FinAnCiAl report

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FinAnCiAl report

  1. 1. Comprehensive AnnuAl FinAnCiAl reportAN INDEPENDENT SPECIAL DISTRICT OF THE STATE OF FLORIDA FISCAL YEAR ENDED JuNE 30, 2008 staying ahead OrlandO-Orange COunty expressway authOrity
  2. 2. Comprehensive AnnuAl FinAnCiAl report AN INDEPENDENT SPECIAL DISTRICT OF THE STATE OF FLORIDA FISCAL YEAR ENDED JuNE 30, 2008 staying ahead Prepared by Orlando-Orange County Expressway Authority Financial Office OrlandO-Orange COunty expressway authOrity
  3. 3. Table of Contents Introductory Section (A) A-2 Letter of Transmittal A-4 Highlights of Fiscal Year 2008 Activities and Accomplishments A-13 Certificate of Achievement for Excellence in Financial Reporting A-14 Expressway System Map A-15 Organizational Chart Financial Section (B) B-1 Independent Auditors’ Report B-2 Management’s Discussion and Analysis Basic Financial Statements B-8 Balance Sheets B-10 Statements of Revenues, Expenses and Changes in Net Assets B-11 Statements of Cash Flow B-13 Notes to Financial Statements B-34 Required Supplementary Information B-35 Calculation of the Composite Debt Service Ratio, as Defined by the Bond Resolutions and Related Documents Statistical Section (C) C-1 Revenues, Expenses and Changes in Net Assets C-2 Net Assets by Component C-3 Toll Revenue by Roadway C-4 Toll Transactions by Roadway C-5 Toll Revenue by Plaza C-6 Toll Transactions by Plaza C-7 Breakdown of Toll Revenue C-8 Breakdown of Toll Transactions C-9 Schedule of Toll Rates C-10 Average Toll Rate C-11 Revenue Bond Coverage C-12 Ratio of Outstanding Debt by Type C-13 Orlando-Kissimmee MSA Employment by Industry Sector C-14 Orlando MSA Population (by Age Group) C-15 Orlando MSA Principal Employers C-15 Demographic and Economic Statistics C-16 Contribution to Infrastructure Assets C-17 Roadway and Facility Statistics C-18 E-PASS®* Accounts and Transponders C-19 Distribution of E-PASS Accounts by County C-20 Number of Employees by Identifiable Activity Other Reports (D) D-1 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit Performed in Accordance with Government Auditing Standards D-3 Independent Auditors’ Report on Compliance with Bond Covenants * E-PASS is a registered trademark of the Orlando-Orange County Expressway Authority.
  4. 4. STRengThenIng TRAnSpORTATIOn ThROugh pARTneRShIpS ... A yeAR In RevIew
  5. 5. INTRODUCTORY SECTION (A)
  6. 6. OrlandO - Orange COunty 4974 ORL TOweR ROAD, ORLAnDO, FLORIDA 32807 TeLephOne (407) 690-5000 • FAX (407) 690-5011 • www.eXpReSSwAyAuThORITy.COm november 21, 2008 authority Board Members Orlando-Orange County expressway authority the Comprehensive annual Financial report (CaFr) for the Orlando-Orange County expressway authority (the authority) for the fiscal year ended June 30, 2008 is hereby submitted. in preparing this report, responsibility for accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the Orlando-Orange County expressway authority. internal controls are designed to provide reasonable assurance regarding the safeguard of assets and the reliability of the financial records for preparing financial statements. Management believes it has established and maintained an internal control system that provides reasonable, but not complete, assurance that the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the authority, which is reported as an independent special district of the state of Florida, consisting of a single enterprise fund. the authority established an audit committee whose primary function is to assist the authority Board in fulfilling its oversight responsibilities by reviewing the financial information, systems of internal controls and the audit process. the committee is comprised of five voting members: two members of the Board, a representative from the City of Orlando, a representative from Orange County and a member of the community that is recommended by the authority Board Chairman and approved by a majority vote of the authority Board. the financial operations of the authority are independently audited on an annual basis. For the fiscal year 2008, Cherry, Bekaert & holland, l.l.p. conducted the audit and issued an unqualified (“clean”) opinion on the authority’s financial statements. their report is presented in the financial section of the CaFr. to gain a more complete understanding of the operations and financial condition of the authority, the management discussion and analysis contained in the financial section introduces the basic financial statements and provides a brief analysis of the financial activities of the authority. Authority Profile the authority is an agency of the state of Florida and was created in 1963 by Chapter 348 of the Florida statutes for the purpose of construction and operation of an expressway road system in Orange County and to lease such system to the Florida department of transportation (the FdOt). the authority Board is composed of five members, three of whom are appointed by the governor, and two ex-officio members, the Mayor of the Board of County Commissioners of Orange County, Florida and the district Five secretary of the FdOt. the authority currently owns and operates 100 miles of roadway in Orange County. the roadways include 22 miles on the sr 408 (east-west expressway), 23 miles on the sr 528 (Beachline expressway), 33 miles on the sr 417 (Central Florida greeneway) and 22 miles on the sr 429 (daniel webster western Beltway). Economic Conditions the population in the Orlando metropolitan statistical area (Msa), which includes lake, Orange, Osceola and seminole counties, grew 215 percent during the 30-year period from 1970 to 2000 for a 3.9 percent compounded annual growth rate (Cagr). at 2 million in 2007, the population is expected to increase by another 13 percent by 2012. the region is projected to remain among the nation’s fastest-growing areas throughout this decade. a-2
  7. 7. One factor of economic strength is jobs creation. the number of jobs in the Orlando Msa rose 18 percent from 929,000 in 2003 to 1.1 million in 2007. the sectors that saw the largest increases were the construction and transportation industries, while the service and retail industries continued to provide 69 percent of the local jobs. while the total number of jobs increased, the employment rate dropped from 97 percent at the beginning of 2007 to 95.5 percent during the first half of 2008. this remained above the national average of 94.8 percent. the area as a whole is experiencing a decline in traffic on all surface roads. the authority experienced only a 1 percent increase in traffic for fiscal year 2008 in comparison to an average of 7 percent per year increase observed during the previous ten years. traffic has actually declined by approximately 8 percent over last year through the first four months of fiscal year 2009. the authority’s capital projects are budgeted and planned for in its five-year work plan. renewal and replacement projects, intelligent transportation systems projects and projects from the 2030 Master plan are prioritized according to critical need. the cost of the projects is then compared to revenue projections compiled by the authority’s traffic and revenue consultant. Once the Finance department deems the plan fundable, it is brought before the Board for approval. a $1 billion work plan was approved in fiscal year 2008. the authority’s total investment in capital assets since its creation is approximately $2.7 billion. the authority utilizes the modified approach for infrastructure reporting. in lieu of recording depreciation on infrastructure, the authority reports preservation expense, which is the actual cost of maintaining the roadway in good condition. this expense varies from year to year as can be seen in this year’s statements of revenues, expenses and Changes in net assets. preservation expense decreased from $24.7 million in fiscal year 2007 to $10.5 million in fiscal year 2008. this change is consistent with the five-year work plan. in addition to the five-year work plan, the authority also has an Operations, Maintenance and administration (OM&a) budget. Budgets are prepared at departmental level and compiled by the Finance department. the entire budget is then presented to the Board for approval. the fiscal year 2008 original OM&a budget was $51 million. during the year, adjustments were approved such that the final net budget was $45.5 million. Awards and Acknowledgements the government Finance Officers association of the united states and Canada (gFOa) awarded a Certificate achievement for excellence in Financial reporting to the Orlando-Orange County expressway authority for its Comprehensive annual Financial report for the fiscal year ended June 30, 2007. in order to be awarded a Certificate of achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. this report must satisfy both u.s. generally accepted accounting principles and applicable legal requirements. a Certificate of achievement 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. the preparation of the CaFr was made possible by the hard work and dedicated service of the Finance department and in particular, lisa lumbard and Marc Ventura. sincere thanks are expressed to the Marketing department and to our external auditors, Cherry, Bekaert & holland, l.l.p., for their special effort in compiling this report. Finally, we extend our appreciation to all the employees and Board members of the Orlando-Orange County expressway authority for their cooperation and assistance in matters pertaining to the finances of the authority. respectfully submitted, Michael snyder, p.e. nita e. Crowder, Cpa, Cia, CpFO, CgFO executive director Chief Financial Officer a-3
  8. 8. Recent construction on the SR 414 near US 441 the Orlando-Orange County expressway authority (OOCea or the authority) has shown strong performance throughout 2008. under new performance measures set by the Florida transportation Commission in order to assess the performance of toll authorities in the state of Florida, OOCea received outstanding remarks in a majority of the categories. “it is clear from our performance that the expressway authority is well on track to be the best performer in the state,” said Chairman richard t. Crotty. Based on objective criteria, OOCea exceeded all performance goals in a number of critical areas. these included completing the construction projects within the original contract time, completing the contracts within the original contract amount, low toll violation rates and safe, quality roads and bridges with ratings of “excellent or good.” A nearly completed portion of SR 414 a-4
  9. 9. in the past year, the authority has also made tremendous progress on several major transportation projects that will improve the quality of life for the millions of residents, businesses and tourists in Central Florida. using careful planning, smart-growth principles and sound financial stewardship, OOCea is committed to building better, safer, roads that meet our region’s transportation challenges in a fiscally sound and responsible manner. dynamic Message signs up and running giving a great benefit to our customers, the authority has installed 35 dynamic Message signs throughout our system. these signs give drivers an instant alert about the road ahead – including back-ups, accidents and changing traffic patterns. this technology greatly assists our customers in making important decisions about their drive. Customers can now respond to any changes well in advance to keep traffic moving in a safer manner. in addition, the signs can display evacuation information in the event of a hurricane or other potential emergencies as well as aMBer and silver alerts when requested by local law enforcement. when no special advisory is needed, the signs display travel times calculated from current traffic conditions with updates sent to the signs once per minute. travel times are based upon anonymous information gathered from e-pass and sunpass toll transponders traveling the expressway system at any given time. data is gathered on a real-time basis at interchanges and system boundaries. One of the many new Dynamic Message Signs throughout the expressway system a-5
  10. 10. sr 408 express lanes Open at new Conway east plaza in May 2008, the authority reached a major milestone with the opening of express lanes at the new Conway east plaza. e-pass customers traveling east on state road 408 (east-west expressway) now can drive from one end of the roadway to the other without having to slow down to pay their tolls. More than 130,000 vehicles a day currently travel this particular section of sr 408. that traffic volume is expected to increase to nearly 218,000 vehicles a day by 2025. this project is part of the authority’s initiative to make the entire system open-road tolled. this work is part of a $600-million, 16-mile road widening and plaza renovation planned from Clarke road to state road 417 (Central Florida greeneway). Once complete, customers traveling on sr 408 will enjoy a safer and more convenient drive while residents and businesses near the expressway will benefit from a quieter, visually pleasing roadway and landscape that integrates well within our community. Harvey Massey, Vice Chairman “With the ever - changing economy, we are very pleased to see such strong financial responsibility while continuing the Authority’s commitment to maintain and enhance its system.” The new Conway East Toll Plaza on SR 408 a-6
  11. 11. sr 408 downtown Construction recognized for excellence the sr 408 widening through downtown Orlando has been honored as one of Florida’s outstanding roadway projects for the year. the Florida transportation Builders association recognized the sr 408 improvements between rosalind avenue and Crystal lake drive for a “Best in Construction” award. in addition to the smooth ride of the new roadway, the prestigious award acknowledged how the agency overcame challenges in completing the work in the heart of downtown Orlando on the second-most heavily traveled road in Central Florida, behind interstate 4. the high-profile project was fronted by several high-rise office buildings and condominiums to the north, established neighborhoods to the south, and the Florida department of transportation’s major interstate 4/sr 408 interchange project to the west. the authority successfully kept delays and inconveniences to a minimum for more than 100,000 customers who travel sr 408 through downtown each day. agency representatives worked closely with area residents, businesses and government agencies to lessen the community impacts of the work. that included expediting the building of sound barrier walls to shield residents from much of the construction. the proactive efforts resulted in strong support for the project, which received public praise for the easier ride and appeal of the landscaping, as well as the overall bridge and roadway aesthetics as seen from the adjacent neighborhoods. Noranne B. Downs, P.E., Secretary/ Treasurer “We are honored to receive this prestigious recognition. We strive for great relationships with our neighbors and surrounding community.” Award-winning SR 408 downtown widening project a-7
  12. 12. Artist’s rendering of the proposed SR 414 bridge over US 441 Viaduct section of SR 414 sr 414 nears Completion the $240-million state road 414 (John land in mid-2008, crews began installing the bridge apopka expressway) project made tremendous beams over hiawassee road. this bridge also progress this year with the completion of many features an innovative design - with beams that are bridges and new travel lanes. nine feet high on the ends and five feet high in the center, creating an appealing, gradual arch. in early 2008, the authority shifted traffic from Maitland Boulevard onto a new westbound sr 414 with construction on sr 414 making such tremendous off ramp, which ends at a new elevated us 441 headway, the authority is planning to open all of sr intersection. 414 in mid-2009. to elevate the new expressway, crews placed nearly Bridge construction on SR 414 five million cubic yards of dirt in the roadway and installed 32,000 concrete panel walls to hold the dirt in place. the roadway has been paved from west of County road 435 (Clarcona road) to east of hiawassee road. Buildings and a pedestrian walkway for the Coral hills Mainline plaza, which will feature express lanes, are nearly finished, as are plaza buildings at hiawassee and Keene roads. ramps at hiawassee and Keene roads have been completed and crews continue working on ramps at us 441 and state road 429 (daniel webster western Beltway). Visually, the most impressive and innovative section of this project is a half-mile-long viaduct (a series Mark Filburn, Board Member of bridge spans) between hiawassee road and “The accelerated progress of Overland road, which is still under construction. construction for 414 is truly Viaducts of this type are commonly seen in large remarkable. It is impressive to cities and are rare in Central Florida. see construction of this scale going so smoothly.” a-8
  13. 13. OOCea promotes safety at local schools - sr 414 extension project with public schools in close vicinity and bus routes and event schedules. in addition, children walking or biking across parts of the the project team recruited crossing guards, work zone for the sr 414 project, the authority flaggers and off-duty Florida highway patrol made a concerted effort to keep students safe. troopers to keep students safe. authority representatives worked very closely with lakeville elementary, piedmont lakes the authority worked closely with school Middle and wekiva high school. officials to make periodic construction safety announcements to students. agency wooden pedestrian canopies were built to representatives gave safety presentations to protect children and other pedestrians from school advisory Councils and parent teacher overhead bridge work along County road student associations. authority representatives 435 (Clarcona road), lakeville road and also worked with school staff to send home hiawassee road. temporary traffic lights with flyers with students to share with parents and pedestrian signals were installed on lakeville use for safety discussions. and hiawassee roads to control dump trucks and other equipment moving in and out of the open communications led one contractor, the work zone and across sidewalks used by ranger Construction inc., to help lakeville school children. elementary school move a donated train caboose to the campus. the school, whose agency representatives met numerous times mascot is the engineers, will use the caboose with school staff to let them know what to to teach students about railroad history and expect from construction and to obtain crucial serve as a learning lab. Contractor representatives with Lakeville Elementary staff Recent progress on the SR 414 construction project Tanya T. Juarez, Board Member “We are excited about opportunities to partner with local communities, particularly when we can help enrich a student’s educational experience. We are fortunate that our industry partners feel as strongly as we do about giving back to the areas we serve.” a-9
  14. 14. Groundbreaking ceremony for the SR 417 and Moss Park Interchange Richard T. Crotty, Chairman “Planning for the future growth and transportation needs of an upcoming medical city, the Authority’s projects on 417 will meet the needs of the Innovation Way community for years to come.” sr 417 and Moss park road interchange in June 2008, the authority broke ground on the the slate of projects, known as the southeast new Moss park road interchange at sr 417. Community Mobility initiative, mark a significant step in opening up the area to easier travel as part of the sr 417 Moss park interchange is just one of Orange County’s plans for the innovation way Corridor. the new projects scheduled that will help alleviate traffic and meet the needs of the up-and-coming the groundbreaking ceremony was attended medical city planned for this area. in total, the by local residents, businesses and local elected projects consist of four new interchanges and the officials, as well as representatives from the conversion of two toll plazas to open-road tolling, Burnham institute for Medical research at lake which will allow customers to pay their tolls at nona, the university of Central Florida’s College of highway speeds. Medicine, the Orlando international airport (Oia) and the east Orlando Chamber of Commerce. sr 528 Mainline plaza Conversion Construction on the SR 528 Mainline Plaza work began in January 2008 to add express lanes to the state road 528 (Beachline expressway) Mainline plaza. the $26.8-million project will feature a new plaza with a total of four open-road tolling express lanes (two in each direction) and eight cash receipt lanes (four in each direction). this project will create an easier drive for visitors heading to the beaches, port Canaveral and the space Coast. it will also improve the weekday commute and make traveling to Oia more convenient. scheduled to open in the early summer of 2009, the project completion will mark a significant milestone, as the last scheduled express lane plaza conversion on the entire OOCea system. a-10
  15. 15. Completed sr 528 and sr 436 interchange the new $26.7-million flyover ramp from sr 528 to sr 436 (semoran Boulevard) heading into Oia opened in May 2008. with close to 50 million visitors to Oia each year, the authority worked very closely with the greater Orlando aviation authority (gOaa) during the construction of this project. agency representatives communicated frequently with gOaa officials to coordinate lane and ramp closures to minimize delays for airport travelers and employees, especially during the highly traveled holidays. The recently completed SR 436 flyover ramp on the SR 528 at OIA Michael Snyder, P.E. Executive Director “This flyover ramp is just the beginning of creating an exciting gateway to Orlando, showcasing our finest attributes to world visitors and residents alike.” e-pass teams up with uCF Football to further strengthen the authority’s involvement with the local community, in november 2007, the authority partnered with the university of Central Florida’s athletics department for a unique e-pass promotion prior to the university’s homecoming football game. to add to the excitement and frenzy of homecoming, authority representatives traveled around campus handing out coupons good for one free e-pass transponder to be redeemed online. in addition, fans were also treated to free transponder holder clips, which were a huge hit with both new and current e-pass customers. students, local alumni and members of the community were on hand to enjoy the e-pass promotion and learn more about the electronic tolling program. the promotion was a tremendous success – boasting a redemption rate of more than 15 percent. a-11
  16. 16. wekiva parkway project update work on the highly anticipated wekiva another 800-foot-long bridge is planned parkway project continued this year, with for one of the conservation properties to great strides toward making this beltway allow wildlife to move west from the rock a reality. the wekiva parkway in lake and springs reserve. seminole counties is being developed to replace much of sr 46 – one of the top roads the nearly two miles of wildlife bridges will in the state for vehicle accidents involving allow far more animals to safely move wildlife. elevating the road in this area and between the rock springs run state reserve introducing wildlife bridges will make travel and the seminole state Forest. safer for motorists and wildlife alike. plans for the wekiva parkway also include Currently, black bears and other wild animals closing the portion of County road 46a can only safely cross sr 46 in east lake through the seminole state Forest, County at two wildlife tunnels totaling 78 feet further separating vehicles and animals. in width. the wekiva parkway would replace the realigned Cr 46a would connect to those tunnels with two wildlife bridges totaling sr 46 farther west outside the forest. nearly 6,000 feet – more than 76 times the environmental watchdogs applaud the current crossing space. also, the parkway innovative protections included in the wekiva would replace the existing 561-foot wekiva parkway plans, touting the project as a model river bridge with one about 2,150 feet long. for future transportation planning. Black bears often found in East Lake County a-12
  17. 17. a-13
  18. 18. expressway system Mount 415 Dora 46 LAKE CO. 46 ORANGE CO. er The Wekiva Riv 427 . CO . CO GE AN E OL OR MIN SE WEKIVA PARKWAY STUDY AREA 426 551 438 PARK BLVD. AVALON ALAFAYA TR. MOSS LAKE NONA PA R BLVD. KR D. 27 192 LEGEND: EXPRESSWAY PROJECT EXISTING EXPRESSWAY SYSTEM EXISTING EXPRESSWAYS OR FREEWAYS BY OTHERS TOLL PLAZA JUNE 2008 a-14
  19. 19. Orlando-Orange County expressway authority Authority Board Richard T. Crotty Harvey Massey Noranne Downs, P.E. Tanya T. Juarez Mark Filburn Chairman Vice Chairman secretary/treasurer, FdOt Board Member Board Member Mayor, Orange County, district 5 secretary, ex Officio ex Officio Glenn Holloway internal audit director Michael Snyder, P.E. executive director Laura Kelley Lindsay Hodges Joseph Passiatore Joseph Berenis, P.E. deputy executive director, Finance, Manager of public relations general Counsel deputy executive director administration, planning & Communications engineering & Operations Claude Miller Joann Chizlett Nita Crowder Jacqueline Barr director of director of CPA, CIA, CPFO, CGFO director of Business procurement information technology Chief Financial Officer development David Wynne Ben Dreiling, P.E. Rod Stroupe L.A. Griffin Manager of toll Operations director of Construction Manager of Maintenance Manager of expressway Operations a-15
  20. 20. FINANCIAL SECTION (B) INTRODUCTORY SECTION (A)
  21. 21. Independent Auditors’ Report We have audited the accompanying financial Data on Infrastructure Condition Information on pages statements of the Orlando-Orange County Expressway B-2 through B-7 and page B-34, respectively, are not Authority (the “Authority”) as of and for the years a required part of the basic financial statements ended June 30, 2008 and 2007, as listed in the but are supplementary information required by the table of contents. These financial statements are the Governmental Accounting Standards Board. We have responsibility of the Authority’s management. Our applied limited procedures, which consist principally responsibility is to express an opinion on these financial of inquiries of management regarding the methods statements based on our audits. of measurement and presentation of the required supplementary information. However, we did not audit We conducted our audits in accordance with auditing the information and express no opinion on it. standards generally accepted in the United States of America and the standards applicable to financial audits Our audits were performed for the purpose of contained in Government Auditing Standards, issued by forming an opinion on the financial statements of the the Comptroller General of the United States of America. Authority taken as a whole. The introductory section, Those standards require that we plan and perform the calculation of composite debt service ratio on page audit to obtain reasonable assurance about whether the B-35 and the statistical section, as listed in the table of financial statements are free of material misstatement. contents, are presented for the purpose of additional An audit includes examining, on a test basis, evidence analysis and are not a required part of the basic supporting the amounts and disclosures in the financial financial statements. The calculation of composite statements. An audit also includes assessing the debt service ratio has been subjected to the auditing accounting principles used and significant estimates procedures applied in our audit of the financial made by management, as well as evaluating the overall statements for the years ended June 30, 2008 and financial statement presentation. We believe that our 2007 and, in our opinion, is fairly stated in all material audits provide a reasonable basis for our opinion. respects when considered in relation to the financial statements taken as a whole. The introductory section In our opinion, the financial statements referred and statistical section have not been subjected to the to above present fairly, in all material respects, the auditing procedures applied in the audit of the basic financial position of the Authority as of June 30, 2008 financial statements and, accordingly, we express no and 2007, and the results of its operations and its opinion on them. cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, Orlando, Florida we have also issued a report dated October 3, 2008 October 3, 2008 on our consideration of the Authority’s internal control over financial reporting and 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 conjunction with this report in considering the results of our audit. The Management’s Discussion and Analysis and Trend B-1
  22. 22. Management’s Discussion and Analysis As financial management of the Orlando-Orange Basic financial statements - The basic financial County Expressway Authority (the Authority), we offer statements are designed to provide readers with readers of these financial statements this narrative a broad overview of the Authority’s finances, in a overview and analysis of the financial activities of the manner similar to a private-sector business. Authority for the fiscal years ended June 30, 2008 and 2007. This discussion and analysis is designed The balance sheets present information on all of the to assist the reader in focusing on the significant Authority’s assets and liabilities, with the difference financial issues and activities and to identify any between the two reported as net assets. Over time, significant changes in financial position. We encourage increases or decreases in net assets may serve as a readers to consider the information presented here in useful indicator of whether the financial condition of conjunction with the financial statements as a whole. the Authority is improving or deteriorating. Net assets increase when revenues exceed expenses. Increases to Financial Highlights assets without a corresponding increase to liabilities results in increased net assets, which indicates an Operating income for the Orlando-Orange County improved financial condition. Expressway Authority was $120,149,000 (an increase of 6%) and $113,675,000 (a decrease of 4%) for fiscal The statements of revenues, expenses, and changes years 2008 and 2007, respectively. The increase in in net assets present information showing how a operating income is due to the decrease in preservation government’s net assets changed during the fiscal expense, which was a planned decrease based on year. All changes in net assets are reported as soon as the Authority’s Five-Year Work Plan. See “Modified the underlying event occurs, regardless of timing of Approach for Infrastructure Assets” below for more related cash flows. Thus revenues and expenses are information about preservation expense. reported in these statements for some items that will only result in cash flows in future fiscal periods (e.g., Net income produced an increase in net assets of earned but unused vacation leave). $81,885,000 and $72,829,000 for fiscal years 2008 and 2007, respectively. The term “net assets” refers to the difference between assets and liabilities. At Notes to the financial statements - The notes the close of fiscal year 2008, the Authority had net provide additional information that is essential to a assets of $829,757,000, an increase of 11% over full understanding of the data provided in the basic fiscal year 2007. At the close of fiscal year 2007, financial statements. the Authority had net assets of $747,872,000, an increase of 11% over fiscal year 2006. The Authority’s Other information - In addition to the basic financial overall financial position has improved as shown by statements and accompanying notes, this report the increase in net assets. also presents certain supplementary information concerning the Authority’s composite debt service Overview of the Financial Statements ratio, as defined by the bond resolutions, as well as trend data on infrastructure condition. This discussion and analysis is intended to serve as an introduction to the Authority’s financial statements, Financial Analysis which is comprised of the basic financial statements and the notes to the financial statements, and Net assets may serve, over time, as a useful indicator supplementary information presented. Since the of a government’s financial position. In the case Authority is comprised of a single enterprise fund, fund of the Authority, assets exceeded liabilities by level financial statements are not shown. In addition $829,757,000 at the close of the most recent fiscal to the basic financial statements, this report also year. This represents an increase of $81,885,000 contains other supplementary information concerning (11%) over the previous year, all of which is the Authority’s trend data on infrastructure condition attributable to operations. Unrestricted net assets as well as the debt service ratio, as defined by bond increased from $123,827,000 at June 30, 2007 resolutions and related documents. to $137,465,000 at June 30, 2008, an increase of $13,638,000 (11%) in unrestricted net assets. This increase was primarily due to operating results. B-2
  23. 23. Management’s Discussion and Analysis (continued) By far, the largest portion of the Authority’s net assets interchange. Each partner contributing to this project reflects its investment in capital assets (e.g., right-of- will be repaid through toll revenues generated by this way, roads, bridges, buildings, toll equipment, etc.) road. After all operational expenses are met and the less any related debt used to acquire those assets that partners are reimbursed for their contributions, the is still outstanding. The Authority uses these capital toll plaza will be demolished and the roadway will be assets to provide service and consequently, these transferred to the City of Orlando. The Authority will assets are not available for liquidating liabilities or for retain ownership of the interchange to SR 528 and other spending. certain portions of the right-of-way. Since this project is a non-system project, it is accounted for on a single Of the $2,723,498,000 in capital assets, net of line in the Statement of Revenues, Expenses and accumulated depreciation, $41,186,000 represents the Changes in Net Assets, in the nonoperating revenues roadway, toll plaza and equipment on the Goldenrod (expenses) section. The toll revenues on this project Road Extension. Construction of this project began in are not pledged to the Authority’s bond indebtedness. January 2001 and opened to traffic in March 2003. It was jointly funded by the Authority, the Greater Orlando Aviation Authority, the City of Orlando, Orange County, Florida and private developers with the Authority serving as the lead agency on the project. The Goldenrod Road Extension extends from the previous terminus of Goldenrod Road at Narcoossee Road south to Cargo Road. This facility intersects the Beachline Expressway (SR 528), east of the Orlando International Airport, at a system Orlando-Orange County Expressway Authority’s June 30, Net Assets 2008 2007 2006 Current and other assets $ 414,726,000 $ 392,156,000 $ 396,052,000 Non-current restricted assets 163,240,000 440,258,000 277,485,000 Capital assets 2,723,498,000 2,397,426,000 2,035,833,000 Total assets 3,301,464,000 3,229,840,000 2,709,370,000 Current liabilities: Payable from unrestricted assets 29,289,000 39,919,000 25,341,000 Payable from restricted assets 94,547,000 73,743,000 74,556,000 Revenue bonds outstanding (net of current portion) 2,100,583,000 2,137,104,000 1,719,139,000 Other long-term liabilities 247,288,000 231,202,000 215,291,000 Total liabilities 2,471,707,000 2,481,968,000 2,034,327,000 Net assets: Invested in capital assets net of related debt 684,251,000 612,138,000 510,577,000 Restricted 8,041,000 11,907,000 17,640,000 Unrestricted 137,465,000 123,827,000 146,826,000 Total net assets $ 829,757,000 $ 747,872,000 $ 675,043,000 B-3
  24. 24. Management’s Discussion and Analysis (continued) The Authority’s toll revenues increased 1% and 5% approximately 10% compared to 2008. Part of that during the fiscal years ended June 30, 2008 and 2007, decrease is due to toll suspensions caused by Tropical respectively. The growth rate in revenues has slowed Storm Fay. the last two fiscal years, attributed to volatile fuel prices, economic weakness and inflationary pressures. Toll revenue represents approximately 99% of all The beginning of fiscal year 2008 saw normal operating revenues. The Authority’s toll revenue annual growth on our system with the declines starting in growth rate has averaged 7% over the last 10 years. March of 2008. The decline in toll revenue over the previous year corresponds to the unemployment rate of the area. Subsequent activity for the first three months of fiscal year 2009 has shown a decrease of Toll Revenue Growth Trends $220,000,000 5% 1% 9 % $200,000,000 $203,475,000 $205,947,000 5% $193,055,000 $180,000,000 10% $177,711,000 8% $168,720,000 $160,000,000 4% 9% $153,309,000 $140,000,000 12% $142,357,000 $136,863,000 9 % $120,000,000 $125,550,000 $112,425,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 B-4
  25. 25. Management’s Discussion and Analysis (continued) Orlando-Orange County Expressway Authority’s Changes in Net Assets June 30, 2008 2007 2006 Revenues: Toll revenues $ 205,947,000 $ 203,475,000 $ 193,055,000 Transponder sales 946,000 1,166,000 1,237,000 Investment income 30,214,000 26,143,000 26,479,000 Goldenrod Road Extension - net 897,000 686,000 613,000 Other 8,465,000 3,017,000 1,108,000 Total revenues 246,469,000 234,487,000 222,492,000 Expenses: Operations 35,591,000 33,826,000 33,344,000 Maintenance 14,468,000 12,482,000 11,024,000 Administrative 5,577,000 5,898,000 7,139,000 Depreciation 12,331,000 10,105,000 8,209,000 Preservation 10,532,000 24,734,000 13,407,000 Interest expense 76,928,000 69,705,000 71,583,000 Other 9,157,000 4,908,000 2,625,000 Total expenses 164,584,000 161,658,000 147,331,000 Capital contribution - - 872,000 Change in net assets 81,885,000 72,829,000 76,033,000 Net assets, beginning of year 747,872,000 675,043,000 599,010,000 Net assets, end of year $ 829,757,000 $ 747,872,000 $ 675,043,000 The Authority’s Operations, Maintenance and budget. Due to declining revenues through September Administration expenses increased 6.6% in fiscal 2008 the Authority is budgeting fiscal year 2009’s year 2008 from fiscal year 2007. They increased OM&A expenses to be just 3.3% over fiscal year 2008’s 1.4% in fiscal year 2007 from 2006. The reason for actual expenses. the small increase in fiscal year 2007 is the result of decreases in legal fees and marketing initiatives. Preservation expense decreased by 57.4% in fiscal During fiscal year 2007, the Authority decided to hire year 2008, which is due to the completion of the 417 in-house legal counsel in an effort to reduce legal resurfacing project in fiscal year 2007 and the 528 expenses. Additionally, the Authority reevaluated resurfacing project in fiscal year 2008. Other expenses its marketing program and decided to cut the increased by 86.6% in fiscal year 2008, which is budget by approximately $1.1 million. In fiscal year related to the additional studies the Authority was 2008 the Authority’s Operations, Maintenance and involved in during the year. Administration expenses in total were .2% under B-5
  26. 26. Management’s Discussion and Analysis (continued) Capital Asset and Debt Administration Capital Assets - The Authority’s investment in Modified Approach for Infrastructure Assets - capital assets amounts to $2,723,498,000, net of The Authority has elected to use the modified accumulated depreciation, as of June 30, 2008, an approach for infrastructure reporting. This increase of $326,072,000 (14%) over that of means that, in lieu of reporting depreciation on June 30, 2007. The Authority’s investment in infrastructure, the Authority reports as preservation capital assets amounted to $2,397,426,000, net expense the costs associated with maintaining the of accumulated depreciation, as of June 30, 2007, existing roadway in good condition. The Authority’s an increase of $361,593,000 (18%) over that of policy is to maintain the roadway condition at June 30, 2006. Capital assets include right-of-way, a Maintenance Rating Program rating of 80 or roads, bridges, buildings, equipment, and furniture. better. The FDOT annually inspects the Authority’s A schedule of the change in the Authority’s capital roadways and has determined in fiscal year 2008 assets is in Note 4 of the financial statements. that all of its roadways exceed this standard. Pursuant to its bond covenants, the Authority Major capital asset events during fiscal year 2008 maintains a renewal and replacement fund for included the following: these preservation expenditures. For fiscal year 2008, projected expenses for preservation were • The plan to remodel nine of the Authority’s toll $14,765,000, but $10,532,240 was actually spent. plazas to facilitate open-road tolling continued This was due to some of the work projected to be this year. This conversion to the open-road done in fiscal year 2008 actually being done in tolling concept enables vehicles equipped with fiscal year 2007. transponders to proceed through the toll plaza at highway speeds. The University Toll Plaza was Long-term Debt - The Authority has outstanding completed in August 2003, the Curry Ford Plaza bonds payable of $2,133,728,000 (net of unamortized was completed in June 2005, the Dean Road bond discounts and premiums, deferred loss on Plaza was completed in August 2005, and the refunding, and deferred gain on interest exchange Hiawassee Plaza was completed in July 2006. The agreements) as of June 30, 2008. During fiscal year Holland West Plaza relocation was completed in 2008 the Authority issued $499,105,000 of variable October 2006. The Boggy Creek and John Young rate revenue refunding bonds, Series 2008B1, Plaza conversions were completed in December 2008B2, 2008B3 and 2008B4 (collectively, Series 2006, which made our entire portion of SR 417 2008B Bonds), for the purpose of refunding the Series open-road tolling. SR 429 was the first corridor 2005A, 2005B, 2005C, 2005D and 2005E Bonds to be completely configured for open-road tolling. (collectively, Series 2005 Bonds). During fiscal year The Holland East Plaza relocation and open-road 2007 the Authority issued $425,000,000 of fixed rate tolling project will be completed in fiscal year revenue bonds to partially fund its five-year work plan. 2010. The Beachline Main Plaza conversion to In order to mitigate the risk of rising interest rates, open-road tolling will be completed in fiscal year the Authority entered into six mandatory cash-settled 2009. interest rate exchange agreements, the purpose of which was to lock in the interest rate associated • Within the next year we will have completed the with the Series 2007A bonds. The hedge resulted in widening of 9.8 miles of SR 408. Construction was an $8,078,000 net payment to the Authority which completed in fiscal year 2006 on the first 1.2 miles was capitalized and will be amortized over the life of of the SR 408 widening project, 4.5 miles were the interest rate payments, effectively reducing the completed in fiscal year 2007 and 1.8 miles were interest expense to the Authority. completed in fiscal year 2008. Construction is continuing on the remaining 2.3 miles. The annual requirements to amortize all revenue bonds and revenue refunding bonds outstanding as • The John Land Apopka Expressway project was of June 30, 2008 are summarized in Note 5 of the approved in fiscal year 2005. Construction began financial statements. Of the approximately $2.1 billion on Phase 1 last year with a targeted completion in outstanding bonds, $999,105,000 are variable date of fiscal year 2009. rate bonds, which have corresponding interest rate exchange agreements designed to effectively swap • Completion of the Authority’s new the variable rates to fixed rates. The synthetic interest headquarters building. rate applicable to the variable rate bonds are 4.36% for the 2003C Bonds, 4.29% for the 2003D Bonds and 4.7753% for the 2008 Bonds. B-6
  27. 27. Management’s Discussion and Analysis (continued) Capital Asset and Debt Administration (continued) The Authority’s financial advisor has performed this The Authority’s current bond ratings are as follows: calculation based upon expected forward LIBOR swap rates and discounted cash flows. On a current mark- Ratings to-market basis, using a termination date of June 30, 2008, the Authority would have to make an estimated Standard & Poor A termination payment, in the event that all of the Fitch A outstanding swaps associated with the Series 2003C Moody’s A1 were terminated, of approximately $30,133,326, and a payment of $6,024,750 for terminating the swaps associated with the Series 2003D. The swaps related Requests for Information to the 2008B Bonds originated in 2004 and had an This financial report is designed to provide a general estimated termination payment of $67,168,520. overview of the Authority’s finances for all those with an interest in its finances. Questions concerning any of the information provided in this report or June 30, 2008 June 30, 2007 request for additional financial information should be addressed to the Chief Financial Officer, Orlando- Series 2003C $ 30,133,326 $ 10,296,742 Orange County Expressway Authority, 4974 ORL Series 2003D 6,024,750 745,771 Tower Road, Orlando, FL 32807. Series 2008B 67,168,520 34,993,555 TOTAL $ 103,326,596 $ 46,036,068 The Authority’s debt service ratio before pledged gas taxes changed to 1.54 for fiscal year 2008 from 1.85 for fiscal year 2007 and 1.77 in fiscal year 2006. The debt service ratio, including pledged gas taxes, changed to 1.61 for fiscal year 2008 from 1.94 for fiscal year 2007 and 1.85 in fiscal year 2006. The fiscal year 2008 decrease in the debt service ratios was attributable to a smaller increase in revenue and an increase in debt service payments due to the first full year of payments for the Series 2007A Bond. The 2003, 2007A, and 2008B Series Bonds are not covered by the County’s gas tax pledge; therefore, as of July 1, 2003, the County’s gas tax pledge only applies to the 1990 and 1998 Series bonds. B-7
  28. 28. Balance Sheets June 30, (in thousands) 2008 2007 Assets Current assets: Cash and cash equivalents $ 83,585 $ 129,423 Investments 194,594 136,916 Restricted cash and cash equivalents to meet current restricted liabilities 94,547 73,743 Accrued interest and accounts receivable 372 67 Due from governmental agencies 8,279 10,396 Inventory 2,149 3,258 Total current assets 383,526 353,803 Noncurrent assets: Restricted assets: Cash and cash equivalents 127,510 121,702 Investments 33,974 317,092 Accrued interest receivable 1,756 1,464 Total restricted assets 163,240 440,258 Due from governmental agencies 7,852 7,504 Bond issue cost - net 23,348 30,849 Capital assets not being depreciated: Infrastructure 1,879,510 1,619,931 Construction in progress 700,748 662,947 Capital assets net of accumulated depreciation: Property and equipment 143,240 114,548 Total capital assets - net of accumulated depreciation 2,723,498 2,397,426 Total noncurrent assets 2,917,938 2,876,037 Total assets $ 3,301,464 $ 3,229,840 See Notes to Financial Statements. B-8
  29. 29. Balance Sheets (continued) June 30, (in thousands) Liabilities and net assets 2008 2007 Current liabilities payable from unrestricted assets: Accounts, contracts and retainage payable $ 11,257 $ 20,895 Accrued vacation and sick leave payable 825 678 Unearned toll revenue 13,293 13,296 Unearned rent 550 523 Current portion of due to governmental agencies 3,364 4,527 Total current liabilities payable from unrestricted assets 29,289 39,919 Current liabilities payable from restricted assets: Accounts, contracts and retainage payable 27,246 29,867 Interest payable 34,156 16,026 Current portion of revenue bonds payable 33,145 27,850 Total current liabilities payable from restricted assets 94,547 73,743 Total current liabilities 123,836 113,662 Noncurrent liabilities: Revenue bonds payable - less current portion 2,100,583 2,137,104 Due to governmental agencies - less current portion 245,917 231,202 Arbitrage rebate liability 1,371 - Total noncurrent liabilities 2,347,871 2,368,306 Total liabilities 2,471,707 2,481,968 Net assets: Invested in capital assets - net of related debt 684,251 612,138 Restricted for: Operation, maintenance and administrative reserve 6,511 6,511 Renewal and replacement reserve 1,530 5,396 Total restricted net assets 8,041 11,907 Unrestricted 137,465 123,827 Total net assets 829,757 747,872 Total liabilities and net assets $ 3,301,464 $ 3,229,840 See Notes to Financial Statements. B-9
  30. 30. Statements of Revenues, Expenses and Changes in Net Assets June 30, (in thousands) 2008 2007 Operating revenues: Toll revenues $ 205,947 $ 203,475 Transponder sales 946 1,166 Fees and other 912 995 Total operating revenues 207,805 205,636 Operating expenses: Operations 35,591 33,826 Maintenance 14,468 12,482 Administrative 5,577 5,898 Depreciation 12,331 10,105 Preservation 10,532 24,734 Other expenses 9,157 4,916 Total operating expenses 87,656 91,961 Operating income 120,149 113,675 Nonoperating revenues (expenses): Investment income 30,214 26,143 Miscellaneous (790) 1,044 Intergovernmental grant revenue 8,343 978 Goldenrod Road Extension - net 897 694 Interest expense (76,928) (69,705) Total nonoperating revenues (expenses) (38,264) (40,846) Change in net assets 81,885 72,829 Net assets at beginning of year 747,872 675,043 Net assets at end of year $ 829,757 $ 747,872 See Notes to Financial Statements B-10
  31. 31. Statements of Cash Flow June 30, (in thousands) 2008 2007 Operating activities: Receipts from customers and users $ 207,936 $ 207,377 Payments to suppliers (60,591) (63,511) Payments to employees (3,481) (2,778) Net cash provided by operating activities 143,864 141,088 Capital and related financing activities: Acquisition and construction of capital assets (310,833) (341,933) Proceeds from State Infrastructure Bank Loan 7,571 7,671 Proceeds from capital grants 8,343 978 Proceeds from issuance of revenue bonds 499,105 430,117 Proceeds from interest rate exchange agreements - 8,078 Cash payments related to the issuance of revenue bonds (598) 1,202 Interest paid on revenue bonds (93,149) (97,948) Payment of principal on revenue bonds (526,955) (30,445) Payment of principal on State Infrastructure Bank Loan (438) (188) Payment of principal on government advances (1,193) (1,178) Net cash used in capital and related financing activities (418,147) (23,646) Investing activities: Purchase of investments (299,703) (528,637) Proceeds from sales and maturities of investments 525,144 262,733 Interest received 29,616 26,779 Net cash provided by (used in) investing activities 255,057 (239,125) Net decrease in cash and cash equivalents (19,226) (121,683) Cash and cash equivalents at beginning of year 324,868 446,551 Cash and cash equivalents at end of year $ 305,642 $ 324,868 Cash and cash equivalents - unrestricted $ 83,585 $ 129,423 Restricted cash and cash equivalents - current 94,547 73,743 Restricted cash and cash equivalents - noncurrent 127,510 121,702 $ 305,642 $ 324,868 See Notes to Financial Statements B-11
  32. 32. Statements of Cash Flow (continued) June 30, (in thousands) 2008 2007 Reconciliation of operating income to net cash provided by operating activities: Income from operations $ 120,149 $ 113,675 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 12,331 10,105 Loss on disposal of capital assets 8,883 1,232 Goldenrod Road Extension and other miscellaneous 107 1,738 Changes in assets and liabilities: Due from governmental agencies 1,769 (9,370) Inventory 1,110 (476) Accounts, contracts and retainage payable (9,638) 13,881 Unearned rent 27 20 Due to governmental agencies 7,612 10,199 Unearned toll revenue (3) (9) Accrued vacation and sick leave payable 146 93 Arbitrage rebate payable 1,371 - Net cash provided by operating activities $ 143,864 $ 141,088 B-12
  33. 33. Notes to Financial Statements Years ended June 30, 2008 and 2007 Note 1 - Organization and summary of significant accounting policies Reporting Entity - The Orlando-Orange County statements. In general, the Statement will require Expressway Authority (the Authority) is an agency derivative instruments to be reported on the balance of the state of Florida and was created in 1963 by sheet at fair value with changes in fair value presented Chapter 348 of the Florida Statutes for the purpose as deferred inflows or deferred outflows on the of construction and operation of an expressway road balance sheet. However, if the derivative agreement system (the System) in Orange County, Florida (the is terminated prior to expected conclusion or if County) and to lease such System to the Florida the hedge ceases to significantly reduce risk, the Department of Transportation (the FDOT). With the accumulated gains or losses are to be reported on the consent of the county within whose jurisdictional operating statement. This Statement is effective for boundaries the following activities occur, the Authority the Authority for the year ending June 30, 2010. has the right to construct, operate, and maintain roads, bridges, avenues of access, thoroughfares, and Operating Revenues and Expenses - The Authority’s boulevards together with the right to construct, repair, operating revenues and expenses consist of replace, operate, install, and maintain electronic toll revenues earned and expenses incurred relating payment systems thereon. The Authority is composed to the operation and maintenance of its System. of five members, three of whom are appointed by The Goldenrod Road Extension, which is a project the Governor, the Mayor of the Board of County outside the normal course of operations, and all other Commissioners of Orange County, Florida, ex-officio, revenues and expenses are reported as nonoperating and the District Secretary of the FDOT. The Authority revenues and expenses. is authorized to issue revenue bonds to finance portions of the System and to execute the refunding Lease-Purchase Agreement - Under the of existing revenue bonds. requirements of the Lease-Purchase Agreement between the Authority and the FDOT dated For financial reporting purposes, the Authority is a December 23, 1985, as amended and supplemented, stand-alone entity; there are no component units the Authority is reimbursed by the FDOT for the included in the accompanying financial statements maintenance costs of the Beachline Expressway, the and the Authority is not considered a component unit East-West Expressway, the Airport Interchange and of another entity. Beachline improvements, and the cost of operations of the Conway Main, Pine Hills and Airport Plazas. Basis of Accounting - The Authority prepares However, the reimbursements received are recorded its financial statements on the accrual basis of as advances from the FDOT and are included in due accounting in accordance with accounting principles to governmental agencies since they are to be repaid generally accepted in the United States of America to the FDOT from future toll revenues after the for proprietary funds, which are similar to those for requirements for retirement of bonds and all other private business enterprises. Accordingly, revenues obligations have been met. are recorded when earned and expenses are recorded when incurred. The Authority has elected not to apply Financial Accounting Standards Board (FASB) statements and interpretations issued after November 30, 1989. The assets, liabilities, and net assets of the Authority are reported in a self-balancing set of accounts, which include restricted and unrestricted resources, representing funds available for support of the Authority’s operations. Accounting Pronouncements - In June 2008, the Governmental Accounting Standards Board issued GASB Statement No. 53 statement, Accounting and Financial Reporting for Derivative Instruments, which is intended to improve how state and local governments report information about swaps and other derivative instruments in their financial B-13
  34. 34. Notes to Financial Statements Years ended June 30, 2008 and 2007 Note 1 - Organization and summary of significant accounting policies (continued) Cash and Cash Equivalents - For purposes of the approach,” property costs represent a historical statements of cash flow, demand deposit accounts accumulation of costs expended to acquire rights- with commercial banks, cash invested in commercial of-way and to construct, improve and place in money market funds and funds deposited in the operation the various projects and related facilities. State Board of Administration (SBA) Pool (including It is the Authority’s policy to capitalize amounts restricted assets) are considered cash equivalents. For equal to or in excess of $1,000. investments that are held separately from the pools, those which are highly liquid (including restricted Depreciation Policy - Depreciation of toll equipment, assets) with an original or remaining maturity of 90 buildings, toll facilities, other related costs, signs, days or less when purchased or so near their maturity software and furniture and equipment is computed that they present insignificant risk of changes in value using the straight-line method over the estimated because of changes in interest rates are considered to useful lives of the assets as follows: be cash equivalents. Toll equipment 8 years Investments - Investments consist of unrestricted Buildings, toll facilities, and other 30 years and restricted investments, and are carried at fair Signs 20 years value as determined in an active market, except for Software 3 years investments in the SBA Pool, which are carried at Furniture and equipment 7 years amortized cost and approximate fair value. Inventory - Inventory, which consists of E-PASS Under the modified approach, infrastructure assets system transponders that will be sold to customers, is are considered to be “indefinite lived” assets; carried at lower of cost or market and is valued using that is, the assets themselves will last indefinitely the specific identification method. and are, therefore, not depreciated. Costs related to maintenance, renewal and replacement for these assets are not capitalized, but instead are Restricted Assets - Restricted assets of the considered to be period costs and are included in Authority represent bond proceeds designated preservation expense. for construction, and other monies required to be restricted for debt service, operations, maintenance, Construction in Progress - Construction in administration, renewal and replacement. progress represents costs incurred by the Authority for in-process activities designed to expand, Capital Assets - replace, or extend useful lives of existing property Cost Basis - All capital assets are recorded at and equipment. historical cost. The cost of property and equipment includes costs for infrastructure assets (right- Capitalized Interest - Interest costs on funds used of-way, highways and bridges substructure and to finance the construction of capital assets are highways and bridges), toll equipment, buildings, toll capitalized based upon the blended cost of debt and facilities, other related costs (including software), depreciated over the life of the related assets in and furniture and equipment. Highways and bridges accordance with the above policies. substructure includes road subbase, grading, land clearing, embankments and other related costs. Costs for infrastructure assets include construction Retainage Payable - Retainage payable represents costs, design and engineering fees, administrative amounts billed to the Authority by contractors for and general expenses paid from construction which payment is not due pursuant to retained monies and bond interest expense incurred during percentage provisions in construction contracts until the period of construction. substantial completion of performance by contractor and acceptance by the Authority. Capitalization Policy - Costs to acquire additional capital assets, and to replace existing assets or otherwise prolong their useful lives, are capitalized for toll equipment, buildings, toll facilities, other related costs and furniture and equipment. Under the Authority’s policy of accounting for infrastructure assets pursuant to the “modified B-14
  35. 35. Notes to Financial Statements Years ended June 30, 2008 and 2007 Note 1 - Organization and summary of significant accounting policies (continued) Accrued Vacation and Sick Leave Payable - Accrued bonds and that gross revenues will be sufficient to vacation and sick leave payable includes accumulated pay all other amounts required by the Master Bond vacation pay, vested sick pay and other compensation Resolution as amended and restated. payable to employees. In the event that the Authority determines that Bond Premium, Discount and Issuance Costs - revenues will not be sufficient to satisfy the above Bond premium, discount and issuance costs associated payments, the Authority will conduct a study to with the issuance of bonds are amortized on a straight- determine the toll revenue rate increase required to line basis over the life of the bonds, which approximates restore the revenue deficiency. the effective interest method. Bond premiums and discounts are presented as an addition and a reduction, All schedules of toll revenues and revisions thereof respectively, of the face amount of revenue bonds are filed with the FDOT. payable whereas issue costs are recorded as assets. On or before April 1 of each year, a preliminary Deferred Amount on Refunding of Revenue Bonds - The budget is prepared for maintenance, operations and difference between the reacquisition price and the net administrative expenses for the ensuing fiscal year. carrying amount of refunded bonds is included as a The preliminary budget is reviewed by the FDOT reduction to revenue bonds payable and is amortized and modified if necessary. as an adjustment to interest expense on a straight-line basis over the life of the refunded bonds or the life of On or before July 1 of each year, a final budget the refunding bonds, whichever is shorter. of maintenance, operations, and administrative expenses is adopted subject to approval by the FDOT. Deferred Amount on Interest Rate Exchange - During the fiscal year ended June 30, 2007, the Authority The Authority may adopt an amended or entered into six mandatory cash-settled interest rate supplemental annual budget for the remainder of a exchange agreements, the purpose of which was to fiscal year subject to approval by the FDOT. lock in the interest rate associated with the Series 2007A bonds. The result of these agreements was an Reclassifications - Certain amounts in the 2007 $8,078,000 net payment to the Authority on June 28, financial statements have been reclassified to conform 2007, which is accounted for as a deferred gain that to the 2008 classifications. reduces revenue bonds payable and will be amortized on a straight-line basis as an adjustment to interest expense over the life of the bonds. Restricted Net Assets - Restricted net assets are comprised of amounts reserved for operations, maintenance, administrative expenses and renewals and replacements in accordance with agreements with external parties. Budgets and Budgetary Accounting - The Authority follows the following procedures in establishing budgetary data: On or before February 1 of each year, the Authority completes a review of its financial condition for the purpose of estimating whether the gross revenues together with series payments, system payments and supplemental payments, if any, for the ensuing fiscal year will be sufficient to provide at least 120% of the annual debt service requirements of the B-15
  36. 36. Notes to Financial Statements Years ended June 30, 2008 and 2007 Note 2 - Deposits and investments Florida Statutes, bond resolutions and related bond documents, and the Authority’s Investment Policy dictate certain parameters for permitted investments. The following chart outlines the types of permitted investments, credit quality risk rating requirements by security type, the maximum concentration of credit risk by percentage of the total portfolio that may be invested in a single issuer and in total by security type, and maturity limits prescribed to mitigate interest rate risk exposure: Credit Quality Limit Permitted Rating Maturity for each Total Security Type Requirement Limits Issuer Allocation Local Government Investment Trust (Florida SBA) N/A N/A N/A 100% United States Government Securities N/A 10 years N/A 100% United States Government Agency Securities N/A 10 years 25% 50% Federal Instrumentalities N/A 10 years 40% 100% Mortgage-Backed Securities N/A 10 years 20% 25% Non-Negotiable Interest Bearing Time Certificates of Deposit N/A 1 year 25% 50% Repurchase Agreements N/A 90 days 25% 50% Commercial Paper A1/P1 270 days 10% 35% Corporate Notes AA/Aa 3 years 5% 25% Bankers' Acceptances A1/P1 180 days 20% 35% Asset-Backed Securities AA 10 years 10% 25% State and/or Local Government Taxable and/or Tax-Exempt Debt AA 3 years 20% 20% Fixed Income Money Market Mutual Funds Aam N/A 25% 50% Intergovernmental Investment Pool N/A N/A N/A 25% Additionally, investments in derivative products or the use of reverse repurchase agreements are permitted with the Board’s approval. Concentration of Credit Risk - The following is the percent of any issuer with whom the Authority had invested more than 5% of the total portfolio as of June 30, 2008 and 2007: Issuer 2008 2007 Federal Home Loan Bank 9.89% 7.46% Federal National Mortgage Association 9.76% 20.67% Federal Home Loan Mortgage Corporation - 11.41% Morgan Stanley Repurchase Agreement 5.32% - B-16

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