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<br />CITY OF AUBURN: 2006 CAFR MANAGEMENT’S DISCUSSION AND ANALYSIS <br />MANAGEMENT’S DISCUSSION AND ANALYSIS <br />The City of Auburn’s (the “City”) discussion and analysis is designed to: <br /> Assist the reader in focusing on significant financial issues <br /> Provide an overview of the City’s financial activity <br /> Identify changes in the City’s financial position (its ability to meet future years’ challenges) <br /> Identify any material deviations from the approved budget <br /> Identify individual fund issues or concerns <br />Management’s Discussion and Analysis is designed to focus on the current year’s activities, resulting <br />changes and currently known facts. Therefore, it should be read in conjunction with the Transmittal <br />Letter and the City’s financial statements. <br />Financial Highlights <br /> Total government-wide net assets, the amount by which total assets exceed total liabilities, <br />equal $409.7 million. A total of $326.1 million, or 80% of total net assets, is invested in <br />capital assets, net of debt related to the capital assets, and includes assets such as utility <br />systems, streets, buildings, land, vehicles and equipment. An additional $2.3 million of net <br />assets is restricted for purposes of endowment and debt service. Of the remaining $81.3 <br />million of net assets, the majority is legally restricted, reserved by city policy for specific <br />purposes, or is restricted for use by the city’s utilities. <br /> The net increase in government-wide net assets during 2006 was $18.2 million. Of this <br />amount, $11.4 million was directly related to the increase in City-owned capital assets and <br />infrastructure. <br /> On a government-wide basis, government net assets increased by $10.1 million during <br />2006. Of this amount $7.7 million is related to the capitalization of construction projects, and <br />the balance of the increase is due to lower than anticipated expenditures. <br /> Business-type net assets increased by $8.1 million during 2006. Of this amount, $1.9 million <br />is related to infrastructure assets donated by developers, $2.1 million is related to utility <br />system development charges, and the rest is related to increases in the sanitary sewer and <br />storm drainage funds. <br /> Government fund balances at year-end totaled $41.5 million. Of this amount, $40.0 million, <br />or 96%, is unreserved and available to fund ongoing activities. However, the majority of the <br />unreserved fund balance relates to special revenue funds and, as such, is legally restricted <br />for specific purposes. Included in unreserved fund balance is $5.6 million in the cumulative <br />reserve fund that is intended to provide resources in the event of significant downturns in <br />certain city funds or provide for capital needs as designated by the City Council. <br />Compared to 2005, total government fund balances increased by $1.8 million. This increase <br />is a result of a combination of revenues that were higher than anticipated, particularly with <br />retail sales tax, and expenditures less than budgeted in certain departments. <br /> The general fund’s unreserved fund balance of $14.4 million at year-end is a decrease of <br />$1.5 million from 2005. This decrease is the result of transferring $3.5 million to the capital <br />improvement projects fund, $0.9 million to the cumulative reserve fund and other fund <br />transfers, offset by the increase in retail sales tax and other taxes and fees. <br /> Total City debt payments during the year, net of compensated absences, totaled $2.1 <br />million. Total outstanding debt, including bonds and loans, totaled $30.4 million at <br />15 <br /> <br />