2012 City of Prince George Annual Report

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CITY OF PRINCE GEORGE Notes to the Consolidated Financial Statements For the year ended December 31, 2012 10. Accumulated Surplus CITY OF PRINCE GEORGE 2012 ANNUAL MUNICIPAL REPORT Accumulated Surplus is comprised of the following: 2012 (000’s) 2011 (000’s) Operating - Residual Balance $ 1,684 $ (2,763) Reserves (Schedule 4) 30,486 28,786 Investment in Tangible Capital Assets 495,811 473,249 $ 527,981 $ 499,272 11. Lease Agreement The City has entered into an agreement with Fortis BC (formerly Terasen Gas Inc.) that has resulted in the creation of the Fortis BC Reserve Fund. Capital Lease – under the terms of the agreement the City has entered into a 35 year capital lease with Terasen Gas Inc., commencing November 1, 2004, for the natural gas distribution system within the municipality’s boundary. The City has prepaid $57,000,000 of the capital lease obligation and has financed the prepayment through debenture debt. The remaining obligation of $3,000,000, which is included in long term debt, will be paid with annual lease payments of $273,108 including interest based on Terasen approved pre-tax weighted average cost of capital of 8.596%. Operating Lease – the City has also entered into a 17 year operating lease with Terasen Gas Inc., commencing November 1, 2004, whereby the City leases back to Terasen Gas Inc. the operations of the gas distribution system. Under the operating lease Terasen Gas Inc. is required to make annual lease payments to the City calculated by a formula specified in the agreement which is based on the total annual revenue generated by the transaction. At the end of the 17 year term Terasen Gas Inc. has the option of making a termination payment to the City equal to the unamortized portion of the City’s $57,000,000 prepayment which is estimated to be $29,389,000 or negotiate a new 18 year operating lease with a continuation of the annual lease payments which existed under the previous 17 year operating lease. 12. Budgeted Surplus The planned surplus of $28,956,000, reflected in the Budget Bylaw Column on the Consolidated Statement of Operations was approved by Council in May 2012 upon finalization of the 2012 Annual Budget Bylaw. The approved annual budget bylaw included the purchase of capital assets and servicing debt but these have been adjusted in the Budget Bylaw Column, as well as the incorporation of amortization expense, to more accurately reflect actual expenses. 46 DRAFT www.princegeorge.ca
CITY OF PRINCE GEORGE 2012 ANNUAL MUNICIPAL REPORT CITY OF PRINCE GEORGE Notes to the Consolidated Financial Statements For the year ended December 31, 2012 13. Commitments and Contingencies (a) (b) The City of Prince George is jointly and severally liable, as a member of the Regional District of Fraser-Fort George for any sinking fund deficiencies, and capital debt issued through the Regional District. The City of Prince George and its employees contribute to the Municipal Pension Plan (the Plan), a jointly trusteed pension plan. The board of trustees, representing plan members and employers, is responsible for overseeing the management of the Plan, including investment of the assets and administration of benefits. The Plan is a multi-employer contributory pension plan. Basic pension benefits provided are based on a formula. The Plan has about 176,000 active members and approximately 67,000 retired members. Active members include approximately 35,000 contributors from local governments. The most recent actuarial valuation as at December 31, 2009 indicated a $1,024 million funding deficit for basic pension benefits. The next valuation will be as at December 31, 2012 with results available in 2013. Defined contribution plan accounting is applied to the Plan as the Plan exposes the participating entities to actuarial risks associated with the current and former employees of other entities, with the result that there is no consistent and reliable basis for allocating the obligation, Plan assets and cost to individual entities participating in the Plan. The City of Prince George paid $4,212,071 and the Prince George Public Library paid $177,317 for employer contributions to the Plan in fiscal 2012. (c) (d) The City of Prince George has been named defendant in various legal actions. No reserve or liability has been recorded regarding any of these legal actions or possible claims because the amount of the loss, if any, is undeterminable. Settlement, if any, made with respect to these actions would be accounted for as a charge to expenditures in the period in which outcomes are known. The City is committed to a third party under an agreement for the supply and operation of an off-street parking facility. The City’s annual payment in respect of this commitment is $183,208 for a period of 20 years commencing August 1 st , 1997. (e) The City has issued a Demand Note to the Municipal Finance Authority in the amount of $5,166,386 ($4,819,703 in 2011). This Demand Note together with the cash deposit, as disclosed in Note 5, comprise an amount equal to one-half of the average annual installment of principal and interest for repayment of debenture debt issued by the Authority on behalf of the City of Prince George, and is a requirement of the Authority. www.princegeorge.ca DRAFT 47
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2012 City of Prince George Annual Report

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