

Conduit Debt Obligation – To provide for the financing of the acquisition, construction, improvement and installation of a 24-bed intermediate care facility for the developmentally disabled in the City, the Cape Coral Development Center, Ltd. (Center) has issued two series of Industrial Development Refunding Revenue Bonds, Series 1994A. These bonds do not constitute a debt or pledge of the full faith and credit of the City and, accordingly, they have not been reported in the accompanying financial statements. At September 30, 2005, Industrial Development Refunding Revenue Bonds outstanding aggregated $180,000.

To provide financing of the acquisition, construction and equipping of a six-story building consisting of 192 residential units, 39 personal care units, and a 48-bed nursing home within the City, the City of Cape Coral Health Facilities Authority has issued a series of First Mortgage Revenue Refunding Bonds, Series 1995A. These bonds do not constitute a debt or pledge of the full faith and credit of the City, and accordingly, they have not been reported in the accompanying financial statements. At September 30, 2005, Health Facility Revenue Bonds outstanding aggregated $14,065,000.

To provide for the refinancing of a loan to finance the construction of a 25-bed expansion of the existing Health Center and a new entrance to the assisted living units, the City of Cape Coral Health Facilities Authority has issued a series of First Mortgage Revenue Bonds, Series 1997. These bonds do not constitute a debt or pledge of the full faith and credit of the City, and accordingly, they have not been reported in the accompanying financial statements. At September 30, 2005, First Mortgage Revenue Bonds outstanding aggregated $6,620,000.

Advance and Current Refundings

The City issued Wastewater and Irrigation Water Refunding Assessment Bonds, Series 2005 in the amount of $53,285,000 at an interest rate ranging from 2.20% to 4.25% and maturing in 2022. Proceeds from the bonds, together with other available funds, were used to refund $80,002,862 of prior indebtedness. This refunding was undertaken to remove restrictive debt covenants that limited debt capacity for future debt issuance. This refunding reduced total debt service payments over the next 20 years by $21,391,584.

The City issued Capital Improvement and Refunding Revenue Bonds, Series 2005 in the amount of $20,550,000 at an interest rate ranging from 2.5% to 4.375% and maturing in 2024. Proceeds from the bonds, together with other available funds, were used to refund $11,415,000 of the outstanding principal amount of the City’s Capital Improvement Revenue Bonds, Series 1999 and to finance the cost of acquisition, construction and equipping of a new fire station, public art studio and the reconfiguration and renovation of a recreation park. The City purchased U.S. Treasury Obligations that were placed in an irrevocable trust with an escrow agent to provide all future debt service requirements of the defeased debt. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the financial statements of the City. The reacquisition price exceeded the net carrying amount of the old debt by $606,556. This amount is being netted against the new debt and amortized over the remaining life of the refunded debt, which is equal to the life of the new debt issued. This refunding was undertaken to reduce total debt service payments over the next 20 years by $349,848 and resulted in an economic gain of $256,265.

The City issued Utility Improvement Assessment Bonds, Series 2005 in the amount of $31,680,000 at an interest rate ranging from 3.00% to 4.25% and maturing in 2025. Proceeds from the bonds, together with other available funds, were used to refund $30,653,593 of prior indebtedness. This refunding was undertaken to remove restrictive debt covenants that limited debt capacity for future debt issuance. The refunding increased total debt service payments over the next 20 years by $157,548.

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12. Defeased Debt Issues

Defeased debt is no longer reported as a liability on the face of the financial statements; only the new debt, if any, is reported as a liability.

Governmental Fund Debt: Capital Improvement Revenue Bonds, Series 1999

Enterprise Fund Debt: Junior Lien Water and Sewer Revenue Refunding Bonds, Series 1978 General Obligation Water and Sewer Refunding Bonds, Series 1978A and 1978B Water and Sewer Revenue Refunding and Improvement Bonds, Series 1980

Total defeased debt outstanding

$

$

11,415,000

2,570,000 6,530,000 3,640,000

24,155,000

13. Deficit Fund Balances or Net Assets of Individual Funds

The following individual funds had deficit fund balances as of September 30, 2005:

Governmental activities: Park Recreational Facilities Impact Fee1 $ (11,467,346) Hurricane Charley Disaster Improvement2 (4,343,133)

Seawall Fund3 (268,328)

1The deficit fund balance is a result of an advance from the internal loan fund for the purpose of acquiring land which will be used for the development of parks. The deficit is anticipated to be recovered through Park Recreational Facilities Impact Fees.

2The deficit fund balance is anticipated to be recovered through Federal Emergency Management Agency (FEMA) and State of Florida reimbursements related to Hurricane Charley.

3The deficit fund balance is anticipated to be recovered through future assessment collections for the seawall projects.

Business-type activities: Golf Course $ (359,626)

The Golf Course has received support from the General Fund in order to achieve a positive cash position at the end of the fiscal year. In fiscal year 2006, the golf course debt will be assumed by the General Fund and the subsidy to the Golf Course will be eliminated. This action in addition to population growth within the City, and an increase in the number of rounds of golf is anticipated to recover the deficit net asset balance.

14. Construction Project Interest Cost

Financial Accounting Standard Board Statement No. 62, Capitalization of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings and Certain Gifts and Grants requires that the difference between interest expense on debt and interest earnings on reinvested debt proceeds be capitalized.

Water and Sewer

Actual interest cost $ 860,542 Less interest income (1,836)

Net interest capitalized $ 858,706

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15. Other Revenue

Other revenue in Governmental Fund Types at September 30, 2005 is as follows:

General Fund

Park Recreational

Facilities Impact Fees

Transportation Capital Projects

Hurricane Charley Disaster

Improvement

Other Governmental

Funds Total Recaptured state housing funds $ - $ - $ - $ - $ 721,144 $ 721,144 School impact administrative fee 362,628 - - - - 362,628 Tower leases 158,768 - - - - 158,768 Fines - - - - 68,891 68,891 Assessment refund - 52,872 - - - 52,872 Electric co-op distribution 41,293 - - - 882 42,175 Insurance damage claims 37,959 - - 785,993 350 824,302 Donations - - - - 21,746 21,746 Property leases - - 18,107 - - 18,107

Road improvement/median maintenance contributions 3,455 - - - 59,348 62,803

Sales of surplus material 18 - - - 9,132 9,150 Other 1,568 402 316 - 1,665 3,951

$ 605,689 $ 53,274 $ 18,423 $ 785,993 $ 883,158 $ 2,346,537

16. Segment Information

The City issued revenue bonds to finance its water and sewer division. The water and sewer division and the special assessment funds are accounted for in a single fund in the financial statements. However, investors in the revenue bonds rely solely on the revenue generated by the water and sewer activity for repayment. Summary financial information for the water and sewer division is presented below.

CONDENSED STATEMENT OF NET ASSETS

Assets: Current Assets $ 11,554,434 Loans to other funds 560,643 Restricted assets 34,427,828 Unamortized bond issue costs 360,190 Capital assets 122,949,093

Total assets 169,852,188

Liabilities Current liabilities 1,435,635 Noncurrent liabilities 46,891,286 Restricted liabilities 9,937,083

Total liabilities 58,264,004

Net assets: Invested in capital assets, net of related debt 69,958,652 Restricted for:

Debt service 640,904 Renewal and replacement 1,001,522 Capital improvements 22,848,319

Unrestricted 17,138,787 Total net assets $ 111,588,184

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CONDENSED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS

Charges for services Depreciation expense Other operating expenses

Operating income

$ 33,438,738 (8,236,374)

(25,308,658) (106,294)

Property taxes Investment income Debt service escrow refund Interest expense and bond discount amortization Gain on sale of capital assets

Income before contributions and transfers

525,274 350,791

1,335,597 (2,108,373)

85,767 82,762

Transfers Change in net assets

Total net assets - beginning

11,475,416 11,558,178

100,030,006

Total net assets - ending $ 111,588,184

CONDENSED STATEMENT OF CASH FLOWS New cash provided (used) by: Operating activities $ 12,377,611 Nonoperating financing activities 8,560,066 Capital and related financing activities (9,501,948) Investing activities (542,202) Net decrease 10,893,527 Beginning cash and cash equivalents 15,768,418

Ending cash and cash equivalents $ 26,661,945

NOTE V. OTHER INFORMATION

1. Risk Management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Effective October 1, 2004, (fiscal year 2005) the City established two internal service funds (Risk Management Funds): the workers compensation insurance fund and the property and casualty insurance fund to account for and finance its uninsured risks of loss. Under this program, the funds provide coverage for up to a maximum of $350,000 for each worker’s compensation claim, $100,000 for each general liability claim, and $100,000 for each property damage claim. The City purchases commercial insurance for claims in excess of coverage provided by the funds and for all other risks of loss. Settled claims have not exceeded this commercial coverage in this fiscal year, nor has it had any settlements in excess of insurance coverage in any of the past three years when the City was a member of Public Risk Management of Florida (PRMF), a local government risk management pool.

The workers compensation internal service fund allocates the cost of providing claims servicing and claims payment by charging a premium to each applicable fund based on the State of Florida mandated per $100 rate of salary by employee classification. The property and casualty insurance fund charges a premium to the applicable funds based on the value of capital assets in each fund.

The claims liability of $1,092,749 reported in the workers compensation insurance fund and $106,406 reported in the property and casualty insurance fund at September 30, 2005 is based on requirements of

64

Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be estimated. This includes claims that have been incurred but not reported (IBNR). Changes in the funds’ claims liability amount in fiscal year 2005 were:

Beginning- Current-Year of-Fiscal- Claims and Balance at

Year Changes Claim Fiscal Year-Liability in Estimates Payments End

Workers Compensation $ - $ 1,365,544 $ (272,795) $ 1,092,749 Property and Liability - 148,745 (42,339) 106,406

2. Pension Plans

The City has three defined benefit single-employer pension plans:

• Municipal General Employees’ Pension Plan • Municipal Police Officers’ Pension Plan • Municipal Firefighters’ Pension Plan

The City accounts for all three plans as pension trust funds; therefore, they are accounted for in substantially the same manner as proprietary funds with a “capital maintenance” measurement focus and employment of the accrual basis of accounting. Plan member contributions, employer contributions, and contributions from other entities are recognized in the period in which the contributions are due. Benefits and refunds are recognized when due and payable in accordance with terms of the plans. Plan assets are valued at fair value for financial statement purposes, as reported within the annual trustee statements.

The defined benefit plans do not issue stand-alone financial reports and are not included in any other retirement system’s or entity’s financial report. Financial statements for the individual pension plans are presented below since separate GAAP financial reports have not been issued for the individual plans.

City of Cape Coral, Florida

COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS September 30, 2005

Pension Trust Funds Total Municipal Municipal Pension General Police Municipal Trust

Employees’ Officers’ Firefighters’ Funds

ASSETS Cash and cash equivalents $ 8,273,129 $ 4,345,604 $ 5,366,135 $ 17,984,868 Accrued income 222,398 124,393 154,076 500,867 Employee contributions receivable - 762,108 719,943 1,482,051

Investments, at fair value: U.S. government & agencies 7,067,056 3,821,605 4,757,215 15,645,876 Corporate bonds 16,507,008 9,193,047 11,560,241 37,260,296 Corporate stocks 39,079,465 22,618,275 25,371,505 87,069,245 Mutual funds 10,596,064 8,657,579 8,880,210 28,133,853

Total investments 73,249,593 44,290,506 50,569,171 168,109,270

Total assets 81,745,120 49,522,611 56,809,325 188,077,056

LIABILITIES Refunds payable and other liabilities - - - -

NET ASSETS Held in trust for pension benefits $ 81,745,120 $ 49,522,611 $ 56,809,325 $ 188,077,056

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City of Cape Coral, Florida

COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS

For the Year Ended September 30, 2005

Pension Trust Funds Total Municipal Municipal Pension General Police Municipal Trust

Employees’ Officers’ Firefighters’ Funds ADDITIONS Contributions:

Employer $ 5,545,276 $ 2,265,934 $ 3,016,156 $ 10,827,366 Employee 2,714,501 1,029,367 718,885 4,462,753 State - 762,108 719,943 1,482,051

Total contributions 8,259,777 4,057,409 4,454,984 16,772,170 Interest income:

Net increase in fair value of investments 6,100,605 3,943,956 4,107,346 14,151,907 Interest 2,026,203 1,181,355 1,316,734 4,524,292

Total interest income 8,126,808 5,125,311 5,424,080 18,676,199 Less investment expenses (290,828) (162,575) (210,812) (664,215)

Net interest income 7,835,980 4,962,736 5,213,268 18,011,984 Total additions 16,095,757 9,020,145 9,668,252 34,784,154

DEDUCTIONS Benefits and refunds 3,745,530 1,291,964 1,055,283 6,092,777 Administrative expenses 33,429 29,722 40,134 103,285

Total deductions 3,778,959 1,321,686 1,095,417 6,196,062

Change in net assets 12,316,798 7,698,459 8,572,835 28,588,092 Net assets - beginning 69,428,322 41,824,152 48,236,490 159,488,964

Net assets - ending $ 81,745,120 $49,522,611 $ 56,809,325 $ 188,077,056

(A) Municipal General Employees’ Pension Plan

Current membership is comprised of the following:

Retirees and beneficiaries of deceased retirees currently receiving benefits 276

Employees no longer with the City entitled to benefits but not yet receiving them 28

Employees participating in Deferred Retirement Option Plan (DROP) 6

Active employees 838

Total 1,148

Plan Description

All full-time non-uniformed employees at least 18 years old are required to participate in the City’s Municipal General Employees’ Pension Plan (The Plan) if they are not eligible for the Defined Contribution Pension Plan. The Plan provides retirement, disability, and death benefits to plan members and beneficiaries. This plan and any amendments were adopted through a City Ordinance by the City Council of the City of Cape Coral. A Board of Trustees administers the Plan. All costs of administering the plan are paid from plan assets.

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Funding Policy

Employees contribute 8.9% of their compensation. The City contributes the remaining amounts at actuarially determined rates that are designated to accumulate sufficient assets to pay benefits when due. The current rate is 18.4% of annual covered payroll.

Annual Pension Cost and Net Pension Asset

The City has no net pension obligation (calculated in accordance with GASB No. 27, Accounting for Pensions by State and Local Governmental Employers) as all actuarially determined amounts are contributed each year. The annual required contribution for the current year was determined as part of the October 1, 2003 actuarial valuation using the frozen entry age actuarial cost method. The actuarial assumptions included (a) 8% investment rate of return, and (b) 7.0% projected salary increase which includes an inflation component of 3.0%. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of payroll on a closed basis. The remaining amortization period as of October 1, 2005 is 30 years. The City’s annual pension cost for the fiscal year ended September 30, 2005 was $4,550,905.

Fiscal year ending

Annual pension

cost (APC)

Percentage of APC

contributed

Net pension

asset

September 30, 2005 $ 4,550,905 122% 1,921,736 September 30, 2004 3,364,963 128% 927,365 September 30, 2003 1,783,828 100% —

Development of Net Pension Asset (NPA)

This municipal Defined Benefit Plan has been subject to the minimum funding standards since the adoption of the “Florida Protection of Public Employee Retirement Benefits Act” (Part VII of Chapter 112, Florida Statutes) in 1980.

The development of the Net Pension Asset to date is as follows:

9/30/05 Actuarially determined contribution (A) $ 4,550,905 Interest on NPA -Adjustment to (A) -Annual pension cost 4,550,905

Contributions made 5,545,276 Annual pension cost (4,550,905) Increase in NPA 994,371 NPA beginning of year 927,365 NPA end of year $ 1,921,736

Concentration of Investments

This plan does not have a concentration of investments that are not direct governmental obligations or agency securities that exceed 5% or more of plan net assets.

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(B) Municipal Police Officers’ Pension Plan

Current membership is comprised of the following:

Retirees and beneficiaries of deceased retirees currently receiving benefits 38

Employees no longer with the City entitled to benefits but not yet receiving them 3

Active employees 183

Total 224

Plan Description

All full-time police officers at least 18 years old are required to participate in the City’s Municipal Police Officers’ Pension Plan (Police Officers’ Plan). The Police Officers’ Plan provides retirement, disability, and death benefits to plan members and beneficiaries. This plan and any amendments were adopted through a City Ordinance by the City Council of the City of Cape Coral. A Board of Trustees administers the Police Officers’ Plan. All costs of administering the Police Officers’ Plan are paid from plan assets.

Funding Policy

Employees contribute 7% of their compensation. The State of Florida makes contributions from taxes on casualty insurance premiums. The State of Florida’s Contribution to the Police Officers’ Pension Plan for fiscal year 2005 was $762,108. The City recognized these on-behalf payments from the State as revenues and expenditures in the governmental funds financial statements. The City contributes the remaining amounts at actuarially determined rates that are designated to accumulate sufficient assets to pay benefits when due. The current rate is 21.7% of annual covered payroll.

Annual Pension Cost and Net Pension Asset

The City has no net pension obligation (calculated in accordance with GASB No. 27, Accounting for Pensions by State and Local Governmental Employers) as all actuarially determined amounts are contributed each year. The annual required contribution for the current year was determined as part of the October 1, 2003 actuarial valuation using the frozen entry age actuarial cost method. The actuarial assumptions included (a) 8% investment rate of return, and (b) 7.5% projected salary increase which includes an inflation component of 3.0%. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of payroll on a closed basis. The remaining amortization period as of October 1, 2005 is 30 years. The City’s annual pension cost for the fiscal year ended September 30, 2005 was $1,851,778.

Fiscal year ending

Annual pension

cost (APC)

Percentage of APC

contributed Net pension

asset

September 30, 2005 $1,851,778 122% $1,258,457 September 30, 2004 1,224,168 138% 844,301 September 30, 2003 773,188 109% 386,687

Development of Net Pension Asset (NPA)

This municipal Defined Benefit Plan has been subject to the minimum funding standards since the adoption of the “Florida Protection of Public Employee Retirement Benefits Act” (Part VII of Chapter 112, Florida Statutes) in 1980.

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The development of the Net Pension Asset to date is as follows:

9/30/05 Actuarially determined contribution (A) $ 1,847,579 Interest on NPA (30,595) Adjustment to (A) 34,794 Annual pension cost 1,851,778

Contributions made 2,265,934 Annual pension cost (1,851,778) Increase in NPA 414,156 NPA beginning of year 844,301 NPA end of year $ 1,258,457

Concentration of Investments

The Police Officers’ Plan does not have a concentration of investments that are not direct governmental obligations or agency securities that exceed 5% or more of plan net assets.

(C) Municipal Firefighters’ Pension Plan

Current membership is comprised of the following:

Retirees and beneficiaries of deceased retirees currently receiving benefits 31

Employees no longer with the City entitled to benefits but not yet receiving them 3

Employees participating in Deferred Retirement Option Plan (DROP) 1

Active employees 160

Total 195 Plan Description

All full-time firefighters at least 18 years old are required to participate in the City’s Municipal Firefighters’ Pension Plan (Firefighters’ Plan). The Firefighters’ Plan provides retirement, disability, and death benefits to plan members and beneficiaries. This plan and any amendments were adopted through a City Ordinance by the City Council of the City of Cape Coral. A Board of Trustees administers the Firefighters’ Plan. All costs of administering the Firefighters’ Plan are paid from plan assets.

Funding Policy

Employees contribute 7% of their compensation. The State of Florida makes contributions from taxes on casualty insurance premiums. The State of Florida’s Contribution to the Firefighters’ Pension Plan for fiscal year 2005 was $719,943. The City recognized these on-behalf payments from the State as revenues and expenditures in the governmental funds financial statements. The City contributes the remaining amounts at actuarially determined rates that are designated to accumulate sufficient assets to pay benefits when due. The current rate is 28.5% of annual covered payroll.

Annual Pension Cost and Net Pension Asset

The City has no net pension obligation (calculated in accordance with GASB No. 27, Accounting for Pensions by State and Local Governmental Employers) as all actuarially determined amounts are contributed each year. The annual required contribution for the current year was determined as part of the October 1, 2003 actuarial valuation using the frozen entry age actuarial cost method. The actuarial assumptions included (a) 8% investment rate of return, and (b) 7.5% projected salary

69

increase which includes an inflation component of 3%. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of payroll on a closed basis. The remaining amortization period as of October 1, 2004 was 27 years. The City’s annual pension cost for the fiscal year ended September 30, 2005 was $2,354,925.

Fiscal year ending

Annual pension

cost (APC)

Percentage of APC

contributed Net pension

asset

September 30, 2005 $ 2,354,925 128% $ 1,367,416 September 30, 2004 1,754,949 124% 706,185 September 30, 2003 1,063,609 101% 298,488

Development of Net Pension Asset (NPA)

This municipal Defined Benefit Plan has been subject to the minimum funding standards since the adoption of the “Florida Protection of Public Employee Retirement Benefits Act” (Part VII of Chapter 112, Florida Statutes) in 1980.

The development of the Net Pension Asset to date is as follows: 9/30/05

Actuarially determined contribution (A) $ 2,351,160 Interest on NPA (27,427) Adjustment to (A) 31,192 Annual pension cost 2,354,925

Contributions made 3,016,156 Annual pension cost (2,354,925) Increase in NPA 661,231 NPA beginning of year 706,185 NPA end of year $ 1,367,416

Concentration of Investments

The Firefighters’ Plan does not have a concentration of investments that are not direct governmental obligations or agency securities that exceed 5% or more of plan net assets.

The actuarial assumptions presented below were determined as part of the actuarial valuations at the dates indicated.

General Police employees officers Firefighters

Valuation date 10/1/03 10/1/03 10/1/03 Actuarial cost method Frozen entry age Frozen entry age Frozen entry age Amortization method Level percentage Level percentage Level percentage

Closed Closed Closed Remaining amortization period 30 years as of 30 years as of 27 years as of

October 1, 2005 October 1, 2005 October 1, 2004 Asset valuation method 4-year smoothing 4-year smoothing 4-year smoothing Actuarial assumptions:

Investment rate of return 8.00% 8.00% 8.00% Projected salary increases* 7.00% 7.50% 7.50% * Includes inflation at 3.00% 3.00% 3.00% Post retirement COLA 3.00% 3.00% 3.00%

70

3. Other Postemployment Benefits

The City provides group health and life insurance benefits to its retired employees. All full-time regular employees are eligible for these benefits if actively employed by the City for 10 years, or as outlined in the personnel ordinance and union contracts, and meet the requirements as set forth by the City. As of September 30, 2005 there were 299 retirees receiving medical and life insurance benefits. The cost of these benefits is paid by the City; retirees are responsible for dependent group health coverage, if selected by the retiree. The City finances the benefits on a pay-as-you-go basis and recognizes expenditures at the time premiums are due. The premiums for these benefits, not including the retirees’ costs for dependent health coverage, totaled $1,606,191 during fiscal year 2005.

4. Contingencies

The City is currently receiving, and has received in the past, grants which are subject to special compliance audits by the grantor agency and which may result in disallowed expense amounts. These amounts, if any, constitute a contingent liability of the City. Accordingly, such liabilities are not reflected within the financial statements. The City does not believe any contingent liabilities are material.

The City currently prepares rebate calculations on all debt subject to arbitrage per the United States Department of the Treasury Regulations, Section 1.148, and the Internal Revenue Service Code of 1986. Rebates, if any, are paid to the Internal Revenue Service every fifth year after the year of issuance. Within the five-year period, any positive arbitrage (liability) can be offset by any negative arbitrage (non-liability). The city recorded an arbitrage rebate liability of $127,341 in the water and sewer fund at September 30, 2005. The City does not believe there are any other arbitrage contingent liabilities that are material.

The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City’s counsel the resolution of these matters will not have a material adverse effect on the financial condition of the City.

5. Subsequent Events

In October 2005, the City entered into a three year $2,034,007 Master Equipment Lease/Purchase Agreement to finance the purchase of equipment.

In January 2006 and February 2006, the City sold $6,860,000 and $39,452,321, respectively of commercial paper obligations for the purpose of funding additional land purchases and capital projects.

71

FLORIDA

72

REQUIRED SUPPLEMENTARY INFORMATION

73

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE GENERAL FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Taxes:

Property $ 50,345,174 $ 50,345,174 $ 50,816,153 $ 470,979 Sales 2,459,205 2,459,205 2,804,348 345,143 Half-cent sales 9,973,025 9,973,025 11,904,798 1,931,773 Fuel 1,103,945 1,103,945 1,262,724 158,779 Alcohol and beverage 36,505 36,505 43,557 7,052 Mobile home 400 400 913 513 Franchise 3,845,602 3,845,602 4,393,599 547,997 Communication 3,849,458 3,849,458 4,396,046 546,588

Licenses and permits 1,205,180 1,205,180 1,213,991 8,811 Intergovernmental 2,675,645 2,982,000 4,143,362 1,161,362 Charges for services 12,831,843 9,333,003 9,205,603 (127,400) Fines and forfeitures 1,003,000 1,003,000 1,118,273 115,273 Interest income 548,000 548,000 831,399 283,399 Contributions and donations 20,664 - 27,345 27,345 Other revenue 456,500 456,500 713,819 257,319

Total revenues 90,354,146 87,140,997 92,875,930 5,734,933

EXPENDITURES Current:

General Government 17,583,006 17,943,013 17,491,667 451,346 Public Safety:

Police 21,809,105 21,970,592 22,332,270 (361,678) Fire 16,692,780 16,943,119 17,690,556 (747,437)

Public Works 4,569,857 4,720,656 4,809,024 (88,368) Community Development 1,786,084 1,775,006 1,463,757 311,249 Parks and Recreation 9,318,446 3,937,035 3,567,103 369,932 Transportation 8,614,184 9,465,995 6,549,569 2,916,426

Capital outlay 9,203,788 15,221,145 11,886,532 3,334,613 Debt service:

Principal 1,322,991 1,199,286 336,658 862,628 Interest and fiscal charges 186,178 336,545 10,866 325,679

Total expenditures 91,086,419 93,512,392 86,138,002 7,374,390

Excess revenues over (under) expenditures (732,273) (6,371,395) 6,737,928 13,109,323

OTHER FINANCING SOURCES (USES) Transfers in 1,319,447 1,230,061 1,300,160 70,099 Transfers out (5,087,174) (7,856,104) (12,252,154) (4,396,050) Issuance of debt - 1,561,791 - (1,561,791)

Total other financing sources (uses) (3,767,727) (5,064,252) (10,951,994) (5,887,742) Net change in fund balance (4,500,000) (11,435,647) (4,214,066) 7,221,581

Budgetary fund balance - beginning 17,183,708 17,183,708 17,183,708 -Budgetary fund balance - ending $ 12,683,708 $ 5,748,061 $ 12,969,642 $ 7,221,581

74

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE (continued) GENERAL FUND

For the Year Ended September 30, 2005

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses) Actual revenue amounts (budgetary basis) $ 92,875,930

The proceeds from the sale of capital assets are budgetary revenues but are regarded as other financing sources, rather than revenue, for financial reporting purposes. (108,130)

Total revenue as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 92,767,800

Actual expenditure amounts (budgetary basis) $ 86,138,002 Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. Prior year encumbrances $ 4,164,445 Current year encumbrances (3,436,528) 727,917

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 86,865,919

Actual other financing sources (uses) (budgetary basis) $ (10,951,994)

The proceeds from the sale of capital assets are budgetary revenues but are regarded as other financing sources, rather than revenue, for financial reporting purposes. 108,130

Total other financing sources (uses) as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ (10,843,864)

Budgetary fund balance - ending $ 12,969,642 Current year encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. 3,436,528

Fund balance as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 16,406,170

The accompanying notes to the required supplementary information are an integral part of this schedule.

75

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE PARK RECREATIONAL FACILITIES IMPACT FEES SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

REVENUES

Budgeted Amounts Original Final

Actual Amounts (Budgetary Basis)

Variance with Final Budget

Positive (Negative)

Impact fees Interest income Other revenue

Total revenues

$ 5,521,480 $ 9,869,640 $ 9,869,668 12,000 12,000 31,152

200,000 200,000 53,274 5,733,480 10,081,640 9,954,094

$ 28 19,152

(146,726) (127,546)

EXPENDITURES Parks and Recreation Capital outlay Debt service:

PrincipalInterest and fiscal charges

Total expenditures Excess revenues over (under) expenditures

-3,181,920

820,166 -

4,002,086 1,731,394

179,637 13,141,555

416,250 3,000,000

16,737,442 (6,655,802)

197,199 18,341,566

-5,550

18,544,315 (8,590,221)

(17,562) (5,200,011)

416,250 2,994,450

(1,806,873) (1,934,419)

OTHER FINANCING SOURCES (USES) Transfers in Transfers out

Total other financing sources (uses) Net change in fund balances

Budgetary fund balance - beginning Budgetary fund balance (deficit) - ending

150,000 11,150,000 (1,381,394) (4,646,212) (1,231,394) 6,503,788

500,000 (152,014) 1,049,995 1,049,995

$ 1,549,995 $ 897,981 $

-(4,669,510) (4,669,510)

(13,259,731) 1,049,995

(12,209,736) $

(11,150,000) (23,298)

(11,173,298) (13,107,717)

-(13,107,717)

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

Actual expenditure amounts (budgetary basis) Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. Prior year encumbrances $ 179,637 Current year encumbrances (742,390)

$ 18,544,315

(562,753)

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 17,981,562

Budgetary fund balance - ending Current year encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes.

$ (12,209,736)

742,390

Fund balance as reported on the statement changes in fund balances - governmental funds.

of revenues, expenditures and $ (11,467,346)

The accompanying notes to the required supplementary information are an integral part of this schedule.

76

City of Cape Coral

NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION – BUDGET COMPARISONS September 30, 2005

Budgetary Basis

The City adopts an annual appropriated budget for the General Fund, the following Special Revenue Funds: park recreational facilities impact fee, police confiscation-federal, police confiscation-state, gas tax, fire, rescue & EMS impact fee, road impact fee, community redevelopment agency (CRA), community development block grant, local housing assistance, downtown expansion area, city centrum business park, alarm fee, parks and recreation programs, greenscape donations, and all hazards; and Debt Service. Capital projects are budgeted over the length of the project except for the Hurricane Charley Disaster Improvement Fund. The budget to actual comparison for the general fund and the park recreational facilities impact fees fund are presented on pages 68-70 of the required supplementary information and other governmental funds are presented on pages 86-98 of the combining statements.

Budgetary Information

The following procedures are used in establishing the legally adopted budgetary data reflected in the financial statements.

1. During July, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October. The operating budget includes proposed expenditures and the means of financing them.

2. Public hearings are conducted to obtain taxpayer comments.

3. On or before September 30, the budget is legally enacted by City Council through passage of an ordinance as required by City Charter, and an ordinance for setting the millage is passed as required by the State of Florida.

4. The City Manager can authorize changes within a fund. However, any other revisions require approval of the City Council. Various supplemental appropriations were approved by the Council during the fiscal year ended September 30, 2005.

5. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America except for the reporting of encumbrances, capital leases and sale of capital assets. Annual appropriated budgets are adopted for the general, certain special revenue, and the debt service fund. Project-length financial plans and budgets are adopted for the capital projects funds except for the Hurricane Charley Disaster Improvement Fund.

6. Expenditures may not legally exceed appropriations at the fund level.

77

Municipal General Employees’ Pension Plan

Schedule of Funding Progress

Actuarial UAAL as a Actuarial * Actuarial accrued Unfunded AAL Funded % of covered valuation value of liability (AAL) (UAAL) ratio Covered payroll

date assets (a) -entry age (b) (b–a) (a/b) payroll (c) ((b-a)/c)

10/1/2004** $ 72,456,749 $ 96,489,615 $ 24,032,866 75.09% $ 27,255,635 88.18%

10/1/03 67,457,185 74,973,737 7,516,552 89.97% 23,086,449 32.56%

10/1/02 64,403,318 70,386,501 5,983,183 91.50% 20,129,881 29.72%

10/1/01 61,020,065 67,057,431 6,037,366 91.00% 20,003,002 30.18%

10/1/00 55,753,997 61,830,291 6,076,294 90.17% 18,353,122 33.11%

10/1/99 48,732,134 54,827,900 6,095,766 88.88% 16,561,449 36.81%

* Pension information using the actuarial valuation date of 10/1/2005 was unavailable as of the printing of this document.

** The actuarial cost method was changed from the Frozen Age Actuarial Cost Method to the Entry Age Normal Actuarial Cost Method. Also, the payroll growth assumption has been increased from 3.0% to 5.0%.

Schedule of Contributions from Employer and Other Contributing Entities

Annual Year ended required City Percentage

September 30, contribution contribution contributed

2005 $ 4,550,905 1 $ 5,545,276 122%

2004 3,364,963 1 4,292,328 128%

2003 1,783,828 1,783,828 100%

2002 1,667,129 1,667,129 100%

2001 1,396,003 1,396,003 100%

2000 1,393,259 1,393,259 100%

1 Actuarially determined annual required contribution. The City contributed more than required.

See accompanying independent auditors' report.

78

Municipal Police Officers' Pension Plan

Schedule of Funding Progress

Actuarial UAAL as a Actuarial * Actuarial accrued Unfunded AAL Funded % of covered valuation value of liability (AAL) (UAAL) ratio Covered payroll

date assets (a) -entry age (b) (b–a) (a/b) payroll (c) ((b-a)/c)

10/1/2004** $ 43,584,299 $ 51,221,058 $ 7,636,759 85.09% $ 9,106,994 83.86%

10/1/03 40,711,716 42,310,154 1,598,438 96.22% 7,922,388 20.18%

10/1/02 38,577,451 40,358,240 1,780,789 95.59% 6,761,190 26.34%

10/1/01 36,776,883 38,655,389 1,878,506 95.14% 6,817,312 27.55%

10/1/00 33,669,857 35,661,001 1,991,144 94.42% 6,223,372 31.99%

10/1/99 29,048,797 31,051,243 2,002,446 93.55% 5,860,653 34.17%

* Pension information using the actuarial valuation date of 10/1/2005 was unavailable as of the printing of this document.

** The actuarial cost method was changed from the Frozen Age Actuarial Cost Method to the Entry Age Normal Actuarial Cost Method. Also, the payroll growth assumption has been increased from 3.0% to 5.0%.

Schedule of Contributions from Employer and Other Contributing Entities

Annual Year ended required City State Percentage

September 30, contribution contribution contribution contributed

2005 $ 2,390,211 1 $ 2,265,934 $ 762,108 127%

2004 1,762,554 1 1,681,782 675,276 134% 2 2003 1,312,328 1 841,896 542,632 106%

2002 1,220,770 1 837,919 470,433 107% 2 2001 1,013,061 1 727,714 383,857 110% 2 2000 1,017,659 1 803,742 348,252 113%

1 Actuarially determined annual required contribution. The combined contribution of the State and City is more than required.

2 Frozen per Chapter 185, Florida Statutes, as amended.

See accompanying independent auditors' report.

79

Municipal Firefighters' Pension Plan

Schedule of Funding Progress

Actuarial UAAL as a Actuarial * Actuarial accrued Unfunded AAL Funded % of covered valuation value of liability (AAL) (UAAL) ratio Covered payroll

date assets (a) -entry age (b) (b–a) (a/b) payroll (c) ((b-a)/c)

10/1/04 $ 50,357,107 $ 53,078,933 $ 2,721,826 94.87% $ 8,710,079 31.25%

10/1/03 46,680,169 49,509,636 2,829,467 94.29% 7,667,748 36.90%

10/1/02 44,078,199 47,055,340 2,977,141 93.67% 6,958,688 42.78%

10/1/01 41,872,673 44,618,549 2,745,876 93.85% 6,595,183 41.63%

10/1/00 38,003,317 40,732,255 2,728,938 93.30% 6,444,523 42.35%

10/1/99 32,395,878 35,286,677 2,890,799 91.81% 6,121,001 47.23%

* Pension information using the actuarial valuation date of 10/1/2005 was unavailable as of the printing of this document.

Schedule of Contributions from Employer and Other Contributing Entities

Annual Year ended required City State Percentage

September 30, contribution contribution contribution contributed

1 2005 $ 3,039,071 $ 3,016,156 $ 719,943 123%

1 2004 2,320,863 2,162,646 693,581 123%

1 2003 1,543,829 1,076,306 483,358 101%

2 2002 1,402,497 1,057,696 344,801 100%

1 2 2001 1,382,949 1,068,855 344,801 102%

1 2 2000 1,300,826 1,217,149 344,801 120%

1 Actuarially determined annual required contribution. The combined contribution of the State and City is more than required.

2 Frozen per Chapter 185, Florida Statutes, as amended.

See accompanying independent auditors' report.

80

NONMAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes.

Court Training Fund – used to account for monies received from court fines, which are used for police education.

Police Confiscation-Federal Fund – used to account for monies received from federal confiscation cases and used to purchase equipment for the Police Department.

Police Confiscation-State Fund – used to account for monies received from the sale of confiscated items in nonfederal cases and used to purchase equipment for the Police Department. This also includes the Police Evidence Fund.

Gas Tax Fund – used to account for the Local Option Gas Tax which is used for construction of new roads, reconstruction or resurfacing of existing paved roads and related items.

Fire, Rescue and EMS Impact Fee Fund – used to account for impact fees that are used to provide additional fire public safety facilities.

Road Impact Fee Fund – used to account for impact fees that are used for transportation capacity improvements.

Community Redevelopment Agency Fund – used to account for monies received from tax increment revenue of the City and County taxing authorities in the community redevelopment area.

Community Development Block Grant Fund – used to account for monies received from the U.S. Department of Housing and Urban Development for community development.

Revolving Loan Fund – used to account for monies received from the U.S. Department of Housing and Urban Development to fund loans to small businesses in the area.

Local Housing Assistance Fund – used to account for monies received from the State Housing Initiatives Partnership Programs to provide assistance to low and moderate income families for the purpose of obtaining affordable housing in the City.

Seawall Fund (Phases V, VI, VII, and VIII) – used to account for the collection of assessments after the construction of seawalls.

• Downtown Expansion Area Fund – is used to account for monies received from tax incremental revenue by all taxing authorities in the expanded area of the downtown community redevelopment area.

• City Centrum Business Park Fund – is used to account for monies collected from agencies that occupy the facilities.

• Alarm Fee Fund – is used to account for fees and fines collected by the City in connection with initial installation and false alarms thereafter.

• Parks and Recreation Programs Fund – is used to account for the recreational programs for individuals of various ages, skill levels, interests, social needs, and economic capabilities that collectively enhance the overall quality of life within the City.

Greenscape Donations Fund – used to account for donations received for landscaping medians on City streets.

All Hazards Fund – used to account for monies collected by Lee County in the All Hazards Protection District for the funding of shelters, emergency preparedness, and hazardous material response programs.

81

DEBT SERVICE FUND

The debt service fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest.

CAPITAL PROJECTS FUNDS

Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds. The Other Capital Projects Fund includes the following projects:

Ecological Preserve – improvements at Four Mile Cove Ecological Preserve from grants and City monies.

Seawall Assessment – construction of seawalls.

Public Safety Building – the design and construction of the public safety building.

Parks Capital Projects – improvements at various parks.

Academic Village – the design and construction of the Academic Village which will hold institutions of higher education, a high school, a library, and a recreational complex.

Fire Stations III, IV and VIII – the design and construction of fire stations III, IV and VIII.

Charter School Construction – the design and construction of the various school buildings for which the Charters have been approved by Lee County School District.

82

FLORIDA

83

City of Cape Coral, Florida

COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS

September 30, 2005

Special Revenue Police Police

Court Confiscation Confiscation Gas Training Federal State Tax

ASSETS Cash and cash equivalents $ 1,544 $ 141,435 $ 89,733 $ 5,056,941 Investments - - - 1,007,137 Interest receivable - - - 7,679 Account receivable, net - - - -Notes receivable - - - -Intergovernmental receivable - - - 553,625 Due from other funds - - - 55,815 Inventories - - - -Prepaid items - - - -Restricted assessments receivable - - - -

Total assets 1,544 141,435 89,733 6,681,197

LIABILITIES Accounts payable and other accrued liabilities - - 792 33,728 Accrued payroll and compensated absences - - - 25,457 Due to other funds - - - -Deposits - - - -Unearned revenue - - - -Advances from other funds - - - -

Total liabilities - - 792 59,185

FUND BALANCES Reserved for:

Encumbrances - - - 1,403,843 Debt service - - - -Prepaid items - - - -Transportation - - - 5,218,169 Inventories - - - -

Unreserved, designated for: Capital improvements - - - -Community development - - - -All hazards protection - - - -Alarm fees - - - -Parks and recreation - - - -

Unreserved, undesignated 1,544 141,435 88,941 -Total fund balances (deficit) 1,544 141,435 88,941 6,622,012

Total liabilities and fund balances $ 1,544 $ 141,435 $ 89,733 $ 6,681,197

See accompanying independent auditors' report.

84

- - - - - -

- - - - - -- - - - - -- - - - - -- - - - - -

- - - - - -

- - - - - -

Special Revenue Fire, Rescue Road Community Community Revolving Local

& EMS Impact Redevelopment Development Loan Housing Impact Fee Fee Agency Block Grant Fund Assistance

$ 1,474,492 $ 7,585,521 $ 1,203,175 $ - $ 290,626 $ 2,758,423 1,495,686 2,021,628 - - - -

12,622 22,108 - - - -

- 5,219 - - 586,632 -- - - 203,592 - -

2,982,800 9,634,476 1,203,175 203,592 877,258 2,758,423

28,875 600 2,713 5 - 1,073 - - 2,992 2,164 - 1,770 - - - 201,423 - -

- 5,254 - - - -

28,875 5,854 5,705 203,592 - 2,843

133,750 274,468 106,333 - - -- - - - - -- - - - - -- - - - - -- - - - - -

2,820,175 9,354,154 - - - -- - 1,091,137 - - -- - - - - -- - - - - -- - - - - -- - - - 877,258 2,755,580

2,953,925 9,628,622 1,197,470 - 877,258 2,755,580 $ 2,982,800 $ 9,634,476 $ 1,203,175 $ 203,592 $ 877,258 $ 2,758,423

85

City of Cape Coral, Florida

COMBINING BALANCE SHEET (continued) NONMAJOR GOVERNMENTAL FUNDS

September 30, 2005

Special Revenue Downtown Alarm

Seawall Expansion City Fee Fund District Centrum Fund

ASSETS Cash and cash equivalents $ 103,456 $ 251,246 $ 29,050 $ 206,383 Investments - - - -Interest receivable - - - -Account receivable, net - - 1,042 9,768 Notes receivable - - - -Intergovernmental receivable - - - -Due from other funds - - - -Inventories - - - -Prepaid items - - - -Restricted assessments receivable 518,154 - - -

Total assets 621,610 251,246 30,092 216,151

LIABILITIES Accounts payable and other accrued liabilities - - 22,046 -Accrued payroll and compensated absences - - - 854 Due to other funds - - - -Deposits - - - -Unearned revenue 497,319 - - -Advances from other funds 392,619 - - -

Total liabilities 889,938 - 22,046 854

FUND BALANCES Reserved for:

Encumbrances - - - -Debt service - - - -Prepaid items - - - -Transportation - - - -Inventories - - - -

Unreserved, designated for: Capital improvements - - - -Community development - 251,246 - -All hazards protection - - - -Alarm fees - - - 215,297 Parks and recreation - - - -

Unreserved, undesignated (268,328) - 8,046 -Total fund balances (deficit) (268,328) 251,246 8,046 215,297

Total liabilities and fund balances $ 621,610 $ 251,246 $ 30,092 $ 216,151

86

Special Revenue Capital Projects Total Parks Other Nonmajor and Greenscape All Hazards Debt Service Capital Governmental

Recreation Donations Fund Fund Projects Funds

$ 375,327 $ 32,957 $ - $ 444,491 $ 8,881,214 $ 28,926,014 - - - - 8,472,941 12,997,392 - - - - 4,618 47,027

7,186 - - - 6,023 24,019 - - - - - 591,851

30,640 - 309,589 - - 1,097,446 - - - - 58,784 114,599

63,736 - - - - 63,736 8,420 - - - - 8,420

- - - - - 518,154 485,309 32,957 309,589 444,491 17,423,580 44,388,658

152,496 - 31,894 - 2,710,973 2,985,195 112,558 - - - 1,885 147,680

- - 58,784 - 9,168,153 9,428,360 36,098 - - - - 36,098 39,259 - - - - 541,832

- - - - 386,868 779,487 340,411 - 90,678 - 12,267,879 13,918,652

72,622 - 44,289 - 35,259,625 37,294,930 - - - 444,491 - 444,491

8,420 - - - - 8,420 - - - - - 5,218,169

63,736 - - - - 63,736

- - - - - 12,174,329 - - - - - 1,342,383 - - 174,622 - - 174,622 - - - - - 215,297

120 - - - - 120 - 32,957 - - (30,103,924) (26,466,491)

144,898 32,957 218,911 444,491 5,155,701 30,470,006 $ 485,309 $ 32,957 $ 309,589 $ 444,491 $ 17,423,580 $ 44,388,658

87

City of Cape Coral, Florida

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS

For the Year Ended September 30, 2005

Special Revenue Police Police

Court Confiscation Confiscation Gas Training Federal State Tax

REVENUES Taxes

Property $ - $ - $ - $ -Gas - - - 7,493,111

Special assessments - - - -Intergovernmental - - - 48,448 Charges for services - - - 4,392 Fine and forfeitures - - - -Impact fees - - - -Rent and royalties - - - -Interest income 36 2,696 1,549 103,954 Other revenue - 39,683 29,198 10,346

Total revenues 36 42,379 30,747 7,660,251

EXPENDITURES Current:

General Government - - - -Public Safety:

Police - 250 22,711 -Fire - - - -

Parks and Recreation - - - -Community Development - - - -Transportation - - - 2,829,338

Capital outlay - - 6,099 1,271,552 Debt service:

Principal - - - -Interest and fiscal charges - - - -

Total expenditures - 250 28,810 4,100,890

Excess revenues over (under) expenditures 36 42,129 1,937 3,559,361

OTHER FINANCING SOURCES (USES) Transfers in - - 4,968 755,815 Transfers out - (12,324) (4,968) (1,740,523) Issuance of debt - - - -Payment to escrow agent to refund bonds - - - -Sale of capital assets - - 6,669 46,293

Total other financing sources (uses) - (12,324) 6,669 (938,415) Net change in fund balances 36 29,805 8,606 2,620,946

Fund balances (deficit) - beginning 1,508 111,630 80,335 4,001,066 Fund balances (deficit) - ending $ 1,544 $ 141,435 $ 88,941 $ 6,622,012

See accompanying independent auditors' report.

88

...

- - - - - -- - - - - -

- - - - - -- - - - - -

Special Revenue Fire, Rescue Road Community Community Revolving Local

& EMS Impact Redevelopment Development Loan Housing Impact Fee Fee Agency Block Grant Fund Assistance

$ - $ - $ 693,084 $ - $ - $ -

- 241,894 - 934,224 - 961,216

2,919,584 13,557,182 - - - -- 4,950 - - - -

48,977 125,884 20,460 - 19,287 34,641 79 59,358 13 - 196 721,144

2,968,640 13,989,268 713,557 934,224 19,483 1,717,001

- - - - - -(1,707,251)

-(9,581,630)

---

(76,013) -

--

--

- - - - - -- - - - - -

(1,707,251) 700,698

2,253,227 $ 2,953,925 $

(9,581,630) 3,964,567 5,664,055 9,628,622 $

-402,506 794,964

1,197,470 $

(76,013) --- $

-18,343

858,915 877,258 $

-726,832

2,028,748 2,755,580

89

- - - - - -

- - - - - -37,363 - - - - -

- - - - - -- - 311,051 858,211 1,140 988,392 - 103,493 - - - -

523,328 339,578 - - - 1,777

- - - - - -- - - - - -

560,691 443,071 311,051 858,211 1,140 990,169

2,407,949 13,546,197 402,506 76,013 18,343 726,832

City of Cape Coral, Florida

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (continued) NONMAJOR GOVERNMENTAL FUNDS

For the Year Ended September 30, 2005

Special Revenue Downtown Alarm

Seawall Expansion City Fee Fund District Centrum Fund

REVENUES Taxes

Property $ - $ 250,603 $ - $ -Gas - - - -

Special assessments 126,121 - - -Intergovernmental - - - -Charges for services - - - 247,825 Fine and forfeitures - - - -Impact fees - - - -Rent and royalties - - 67,871 -Interest income 14,707 643 3 178 Other revenue 1,996 - -

Total revenues 142,824 251,246 67,874 248,003

EXPENDITURES Current:

General Government 13,134 - 59,828 -Public Safety:

Police - - - 32,706 Fire - - - -

Parks and Recreation - - - -Community Development - - - -Transportation - - - -

Capital outlay - - - -Debt service:

Principal - - - -Interest and fiscal charges - - - -

Total expenditures 13,134 - 59,828 32,706

Excess revenues over (under) expenditures 129,690 251,246 8,046 215,297

OTHER FINANCING SOURCES (USES) Transfers in - - - -Transfers out - - - -Issuance of debt - - - -Payment to escrow agent to refund bonds - - - -Sale of capital assets - - - -

Total other financing sources (uses) - - - -Net change in fund balances 129,690 251,246 8,046 215,297

Fund balances (deficit) - beginning (398,018) - - -Fund balances (deficit) - ending $ (268,328) $ 251,246 $ 8,046 $ 215,297

90

Special Revenue Capital Projects Total Parks Other Nonmajor and Greenscape All Debt Service Capital Governmental

Recreation Donations Hazards Fund Projects Funds

$ - $ - $ 226,849 $ 1,575,511 $ - $ 2,746,047 - - - - - 7,493,111 - - - - - 126,121

270,935 - 309,589 - - 2,766,306 2,450,247 - - - - 2,702,464

- - - 4,493 - 4,493 - - - - - 16,476,766

609 - - - - 73,430 100 770 2,663 13,370 191,786 581,704

21,145 - - - - 883,158 2,743,036 770 539,101 1,593,374 191,786 33,853,600

- - - 1,000 417,668 491,630

- - - - - 55,667 - - 34,247 - - 71,610

5,087,827 - - - 6,627 5,094,454 - - - - 386,868 2,545,662 - - - - - 2,932,831

174,355 - 120,936 - 13,087,396 15,525,021

- - - 3,535,102 - 3,535,102 - - - 1,805,913 - 1,805,913

5,262,182 - 155,183 5,342,015 13,898,559 32,057,890

(2,519,146) 770 383,918 (3,748,641) (13,706,773) 1,795,710

2,664,044 - - 3,275,200 8,997,948 15,697,975 - - (256,883) - - (13,379,592) - - - 12,550,000 8,000,000 20,550,000 - - - (12,049,294) - (12,049,294) - - - - - 52,962

2,664,044 - (256,883) 3,775,906 16,997,948 10,872,051 144,898 770 127,035 27,265 3,291,175 12,667,761

- 32,187 91,876 417,226 1,864,526 17,802,245 $ 144,898 $ 32,957 $ 218,911 $ 444,491 $ 5,155,701 $ 30,470,006

91

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE POLICE CONFISCATION - FEDERAL SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Interest income $ - $ - $ 2,696 $ 2,696 Other revenue - - 39,683 39,683

Total revenues - - 42,379 42,379

EXPENDITURES Police - 99,306 250 99,056

Excess revenues over (under) expenditures - (99,306) 42,129 141,435

OTHER FINANCING (USES) Transfers out - (12,324) (12,324) -

Net change in fund balances - (111,630) 29,805 141,435 Budgetary fund balance - beginning 111,630 111,630 111,630 -Budgetary fund balance - ending $ 111,630 $ - $ 141,435 $ 141,435

There are no differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

See accompanying independent auditors' report.

92

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE POLICE CONFISCATION - STATE SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

REVENUES Interest income Other revenue

Total revenues

Budgeted Amounts Actual Amounts Original Final (Budgetary Basis)

$ - $ - $ 1,549 - - 35,867 - - 37,416

Variance with Final Budget

Positive (Negative)

$ 1,549 35,867 37,416

EXPENDITURES Public Safety: Police Capital outlay

Total expenditures Excess revenues over (under) expenditures

--

-

9,919 6,099

16,018 (16,018)

22,711 6,099

28,810 8,606

(12,792) -

(12,792) 24,624

OTHER FINANCING SOURCES (USES) Transfers in Transfers out

Total other financing sources (uses) Net change in fund balances

Budgetary fund balance - beginning Budgetary fund balance - ending

- - 4,968 - - (4,968) - - -- (16,018) 8,606

80,335 80,335 80,335 $ 80,335 $ 64,317 $ 88,941

4,968 (4,968)

-24,624

-$ 24,624

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

Actual revenue amounts (budgetary basis) $ 37,416

The proceeds from the sale of capital assets are budgetary revenues but are regarded as other financing sources, rather than revenue, for financial reporting purposes. (6,669)

Total revenue as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 30,747

Actual other financing sources (uses) (budgetary basis) $ -

The proceeds from the sale of capital assets are budgetary revenues but are regarded as other financing sources, rather than revenue, for financial reporting purposes. 6,669

Total other financing sources (uses) as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 6,669

See accompanying independent auditors' report.

93

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE GAS TAX SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Gas taxes $ 6,780,515 $ 7,200,239 $ 7,493,111 $ 292,872 Intergovernmental - - 48,448 48,448 Charges for services - - 4,392 4,392 Interest income 48,000 48,000 103,954 55,954 Other revenue - - 56,639 56,639

Total revenues 6,828,515 7,248,239 7,706,544 458,305

EXPENDITURES Transportation 4,638,671 5,888,766 4,425,562 1,463,204 Capital outlay 646,238 1,627,441 632,278 995,163

Total expenditures 5,284,909 7,516,207 5,057,840 2,458,367 Excess revenues over (under) expenditures 1,543,606 (267,968) 2,648,704 2,916,672

OTHER FINANCING SOURCES (USES) Transfers in 700,000 700,000 755,815 55,815 Transfers out (1,740,523) (1,740,523) (1,740,523) -

Total other financing sources (uses) (1,040,523) (1,040,523) (984,708) 55,815 Net change in fund balances 503,083 (1,308,491) 1,663,996 2,972,487

Budgetary fund balance - beginning 3,554,173 3,554,173 3,554,173 -Budgetary fund balance - ending $ 4,057,256 $ 2,245,682 $ 5,218,169 $ 2,972,487

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

Actual revenue amounts (budgetary basis) $ 7,706,544

The proceeds from the sale of capital assets are budgetary revenues but are regarded as other financing sources, rather than revenue, for financial reporting purposes. (46,293)

Total revenue as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 7,660,251

Actual expenditure amounts (budgetary basis) $ 5,057,840

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. Prior year encumbrances $ 446,893 Current year encumbrances (1,403,843) (956,950)

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 4,100,890

Actual other financing sources (uses) (budgetary basis) $ (984,708) The proceeds from the sale of capital assets are budgetary revenues but are regarded as other financing sources, rather than revenue, for financial reporting purposes. 46,293

Total other financing sources (uses) as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ (938,415)

Budgetary fund balance - ending $ 5,218,169

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. 1,403,843

Fund balance as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 6,622,012

See accompanying independent auditors' report.

94

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE FIRE, RESCUE & EMS IMPACT FEE SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Impact fees $ 1,252,000 $ 2,484,960 $ 2,919,584 $ 434,624 Interest income 34,000 34,000 48,977 14,977 Other revenue - - 79 79

Total revenues 1,286,000 2,518,960 2,968,640 449,680

EXPENDITURES Public Safety: Fire - 46,485 50,541 (4,056) Capital outlay 1,250,000 2,436,475 643,900 1,792,575

Total expenditures 1,250,000 2,482,960 694,441 1,788,519 Excess revenues over expenditures 36,000 36,000 2,274,199 2,238,199

OTHER FINANCING SOURCES (USES) Transfers out (403,894) (1,722,894) (1,707,251) 15,643

Net change in fund balances (367,894) (1,686,894) 566,948 2,253,842 Budgetary fund balance - beginning 2,253,227 2,253,227 2,253,227 -Budgetary fund balance - ending $ 1,885,333 $ 566,333 $ 2,820,175 $ 2,253,842

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditand Other Financing Sources (Uses)

ures

Actual expenditure amounts (budgetary basis) $ 694,441

Encumbrances for equipment and supplies ordered but not received reported in the year the orders are placed for budgetary purposes, but reported in the year the equipment and supplies are received for GAAP purposes.

are are

(133,750)

Total expenditures as reported in the statement changes in fund balances - governmental funds.

of revenues, expenditures and $ 560,691

Budgetary fund balance - ending $ 2,820,175

Encumbrances for equipment and supplies ordered but not received reported in the year the orders are placed for budgetary purposes, but reported in the year the equipment and supplies are received for GAAP purposes.

are are

133,750

Fund balance as reported on the statement changes in fund balances - governmental funds.

of revenues, expenditures and $ 2,953,925

See accompanying independent auditors' report.

95

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE ROAD IMPACT FEE SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

REVENUES Intergovernmental Impact fees Rent and royalties Interest income Other revenue

Total revenues

$

Budgeted Amounts Original Final

- $ -7,872,442 12,135,988

- -100,000 100,000

4,950 4,950 7,977,392 12,240,938

Actual Amounts (Budgetary Basis)

$ 241,894 13,557,182

4,950 125,884 59,358

13,989,268

Variance with Final Budget

Positive (Negative)

$ 241,894 1,421,194

4,950 25,884 54,408

1,748,330

EXPENDITURES Transportation Capital outlay

Total expenditures Excess revenues over expenditures

-430,000 430,000

7,547,392

405,739 1,991,593 2,397,332 9,843,606

24,145 332,793 356,938

13,632,330

381,594 1,658,800 2,040,394 3,788,724

OTHER FINANCING SOURCES (USES) Transfers out

Net change in fund balances Budgetary fund balance - beginning Budgetary fund balance - ending

(5,212,785) (9,601,331) 2,334,607 242,275 5,303,454 5,303,454

$ 7,638,061 $ 5,545,729

(9,581,630) 4,050,700 5,303,454

$ 9,354,154

19,701 3,808,425

-$ 3,808,425

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

Actual expenditure amounts (budgetary basis) $ 356,938

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. Prior year encumbrances $ 360,601 Current year encumbrances (274,468) 86,133

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 443,071

Budgetary fund balance - ending $ 9,354,154

Current year encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. 274,468

Fund balance as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 9,628,622

See accompanying independent auditors' report.

96

,.

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE COMMUNITY REDEVELOPMENT AGENCY SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

REVENUES Property taxes Interest income Other revenue

Total revenues

Budgeted Amounts Actual Amounts Original Final (Budgetary Basis)

$ 708,559 $ 708,559 $ 693,084 8,000 8,000 20,460

- - 13 716,559 716,559 713,557

Variance with Final Budget

Positive (Negative)

$ (15,475) 12,460

13 (3,002)

EXPENDITURES Community Development Capital outlay

Total expenditures Excess revenues over (under) expenditures

367,548 327,301 694,849 21,710

522,477 979,101

1,501,578 (785,019)

417,384 -

417,384 296,173

105,093 979,101

1,084,194 1,081,192

OTHER FINANCING SOURCES (USES) Transfers out

Net change in fund balances Budgetary fund balance - beginning Budgetary fund balance - ending

(21,710) - -- (785,019) 296,173

794,964 794,964 794,964 $ 794,964 $ 9,945 $ 1,091,137

-1,081,192

-$ 1,081,192

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

Actual expenditure amounts (budgetary basis) $ 417,384

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. (106,333)

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 311,051

Budgetary fund balance - ending Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes.

$ 1,091,137

106,333

Fund balance as reported on the statement changes in fund balances - governmental funds.

of revenues, expenditures and $ 1,197,470

See accompanying independent auditors' report.

97

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Intergovernmental $ 748,000 $ 1,361,671 $ 934,224 $ (427,447) Other revenue - 44 - (44)

Total revenue 748,000 1,361,715 934,224 (427,491)

EXPENDITURES Community Development 727,802 1,360,086 816,690 543,396

Excess revenues over expenditures 20,198 1,629 117,534 115,905

OTHER FINANCING SOURCES (USES) Transfers out - (1,629) (76,013) (74,384)

Net change in fund balances 20,198 - 41,521 41,521 Budgetary fund balance (deficit) - beginning (41,521) (41,521) (41,521) -Budgetary fund balance (deficit) - ending $ (21,323) $ (41,521) $ - $ 41,521

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

Actual expenditure amounts (budgetary basis) $ 816,690

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. 41,521

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 858,211

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE LOCAL HOUSING ASSISTANCE SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Intergovernmental $ 898,281 $ 2,009,789 $ 961,216 $ (1,048,573) Interest income - - 34,641 34,641 Other revenue - 463,240 721,144 257,904

Total revenues 898,281 2,473,029 1,717,001 (756,028)

EXPENDITURES Community development 898,281 2,469,980 988,392 1,481,588 Capital Outlay - 3,049 1,777 1,272

Total Expenditures Excess revenues over expenditures

Budgetary fund balance - beginning Budgetary fund balance - ending

898,281 2,473,029 - -

2,028,748 2,028,748 $ 2,028,748 $ 2,028,748 $

990,169 726,832

2,028,748 2,755,580 $

1,482,860 726,832

-726,832

There are no differences between Budgetary Revenues and Expenditures and GAAP Revenues and Expenditures

See accompanying independent auditors' report.

98

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE DOWNTOWN EXPANSION DISTRICT SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Property taxes $ 240,524 $ 240,524 $ 250,603 $ 10,079 Interest income - - 643 643

Total revenues 240,524 240,524 251,246 10,722

EXPENDITURES Capital outlay 240,524 240,524 - 240,524

Excess revenues over expenditures - - 251,246 251,246

Budgetary fund balance - beginning - - - -Budgetary fund balance - ending $ - $ - $ 251,246 $ 251,246

There are no differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE CITY CENTRUM SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Rent and royalties $ 180,632 $ 180,632 $ 67,871 $ (112,761) Interest income - - 3 3

Total revenues 180,632 180,632 67,874 (112,758)

EXPENDITURES General Government 180,632 180,632 59,828 120,804

Excess revenues over expenditures - - 8,046 8,046

Budgetary fund balance - beginning - - - -Budgetary fund balance - ending $ - $ - $ 8,046 $ 8,046

There are no differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

See accompanying independent auditors' report.

99

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE ALARM FEE SPECIAL REVENUE FUND For the Year Ended September 30, 2005

REVENUES Charges for services Interest income

Total revenues

Budgeted Amounts Actual Amounts Original Final (Budgetary Basis)

$ - $ 34,880 $ 247,825 - - 178 - 34,880 248,003

Variance with Final Budget

Positive (Negative)

$ 212,945 178

213,123

EXPENDITURES General Government

Excess revenues over expenditures --

34,880 -

32,706 215,297

2,174 215,297

Budgetary fund balance - beginning Budgetary fund balance - ending $

--

- -$ - $ 215,297

-$ 215,297

There are no differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE PARKS AND RECREATION SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

REVENUES Intergovernmental Charges for services Rent and royalties Interest income Other income

Total revenues

Budgeted Amounts Actual Amounts Original Final (Budgetary Basis)

$ - $ 182,199 $ 270,935 - 3,198,886 2,450,247 - - 609 - - 100 - 20,664 21,145 - 3,401,749 2,743,036

Variance with Final Budget

Positive (Negative)

$ 88,736 (748,639)

609 100 481

(658,713)

EXPENDITURES Parks and Recreation Capital outlay

Total expenditures Excess revenues over (under) expenditures

----

5,812,559 333,723

6,146,282 (2,744,533)

5,160,449 174,355

5,334,804 (2,591,768)

652,110 159,368 811,478 152,765

OTHER FINANCING SOURCES (USES) Transfers in

Net change in fund balances Budgetary fund balance - beginning Budgetary fund balance (deficit) - ending

- 2,843,717 2,664,044 - 99,184 72,276 - - -

$ - $ 99,184 $ 72,276 $

(179,673) (26,908)

-(26,908)

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

Actual expenditure amounts (budgetary basis) $ 5,334,804

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. (72,622)

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 5,262,182

Budgetary fund balance - ending $ 72,276

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes.

Fund balance as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $

72,622

144,898

See accompanying independent auditors' report. 100

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE GREENSCAPE DONATIONS SPECIAL REVENUE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Interest income $ - $ - $ 770 $ 770

EXPENDITURES General Government - - - -

Excess revenues over expenditures - - 770 770 Budgetary fund balance - beginning 32,187 32,187 32,187 -Budgetary fund balance - ending $ 32,187 $ 32,187 $ 32,957 $ 770

There are no differences between Budgetary Revenues and Expenditures and GAAP Revenues and Expenditures

BUDGETARY COMPARISON SCHEDULE ALL HAZARDS SPECIAL REVENUE FUND For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Taxes $ 226,290 $ 226,290 $ 226,849 $ 559 Intergovernmental - 256,883 309,589 52,706 Interest income - - 2,663 2,663

Total revenues 226,290 483,173 539,101 55,928

EXPENDITURES Public Safety: Fire - 66,039 48,027 18,012 Capital outlay 226,290 217,820 132,997 84,823

Total expenditures 226,290 283,859 181,024 102,835 Excess revenues over expenditures - 199,314 358,077 158,763

OTHER FINANCING SOURCES (USES) Transfers out - (309,639) (256,883) 52,756

Net change in fund balances - (110,325) 101,194 211,519 Budgetary fund balance - beginning 73,428 73,428 73,428 -Budgetary fund balance - ending $ 73,428 $ (36,897) $ 174,622 $ 211,519

Explanation of differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses) Actual expenditure amounts (budgetary basis) $ 181,024

Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. Prior year encumbrances $ 18,448 Current year encumbrances (44,289) (25,841)

Total expenditures as reported in the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 155,183

Budgetary fund balance - ending $ 174,622

Current year encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. 44,289

Fund balance as reported on the statement of revenues, expenditures and changes in fund balances - governmental funds. $ 218,911

See accompanying independent auditors' report.

101

City of Cape Coral, Florida

BUDGETARY COMPARISON SCHEDULE DEBT SERVICE FUND

For the Year Ended September 30, 2005

Variance with Final Budget

Budgeted Amounts Actual Amounts Positive Original Final (Budgetary Basis) (Negative)

REVENUES Property taxes $ 1,580,603 $ 1,580,603 $ 1,580,004 $ (599) Interest income - - 13,370 13,370

Total revenues 1,580,603 1,580,603 1,593,374 12,771

EXPENDITURES General Government - - 1,000 (1,000) Debt service:

Principal 1,985,000 3,614,177 3,535,102 79,075 Interest and fiscal charges 928,396 1,805,952 1,805,913 39

Total expenditures 2,913,396 5,420,129 5,342,015 78,114 Excess revenues over (under) expenditures (1,332,793) (3,839,526) (3,748,641) 90,885

OTHER FINANCING SOURCES (USES) Transfers in 1,332,793 3,338,820 3,275,200 (63,620) Issuance of debt - 12,550,000 12,550,000 -Payment to escrow agent - (12,049,294) (12,049,294) -

Total other financing sources (uses) 1,332,793 3,839,526 3,775,906 (63,620) Net change in fund balances - - 27,265 27,265

Budgetary fund balance - beginning 417,226 417,226 417,226 -Budgetary fund balance - ending $ 417,226 $ 417,226 $ 444,491 $ 27,265

There are no differences between Budgetary Revenues, Expenditures and Other Financing Sources (Uses) and GAAP Revenues, Expenditures and Other Financing Sources (Uses)

See accompanying independent auditors' report.

102

City of Cape Coral, Florida

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL TRANSPORTATION CAPITAL PROJECTS FUND

From Inception and For the Year Ended September 30, 2005

REVENUES Interest income Other revenue

Total revenues

EXPENDITURES Transportation Capital outlay

Total expenditures Excess of revenues (under) expenditures

OTHER FINANCING SOURCES (USES) Transfers in Transfers out Sale of capital asset

Total other financing sources Net change in fund balances

Budgetary fund balance - beginning Budgetary fund balance - ending

See accompanying independent auditors' report.

Prior Years

$ 225,709 109,647 335,356

32,166 5,575,023 5,607,189

(5,271,833)

25,057,229 --

25,057,229 $ 19,785,396

Current Year

$ 351,214 18,423

369,637

197,476 3,947,056 4,144,532

(3,774,895)

12,175,000 (1,500,000)

2,926 10,677,926 6,903,031

19,785,396 $ 26,688,427

Total to Date

Project Authorization

$ 576,923 128,070 704,993

$ -70,674 70,674

229,642 9,522,079 9,751,721

(9,046,728)

180,509 37,288,675 37,469,184

(37,398,510)

$

37,232,229 (1,500,000)

2,926 35,735,155 26,688,427 $

37,398,510 --

37,398,510 -

103

City of Cape Coral, Florida

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL OTHER CAPITAL PROJECTS FUND

From Inception and For the Year Ended September 30, 2005

Prior Years

CurrentYear

Total to Date

Project Authorization

REVENUES Intergovernmental Interest income

Total revenues

$ 1,321,811 421

1,322,232

$ -191,786 191,786

$ 1,321,811 192,207

1,514,018

$ 857,434 -

857,434

EXPENDITURES General Government Parks and Recreation Community Development Capital outlay

Total expenditures Excess revenues (under) expenditures

---

1,730,682 1,730,682 (408,450)

417,668 6,627

386,868 13,087,396 13,898,559

(13,706,773)

417,668 6,627

386,868 14,818,078 15,629,241

(14,115,223)

1,385,821 6,627

-58,960,057 60,352,505

(59,495,071)

OTHER FINANCING SOURCES (USES) Transfers in Transfer out Issuance of debt

Total other financing sources Net change in fund balances

Budgetary fund balance - beginning Budgetary fund balance - ending

2,402,875 (129,899)

-2,272,976

$ 1,864,526

8,997,948 -

8,000,000 16,997,948 3,291,175 1,864,526

$ 5,155,701

$

11,400,823 (129,899)

8,000,000 19,270,924 5,155,701 $

55,109,250 -

4,385,821 59,495,071

-

See accompanying independent auditors' report.

104

PROPRIETARY FUNDS

ENTERPRISE FUNDS

Enterprise Funds are used to account for activity for which a fee is charged to external users for goods or services

Stormwater Fund – used to account for the activities of the City’s stormwater drainage program.

Yacht Basin Fund – used to account for the operations of the City’s public marina and docks.

Golf Course Fund – used to account for the operations of the year-round municipal golf facility which includes the clubhouse, greens and restaurant operations.

Water Park Fund – used to account for the operations of the City’s Sun Splash Family Water Park and aquatic facility.

INTERNAL SERVICE FUNDS

Workers Compensation Insurance Fund – used to account for self-insurance of workers compensation.

Property and Casualty Insurance Fund – used to account for the self-insurance liability.

Internal Loan Fund – used to account for the Commercial Paper Program, which is used on a short-term basis to fund certain capital improvements that will ultimately be either financed with long-term debt or paid off in a much shorter period due to the low interest rates.

105

City of Cape Coral, Florida

COMBINING STATEMENT OF NET ASSETS NONMAJOR ENTERPRISE FUNDS

September 30, 2005

Yacht Golf Water Stormwater Basin Course Park Total

ASSETS Current assets: Cash and cash equivalents $ 961,880 $ 214,165 $ 1,754 $ 12,593 $ 1,190,392 Investments 1,012,458 307,016 - - 1,319,474 Interest receivable 6,695 2,285 - - 8,980 Accounts receivable, net 1,761 19,825 - 3,194 24,780 Intergovernmental receivable 54,309 3,565 7,573 86,786 152,233 Inventories - - 22,911 22,189 45,100 Restricted:

Cash and cash equivalents 178,272 8,524 40,367 - 227,163 Interest receivable 3,975 - - - 3,975

Total restricted assets 182,247 8,524 40,367 - 231,138 Total current assets 2,219,350 555,380 72,605 124,762 2,972,097

Noncurrent assets: Unamortized bond issue costs 60,627 - 75,336 - 135,963 Restricted:

Cash and cash equivalents 2,042,412 - 350,000 - 2,392,412 Investments 510,591 - - - 510,591 Accounts receivable - - - - -

Capital assets: Land 53,542 20,555 1,787,521 29,492 1,891,110 Buildings - - 1,119,261 520,669 1,639,930 Building improvements 49,316 - - 5,931 55,247 Improvements other than buildings 19,769,443 628,781 2,276,786 4,617,348 27,292,358 Equipment 5,227,599 8,660 535,970 662,472 6,434,701 Construction in progress 2,458,368 - 97,882 67,215 2,623,465

Less accumulated depreciation (11,964,302) (398,965) (2,558,602) (3,236,901) (18,158,770) Total capital assets, net 15,593,966 259,031 3,258,818 2,666,226 21,778,041

Total noncurrent assets 18,207,596 259,031 3,684,154 2,666,226 24,817,007 Total assets 20,426,946 814,411 3,756,759 2,790,988 27,789,104

LIABILITIES Current liabilities: Accounts payable and other accrued liabilities 93,447 7,576 40,932 88,315 230,270 Accrued payroll and compensated absences 128,825 4,426 25,104 25,774 184,129 Due to other funds 152,902 - 120,000 154,080 426,982 Unearned revenue 213,510 - 189,991 - 403,501 Debt:

Revenue bonds 430,000 - 420,000 - 850,000 Capital leases 88,068 - - - 88,068

Total debt 518,068 - 420,000 - 938,068 Total current liabilities 1,106,752 12,002 796,027 268,169 2,182,950

Current liabilities payable from restricted assets: Accounts payable and other accrued liabilities 98,738 - - - 98,738 Deposits - 8,524 - - 8,524 Accrued interest payable 83,509 - 40,367 - 123,876

Total current liabilities payable from restricted assets 182,247 8,524 40,367 - 231,138

Noncurrent liabilities: Advances from other funds - - 140,476 1,173,444 1,313,920 Compensated absences 270,539 9,910 39,534 46,236 366,219 Debt:

Revenue bonds 2,842,466 - 3,099,981 - 5,942,447 Capital leases 189,311 - - - 189,311

Total debt 3,031,777 - 3,099,981 - 6,131,758 Total noncurrent liabilities 3,302,316

9,910 3,279,991 1,219,680 7,811,897 Total liabilities 4,591,315 30,436 4,116,385 1,487,849 10,225,985

NET ASSETS Invested in capital assets, net of related debt 12,044,121 259,031 (261,163) 2,666,226 14,708,215 Restricted for:

Debt service 126,954 - 350,000 - 476,954 Capital improvements 1,905,787 - - - 1,905,787 Renewal and replacement 520,262 - - - 520,262

Unrestricted 1,238,507 524,944 (448,463) (1,363,087) (48,099) Total net assets (deficit) $ 15,835,631 $ 783,975 $ (359,626) $ 1,303,139 $ 17,563,119

See accompanying independent auditors' report.

106

City of Cape Coral, Florida

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS NONMAJOR ENTERPRISE FUNDS

For the Year Ended September 30, 2005

Yacht Golf Water Stormwater Basin Course Park Total

OPERATING REVENUES Charges for services $ 9,036,136 $ 295,445 $ 1,727,198 $ 1,991,044 $ 13,049,823 Other revenue 20,190 540 4,394 265,901 291,025

Total operating revenues 9,056,326 295,985 1,731,592 2,256,945 13,340,848

OPERATING EXPENSES Salaries, wages and employee benefits 3,981,378 116,040 847,967 1,103,289 6,048,674 Contractual services, materials and supplies 2,546,900 91,719 802,209 1,065,919 4,506,747 Depreciation 1,499,636 36,387 166,607 183,167 1,885,797

Total operating expenses 8,027,914 244,146 1,816,783 2,352,375 12,441,218 Operating income (loss) 1,028,412 51,839 (85,191) (95,430) 899,630

NONOPERATING REVENUES (EXPENSES) Intergovernmental 132,600 3,565 7,574 118,278 262,017 Interest income 136,594 19,443 9,108 1,938 167,083 Interest expense and bond discount amortization (200,974) - (152,043) (16,377) (369,394) Gain on sale of assets 59,778 - - - 59,778

Total nonoperating revenues (expenses) 127,998 23,008 (135,361) 103,839 119,484 Income (loss) before contributions

and transfers 1,156,410 74,847 (220,552) 8,409 1,019,114

Capital contributions 2,095 150 - - 2,245 Transfers in 23,644 - 250,000 - 273,644 Transfers out (1,002,796) - - - (1,002,796)

Total contributions and transfers (977,057) 150 250,000 - (726,907) Change in net assets 179,353 74,997 29,448 8,409 292,207

Total net assets (deficit) - beginning 15,656,278 708,978 (389,074) 1,294,730 17,270,912 Total net assets (deficit) - ending $ 15,835,631 $ 783,975 $ (359,626) $ 1,303,139 $ 17,563,119

See accompanying independent auditors' report.

107

City of Cape Coral, Florida

COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS

For the Year Ended September 30, 2005

Yacht Golf Water Stormwater Basin Course Park Total

CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 9,278,337 $ 280,984 $ 1,839,519 $ 2,315,194 $ 13,714,034 Cash payments to suppliers (1,682,780) (69,683) (608,853) (970,384) (3,331,700) Cash payments to employees (3,945,002) (114,025) (860,398) (1,102,021) (6,021,446) Interfund service payments (749,921) (20,344) (225,951) (189,354) (1,185,570)

Net cash provided (used) by operating activities 2,900,634 76,932 144,317 53,435 3,175,318

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Transfers in 23,644 - 250,000 - 273,644 Transfers out (849,894) - - - (849,894) Intergovernmental revenue 132,600 3,565 7,574 118,278 262,017

Net cash provided (used) by noncapital financing activities (693,650) 3,565 257,574 118,278 (314,233)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition and construction of capital assets (1,758,360) (5,077) (76,584) 5,415 (1,834,606) Auction proceeds 59,778 - - - 59,778 Principal payments on debt (506,677) - (405,000) - (911,677) Collection of capital contributions 2,095 150 - - 2,245 Interest paid (166,856) - (132,000) (9,793) (308,649) Advances from other funds - - 120,000 (342,400) (222,400)

Net cash used by capital and related financing activities (2,370,020) (4,927) (493,584) (346,778) (3,215,309)

CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (536,461) (307,016) - - (843,477) Investment income 144,366 17,158 9,108 1,938 172,570

Net cash provided by investing activities (392,095) (289,858) 9,108 1,938 (670,907) Net increase (decrease) in cash and cash equivalents (555,131) (214,288) (82,585) (173,127) (1,025,131) Cash and cash equivalents - beginning 3,737,695 436,977 474,706 185,720 4,835,098 Cash and cash equivalents - ending $ 3,182,564 $ 222,689 $ 392,121 $ 12,593 $ 3,809,967

The following reconciles cash and cash equivalents to the Statement of Net Assets Nonmajor Enterprise Funds Cash and cash equivalents $ 961,880 $ 214,165 $ 1,754 $ 12,593 $ 1,190,392 Restricted cash and cash equivalents 2,220,684 8,524 390,367 - 2,619,575

Total cash and cash equivalents $ 3,182,564 $ 222,689 $ 392,121 $ 12,593 $ 3,809,967

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) $ 1,028,412 $ 51,839 $ (85,191) $ (95,430) $ 899,630 Adjustments to reconcile operating income (loss)

to net cash provided (used) by operating activities: Depreciation expense 1,499,636 36,387 166,607 183,167 1,885,797 (Increase) decrease in assets:

Accounts receivable 14,425 (17,554) - 123,163 120,034 Intergovernmental receivable - (1,417) 8,857 (64,914) (57,474) Inventories - - 2,753 (14,540) (11,787) Prepaid items 101,677 1,283 1,870 - 104,830 Unamortized bond issue costs 9,209 - 10,513 - 19,722

Increase (decrease) in liabilities: Accounts payable and other accrued liabilities 3,313 63 (54,689) (79,279) (130,592) Accrued payroll and compensated absences 36,376 2,015 (12,431) 1,268 27,228 Intergovernmental payable - 345 6,958 - 7,303 Deposits - 3,971 - - 3,971 Unearned revenue 207,586 - 99,070 - 306,656

Total adjustments 1,872,222 25,093 229,508 148,865 2,275,688

Net cash provided (used) by operating activities $ 2,900,634 $ 76,932 $ 144,317 $ 53,435 $ 3,175,318

Supplemental disclosure of noncash investing, capital and financing activities: Stormwater recognized a liability for transfer out to Hurricane Charley Improvement Fund for removal of canal debris.

See accompanying independent auditors' report. 108

City of Cape Coral, Florida

COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS

September 30, 2005

ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Loans to other funds Prepaid items

Total current assets

Workers Property and Compensation Casualty

Insurance Insurance

$ 1,920,338 $ 1,790,594 - -- -- 35,962

1,920,338 1,826,556

$

Internal Loan Fund

99,884 38,306

44,666,309 11,233

44,815,732

$

Total

3,810,816 38,306

44,666,309 47,195

48,562,626

Noncurrent assets: Unamortized bond issue costs

Total assets -

1,920,338 -

1,826,556 371,511

45,187,243 371,511

48,934,137

LIABILITIES Current liabilities: Accounts payable and other accrued liabilities Commercial paper obligations

Total current liabilities

1,092,749 -

1,092,749

107,597 -

107,597

-45,180,000 45,180,000

1,200,346 45,180,000 46,380,346

NET ASSETS Unrestricted

Total net assets 827,589 1,718,959

$ 827,589 $ 1,718,959 $ 7,243 7,243 $

2,553,791 2,553,791

See accompanying independent auditors' report.

109

City of Cape Coral, Florida

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS

For the Year Ended September 30, 2005

Workers Compensation

Insurance

Property and Casualty

Insurance

Internal Loan Fund Total

OPERATING REVENUES Charges for services $ 2,211,019 $ 1,956,435 $ 974,148 $ 5,141,602

OPERATING EXPENSES Contractual services, materials and supplies Claims and claims adjustments

Total operating expenses Operating income

830,511 1,365,544 2,196,055

14,964

901,346 148,745

1,050,091 906,344

189,081 -

189,081 785,067

1,920,938 1,514,289 3,435,227 1,706,375

NONOPERATING REVENUES (EXPENSES) Interest income Interest expense

Total nonoperating revenues (expenses) Income before transfers

2,625 -

2,625 17,589

2,615 -

2,615 908,959

6,900 (785,067) (778,167)

6,900

12,140 (785,067) (772,927) 933,448

Transfers in Change in net assets

Total net assets - beginning Total net assets - ending

810,000 810,000 -827,589 1,718,959 6,900

- - 343 $ 827,589 $ 1,718,959 $ 7,243 $

1,620,000 2,553,448

343 2,553,791

See accompanying independent auditors' report.

110

City of Cape Coral, Florida

COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS

For the Year Ended September 30, 2005

Workers Property and Internal Compensation Casualty Loan

Insurance Insurance Fund Total CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers (including other funds) $ 2,211,019 $ 1,956,435 $ 921,764 $ 5,089,218

Cash payments to suppliers (646,122) (948,545) (193,202) (1,787,869) Cash payments to employees (52,230) - - (52,230)

Net cash provided by operating activities 1,512,667 1,007,890 728,562 3,249,119

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Transfers in 810,000 810,000 - 1,620,000 Transfers out - - (22,294,075) (22,294,075) Advances to other funds - - 2,835,241 2,835,241 Issuance of debt - - 60,777,500 60,777,500 Principal payments on debt - - (41,600,000) (41,600,000) Interest paid - - (785,067) (785,067)

Net cash provided (used) by noncapital financing activities 810,000 810,000 (1,066,401) 553,599

CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 2,625 2,615 6,900 12,140

Net cash provided by investing activities 2,625 2,615 6,900 12,140 Net increase (decrease) in cash and cash equivalents 2,325,292 1,820,505 (330,939) 3,814,858 Cash and cash equivalents - beginning - - 430,823 430,823 Cash and cash equivalents - ending $ 2,325,292 $ 1,820,505 $ 99,884 $ 4,245,681

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income $ 419,918 $ 936,255 $ 785,067 $ 2,141,240 Adjustments to reconcile operating income

to net cash provided (used) by operating activities: (Increase) decrease in assets:

Accounts receivable - - (38,306) (38,306) Due from other funds - - (8,372) (8,372) Prepaid items - (35,962) (11,233) (47,195) Unamortized bond issue costs - - 26,017 26,017

Increase (decrease) in liabilities: Accounts payable and other accrued liabilities 1,092,749 107,597 (24,611) 1,175,735

Total adjustments 1,092,749 71,635 (56,505) 1,107,879

Net cash provided by operating activities $ 1,512,667 $ 1,007,890 $ 728,562 $ 3,249,119

See accompanying independent auditors' report.

111

FIDUCIARY FUNDS

AGENCY FUNDS

Agency Funds are used to account for assets held in an agency capacity for others and therefore cannot be used to support the City’s own programs.

• School Impact Fee Fund – used to account for the City’s collection of school impact fees, at the time of building permit issuance, for the Lee County School Board.

• Solid Waste Fund – used to account for the City’s collection of solid waste fees for Waste Management Inc. who performs the solid waste collection and disposal services for the City.

112

City of Cape Coral, Florida

COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS

For the Year Ended September 30, 2005

School Impact Solid Total

Fee Waste Agency Fund Fund Funds

ASSETS Cash and cash equivalents $ 1,824,528 $ 791,771 $ 2,616,299 Accounts receivable - 7,207 7,207

Total assets $ 1,824,528 $ 798,978 $ 2,623,506

DUE TO OTHERS (OCTOBER 1, 2004) $ 1,011,104 $ 1,303,502 $ 2,314,606

Additions: Collections 17,900,129 9,008,855 26,908,984 Investment income - 34,891 34,891

Total additions 17,900,129 9,043,746 26,943,875

Deductions: Remittances to Lee County School Board 17,086,705 - 17,086,705 Remittances to Waste Management - 9,548,270 9,548,270

Total deductions 17,086,705 9,548,270 26,634,975

Total due to others ending balance $ 1,824,528 $ 798,978 $ 2,623,506

See accompanying independent auditors' report.

113

FLORIDA

114

STATISTICAL SECTION

The City has implemented Governmental Accounting Standards Board (GASB) Statement No. 44, Economic Condition Reporting: The Statistical Section.

The Statistical Section presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health.

Contents Page

Financial Trends 116

These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time.

Revenue Capacity 121

These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax.

Debt Capacity 125

These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future.

Note: the Constitution of the State of Florida (FS 200.181) and City of Cape Coral set no legal debt limit.

Demographic and Economic Information 130

These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place.

Operating Information 132

These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs.

115

City of Cape Coral, Florida

NET ASSETS BY COMPONENT Last Four Fiscal Years

(accrual basis of accounting)

Schedule 1

2002 2003 Fiscal Year

2004 2005

Governmental activities Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets

$ 51,044,833 $ 11,833,08431,307,63894,185,555

75,136,338 $ 19,804,599 20,549,325 115,490,262

88,466,290 13,565,206 45,160,111 147,191,607

$ 103,796,429 19,649,05066,703,408

190,148,887

Business-type activities Invested in capital assets, net of related debt Restricted Unrestricted Total business-type activities net assets

129,328,40611,009,385

101,995,077242,332,868

131,999,783 10,301,964 123,725,827 266,027,574

159,799,431 104,638,936 13,620,522 278,058,889

201,904,57390,652,25321,306,707

313,863,533

Primary government Invested in capital assets, net of related debt Restricted Unrestricted Total primary government net assets

180,373,23922,842,469

133,302,715$ 336,518,423 $

207,136,121 30,106,563 144,275,152

381,517,836 $

248,265,721 118,204,142 58,780,633

425,250,496 $

305,701,002110,301,303

88,010,115 504,012,420

Source: City of Cape Coral, Financial Services Department

See accompanying independent auditors' report.

116

City of Cape Coral, Florida

CHANGES IN NET ASSETS Last Four Fiscal Years

(accrual basis of accounting)

Schedule 2

2002 2003 Fiscal Year

2004 2005

Expenses Governmental activities: General Government Public Safety: Police Fire Public Works Community Development Parks and Recreation Transportation Interest on long-term debt Total governmental activities expenses

$ 10,959,838 $

15,540,42811,333,512

4,869,5494,322,2737,327,4649,629,9531,646,963

65,629,980

15,882,687 $ 32,483,423

16,681,383 20,228,887 12,343,150 14,273,912 5,086,678 4,207,769 1,130,261 3,153,439 7,565,632 9,500,683 9,645,598 11,445,235 1,518,503 1,419,049 69,853,892 96,712,397

$ 19,331,574

23,521,55517,912,944

5,250,4954,033,4979,417,001

12,680,7512,680,674

94,828,491

Business-type activities: Water and Sewer Building Division Stormwater Yacht Basin Golf Course Water Park Total business-type activities expenses Total primary government expenses

34,255,664-

5,945,177143,507

1,727,9792,080,358

44,152,685$ 109,782,665 $

38,977,836 45,904,247 3,575,291 5,158,906 6,986,521 7,525,921 164,781 183,931 1,701,144 1,878,730 2,275,012 2,565,119 53,680,585 63,216,854

123,534,477 $ 159,929,251 $

53,051,2857,420,5178,135,912

242,9621,961,1592,360,455

73,172,290 168,000,781

Program Revenues Governmental activities: Charges for services:

General Government Public Safety: Police Fire Public Works Community Development Parks and Recreation Transportation Operating grants and contributions Capital grants and contributions Total governmental activities program revenues

$ 10,298,469 $

310,942330,156

-1,226,8752,205,883

127,54112,702,429

8,122,57335,324,868

8,834,807 $ 10,878,526

237,594 259,244 285,015 401,970

- 15,303 888,275 1,398,526 2,306,109 2,985,738 562,680 104,081 13,894,413 17,825,996 15,042,520 20,428,062 42,051,413 54,297,446

$ 10,664,945

633,583673,631

-1,935,3312,525,275

112,3653,458,325

29,071,464 49,074,919

Business-type activities: Charges for services: Water and Sewer Building Division Stormwater Yacht Basin Golf Course Water Park Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues

26,477,496-

6,783,541189,194

1,549,9941,998,768

-13,946,02950,945,022

$ 86,269,890 $

27,184,806 29,909,329 5,017,511 5,894,614 9,241,823 7,504,414 247,277 295,511 1,412,752 1,524,491 1,978,423 2,068,956

- - 24,320,832 19,021,807 69,403,424 66,219,122

111,454,837 $ 120,516,568 $

33,666,82510,666,495

9,056,326295,985

1,731,5922,256,9459,200,341

42,976,333 109,850,842 158,925,761

Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense

$

$

(30,305,112) 6,792,337

(23,512,775)

$

$

(27,802,479) 15,722,839

(12,079,640)

$

$

(42,414,951) 3,002,268

(39,412,683)

$

$

(45,753,572) 36,678,552 (9,075,020)

Source: City of Cape Coral, Financial Services Department

See accompanying independent auditors' report.

117

City of Cape Coral, Florida

CHANGES IN NET ASSETS (continued) Last Four Fiscal Years

(accrual basis of accounting)

Schedule 2

2002 2003 Fiscal Year

2004 2005

General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes, levied for general purpose Property taxes, levied for debt service Sales Half-cent sales Fuel Alcohol and beverage Mobile home Franchise Communication Gas Interest income Gain on sale of capital assets Transfers Total governmental activities

$ 27,487,408 $ 32,441,753 $ 1,716,813 1,712,396

- -- -- -- -- -

3,298,084 3,379,802 3,469,719 3,791,547 6,038,163 6,407,369 1,267,675 951,489

- 138,387 4,911,096 1,751,499

48,188,958 50,574,242

41,014,450 1,580,954 2,099,547 11,183,747 954,360 43,615

- 3,664,368 3,963,298 7,561,087 872,899 812,583 365,388 74,116,296

$ 51,986,689 1,575,5112,804,348

11,904,7981,262,724

43,557913

4,393,5994,396,0467,493,1111,386,539

64,1781,398,839

88,710,852

Business-type activities: Property taxes, levied for debt service Interest income Debt service escrow refund Gain on sale of capital assets Transfers Total business-type activities Total primary government

1,584,900 1,401,052 5,846,154 7,193,049

- -- -

(4,911,096) (1,751,499)2,519,958 6,842,602

$ 50,708,916 $ 57,416,844 $

1,385,189 8,009,246

--

(365,388) 9,029,047

83,145,343 $

525,274---

(1,398,839) (873,565)

87,837,287

Change in Net Assets Governmental activities Business-type activities Total primary government

$ 17,883,846 $ 22,771,763 $ 9,312,295 $ 22,565,441 $

$ 27,196,141 $ 45,337,204 $

31,701,345 12,031,315 43,732,660

$ $ $

42,957,280 35,804,987 78,762,267

Source: City of Cape Coral, Financial Services Department

See accompanying independent auditors' report.

118

City of Cape Coral, Florida

FUND BALANCES OF GOVERNMENTAL FUNDS Last Four Fiscal Years

(modified accrual basis of accounting)

Schedule 3

Fiscal Year

General Fund Reserved Unreserved Total General Fund

All Other Governmental Funds Reserved Unreserved, reported in: Special Revenue funds Capital Projects funds Total all other governmental funds

2002

$ 2,191,403 15,606,941

$ 17,798,344

$ 6,268,123

13,920,4437,889,775

$ 28,078,341

$

$

$

$

2003

2,548,687 10,994,631

13,543,318

7,677,615

17,501,320 4,317,836

29,496,771

$

$

$

$

2004

6,088,852 15,259,301

21,348,153

13,173,792

10,975,403 4,248,312

28,397,507

$

$

$

$

2005

4,554,988 11,851,182 16,406,170

49,405,305

4,161,004(12,218,355) 41,347,954

Source: City of Cape Coral, Financial Services Department

See accompanying independent auditors' report.

119

City of Cape Coral, Florida

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Four Fiscal Years

(modified accrual basis of accounting)

Schedule 4

Fiscal Year 2002 2003 2004 2005

Revenues Taxes $ 42,010,187 $ 47,732,867 $ 72,065,426 $ 85,861,296 Special assessments 218,292 177,162 141,808 126,121 Licenses, fees and permits 4,518,683 595,301 1,146,345 1,213,991 Intergovernmental 14,265,213 16,883,190 5,292,181 17,508,699 Charges for services 7,418,862 10,078,573 11,396,499 11,908,067 Fines and forfeitures - - - 1,122,766 Impact fees 6,341,497 10,082,109 16,963,652 26,346,434 Rent and royalties - - - 73,430 Interest income 1,267,675 951,489 872,899 1,796,056 Contributions and donations - - - 27,345 Other revenue 2,189,460 2,289,559 2,180,088 2,346,537 Total revenues 78,229,869 88,790,250 110,058,898 148,330,742

Expenditures General Government 10,247,971 14,681,525 26,892,081 24,937,115 Public Safety: Police 14,873,738 15,722,576 19,253,063 22,363,945 Fire 10,809,765 11,694,559 13,881,777 17,636,755 Public Works 4,761,834 4,920,654 3,818,081 4,773,700 Parks and Recreation 6,567,628 6,746,164 7,963,913 9,007,597 Community Development 4,232,817 1,122,139 3,130,936 4,009,419 Transportation 7,483,210 8,126,628 9,255,058 10,243,903 Capital outlay 18,445,025 24,774,582 23,451,754 50,057,897 Debt service: Principal 2,141,868 2,953,153 4,471,459 3,913,358 Interest and fiscal charges 1,489,339 1,370,407 1,353,404 1,822,157 Total expenditures 81,053,195 92,112,387 113,471,526 148,765,846

Excess revenues under expenditures (2,823,326) (3,322,137) (3,412,628) (435,104)

Other Financing Sources (Uses) Transfers in 17,737,441 9,766,023 25,528,911 31,580,095 Transfers out (12,800,607) (7,914,437) (25,035,133) (31,801,256) Issuance of debt - 10,470,000 7,500,000 20,550,000 Payment to escrow agent to refund bonds - (10,577,963) - (12,049,294) Capital leases - - 338,551 -Sale of capital assets - - 1,785,870 164,018 Total other financing sources 4,936,834 1,743,623 10,118,199 8,443,563

Net change in fund balances $ 2,113,508 $ (1,578,514) $ 6,705,571 $ 8,008,459

Debt service as a percentage of noncapital expenditures 5.80% 6.42% 6.47% 5.81%

Source: City of Cape Coral, Financial Services Department

See accompanying independent auditors' report.

120

City of Cape Coral, Florida

ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years

Fiscal Year

Ended Real Personal September 30, Property Property

1996 $ 4,365,065,210 $ 1997 4,378,139,670 1998 4,400,195,440 1999 4,568,871,040 2000 4,837,998,090 2001 5,232,437,720 2002 5,883,793,170 2003 7,202,959,160 2004 9,538,643,660 2005 12,326,425,350

Source: Lee County Property Appraiser

See accompanying independent auditors' report.

196,298,980 198,190,150 200,228,560 181,984,860 184,884,510 211,217,140 229,196,520 286,116,930 317,447,520 338,447,130

Schedule 5

Less: Tax Exempt

Property $ 913,285,100

944,319,590 961,646,430

1,008,640,680 1,090,549,960 1,205,876,950 1,398,401,030 1,880,541,550 2,555,891,070 3,236,848,620

Total Taxable Assessed

Value $ 3,648,079,090 $ 6.27 $ 4,561,364,190 79.98 %

3,632,010,230 6.27 4,576,329,820 79.37 3,638,777,570 6.27 4,600,424,000 79.10 3,742,215,220 6.89 4,750,855,900 78.77 3,932,332,640 6.85 5,022,882,600 78.29 4,237,777,910 6.78 5,443,654,860 77.85 4,714,588,660 6.52 6,112,989,690 77.12 5,608,534,540 6.38 7,489,076,090 74.89 7,300,200,110 6.11 9,856,091,180 74.07 9,428,023,860 5.76 12,664,872,480 74.44

Total Estimated Assessed Direct Actual Value as a Tax Taxable Percentage of Rate Value Actual Value

121

City of Cape Coral, Florida

PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS

Last Ten Fiscal Years

Schedule 6

City of Cape Coral Overlapping Rates Total

General Direct General Obligation &

Fiscal Government Debt General School Overlapping Year Services Service Total County Board Other(1) Rates

1996 5.4298 0.8376 6.2674 4.7470 9.348 1.851 22.2134 1997 5.4298 0.8376 6.2674 4.4751 9.245 2.375 22.3625 1998 5.4298 0.8376 6.2674 4.4751 9.306 2.927 22.9755 1999 5.9873 0.9056 6.8929 4.4751 9.306 3.018 23.6920 2000 5.9873 0.8605 6.8478 4.4751 8.941 3.550 23.8139 2001 5.9873 0.7914 6.7787 4.3277 8.798 3.525 23.4294 2002 5.8033 0.7144 6.5177 4.3277 8.478 3.525 22.8484 2003 5.8033 0.5712 6.3745 4.3277 8.580 3.501 22.7832 2004 5.6831 0.4218 6.1049 4.3277 8.346 3.260 22.0386 2005 5.5287 0.2311 5.7598 4.2612 8.065 2.903 20.9890

122

Source: Lee County Property Appraiser

(1) Other consists of Lee County Capital Improvement, Lee County All Hazards, Lee County Library, and Lee County Unincorporated MSTU.

See accompanying independent auditors' report.

City of Cape Coral, Florida

PRINCIPAL PROPERTY TAXPAYERS(1)

Current Year and Nine Years Ago

Schedule 7

2005 1996

Taxpayer Theiman Enterprises LLC K. Hovnanian First Homes LLC Adams Homes of NW Florida, Inc. Eagle Gregory W. Trust GRE Coralwood LP Tarpon Point Associates LLC HWA Properties Inc. Lowes Home Centers Inc. Sydass Investments Ltd. Paradise Preserve LLC Avatar Properties, Inc. Coralwood Partners Wal-Mart Stores Incorporated Fullenkamp Family Nevins, John (Bishop) Gomez, Jack Net Realty Holding Trust Manner, Richard Euchre Group Total

Taxable Assessed

Value $ 47,763,360

41,122,890 32,296,220 27,520,690 20,318,790 19,711,050 15,533,200 13,277,160 13,200,080 12,484,270

---------

$ 243,227,710

Rank 1 2 3 4 5 6 7 8 9

10

Percentage of Total City

Taxable Assessed Value(2)

.51 %

.44

.34

.29

.22

.21

.16

.14

.14

.13 ---------

2.58 %

Taxable Assessed

Value ---

3,618,530 ------

81,705,090 13,177,130 9,668,710 8,501,280 6,543,130 5,707,140 4,812,610 3,669,310 3,618,270

$ 141,021,200

Rank

9

1 2 3 4 5 6 7 8

10

Percentage of Total City Assessed Value(2)

- % ---------

2.24 .36 .27 .23 .18 .16 .13 .10 .10

3.77 %

(1) Source: City of Cape Coral, Financial Services Department (2) Source: Lee County Property Appraiser

The total taxable assessed value of Cape Coral for 2005 is $9,428,023,860. The total taxable assessed value of Cape Coral for 1996 is $3,648,079,090.

See accompanying independent auditors' report.

123

City of Cape Coral, Florida

PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years

Schedule 8

Collected within the Fiscal Year of the Levy(2) Total Collections to Date

Fiscal Year Taxes Levied Collections

Ended September 30,

for the Fiscal Year(1) Amount

Percentage of Levy

in Subsequent Years(3) Amount

Percentage of Levy

1996 $ 22,863,971 $ 22,679,900 99.19 % $ 532 $ 22,680,432 99.20 % 1997 22,763,261 22,538,010 99.01 1,595 22,539,605 99.02 1998 22,805,674 22,547,070 98.87 1,925 22,548,995 98.87 1999 25,794,715 25,494,110 98.83 2,356 25,496,466 98.84 2000 26,927,903 26,621,859 98.86 2,694 26,624,553 98.87 2001 28,726,625 28,464,930 99.09 6,326 28,471,256 99.11 2002 30,728,274 30,789,121 100.20 6,748 30,795,869 100.22 2003 35,751,603 35,555,201 99.45 78,115 35,633,316 99.67 2004 44,566,991 43,980,593 98.68 53,412 44,034,005 98.80 2005 54,303,532 54,087,475 99.60 - 54,087,475 99.60

(1) Source: Lee County Property Appraiser Property taxes are levied on November 1 of each year, and are due and payable upon receipt of the notice of the levy. A 4% discount is allowed if the taxes are paid in November, with the discount declining by 1% each month therafter. Accordingly, taxes collected will not be 100% of tax levy. Taxes become delinquent on April 1 of each year, and tax certificates for the full amount of any unpaid taxes and assessments are sold at public auction prior to June 1 of each year, and the proceeds collected are remitted to the City.

(2) Source: City of Cape Coral, Financial Services Department

(3) Information on collections in subsequent years available for 2004 and 2005 only.

See accompanying independent auditors' report.

124

City of Cape Coral, Florida

RATIOS OF OUTSTANDING DEBT BY TYPE(1)

Last Ten Fiscal Years

Schedule 9

Fiscal Year

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

General Obligation

Bonds

$ 15,720,000 14,805,000 13,860,000 12,875,000 11,845,000 10,765,000 9,635,000 8,705,000 7,350,000 5,935,000

$

Governmental Activities Capital Commercial General

Revenue Leases Paper Notes Obligation Bonds Payable Obligation Payable Bonds

2,509,950 $ 2,200,312 $ - $ 465,109 $ 9,899,710 2,417,150 942,339 - 1,407,997 8,896,836 2,321,450 254,338 - 3,273,353 7,848,961 2,221,400 134,027 - 1,725,366 6,751,087

17,308,450 1,354,935 - 851,993 5,593,398 16,846,150 1,074,024 - 601,656 4,415,525 16,366,600 788,252 - 355,110 3,162,650 15,855,000 2,558,150 - 161,777 1,999,775 22,485,207 811,712 26,000,000 - 762,087 29,500,104 433,457 45,180,000 - -

Business-Type Activities Special

Revenue Notes Assessment Bonds Payable Debt

$ 40,915,415 $ - $ -39,842,650 - -38,210,786 77,475,571 87,975,868 36,980,662 - -35,672,622 - -40,271,387 64,784,179 27,017,180 38,056,070 72,472,051 22,628,579 35,851,054 97,255,110 53,788,418 32,278,969 110,964,788 30,320,008 30,638,593 37,459,300 96,675,823

Capital Leases Payable

$ --

280,920 --

300,779 190,947

79,389 -

277,379

Total Primary

Government -

$ 71,710,496 68,311,972

231,501,247 60,687,542 72,626,398

166,075,880 163,655,259 216,253,673 230,972,771 246,099,656

Percentage of Personal

(2) Income

3.52 % 3.35

11.36 2.98 3.56 8.15 8.03

10.61 11.33 12.07

Per Capita(2)

$ 833 842

2,856 749 895

2,049 2,019 2,668 2,849 3,035

Source: City of Cape Coral, Financial Services Department

(1) Details regarding the City's outstanding debt can be found in the notes to the financial statements.

(2) See Schedule 13 for personal income and population data. These ratios are calculated using personal income and population for prior calendar year.

See accompanying independent auditors' report.

125

City of Cape Coral

RATIOS OF GENERAL BONDED DEBT OUTSTANDING(1)

Last Ten Fiscal Years

Schedule 10

Fiscal Year

General Obligation

Bonds

Less: Amounts Available in Debt

Service Fund Total

Percentage of Estimated

Actual Taxable Property(2)

Per Capita(3)

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

$ 25,619,710 23,701,836 21,708,961 19,626,087 17,438,398 15,180,525 12,797,650 10,704,775

8,112,087 5,935,000

$ - $ 25,619,710 16,789 23,685,047 23,537 21,685,424 66,363 19,559,724

175,757 17,262,641 178,924 15,001,601 312,646 12,485,004 369,774 10,335,001 337,346 7,774,741 269,966 5,665,034

.56 %

.52

.47

.41

.34

.28

.20

.14

.08

.04

$ 132.52 130.75 120.16 113.32

87.96 74.65 55.04 40.39 23.23 12.01

Source: City of Cape Coral, Financial Services Department

(1) Details regarding the City's outstanding debt can be found in the notes to the financial statements.

(2) See Schedule 5 for property value data.

(3) Population data can be found in Schedule 13.

See accompanying independent auditors' report.

126

City of Cape Coral, Florida

DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT As of September 30, 2005

Schedule 11

Estimated Estimated Share of

Debt Percentage Overlapping Governmental Unit Outstanding Applicable Debt Debt repaid with property taxes Lee County $ 247,741,000 (1) 18.756% (2) $ 46,466,302

City direct debt 81,048,561 (3)

Total direct and overlapping debt $ 127,514,863

127

(1) Source: Lee County Clerk of Court, Finance Division

(2) Determined by dividing: taxable assessed valuation of the City of Cape Coral (see Schedule 5) $ 9,428,023,860 by the total taxable valuation of Lee County. $ 50,266,648,842

(3) Source: City of Cape Coral, Financial Services Department (see Schedule 9 governmental activities).

See accompanying independent auditors' report.

City of Cape Coral, Florida

PLEDGED-REVENUE COVERAGE Last Ten Fiscal Years

Schedule 12

Water and Sewer Debt

Fiscal Year

Operating Revenues(1)

Less: Operating

Expenses(2)

Net Available Revenue for

Debt Services Debt Service Requirements(3)

Principal Interest Total Coverage(4)

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

$ 19,846,650 22,216,509 23,006,905 24,096,801 25,689,115 26,293,287 26,563,432 27,660,546 30,619,191 33,789,529

$ 12,374,498 13,163,876 13,126,601 12,579,690 12,341,507 13,621,303 14,828,630 18,043,818 22,038,017 24,364,481

$ 7,472,152 9,052,633 9,880,304

11,517,111 13,347,608 12,671,984 11,734,802

9,616,728 8,581,174 9,425,048

$ 1,940,213 $ 1,986,788 3,016,849 2,517,720 3,060,315 2,384,850 3,195,175 2,244,681 3,393,297 2,046,440 3,443,435 2,015,466 3,536,063 1,923,819 3,680,538 1,637,563 4,087,529 2,639,823 3,454,336 1,970,647

$ 3,927,001 5,534,569 5,445,165 5,439,856 5,439,737 5,458,901 5,459,882 5,318,101 6,727,352 5,424,983

1.90 1.64 1.81 2.12 2.45 2.32 2.15 1.81 1.28 1.74

Source: City of Cape Coral, Financial Services Department

(1) Includes interest income; excludes ad valorem taxes, refund from debt escrow and gain on disposal of assets.

(2) Excludes depreciation expense, interest expense, and bond discount amortization.

(3) Includes all debt with a pledge of net revenues and expansion fees of the utility system.

(4) Bond covenant requires net revenues adequate to pay at least 100% of the annual debt service on all outstanding bonds becoming due in such fiscal year.

(5) Includes interest income.

(6) Includes only debt being funded by the net revenue of the system.

See accompanying independent auditors' report.

128

Stormwater Debt Less:

Operating Operating Revenues(5) Expenses(2)

$ 5,405,424 $ 3,584,744 5,782,125 3,995,630 5,652,374 3,123,945 5,384,878 3,654,270 5,894,667 3,145,386 6,345,724 4,098,461 6,958,848 4,244,836 9,362,738 5,341,900 7,597,554 5,896,534 9,145,111 6,421,991

Net Available Revenue for Debt Service

$ 1,820,680 1,786,495 2,528,429 1,730,608 2,749,281 2,247,263 2,714,012 4,020,838 1,701,020 2,723,120

Debt Service Requirements(6)

Principal Interest Total Coverage

$ 240,000 $ 426,546 $ 250,000 414,169 265,000 400,643 280,000 385,854 295,000 369,894 310,000 352,799 330,000 334,394 380,000 193,831 390,000 181,481 506,677 166,856

666,546 2.73 664,169 2.69 665,643 3.80 665,854 2.60 664,894 4.13 662,799 3.39 664,394 4.08 573,831 7.01 571,481 2.98 673,533 4.04

129

City of Cape Coral, Florida

DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Calendar Years

Schedule 13

Per Capita

Personal Personal Median School Unemployment Year Population(1) Income Income(1) Age(2) Enrollment(3) Rate(4)

1996 88,119 $ 2,215,664,136 $ 25,144 40 12,409 4.0 % 1997 90,484 2,313,404,428 25,567 40 12,514 3.4 1998 93,017 2,570,989,880 27,640 42 12,412 3.2 1999 97,637 2,525,869,190 25,870 42 12,590 2.7 2000 102,067 2,721,106,220 26,660 40 13,097 2.7 2001 107,377 2,955,122,417 27,521 40 13,542 2.7 2002 114,919 3,315,528,069 28,851 42 13,994 3.8 2003 124,449 3,613,625,613 29,037 42 15,504 4.3 2004 133,995 4,021,591,935 30,013 42 16,535 3.6 2005 147,011 3,696,591,595 25,145 42 17,345 3.4

130

(1) Source: Lee County Economic Development (per capita is for entire Lee County as City of Cape Coral is not available)

(2) Source: City of Cape Coral, Department of Community Development, Division of Growth and Land Management

(3) Source: School District of Lee County

(4) Source: Department of Labor, Bureau of Labor Statistics

See accompanying independent auditors' report.

City of Cape Coral, Florida

PRINCIPAL EMPLOYERS(1)

Current Year and Five Years Ago

Schedule 14

2005 2000(2)

Percentage Percentage of Total City of Total City

Employer Employees Rank Employment(3) Employees Rank Employment

Lee County School District 3,628 1 5.41 % 1,117 1 2.17 % City of Cape Coral(4) 1,702 2 2.54 1,091 2 2.12 Cape Coral Hospital 1,524 3 2.27 904 3 1.76 Publix Super Market 922 4 1.37 782 4 1.52 Wal-Mart 572 5 .85 428 5 .83 McDonald's 290 6 .43 - - -Walgreen's 287 7 .43 - - -Lowes 275 8 .41 - - -Gulf Coast Village 250 9 .37 - - -Whitney Education Group 220 10 .33 - - -The Breeze - - - 169 6 .33 U.S. Post Office - - - 155 7 .30 Cape Coral Nursing Pavilion - - - 135 8 .26 Carnival Airlines - - - 120 9 .23 Kash 'n Karry - - - 108 10 .21

Source: City of Cape Coral, Economic Development Office, as of November, 2005.

(1) The data shows only employees working in the City of Cape Coral and does not include other jobs with the same employer located throughout Lee County.

(2) Year 2000 is the first year City of Cape Coral total City employment was tracked separately from Fort Myers. Total city employment was 51,418.

(3) The total city employment for 2005 was 67,227.

(4) Includes full time and contract employees.

See accompanying independent auditors' report.

131

City of Cape Coral, Florida

FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years

Schedule 15

Full-time Equivalent Employees as of September 30 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Function/Program

General Government 84 84 85 87 90 89 94 103 120 132 Public Safety Police 193 208 217 218 231 252 259 275 273 299 Fire 134 141 141 141 141 141 141 144 154 177 Public Works 154 153 151 147 62 63 66 59 49 53 Community Development 59 66 70 78 78 82 84 100 32 36 Parks and Recreation 132 135 132 132 130 143 151 155 177 201 Transportation(1) - - - - 82 86 87 99 109 116 Water and Sewer 165 179 177 181 179 180 182 188 192 204 Building Division(2) - - - - - - - - 89 130 Stormwater 155 59 56 59 65 68 73 83 93 91 Yacht Basin 4 4 2 2 2 2 2 2 2 3 Golf Course 36 36 39 40 38 37 40 41 38 39 Water Park 52 50 50 50 50 52 50 49 50 49

Total 1,168 1,115 1,120 1,135 1,148 1,195 1,229 1,298 1,378 1,530

Source: City of Cape Coral, Department of Financial Services

(1) For years 1996-1999 Transportation is included in Public Works.

(2) For years 1996-2003 Building Division is included in Community Development.

See accompanying independent auditors' report.

132

City of Cape Coral, Florida

OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years

Schedule 16

Fiscal Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Function/Program

Police Number of sworn officers 126 131 135 140 152 148 146 156 160 186 Total calls received 30,767 133,199 166,036 249,051 159,580 179,337 178,317 184,148 198,180 230,809 Number of crime scenes processed by evidence technician 62 86 276 275 198 285 304 426 445 589 Traffic citations issued (all units) 13,355 11,452 12,003 18,191 14,338 19,000 19,407 16,315 17,014 18,256 Vice, intelligence and narcotics arrests (1) 170 175 NA NA NA 46 152 594 843 675

Fire Number of firefighters and officers 126 135 133 133 134 130 136 134 142 162 Calls for service 8,299 8,655 8,454 9,304 10,290 11,167 11,100 11,720 15,045 16,187 Inspections NA 4,352 2,875 2,141 3,341 2,737 5,944 5,036 4,987 5,000

Public Works Tons of debris collected and disposed of 4.03 170 201 281 565 139 235 246 469 354 Lane miles of road surface restored 65 74 70 75 121 96 53 87 80 90

Community Development Contacts (counter and telephone) 37,608 27,799 34,400 18,254 19,462 19,938 32,414 23,979 22,276 22,524 Certificates of use 631 552 600 600 470 506 565 544 600 650 Sign permits issued 649 411 411 400 470 347 486 503 445 500

Parks and Recreation Programs held at art studio 52 132 136 174 191 134 146 166 159 156 Sessions held for aquatics 155 117 193 122 135 145 92 85 108 120 Senior centers memberships NA 2,946 1,653 1,710 1,533 1,547 1,506 1,203 1,295 1,531 Transportation program-total miles driven NA NA NA NA 64,584 65,126 64,040 78,061 76,793 77,513

Transportation Signs made 1,264 1,962 1,922 592 508 3,194 4,781 3,809 3,500 5,641 Centerline miles of roadway striped annually 97 58 75 147 147 138 104 104 145 95

Water and Sewer Finished water pumped to system (millions of gallons) 2,628 2,664 2,734 2,805 2,986 3,074 3,161 3,270 3,734 4,126 Dry tons of bio-solids generated 1,383 1,395 1,410 NA NA 1,343 1,428 1,523 1,600 1,941

Building Division Total inspections 43,917 48,793 81,738 89,911 62,944 69,541 91,652 228,088 320,179 187,665 Permits issued 16,522 17,562 11,594 22,141 25,190 26,241 35,312 43,883 58,139 82,642

Stormwater Utility Cubic yards dredged from canals 71,818 76,534 46,558 27,054 139,687 222,270 299,121 241,129 246,536 241,028 Swale requests received NA 240 300 300 484 428 428 460 441 626 Swale regraded(2) 36,534 28,707 32,355 25,960 471,566 452,125 452,125 493,511 607,122 450,000

Yacht Basin Average annual slip rentals NA 73 66 74 74 74 81 81 76 78

Golf Course Rounds played 56,366 57,473 44,898 61,497 52,089 54,789 53,943 51,526 54,000 54,390

Water Park Admissions 156,747 172,430 182,338 173,790 166,713 170,517 186,144 164,451 160,527 172,802

Sources: City of Cape Coral, Financial Services Department City of Cape Coral, Police Department City of Cape Coral, Public Works City of Cape Coral, Department of Community Development City of Cape Coral, Parks and Recreation City of Cape Coral, Building Division

(1) Numbers reflect juvenile arrests only 1996 - 2002. Number reflects adult and juvenile arrests 2003 - 2005.

(2) Linear feet of swale regraded 1996 - 1999. Cubic feet of swale regraded 2000 - 2005.

See accompanying independent auditors' report.

133

City of Cape Coral, Florida

CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years

Schedule 17

Fiscal Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Function/Program

Police Stations 1 1 1 1 1 1 1 1 1 1

Fire Stations 7 7 7 7 7 7 7 7 7 8

Public Works Paved alleys (miles) 10 10 10 10 10 10 10 12 12 12 Sidewalks (miles) 50 50 50 52 77 77 77 69 78 79

Parks and Recreation City owned developed parks 20 20 20 20 20 23 25 25 25 25 Number of developed acres 281 281 281 281 281 385 348 348 348 348 City owned undeveloped parks 33 29 29 29 30 32 25 25 25 25 Number of undeveloped acres 393 483 472 472 502 951 796 840 949 1,039 City owned senior centers 2 2 2 2 2 2 2 2 2 2 City owned boat launches, locks, and lifts 7 7 7 7 7 7 7 7 7 7

Transportation Paved streets (lane miles) 3,020 3,023 3,023 3,025 3,027 3,236 3,104 3,110 3,110 3,111

Water and Sewer Number of water connections 30,479 30,748 32,139 33,187 34,457 35,642 37,462 40,792 44,403 48,242 Number of sewer connections 28,154 28,369 29,815 30,699 31,216 32,138 33,513 36,330 39,475 42,315 Miles of water distribution 540 540 540 540 540 540 556 628 688 688

Stormwater Stormwater drainage pipes (miles) 475 475 575 575 485 485 485 485 488 517 Swales (miles) 6,000 6,000 3,500 3,500 2,897 2,897 2,897 2,897 2,897 2,788 Catch basins(1) 45,000 45,000 45,000 45,000 45,781 45,781 45,781 45,781 45,781 23,786

Yacht Basin Boat slips 89 89 89 89 89 89 89 89 89 89

Golf Course City owned golf courses 1 1 1 1 1 1 1 1 1 1

Water Park City owned water park facilities 1 1 1 1 1 1 1 1 1 1

Sources: City of Cape Coral, Financial Services Department City of Cape Coral, Police Department City of Cape Coral, Public Works City of Cape Coral, Department of Community Development City of Cape Coral, Parks and Recreation City of Cape Coral, Building Division

(1) For years 1996-2004 this included all outfalls, ditch outlets and other stormwater points or connections. Starting in year 2005, the City has Geographic Information Systems (GIS) which can querry on the individual items to be counted that are actual maintenance structures such as storm drain inlets.

See accompanying independent auditors' report.

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SINGLE AUDIT

135

KPMG LLP Suite 1700 100 North Tampa Street Tampa, FL 33602

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit

of Financial Statements Performed in Accordance with Government Auditing Standards

The Honorable Mayor and Members of the City Council City of Cape Coral, Florida:

We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Cape Coral, Florida (the City), as of and for the year ended September 30, 2005, which collectively comprise the City's basic financial statements and have issued our report thereon dated March 10, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We noted certain matters that we reported to management of the City of Cape Coral, Florida in a separate letter dated March 10, 2006.

136 KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative.

This report is intended solely for the information and use of the Mayor, Members of the City Council, and management of the City, and federal and state awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.

March 10, 2006 Certified Public Accountants

137

KPMG LLP Suite 1700 100 North Tampa Street Tampa, FL 33602

Independent Auditors' Report on Compliance with Requirements Applicable to Each Major Program an on Internal Control Over Compliance in Accordance with

0MB Circular A-133 and Chapter 10.550, Rules of the Auditor General

The Honorable Mayor and Members of the City Council City of Cape Coral, Florida:

Compliance

We have audited the compliance of the City of Cape Coral, Florida (the City), with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement and the requirements described in the Executive Office of the Governor's State Projects Compliance Supplement that are applicable to each of its major federal programs and state projects for the year ended September 30, 2005. The City's major federal programs and state projects are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs and state projects is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; 0MB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations; and Chapter 10.550, Rules of the Auditor General. Those standards, 0MB Circular A-133 and Chapter 10.550, Rules of the Auditor General, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state project occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City's compliance with those requirements.

In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs and state projects for the year ended September 30, 2005.

Internal Control Over Compliance

The management of the City is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs and state projects. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program or state project in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with 0MB Circular A-133 and Chapter 10.550, Rules of the Auditor General.

Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or

138 KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative.

operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants caused by error or fraud that would be material in relation to a major federal program or a state project being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.

This report is intended solely for the information and use of the Mayor, Members of the City Council and management of the City, and federal and state awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

March 10, 2006 Certified Public Accountants

139

City of Cape Coral, Florida

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE For the Year Ended September 30, 2005

Federal Federal or CFDA

Federal agency/program title number pass through grant number Expenditures

Transfers to Subrecipients

State Match

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT:

Community Planning and Development: Community Development Block Grants/Entitlements 14.218

U.S. DEPARTMENT OF JUSTICE:

B05MC120027 B04MC120027 B03MC120027

$ 629,602 285,253 19,369

934,224 $ 782,452

Office of Justice Programs (OJP): Passed-Through State of Florida, Department of Legal Affairs and Lee County, Florida:

Crime Victim Assistance: Victims of Crime Act (V.O.C.A.) 16.575 V3266 25,773

U.S. DEPARTMENT OF JUSTICE: 16.579 Office of Justice Programs (OJP)

Passed-Through State of Florida, Department of Community Affairs and Lee County, Florida:

Byrne Formula Grant: Combined Law Enforcement Against Narcotics

(C.L.E.A.N) Drug Enforcement Agency (DEA)

01-CJ-J1-09-46-01-150 NA

37,119 34,096 71,215

Office of Justice Programs (OJP): Local Law Enforcement Block Grants:

Bureau of Justice Assistance VIII 16.592 2003-LB-BX-2100 17,201

Office of Justice Programs (OJP): Edward Byrne Justice Assistance Grant 16.738 2005-DJ-BX-1349 2,400

Office of Community Oriented Policing Services: Public Safety Partnership and Community Policing Grants: 16.710

Cops Universal IIICops Universal IV

DEPARTMENT OF HOMELAND SECURITY

95-CC-WX-0298 2003-UM-WX-0345

124,997 171,090 296,087

Passed-Through State of Florida, Department of Community Affairs:

Homeland Security Training 97.004 HazMat Equipment Grant

05-DS-2N-09-46-02-315 05-DS-2N-09-46-01-372

3,500 49,997 53,497

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES:

Administration for Children and Families: Passed-Through State of Florida, Department of Children and Families:

Social Services Block Grant: 93.667 Special Populations N/A 131,249

FEDERAL EMERGENCY MANAGEMENT AGENCY: Office of Financial Management:

Passed-Through State of Florida, Department of Community Affairs:

Public Assistance Grants: 97.036 Hurricane Charley FEMA-1539-DR-FL FIPS No. 071-10275-00 6,951,404 772,378 *

U.S. DEPARTMENT OF TRANSPORTATION Federal Highway Administration:

Passed-Through State of Florida, Department of Transportation:

Highway Planning and Construction 20.205 Del Prado Street Lighting Hurricane Charley

AM227 FPN No. 417654-1-78-01

86,133 713,700 799,833

U.S. DEPARTMENT OF AGRICULTURE: Natural Resources Conservation Service:

Emergency Watershed Protection Program Recovery 10.904 Assistance - Hurricane Charley

69-4209-5-1631 1,016,799

TOTAL EXPENDITURES OF FEDERAL AWARDS $ 10,299,682 $ 782,452 $ 772,378

* Matching funds received from the State of Florida, Department of Community Affairs. State contract number: 05-PA-C%-09-46-02-603

140

City of Cape Coral, Florida

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE (continued)

For the Year Ended September 30, 2005

State agency/program title

STATE OF FLORIDA, DEPARTMENT OF ENVIRONMENTAL PROTECTION:

Water Resource Management: Gator Slough Project-Phase IV Gator Slough Project-Phase V Reclaimed Water ASR Phase I

State CSFA

number

37.039

State contract/ grant number

WAP 037 IA050214

DG050239

State expenditures

$ 70,347 261,706 50,663

382,716

Transfers to Subrecipients

State Match

STATE OF FLORIDA, DEPARTMENT OF EDUCATION:

Passed-Through Lee County School Board: School and Instructional Enhancement Programs:

Drug Abuse Resistance Education (D.A.R.E.)

STATE OF FLORIDA, FLORIDA HOUSING FINANCE CORPORATION:

State Housing Initiatives Partnership Program (S.H.I.P.)

48.040

52.901

N/A

N/A

272,120

990,169 $ 906,900

STATE OF FLORIDA, DEPARTMENT OF CHILDREN AND FAMILIES:

Community Development Services: Special Populations 60.004 N/A 108,996

TOTAL EXPENDITURES OF STATE FINANCIAL ASSISTANCE 1,754,001 906,900 -

TOTAL EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE $ 12,053,683 $ 1,689,352 $ 772,378

141

City of Cape Coral, Florida

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE

September 30, 2005

NOTE 1. PURPOSE OF THE SCHEDULE

The Schedule of Expenditures of Federal Awards and State Financial Assistance (the Schedule) is a supplementary schedule to the City’s basic financial statements and is presented for purposes of additional analysis. The Schedule is required by the Office of Management and Budget (OMB) Circular A-133, Audits of State and Local Governments, and Non-Profit Organizations and by Chapter 3A-5, Rules of the Florida Department of Banking and Finance, Florida Administrative Code, Schedule of Expenditures of State Financial Assistance.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation

Federal Financial Assistance – Pursuant to the Single Audit Act of 1984 (Public Law 98-502), the Single Audit Act Amendments of 1996 (Public Law 104-156), and OMB Circular A-133, federal financial assistance is defined as assistance provided by a federal agency, either directly or indirectly, that nonfederal entities receive or administer, in the form of grants, contracts, cooperative agreements, loans, loan guarantees, property interest subsidies, insurance, or direct appropriations.

State Financial Assistance – Pursuant to Florida Single Audit Act (Section 215.97, Florida Statutes) and Chapter 27D-1, Rules of the Executive Office of the Governor, Florida Administrative Code, state financial assistance is defined as assistance from state resources, not including federal financial assistance and state matching, provided to nonstate entities to carry out a state project. State Financial Assistance includes all types of state assistance as stated in the rules of the Executive Office of the Governor, established in consultation with the Comptroller and appropriate state agencies that provide state financial assistance. It includes state financial assistance provided directly by state awarding agencies or indirectly by recipients of state awards or subrecipients. It does not include procurement contracts used to buy goods or services from vendors.

Catalog of Federal Domestic Assistance – OMB Circular A-133 requires the Schedule to present the total expenditures for each of the City’s federal financial assistance programs as identified in the Catalog of Federal Domestic Assistance (CFDA). The CFDA is a government-wide compendium of individual federal programs. Federal financial assistance programs that have not been assigned a CFDA number are indicated with an “N/A.”

Catalog of State Financial Assistance – Chapter 3A-5, Rules of the Florida Department of Banking and Finance, Florida Administrative Code requires the Schedule to present the total state financial assistance expended for each individual state project as identified in the Catalog of State Financial Assistance (CSFA). The CSFA is a comprehensive listing of state projects. State financial assistance projects that have not been assigned a CSFA number are indicated with an “N/A.”

B. Type A and Type B Programs

The Single Audit Act Amendments of 1996 and OMB Circular A-133 establish the levels of expenditures to be used in defining Type A and Type B federal financial assistance programs. Type A assistance programs for the City of Cape Coral are those programs that exceeded $308,991 for federal assistance and $300,000 for state projects for the year ended September 30, 2005.

Each nonstate entity that expends a total amount of state financial assistance equal to or in excess of $500,000 in any fiscal year is required to have a state single audit for such fiscal year in accordance with the requirements of the Florida Single Audit Act (Section 215.97, Florida Statutes).

C. Reporting Entity

The Schedule includes all federal financial assistance programs and state projects administered by the City of Cape Coral and included in the City’s Comprehensive Annual Financial Report.

142

D. Basis of Accounting

Expenditures included in the Schedule are reported using the modified accrual basis of accounting for governmental funds and the accrual basis of accounting for enterprise funds as defined in Note I to the basic financial statements.

NOTE 3. SUBRECIPIENTS

Of the federal expenditures presented in the Schedule, the City of Cape Coral provided federal awards to subrecipients as follows:

Federal CFDA Amount Provided Program title Number to Subrecipients

Community Development Block Grant – Entitlement Grants 14.218 $782,452

Of the state expenditures presented in the Schedule, the City of Cape Coral provided state financial assistance to subrecipients as follows:

State CSFA Amount Provided Program title Number to Subrecipients

State Housing Initiatives Partnership Program (S.H.I.P) 52.901 $906,900

NOTE 4. RELATIONSHIP TO BASIC FINANCIAL STATEMENTS

Federal financial assistance expenditures are included in the City’s basic financial statements as follows:

Expenditures

General Fund $ 597,422 Special Revenue Fund: Community Development Block Grant 934,224 Capital Projects Fund: Hurricane Charley 8,681,903 Transportation Capital Projects Fund 86,133

$ 10,299,682

EPA grant funding is included as a liability in the proprietary funds.

State financial assistance expenditures are included in the City’s basic financial statements as follows:

Expenditures

General Fund $ 381,116 Special Revenue Fund:

Local Housing Assistance Fund - State Housing Initiatives Partnership Program (S.H.I.P) 990,169

Enterprise Fund: Water and Sewer 382,716 $ 1,754,001

143

City of Cape Coral

SCHEDULE OF FINDINGS AND QUESTIONED COSTS September 30 2005

(1) Summary of Auditors’ Results: Financial Statements: (a) An unqualified opinion was issued on the basic financial statements: Yes

(b) Internal control over financial reporting: Material weaknesses identified No Reportable conditions identified that were not considered to be material weaknesses: None reported

(c) Noncompliance which is material to the basic financial statements: No

Federal and State Awards: (d) Internal control over major programs:

Material weaknesses identified No

Reportable conditions disclosed that were not considered to be material weaknesses: None reported

(e) The type of report issued on compliance for major programs: Unqualified

(f) Any audit findings which are required to be reported under Section 510(a) of OMB Circular A-133 and Chapter 10.550, Ruses of the Auditor General:

(g) The programs/projects tested as major included the following: No CFDA #

Name of Federal Program Federal Emergency Management Agency:

Public Assistance Grants 97.036 U.S. Department of Transportation:

Highway Planning and Construction U.S. Department of Agriculture:

Emergency Watershed Protection Program Recovery U.S. Department of Health and Human Services:

Social Services Block Grant

20.205

10.904

93.667

Name of State Project CSFA #

Florida Housing Finance Corporation:

State Housing Initiatives Partnership Program 52.901

(h) Dollar threshold used to distinguish between Type A and Type B programs:

Federal $308,991

(i) Auditee qualified as a low-risk auditee under Section 530 of OMB Circular A-133:

State $300,000

Yes

(2) Findings Relating to the Basic Financial Statements Reported in Accordance with Government Auditing Standards: None

(3) Findings and Questioned Costs Relating to Federal Awards and State Financial Assistance: No

144