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Home My WebLink About20051880.tiff I KPMG , r J rJ F.1 NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY I Basic Financial Statements F December 31, 2004 (With Independent Auditors' Report Thereon) r � r ., r � ra r � r� _� r-] enzs€cur 46°404 ©e, -a 7-D S` 00 , Pt() 2005-1880 1 - r_ NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY res Basic Financial Statements December 31, 2004 Table of Contents I 1 Page Management's Discussion and Analysis 1 FIndependent Auditors' Report 6 Basic Financial Statements: Statement of Net Assets 7 IStatement of Revenue, Expenses, and Changes in Net Assets 8 Fr Statement of Cash Rows 9-91 i Notes to Basic Financial Statements 10 r r2 r I Northwest Parkway Public Highway Authority _ ', TM Jill Lamoureux Finance Manager I — 1 3701 Northwest Parkway Broomfield,Colorado 80020 jlamoureuz®nwpky.ore 1 www.nwpky.org r Direct:303-533-1212 Cell:720-530-0138 1 Mein:303-533-1200 Fax:303-404-3049 IS r� 1 NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY rManagement's Discussion and Analysis December 31, 2004 rJ This discussion and analysis is designed to assist the reader in focusing on significant financial issues and activities and to identify any significant changes in financial position. Please read it in conjunction with the basic I el financial statements, which immediately follow this section. I The Northwest Parkway Public Highway Authority (Authority) implemented a new reporting model as required by the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial 1 Statements—and Management's Discussion and Analysis—for State and Local Governments, for 2004 financial r _ reporting; therefore, comparative information with the previous year is limited due to differences in reporting models. In future years, when prior period information is in a comparative format, a comparative analysis will be presented. - Financial Highlights r 1 • 2004 represented the first full year of operations for the Northwest Parkway toll road (Northwest Parkway). r • Monthly toll revenues increased approximately 87% during the year growing from $231,817 in January to $433,276 in December. r 1 • 2004 operating expenses of $5,204,477 before depreciation were below the budgeted amount of $6,074,890. rSummary of Operations Northwest Parkway opened to traffic on November 24, 2003. All drivers drove Northwest Parkway free of charge until December 8, 2003 when a period of trial cash collection began to permit system testing and to Iencourage EXpress Toll usage. Toll collection from all users officially started as of January 1, 2004. Northwest Parkway toll revenues for 2004 were $4,216,492, a increase over 2003 of$108,418 which represented only one month of trial cash collections. Traffic on Northwest Parkway for the year ended December 31, 2004 was r approximately 9,239 average daily transactions, with over 56% collected electronically by EXpress Toll I transponders. r_ Totaloperating expenses excluding depreciation expense for 2004 were $5,204,477, representing a 139% increase over 2003 operating expenses before depreciation of $2,174,576. This increase is primarily due to the costs of the first full year of operations. Revenue bond interest payments for the year were $12,897,309. Interest r payments on revenue bonds outstanding for the Northwest Parkway continue to be paid from bond proceeds until June 15, 2006. The debt service coverage bond covenant does not begin until the first day of the third full fiscal year immediately following the date on which tolls are first collected. r r 1 1 (Continued) fis r1 NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY rJ Management's Discussion and Analysis 1 December 31, 2004 2004 Financial Results and Analysis F `1 2004 Net Assets Current assets $ 16,565,746 1 Noncurrent assets 472,149,418 Total assets $ 488,715,164 Current liabilities F Noncurrent liabilities $ 849,052 533,628,710 Total liabilities 534,477,762 Net assets: 1 Investment in capital assets, net of related debt (3,921,370) Unrestricted (41,841,228) F— Total net asset deficit (45,762,598) Total liabilities and net assets $ 488,715,164 I_ 1 2004 Revenue,Expenses,and Changes in Net Assets F Operating revenue—vehicle tolls and other revenue $ 4,586,457 I J Less operating expenses: Toll road maintenance 3,291,097 F Other 1,913,380 Depreciation 17,491,489 Total operating expenses 22,695,966 I Operating loss (18,109,509) Nonoperating revenue (expenses) (22,431,898) Change in net assets (40,541,407) JNet asset deficit,beginning of year (5,221,191) Net asset deficit,end of year $ (45,762,598) P The largest portion of the Authority's assets, over 97%, are noncurrent. Current assets total $16,565,746, representing 3% of total assets. Seventy-six percent (76%) of the noncurrent assets are capital assets (e.g.,right- of-way, roads, bridges, buildings, toll equipment), net of accumulated depreciation. The Authority uses these capital assets to provide service, and consequently, these assets are not available to liquidate liabilities or for 1 other spending. The acquisition of capital assets was primarily financed from revenue bond proceeds. Revenue bonds payable are 85% of noncurrent liabilities. F Total current liabilities are $849,052 at the end of 2004. Over 63% of the total is interest payable related to bonds payable. Current liabilities are to be paid from current assets. F-.1 2 (Continued) 3 I rr1, I r 1 NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Management's Discussion and Analysis -December 31, 2004 rToll revenues in 2004 were $4,216,492. Toll revenue accounted for 43% of total revenue. Ninety-three percent I - (93%)of all other revenue is interest earnings. r •J 2004 Toll Revenue r i � � $35000000 P. , l Pr r ! $300,000.00. __ - ___._ 1 $250,000.00. $200,000.00 1 $150,00000 11 - $100,000.00 $50,00.00 I $0.00 A LA 'AU./ AA , AAA _. _ !. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec !I ] r Total revenues for 2004 were $9,772,168,approximately a 20% increase over 2003 total revenues of$8,137,438. I 1 Total operating expenses before depreciation for 2004 were $5,204,477, representing a 139% increase over 2003 Iexpenses. The increase is primarily due to the costs associated with operating the toll road for a full year. 1 The net asset deficit increased during 2004 from a deficit of$5,221,191 at the beginning of the year to a deficit of$45,762,598 at the end of 2004. The primary reason for the increase was attributable to depreciation expense I1 and interest expense. The Authority plans to reduce the net asset deficit in future years through additional revenue from increased traffic on the toll road. F Capital Assets and Long-Term Debt I Total gross land, property, and equipment totaled $378,151,439 in 2004. Accumulated depreciation reduced the 2004 year-end land, property, and equipment balances by $17,563,430. Construction in progress was reduced to $109,143 due to the toll road going into service. The remaining construction in progress balance is related to the 7 construction of the Sheridan Interchange that is currently in progress. For a further understanding of capital asset amounts and activity, see note 3 to the basic financial statements. r- Total interest expense for 2004 was $26,528,284. Interest paid on bond debt in 2004 was $12,897,309, with the rmajority of the remaining interest expense accreting to bond principal. I I i r , 3 (Continued) I NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Management's Discussion and Analysis December 31, 2004 All of the rating agencies maintained their existing investment grade ratings for the Authority during 2004. However, in February of 2005 Moody's revised its outlook from stable to negative. All of the existing senior — debt is further insured by AMBAC and FSA and consequently carries the highest and most secure rating of the rating agencies. I ^ Senior Bonds Rating agency Rating Outlook Moody's Aaa Stable Standard&Poors AAA Stable Fitch AAA Negative Subordinate Bonds Rating agency Rating Outlook Moody's Bal Stable — Standard &Poors BB+ Stable Debt Administration Northwest Parkway Revenue Bonds December 31, 2004: Senior Current Interest Bonds—Series 2001A $ 175,720,000 Senior Capital Appreciation Bonds—Series 2001B 413,045,000 Senior Convertible Capital Appreciation Bonds—Series 2001C 189,175,000 Subordinate Current Interest Bonds—Series 2001D 52,465,000 Discounts(original issue and future accretion) (374,905,258) Total $ 455,499,742 Other Debt December 31, 2004: Intergovernmental $ 20,000,000 Reimbursements 55,872,040 $ 75,872,040 Debt levels remain consistent with debt reported at year-end 2003. No changes in the debt structure took place in - 2004. Interest payments funded by bond proceeds end on June 15, 2006. After that time, interest payments are scheduled to be paid from cash from operations. Principal repayment on the bonds begins June 15, 2008 and ends June 15, 2041. For a further understanding of long-term debt amounts and activity, see notes 4 and 5 to the basic financial statements. 4 (Continued) NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Management's Discussion and Analysis i December 31,2004 Contacting Northwest Parkway's Financial Management This financial report is designed to provide overview information to our bondholders, customers, and other interested parties. Should you have any questions about this report, contact the Northwest Parkway Public -- Highway Authority, 3701 Northwest Parkway, Broomfield, CO 80020. 5 • r } rKPMG KPMG LLP J Suite 2700 ✓ 707 Seventeenth Street Denver,CO 80202 r I 1 Independent Auditors' Report ✓ ..• � The Board of Directors Northwest Parkway Public Highway Authority: 1 We have audited the accompanying basic financial statements of the Northwest Parkway Public Highway Authority (Authority) as of and for the year ended December 31, 2004, as listed in the table of contents. IThese basic financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audit. r We conducted our audit in accordance with auditing standards generally accepted in the United States of I America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of ✓ internal control over financial reporting as a basis for designing audit procedures that are appropriate in the Icircumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes I__ . examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by J management, as well as evaluating the overall financial statement presentation. We believe that our audit r provides a reasonable basis for our opinion. 3/4 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Northwest Parkway Public Highway Authority as of December 31, 2004, and the changes in its financial position and its cash flows for the year then ended in conformity with accounting J principles generally accepted in the United States of America. As discussed in note 1 to the basic financial statements, effective January 1, 2004, the Authority implemented the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis — for State and Local Governments; GASB Statement No. 37, Basic Financial Statements — and Management's Discussion and Analysis —for State and Local Governments: Omnibus; and GASB Statement No. 38, Certain Financial JStatement Note Disclosures. F.. The Management's Discussion and Analysis is not a required part of the basic financial statements but is I supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of r — management regarding the methods of measurement and presentation of the required supplementary Iinformation. However, we did not audit the information and express no opinion on it. F, K`PMc LLP' 1 r May 16, 2005 r� KPMG LLP,a U 5.limited liability partnership,is the U.S. J member fern of KPMG International,a Swiss cooperative. 6 I' 1 NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Statement of Net Assets l _December 31, 2004 Assets Current assets: Cash and cash equivalents $ 3,194,265 Restricted investments 12,819,207 Restricted accrued interest receivable 154,241 Accounts receivable 370,677 1 Prepaid and other expenses 27,356 Total current assets 16,565,746 Noncurrent assets: Restricted cash and cash equivalents 29,389,427 Restricted investments 50,200,188 Capital assets(net of accumulated depreciation of$17,563,430) 360,588,009 L Bond issuance costs(net of accumulated amortization of$3,558,959) 31,971,794 Total noncurrent assets 472,149,418 Total assets $ 488,715,164 Liabilities and Net Assets Current liabilities: Accounts payable and other liabilities $ 311,665 Accrued bond interest payable from restricted assets 537,387 Total current liabilities 849,052 Noncurrent liabilities: Revenue bonds payable 455,499,742 Intergovernmental payable 20,000,000 Reimbursements payable 55,872,040 Accrued interest on reimbursements payable 2,256,928 Total noncurrent liabilities 533,628,710 Total liabilities 534,477,762 Net assets: Invested in capital assets, net of related debt (3,921,370) Unrestricted deficit (41,841,228) Total net asset deficit (45,762,598) Total liabilities and net assets $ 488,715,164 See accompanying notes to basic financial statements. 7 NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Statement of Revenue,Expenses, and Changes in Net Assets Year ended December 31,2004 Operating revenue: Toll revenue $ 4,216,492 Other revenue 369,965 65 Total operating revenue 4,586,457 Operating expenses: Salaries and benefits Professional fees 964,974 Toll road maintenance 213,728 General and administrative expenses 3,291,097 Depreciation 734,678 17,491,489 Total operating expenses 22,695,966 Operating loss (18,109,509) Nonoperating revenues (expenses): Interest income 5,185,711 Amortization expense for bond issuance costs (1,089,325) Interest expense (26,528,284) Total nonoperating revenues(expenses) (22,431,898) Change in net assets (40,541,407) Net asset deficit, beginning of year (5,221,191) Net asset deficit, end of year $ (45,762,598) See accompanying notes to basic financial statements. 8 e I NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Statement of Cash Flows T Year.ended December 31, 2004 Cash flows from operating activities: Receipts of tolls $ 4,209,258 Receipts from other revenue sources 201,005 Payments to employees (964,974) Payments to suppliers (4,042,156) Net cash used in operating activities (596,867) Cash flows from capital and related financing activities: Interest paid (12,897,309) Purchase of capital assets (7,960,442) Net cash used in capital and related financing activities (20,857,751) Cash flows from investing activities: Purchase of investments (5,154,707) Proceeds from sale/maturity of investments 53,641,853 Interest received 5,284,425 Net cash provided by investing activities 53,771,571 Net increase in cash and cash equivalents 32,316,953 Cash and cash equivalents, beginning of year 266,739 Cash and cash equivalents, end of year $ 32,583,692 Reconciliation of cash and cash equivalents to the statement of net assets: Cash and cash equivalents—current assets $ 3,194,265 Cash and cash equivalents—noncurrent assets, restricted 29,389,427 Cash and cash equivalents,end of year $ 32,583,692 Reconciliation of operating loss to net cash used in operating activities: Operating loss $ (18,109,509) Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation 17,491,489 Loss on disposal of property and equipment 4,319 Changes in assets and liabilities: Increase in accounts receivable (176,194) Increase in prepaid expenses (3,262) Increase in accounts payable and other liabilities 196,290 Net cash used in operating activities $ (596,867) Noncash investing and financing activities: Amortization of bond issuance costs $ 1,089,325 Amortization of bond discount 148,955 Accretion of capital appreciation bonds 13,049,917 See accompanying notes to basic financial statements. 9 C LNORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements CDecember 31, 2004 ii (1) Summary of Significant Accounting Policies 1� The Northwest Parkway Public Highway Authority (Authority) was formed by an intergovernmental agreement on June 2, 1999, among the City and County of Broomfield, the County of Weld, and the City of Lafayette (the Governmental Unit(s)). The purpose of the agreement was to finance, construct, operate, and/or maintain the Northwest Parkway toll road. In November 2003, the toll road was opened for trial t. cash collection and system testing. Toll collection officially began on January 1, 2004, but the Authority did not grant final acceptance to the Design-Build Contract until June 30, 2004. It is the Authority's intent to serve as an enterprise, as such term is defined in the Colorado Constitution, Article X, Section 20(2)(d), and in furtherance thereof, to serve as a government-owned business, engaged in the business venture of providing roadway transportation in exchange for the payment of toll fees. (a) Reporting Entity The Authority is a separate stand-alone governmental entity. Each member of the Governmental Units appoints a representative to the Authority board of directors. The State of Colorado (State) may join in the Authority, pursuant to the Colorado Constitution. In the event the State of Colorado joins in the Authority, the State shall have one Director on the Board. The Authority follows Governmental Accounting Standards Board (GASB) accounting pronouncements, which provide guidance for determining which governmental activities, organizations, and functions should be included within the financial reporting entity. GASB pronouncements set forth the financial accountability of a governmental organization's elected governing body as the basic criterion for including a possible component governmental organization in a primary government's legal entity. Financial accountability includes, but is not limited to, appointment of a voting majority of the organization's governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benefits or burdens, and fiscal dependency. The Authority is not financially accountable for any other organization; nor is the Authority a component unit of any other primary governmental entity. (b) Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Enterprise funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Enterprise funds are used to account for business type entities whose operations are financed with debt that is secured by a pledge of net revenues from fees and charges. The Authority applies all applicable GASB pronouncements, as well as Financial Accounting Standards Board (FASB) pronouncements, issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements.The Authority has elected not to apply FASB pronouncements issued after November 30, 1989. 10 (Continued) i NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements _ _ ,December 31, 2004 - J (c) Changes in Accounting Principles Effective January 1, 2004, the Authority implemented GASB Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis — for State and Local Governments; Statement No. 37, Basic Financial Statements — and Management's Discussion and Analysis —for State and Local Governments: Omnibus; and GASB Statement No. 38, Certain Financial Statement Note Disclosures. These statements establish financial reporting and disclosure standards for all state and local governments and related entities. The impact of these statements relates to the format of the basic financial statements, presentation of net assets, the inclusion of management's discussion and analysis, additional disclosures for capital assets and debt, and preparation of a statement of cash flows on the direct method. However, the application of these standards had no impact on total net assets. 1 (d) Investments and Cash Equivalents The Authority's investments consist of nonnegotiable guaranteed investment contracts, money market funds, and amounts invested in the Colorado Government Liquid Assets Trust (COLOTRUST). The guaranteed investment contracts cannot be traded; therefore, they are reported using a cost-based measurement. Money market funds and COLOTRUST amounts are highly liquid t instruments and are considered cash equivalents for financial reporting u oses. Due to the highly liquid nature of these instruments, they are reported using a cost-based measurement. (e) Capital Assets Capital assets are defined as assets with an initial cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost. Donated capital assets are recorded at estimated market value at the date of transfer. Capital assets subject to depreciation are depreciated using the straight-line method over the following estimated useful lives: Years Assets: Furniture, vehicles, and equipment 3-7 Buildings 30 • Bridges 30 Roadway 20 1 (I) Net Assets Net asset amounts reported in the Authority's statement of net assets consist of two categories: net assets invested in capital assets, net of related debt; and unrestricted net assets. Net assets invested in capital assets net of related debt consist of all capital assets, net of accumulated depreciation, and reduced by outstanding borrowings, and the costs associated with those borrowings, to acquire or construct the capital assets. Unrestricted net assets are available to fund any obligation of the Authority. 11 (Continued) L AINNION r NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements I2ecember 31, 2004 (g) Bond Discounts/Issuance Costs Bond discounts and costs related to the issuance of bonds are amortized over the remaining term of the bonds using the effective-interest method. (h) Operating Activity The Authority's statement of revenue, expenses, and changes in net assets distinguishes between operating and nonoperating revenue and expenses. Operating revenue results primarily from vehicle tolls associated with the operation of the Authority's toll road. The Authority recognizes toll operating revenue when earned. Operating expenses include costs incurred to provide for maintenance and administration of the toll road. Nonoperating revenue and expenses consist of investment income, interest on debt, and amortization of bond issuance costs. (i) Statement of Cash Flows The basic financial statements include a statement of cash flows which presents unrestricted and restricted cash and cash equivalents provided and used by operating, investing, and financing r- activities. The Authority considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. (I) Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (k) Income Taxes The income derived by the Authority is exempt from federal income tax under the provisions of Internal Revenue Code Section 115. Accordingly, no provision for the payment or refund of income taxes has been made in the accompanying basic financial statements. (2) Deposits and Investments (a) Deposits The Colorado Public Deposit Protection Act (PDPA) requires that all units of local government deposit cash in eligible public depositories, with eligibility determined by State regulators. Amounts on deposit in excess of federal insurance levels must be collateralized by eligible collateral as determined by the PDPA. The PDPA allows the financial institution to create a single collateral pool for all public funds held. The pool is to be maintained by another institution or held in trust for all the uninsured public deposits as a group. The market value of the collateral must be at least equal to 102% of the uninsured deposits. 12 (Continued) NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31,2004 Deposits are categorized with regard to custodial credit risk as follows. Category 1 — insured or collateralized with securities held by the Authority or by its agent in the Authority's name, " Category 2 — collateralized with securities held by the pledging financial institution's trust department or agent in the Authority's name, and Category 3 — uncollateralized, including any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent,but not in the Authority's name. At December 31, 2004,the Authority's deposits had a carrying value of$417,904 and a bank balance of$600,220.The carrying value is different from the bank balance due to reconciling items. At December 31, 2004,the Authority's cash deposits are categorized as follows: Categorized deposits: Insured deposits—Category 1 $ 100,000 r Deposits collateralized through !, PDPA—Category 2 500,220 — Total $ 600,220 Er (b) Investments and Cash Equivalents Colorado statutes specify investment instruments meeting defined rating and risk criteria in which local government entities may invest: C • Obligations of the United States and certain U.S. government agency securities • Certain international agency securities C • Bonds of certain Colorado government entities • Bankers' acceptances of certain banks • Commercial paper with a certain rating • Written repurchase agreements collateralized by certain authorized securities • Certain money market mutual funds • Guaranteed investment contracts • Local government investment pools The Authority may invest or deposit any funds in the manner provided by law for political subdivisions of the State. In addition, the Authority may direct a corporate trustee which hold funds of the Authority to invest or deposit such funds in investments or deposits other than those specified by law for political subdivisions of the State if the board determines, by resolution, that such investment or deposit meets the standard established in the Colorado Revised Statutes, the income is at least comparable to income available on investments or deposits specified by law for political r J J 13 (Continued) • I'r i i; T, NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY ilM Notes to Basic Financial Statements December 31,2004 TH. subdivisions of the State, and such investments will assist the Authority in the financing, construction, maintenance, or operation of public highways. The bond documents impose additional restrictions on investments as discussed below in (c)and(d). Investments made by the Authority are summarized below. The investments that are represented by specific identifiable investment securities are classified by the three categories of custodial credit risk described below: Category 1 — Insured or registered, or securities held by the Authority or its agent in the Authority's name. Category 2 —Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the Authority's name. Category 3 — Uninsured and unregistered with securities held by the counterparty or by it trust 1,-- if..,. department or agent but not in the Authority's name. (c) Investments Considered Cash Equivalents (Restricted and Unrestricted) The Authority participates in COLOTRUST, which is a local government investment pool. This investment operates similarly to a money market fund and each share is equal to $1 since investments are not evidenced by a physical or book entry security; therefore, this investment is not I. categorized as to custodial credit risk. At December 31, 2004, the Authority's investment in this COLOTRUST account is $517,870. This investment is included in unrestricted cash and cash equivalents. • In September 2004, one of the original guaranteed investment contracts, which was to be used for construction costs, matured. The balance in this contract was invested in COLOTRUST and continues to be restricted for construction costs. Construction costs include the design build contract, right-of-way acquisitions, project oversight engineering services, administrative costs, and reimbursement agreements. As previously mentioned, funds in COLOTRUST are not subject to categorization as to custodial credit risk. The investment balance in this COLOTRUST account at December 31, 2004 is $29,389,427 and is included in restricted cash and cash equivalents. During 2004, the Authority started toll collection and this revenue is to be deposited into a reserve account. At the end of each calendar month, the funds in this reserve account are to be used to pay N the operating expenses budgeted by the Authority for the immediately succeeding calendar month. The funds in this account are invested in a money market fund, which is not subject to categorization as to custodial credit risk. The investment balance in this money market fund at December 31, 2004 is $2,258,491 and is included in unrestricted cash and cash equivalents. (d) Restricted Investments The investments the Authority acquired from bond proceeds were required to be deposited into reserve accounts for capitalized interest, debt service reserve, and construction funds. At December 31, 2004, the investments for the reserve accounts are held in five different guaranteed 14 (Continued) i i _ NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY �' Notes to Basic Financial Statements 11 December 31, 2004 investment contracts. The investments are not subject to categorization because such contracts are � not evidenced by a physical or book entry security. Interest is paid semiannually on June 15 and _ December 15 for each contract. Two of the guaranteed investment contracts are structured so the original investment plus interest earnings are sufficient to make the required semiannual interest payments on the Series A&D bonds through June 15, 2006. A total of $43,513,177 was deposited into these two contracts. One of the contracts contains an interest rate of 5.101%, and the other contract has an interest rate of 5.041%; both contracts mature on June 15, 2006. A third party guarantees the funds in both contracts. In addition, both contracts call for the provider of the contracts (Provider) to maintain certain credit ratings with S&P and Moody's. The investment balance in these two guaranteed investment contracts for the debt service accounts at December 31,2004 is $12,819,207. Another guaranteed investment contract, which is to be used for construction costs, contains an interest rate of 4.51%. The amount in this investment is to be used to pay all cost associated with the construction of the toll road, which includes the design build contract, right-of-way acquisitions, project oversight engineering services, administrative costs, and reimbursement agreements. This contract terminates on June 1, 2007 and calls for the provider to maintain certain credit ratings with S&P and Moody's. The investment balance in this contract at December 31, 2004 is$8,960,537. Two other guaranteed investment contracts are investments of the debt reserve accounts, which are to be used to pay debt service and redemption price of the bonds. The original investments in both of these contracts are to remain in whole, unless liquidation is required as noted in the contracts. A total of $41,239,651 was deposited into these two contracts. Both contracts terminate on June 15, 2021, but have an optional termination date of June 15, 2011. In addition, both contracts call for the Provider to maintain certain credit ratings with S&P and Moody's. One of the contracts contains an interest rate of 6.42% and the other contract contains an interest rate of 5.86% along with a third-party guarantee of the funds. The investment balance in these contracts at December 31, 2004 is $41,239,651. 15 (Continued) r.. NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31, 2004 (3) Capital Assets A summary of changes in capital assets at December 31, 2004 is as follows: Balance at Balance at — January 1, December 31, 2004 Increases Decreases Transfers 2004 - Capital assets not being depreciated: - Construction in progress $ 335,048,704 1,339,319 — (336,278,880) 109,143 Land-right of way 35,1 17,826 4,459,252 — 39,577,078 Total capital assets not being - depreciated 370,166,530 5,798,571 — (336,278,880) 39,686,221 Capital assets being depreciated: Furniture,vehicles,and equipment 411,713 1,695,993 (11,517) 2,096,189 — — 12,375,494 12,375,494 Bridges — 51,175,3925— 51,175,392 Roadway — 90,149 — 272,727,994 272,818,143 - Total capital assets being depreciated 411,713 1,786,142 (11,517) 336,278,880 338,465,218 Less accumulated depreciation for: Furniture,vehicles,and equipment (79,139) —(418,387) 7,198 (490,328) Buildings (446,893) Bridges (1,848,560) — (446,893) Roadway — (14,777,649) — _ 1(1,848,560) (14,777,649) Total accumulated depredation (79,139) (17,491,489) 7,198 — (17,563,430) Capital assets being depreciated,net 332,574 (15,705,347) (4,319) 336,278,880 320,901,788 Total capital assets $ 370,499,104 (9,906,776) (4,319) — 360,588,009 (a) Construction Contractor On June 22, 2001, the Authority entered into a Design/Build Contract with Northwest Parkway Constructors (the Contractor) to construct the Authority's toll road. The original contract price to be paid to Northwest Parkway Constructors was $187,637,528. The contract includes provisions for change orders, guarantees, liquidated damages for delay, and early completion bonuses. As of December 31, 2004, there have been 81 authorized contract changes, which have increased the contract price to $191,615,337. The original Design/Build Contract achieved final acceptance in June 2004. A subsequent work order was added in November 2004 for work related to the Sheridan Interchange. The original Authority plan included construction of an interchange at Sheridan Boulevard by 2010. Current activities in that area have indicated that it would be beneficial to the 16 (Continued) NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31, 2004 Authority to open that interchange as soon as possible. As a result, the Authority included the work order to the original Design/Build Contract and plans to enter into an agreement with a general contractor for interchange construction in 2005. (b) Project Oversight The Authority has a contract for$5,300,000 with Carter& Burgess, Inc. to serve as project oversight engineer. This contract expired in July 2004 and was extended to December 31, 2005. The Authority entered into a second contract with Carter & Burgess, Inc. for design work and project oversight related to the Sheridan Interchange in the amount of $890,000 which also expires December 31, 2005. (4) Revenue Bonds Payable The detail of the Authority's long-term revenue bonds payable is as follows: $175,720,000 Series 2001A Senior Current Interest Bonds, $175,720,000 Revenue Bonds mature June 15, 2041. Annual principal payments ranging from $1,175,000 to$10,025,000 commence on June 15, 2008 and continue through June 15, 2041. Interest is due semiannually on June 15 and December 15 at rates ranging from 4.0% to 5.5%. $79,865,792 Series 2001B Senior Capital Appreciation Bonds, $413,045,000 Revenue Bonds with maturity values ranging from $6,725,000 to $38,750,000 are payable on respective maturity dates commencing June 15, 2018 and continuing through June 15, 2034. The Series 2001B Bonds accrete in value from date issued through maturity or any earlier redemption date, compounded on June 15 and December 15 of each year at yields to maturity ranging from 5.90% to 6.31%. $108,371,280 Series 2001C Senior Convertible Capital Appreciation Bonds, $189,175,000 Revenue Bonds with maturity values ranging from $995,000 to $92,245,000, are payable on respective maturity dates commencing on June 15, 2012 and continuing through June 15, 2025. The Series 2001C Bonds accrete in value from date issued through conversion date, December 15, 2011, compounded on June 15 and December 15 of each year at yields to conversion date ranging from 5.00% to 5.80%. The bonds will convert to current interest bonds on the conversion date. Commencing on December 15, 2011, interest is due semiannually on June 15 and December 15 at rates ranging from 5.00% to 5.80%. $52,465,000 Series 2001O First Tier Subordinate Current Interest Bonds,$52,465,000 Revenue Bonds mature June 15, 2041. Annual mandatory sinking fund requirements commence on June 15, 2008 and continue through June 15, 2041 in increasing amounts from $400,000 to $3,860,000. Interest is due semiannually on June 15 and December 15 at a rate of 7.125%. The 2001 bonds are secured principally from cash flows from current and future revenues and a debt service reserve account. The outstanding senior bonds are also secured by insurance. • 17 (Continued) + h r b(.7.5,.5 j• yyyy 4 k 1 NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31, 2004 A summary of changes in long-term revenue bonds payable at December 31, 2004 is as follows: Balance Balance January 1, Accretion December 31, Description 2004 Additions of discounts 2004 Senior Current Interest Bonds— 2001A(CIB)-A $ 175,720,000 — — 175,720,000 Discount on Senior CIB-2001A (original issue) (2,127,672) — 89,724 (2,037,948) Senior Capital Appreciation Bonds— 2001B (CAB)-B 413,045,000 — — 413,045,000 Discount on Senior CAB-2001B (accretion) (319,929,150) — 5,881,675 (314,047,475) Senior Convertible Capital Appreciation Bonds—2001C (CCAB)-C 189,175,000 — — 189,175,000 Discount Senior CCAB—2001C (accretion) (64,506,914) — 7,168,242 (57,338,672) Subordinate Current Interest Bonds—2001D(CIB)-D 52,465,000 — — 52,465,000 Discount Subordinated CIB—2001D (original issue) (1,540,394) — 59,231 (1,481,163) Total $ 442,300,870 — 13,198,872 455,499,742 18 (Continued) NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31, 2004 The aggregate future principal maturities and interest payments for the long-term revenue bonds at December 31,2004 are: Principal Interest Total Year ending December 31: 2005 $ - 12,897,310 12,897,310 2006 - 12,897,310 12,897,310 2007 - 12,897,310 12,897,310 2008 1,575,000 12,859,560 14,434,560 2009 3,925,000 12,710,419 16,635,419 2010-2015 40,240,000 118,023,561 158,263,561 2016-2020 108,080,000 95,697,084 203,777,084 2021 -2025 193,300,000 64,724,924 258,024,924 2026-2030 217,700,000 38,599,275 256,299,275 2031 -2035 192,820,000 27,598,969 220,418,969 2036-2040 58,880,000 12,860,513 71,740,513 2041 13,885,000 400,669 14,285,669 830,405,000 422,166,904 1,252,571,904 Less original issue discount (3,519,111) — (3,519,111) Total scheduled payments 826,885,889 $ 422,166,904 1,249,052,793 Less future years' accretion (371,386,147) Total bonds payable $ 455,499,742 (5) Reimbursements Payable (a) Intergovernmental Agreements On February 18, 1999, an intergovernmental agreement was entered into between the City and County of Broomfield, City of Lafayette, City of Louisville, and the County of Boulder for the purpose of regulating land uses regarding the construction of the toll road. Certain sections of this agreement were amended on January 16, 2001, and the Authority was added as a signatory. Per the agreement, the Authority will pay the following: a total of $12,000,000 for Dillon Road improvements, of which $1,000,000 was paid to the City of Lafayette during 2001 and the other $11,000,000 was included in the design/build contract; $12,000,000 for South 96th Street improvement to the City and County of Louisville, which was paid during 2002; $12,000,000 for West Midway Boulevard improvements to the City and County of Broomfield, of which $2,000,000 was paid during 2001 and $10,000,000 is recorded as a liability at December 31, 2004; $5,000,000 each to the City of Louisville and the City and County of Broomfield for open space and conservation easement allocation, which was paid during 2001; $3,000,000 each to the City and County of Broomfield, City of Louisville, and Boulder County and $1,000,000 to the City of Lafayette for acquisition of permanent open space located within the Plan area, of which the total $10,000,000 is recorded as a liability at December 31, 2004. No amounts are due within one year at 19 (Continued) NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31, 2004 December 31, 2004. The permanent open space payments are to be paid by December 31, 2008. No additional amounts related to intergovernmental agreements were agreed to during 2004 and no amounts were paid during 2004. Outstanding amounts related to the intergovernmental agreements bear no interest. (b) Reimbursement Agreements The Authority entered into reimbursement agreements with the following entities, Interlocken Ltd., Interlocken Consolidated Metropolitan District(ICMD), and the City and County of Broomfield. The Authority agreed to reimburse the following costs at such time as the Authority has funds available. Interlocken Ltd. incurred costs with respect to the planning, financing, design, and/or construction of Interlocken Loop in the amount of$1,995,904. ICMD incurred costs with respect to planning, financing, design, and construction of Interlocken Loop in the amount of$5,205,813. Both of these commitments are recorded as a liability and bear interest at the rate of 6% per annum from the date of the agreements until they are paid in full. These entities will be reimbursed at such time as the Authority has funds available. No amounts are due within one year at December 31, 2004. At December 31, 2004, the Authority has recorded accrued interest of $2,256,928 for these commitments. 1 The Authority agreed to reimburse the City and County of Broomfield for the portion of its expenditures that benefit or are incorporated into the toll road. The City and County of Broomfield incurred initial expenditures and secondary expenditures, which were recorded as a capital asset and liability by the Authority. The determination of whether any of these amounts can be reimbursed from the initial funding shall be solely the determination of the Authority. If reimbursement of the unpaid expenditures is not made from the initial funding, the amounts shall be reimbursed at such time the Authority has funds available from financings or revenues, if any. The unpaid expenditures bear no interest. The Authority reimbursed the City and County of Broomfield for their initial expenditures during 2001, and the secondary expenditures of$48,670,323 are recorded as a liability at December 31, 2004. No amounts are due within one year at December 31, 2004. No additional principal amounts related to reimbursement agreements were agreed to during 2004 r and no amounts were paid during 2004. (6) Retirement Plans The Authority has a single employer defined contribution plan in which all employees are eligible to participate upon their first day of employment. This plan is administered by ICMA Retirement Corporation, an outside trustee. The plan is in lieu of Social Security and the Authority contributes 16.5% of each participant's compensation to the plan for full-time employees and 6.5% for part-time employees. All participants are required to contribute 6.5% of their compensation. Participants vest immediately 100% in all contributions. The Authority contributed $114,014 to this plan for the year ended December 31, • 2004. The Authority's total payroll for the year ended December 31, 2004 was $729,885. Fringe benefit amounts paid to employees are not included as compensation for this plan. • 20 (Continued) 7I'i NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31, 2004 In addition to the defined contribution plan, the Authority has a defined contribution retirement health savings plan that the Authority contributes $1,000 per year per full time employee. This plan is also administered by ICMA. Employees can contribute to this plan after tax, up to 100% of their salary. The plan allows for tax-free withdrawals after retirement (age 59-1/2) for medical costs. The Authority contributed $8,000 to this plan for the year ended December 31, 2004. Employees contributed $724 to this plan for the year ended December 31, 2004. The Authority's board of directors establishes all retirement plans and amends them as necessary. (7) Deferred Compensation As of September 2001, the Authority offered all regular employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan permits participants to defer a portion of their salary until future years. This plan is also administered by ICMA. The employees' voluntary contributions are made to the 457 plan. No employer contributions are made to this plan. Employees can contribute a maximum of$8,500 per year. Deferred compensation is available for withdrawal anytime after the participant reaches age 59-1/2, and must begin at age 70. Withdrawals can also be made upon termination of employment, death, or unforeseeable emergency. Such withdrawals may be subject to the IRS penalties for early withdrawal. Withdrawals can also be made upon termination of the plan. An independent trustee administers funds in the plan. The trustee provides participants with quarterly statements of contributions, withdrawals, and earnings. Employee contributions made for the years ended December 31, 2004 were$36,100. The Authority's board of directors establishes all deferred compensation plans and amends them as necessary. (8) TABOR In November 1992, the voters of Colorado approved Amendment 1, commonly known as the Taxpayer's Bill of Rights (TABOR), which adds a new Section 20 to Article X of the Colorado Constitution. TABOR contains tax, spending, revenue, and debt limitations, which apply to the State of Colorado and all local governments. Enterprises, defined as government-owned businesses authorized to issue revenue bonds and receiving less than 10% of annual revenue in grants from all state and local governments combined, are excluded from the provisions of TABOR. During the January to May 1996 session, the Colorado General Assembly enacted S.B. 96-173, which was signed into law by the Governor on March 18, 1996. The General Assembly declared its intention that public highway authorities be permitted to qualify as enterprises under Section 20 of Article X of the Colorado Constitution; therefore, TABOR is not applicable to the Authority. r F 21 (Continued) f NORTHWEST PARKWAY PUBLIC HIGHWAY AUTHORITY Notes to Basic Financial Statements December 31, 2004 (9) Risk Management The Authority is exposed to various risks of losses, including general liability, property damage, and employee life, medical, dental, and accidental benefits. The Authority has a risk management program, • which includes commercial property insurance for catastrophic losses, including floods and earthquakes, for the entity. The Authority also carries commercial insurance for employee life, health, accident, and workers' compensation. The Authority has various set limits on their commercial insurance coverage and has not exceeded the coverage since inception. 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