CHEROKEE METROPOLITAN DISTRICT
Management's Discussion and Analysis,
Basic Financial Statements and
Supplemental Information
For the Year Ended December 31, 2016
And
Independent Auditors' ReportCHEROKEE METROPOLITAN DISTRICT
‘TABLE OF CONTENTS.
INDEPENDENT AUDITORS’ REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS.
BASIC FINANCIAL STATEMENTS AS OF AND FOR THE,
YEAR ENDED DECEMBER 31, 2016:
Government-wide Financial Statements:
Statement of Net Position
Statement of Activities
Fund Financial Statements:
Balance Sheet — Governmental Funds and Reconciliation of the Governmental
Funds Balance Sheet to the Statement of Net Position
Statement of Revenues, Expenditures and Changes in Fund Balance ~
‘Governmental Funds
Recontiliation of the Statement of Revenues, Expenditures and Changes in
Fund Balance ~ Governmental Funds to the Statement of Net Position
Statement of Net Position ~ Proprietary Funds
Statement of Revenues, Expenses and Change in Net Position ~
Proprietary l'unds
Statement of Cash Flows ~ Proprietary Funds
Schedule of Revenues, Expenditures and Change in Fund Balance ~ Budget and Actual ~
General Fund)
‘Schedule of Revenues, Expenditures and Change in Fund Balance ~ Budget and Actual —
Parks Fund
Notes to the Finan:
Statements,
SUPPLEMENTAL INFORMATION:
Schedule of Revenues, Expenses and Changes in Net Position
(Non-GAAP Budgetary Basis)— Water and Wastewater Fund
Schedule of Revenues, Expenses and Changes in Net Position
(Non-GAAP Budgetary Basis) — Golf Course Fund
Debit Service Coverage and Reserve Requirements
Page
10
ut
12
13
4
15
16
37
38
39)INDEPENDENT AUDITORS! REPORT
Board of Directors
Cherokee Metropolitan District
Colorado Springs, Colorado
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, and cach major fund of Cherokee Metropolitan District, (the District) as of and for the year
ended December 31, 2016, and the related notes to the financial statements, which collectively comprise
the Districts basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors' Responsibility
‘Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
‘An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal control, Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions,
Svite 400, Colorado Springs, CO 80903
C19) 630-1186
(719) 630-1187In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities and each major
fund of the District as of December 31, 2016, and the respective changes in financial position and, where
applicable, cash flows thereof for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Report on Required Supplemental Information
‘Accounting prineiples generally accepted in the United States of America require that the management's
discussion and analysis on pages 1 through 5 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic or historical context. We have applied
certain limited procedures to the required supplemental information in accordance with auditing standards
generally accepted in the United States of America, which consisted of inquiries of management about the
‘methods of preparing the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements and other knowledge we obtained during our
uidit of the basic financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to express an
opinion or provide any assurance.
Report on Other Supplemental Information
ur audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the District's basic financial statements. The supplemental schedules are presented for purposes
of additional analysis and are not a required part ofthe basic financial statements.
‘The supplemental schedules on pages 37 through 39 are the responsibility of management and were
derived from and relate directly to the underlying accounting and other records used to prepare the basic
financial statements. Such information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and certain additional procedures, including comparing and reconciling
such information directly to the underlying accounting and other records used to prepare the basic
financial statements or to the basic financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America. In our opinion,
the information is fairly stated in all material respects in relation to the basic financial statements as
whole.
Stockman Kast Ryan & @,, LLP
July 27, 2017MANAGEMENT’S DISCUSSION AND ANALYSIS.CHEROKEE METROPOLITAN DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
‘The Management Discussion and Analysis (MDJ&A) is presented to provide an overview of the financial
activities and conditions for the fiscal year ended on December 31, 2016. ‘The MD&A contains information
currently known to management as af the date of the auditor's report. The MD&A should be read in
conjunction with the District's financial statements that accompany this report,
FINANCIAL HIGHLIGHTS.
Total Assets equaled: $112,903,779 for 2016.
Cash, Cash Equivalents and Investments as of December 31, 2016 were $11,156,377,
Total Liabilities for 2016, as of December 31, 2016, equaled $30,959,478.
Net Position, as of December 31, 2016, totaled $81,944,301.
Governmental change in Net Position from 2015 to 2016 totaled $117,768.
‘+ Business-type change in Net Position from 2015 to 2016 totaled $3,073,957.
FINANCIAL STATEMENTS
‘The financial statements consist of three parts - management discussion and analysis, the basic financial
statements, and supplemental information. ‘The basic financial statements include two kinds of statements
that present different views of the Distrit:
+ The first two are government-wide statements that provide both long-term and short-term
information about the District's overall financial status.
‘+ The remaining statements are fund financial statements that focus on individual parts of the
District government, reporting the District's operations in more detail than the government-wide
statements.
‘The financial statements also include notes that explain some of the information in the financial
statements and provide more detailed data. The statements are followed by a section of supplemental
information that further explains and supports the information in the financial statements,
Government-wide Statements — The government-wide statements consist of the Statement of Net
Position and the Statement of Activities. These statements report information about the District as a whole
and include all assets and liabilities using the accrual basis of accounting. All of the current year’s revenues
‘and expenses are taken into account regardless of when the cash is received or paid.
These two statements report the District's net position and changes in them. The Districts net position, the
difference between assets and liabilities, is one way to measure the District's financial status, or financial
position. Over time increases or decreases in the District's net position is one indicator whether is financial
health is improving or deteriorating.
Fund Financial Statements — The fund financial statements provide more detailed information about
the District's funds, focusing on its most significant funds, not the District as a whole. The District's two
kinds of funds, governmental and proprietary, use different accounting approaches.
1Governmental Funds — The activity of the District's General fund is reported as a governmental fund,
which focuses on how money flows into and out of the General fund. ‘This fund is reported using the
‘modified acerual accounting method, which measures cash and all of the other financial assets that can
readily be converted to cash. The governmental fund statement provides a detailed short-term view of the
District's general governmental operations and the basic services it provides. Governmental fund
information helps to determine whether there are more or less financial resources that can be spent in the
near future to finance the District's programs.
Proprietary (Enterprise) Funds — The activity of the District Enterprise funds isto report the same way
that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the
District's Enterprise fund is the same as the business-type activities reported in the governmental-wide
statements but provides more detailed and additional information, such as cash flows
District Specific — The Chetokee Metropolitan District utilizes two separate financial categories of
activities; one for the general district functions and one for the enterprise, or business-type functions. Each
of these, in tur, is segregated into operational and capital functions, Together, these comprise the overall
‘government-wide statements. ‘The Governmental, or general, category covers the public functions
involving: street lighting and parks. The Proprietary, or Business-type, category involves the public
provision of water, wastewater, reuse water, related administration, and golf course functions. The
Governmental functions are funded by fees and conservation trust funds. ‘The Proprietary functions are
funded by water and sewer user charges, tap fees, golf fees, and, similarly, bond financing when required
for capital projects.
FINANCIAL POSITION & RESULTS FROM OPERATIONS
NET POSITIO!
2016.
Governmental Business-ype Governmental pe
‘Activities Activities Total ‘Activities Activities Total
ASSETS,
Other S$ 363,792 $ 12525822 $ 1288614 $ 330,113 9.346917 $9,697,030
Capital 3981962 __99,618.203 100,014,165 265929 99,719,234 __ 99,985,163,
Total assets $159.18 $112.144,025 $12,903,779 $_596.042 $109,066,151 $_109,662,193LIABILITIES
Cureat
Long-term
“oral ibiiies
NET POSITION
Invested position
Resiriced position
Unrestricted position
‘Total net position
Condensed Statements of Act
Charges for service
Operating grants
and contributions
Capita grams
‘and contributions
Investment earings
‘Other revenues
Lawsult setiement
‘Total revenues
FUNCTIONAL
Steve lights
Parks
‘Water and wastewater
Golf course
Total expenditures
(Change in net position
‘Net position —
beginning of year
Net postion
nd of year
2018
Governmental Business- ype
Total ‘Activ ‘Activities
S SRORD S$ 3.836.136 $ 3895118 $13,038 $2,536,882
27064360 __ 27,064,360 28359,687,
S___s8982 $30,000,495 $ 30959478 $_3.038 $_30,896579
S$ 395962 $ 71314805 $ 71,710.767 $ 265,29 $ 70,161,613
204290 1/$70,203 1.774.493, 227,128 1,985,264
8459,081 89.947 022.698
ties for the years ended December 31, 2016 and 2015,
2016 2018
Governmental Business Type Governmental Buiiness-Type
‘Activ ‘Activities Total ‘Activities Activities
$299,152 $ 12,201,992 $ 12,801,144 $ 280,39 $11,490,256
126,904 27,000 153,90 108,004
1,565,603 1,565,603 25,000 2,219,196
51 47,37 47,188, SI 8.945
22,151 660,313, 682,468 235983,
2,000,000 __2,000,000 275,000
TRIE 16,950,303 798
121,076 121076 16828
209,414 181,106,
9,033,554
935,006,
330,490 297.930 __9,968,560
117,768 __3,073,957 4,260,820
78,752,516
7860572 402.547
752
S$ 100772 $81,263,529 §_SL944301 §__$83,004 §_78,169572
Total
$2,549,920
2399.09
$3009.17
S$ 70427,582
2212392
61262
$18,752,576
Total
$11,770,695
108,004
2,214,196
8.996
233.983,
273,000
—14602.874
116,824
181,106
9.033388
935,006
$78,192.516
Both Governmental and Business-type Activities exhibited a positive change in net position primarily
attributable to monitoring appropriate expenditures in conjunction with increasing fee revenue.
ANALYSIS OF POSITION
‘The overall financial position of the District improved during 2016, due to continued moni
operating expenditures.During 2016, supplementary appropriations approved by the District's Board of Directors modified the
appropriation from $275,923 to $340,500 in the Parks fund to account for additional capital expenditures
incurred in 2016.
Capital assets for both Governmental and Business-type Activities increased as the District conti
make improvements to its parks and water and wastewater infrastructure,
les to
CAPITAL ASSETS:
2016.
Governmental Businese-type ype
‘Activities Activides Total ‘Activites Total
Water and
wastewater find § $ 123,672,707 $ 123,672,707 $ $ 121470326 $ 121,470,327
and Golf course
Steet ight and
park improvements 772.936 72,936 618,917 618.917
Accumulated depreciation 376,974) (23,489,504) (23,866,478) 452,988) (21,186,093) (21,539,081)
Impeinnent (565.000) (565,000) 65,000) (865,000)
Total capital assets net S_—T959 F_H.61a20s Tlonow.6s FIG LI TWIG
The long-term liabilities decreased during 2016 by $1,295,337 the Water and Wastewater fund due to
significant principal payments being made on outstanding debt.
LONG-TERM DEBT:
2016 2015
Governmental Proprietary Fropri
‘Aeti Activities ‘Total ‘Activities ‘Total
Bonds payable 8 S 16,863,589 $16,863,589 $17,446,186 $17,446,186
"Notes payable 10200771 10200771 $ Jog1s.si1 10913511
Total debe s = $2.064.360 $27,068,360 $ = $.28359.697 $_28359,697
FUTURE TRENDS AND ECONOMIC FACTORS
Cherokee Metropolitan District's financial position has maintained a record of moderate but steady growth.
‘The District was able to refinance some existing debt in 2016, thereby lowering ongoing interest payments,
Staff will continue to look for innovative ways to reduce operating expenditures while maintaining a high
level of customer service. As of December 31, 2016 there are 7,235 residential taps and 594 commercial
taps being serviced by the District.
Water return flow quality limits imposed by the State of Colorado have made it necessary for the District
to design and eventually construct additional return flow water filtration facilities. In addition, the District
continues to seek out for purchase new and renewable water resources. This will help secure resources
necessary for future growth and to improve return flow qualities. ‘The District has performed a rate and fee
study in anticipation of acquiring future debt to finance these and other infrastructure projects. It is
anticipated that rates will be increased over a period of years to meet the District's planned infrastructure
upgrades.CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide @ general overview of the Cherokee Metropolitan District's
finances for all those with an interest in the District's finances. Questions conceming any of the information
provided in this report or request for additional information should be addressed to Kurt Schlegel, General
Manager, at (719) 597-5080.BASIC FINANCIAL STATEMENTS:(CHEROKEE METROPOLITAN DISTRICT
STATEMENT OF NET POSITION
December 31, 2016
Governmental __Business-Type
‘Activities Activities Total
ASSETS
Cash and cash equivalents 8 = $ 9134207 $ 94134207
‘Cash and cash equivalents, restricted 200340 1,821,830 2,022,170
“Total cash and cash equivalents 200,340 10,956,037 T1156,377
Accounts receivable ’ 4,505,409 1,508,409
Inventories # 40,804 40,808
Prepaid expenses 2 187,024 187,024
ue (to) from other funds 163,452 (163,452) >
Capital assets, net of accumulated
depreciation 395.962 99,618,208, 100,014,165,
‘Total assets 759.754 112,144,025 1298.79,
‘LIABILITIES,
‘Accounts payable 58.982 1,870,238 1,929,220
‘Accrved expenses . 178331 178,531
‘Accrued interest : 377,382 377.582
‘Customer deposits : 170,747 170,747
Longe-term bilities
‘Due within one year - 1,239,038 1,239,038
Due in more than one year 27,064,360 27,064,360,
Total liabilities am, 30,900,496 30989.478,
NET POSITION
NNetiavestment in capital assets 395,962 71314.805 ‘71,710,767
Restricted 204,290 1,570,203, 1,774,493,
Unrestricted 100.520 8.358.521 8,459,041
Total net postion S__700,772> “S_81,243,529 31,944,301
These financial statements should be read only in connection with
the accompanying notes to financial statements=
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