City of Baltimore Maryland Comprehensive Annual Financial Report Year Ended June 30, 2006 City of Baltimore, Maryland Comprehensive Annual Financial Report Year Ended June 30, 2006 Prepared by the Department of Finance Edward J. Gallagher Director of Finance Bureau of Accounting and Payroll Services Michael E. Broache Bureau Chief 454 City Hall, 100 N. Holliday Street, Baltimore, Maryland 21202 ELECTED OFFICIALS MAYOR Martin O’Malley PRESIDENT OF THE CITY COUNCIL Sheila Dixon COMPTROLLER Joan M. Pratt BOARD OF ESTIMATES PRESIDENT Sheila Dixon MAYOR Martin O’Malley COMPTROLLER Joan M. Pratt DIRECTOR OF PUBLIC WORKS George L. Winfield CITY SOLICITOR Ralph S. Tyler CITY COUNCIL Sheila Dixon, President Stephanie Rawlings-Blake, Vice-President FIRST DISTRICT EIGHTH DISTRICT James B. Kraft Helen Holton SECOND DISTRICT NINTH DISTRICT Nicholas D’Adamo, Jr. Agnes Welch THIRD DISTRICT TENTH DISTRICT Robert Curran Edward Reisinger FOURTH DISTRICT ELEVENTH DISTRICT Kenneth N. Harris, Sr. Keiffer Jackson Mitchell FIFTH DISTRICT TWELFTH DISTRICT Rochelle “Rikki” Spector Bernard “Jack” Young SIXTH DISTRICT THIRTEENTH DISTRICT Stephanie Rawlings-Blake Paula Johnson Branch SEVENTH DISTRICT FOURTEENTH DISTRICT Belinda Conaway Mary Pat Clarke II City of Baltimore Comprehensive Annual Financial Report Year Ended June 30, 2006 TABLE OF CONTENTS Page INTRODUCTORY SECTION Title Page ...................................................................................... Elected Officials ................................................................................. II Table of Contents ................................................................................ III Letter of Transmittal .............................................................................. VII Municipal Organization Chart ...................................................................... XVIII Certificate of Achievement for Excellence in Financial Reporting .......................................... XIX FINANCIAL SECTION Report of Independent Auditors ..................................................................... 1 Management’s Discussion and Analysis ............................................................... 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets ....................................................................... 15 Statement of Activities ........................................................................ 16 Fund Financial Statements: Balance Sheet — Governmental Funds ........................................................... 17 Statement of Revenues, Expenditures, and Changes in Fund Balances — Governmental Funds ............... 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................................. 19 Statement of Fund Net Assets — Proprietary Funds ................................................. 20 Statement of Revenues, Expenses, and Changes in Fund Net Assets — Proprietary Funds ................... 21 Statement of Cash Flows — Proprietary Funds ..................................................... 22 Statement of Fiduciary Net Assets — Fiduciary Funds ............................................... 23 Statement of Changes in Fiduciary Net Assets — Pension Trust Funds .................................. 24 Notes to the Basic Financial Statements ............................................................. 26 Required Supplementary Information: Schedule of Revenues, Expenditures and Encumbrances, and Changes in Fund Balance — Budget and Actual — Budgetary Basis — General Fund ............................................................... 65 Schedule of Revenues, Expenditures and Encumbrances, and Changes in Fund Balance — Budget and Actual — Budgetary Basis — Motor Vehicle Fund .......................................................... 66 Schedule of Funding Progress — Pension Trust Funds ................................................. 67 Notes to the Required Supplementary Information .................................................... 68 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet — Nonmajor Governmental Funds ........................................... 72 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances — Nonmajor Governmental Funds ...................................................................................... 73 III Page Schedule of Revenues, Expenditures, and Changes in Fund Balance — Budget and Actual — Special Racetrack Fund ...................................................................................... 74 Combining Statement of Fund Net Assets — Nonmajor Proprietary Funds ................................. 76 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets — Nonmajor Proprietary Funds . 77 Combining Statement of Cash Flows — Nonmajor Proprietary Funds ..................................... 78 Combining Statement of Fund Net Assets — Internal Service Funds ...................................... 80 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets — Internal Service Funds ........ 80 Combining Statement of Cash Flows — Internal Service Funds .......................................... 81 Combining Statement of Fiduciary Net Assets — Pension Trust Funds .................................... 83 Combining Statement of Changes in Fiduciary Net Assets — Pension Trust Funds........................... 84 Combining Statement of Fiduciary Net Assets — Agency Funds ......................................... 85 Combining Statement of Changes in Assets and Liabilities — Agency Funds ............................... 86 STATISTICAL SECTION Financial Trends ................................................................................. 91 Net Assets by Component ....................................................................... 93 Changes in Net Assets, Last Five Fiscal Years ....................................................... 94 Fund Balances, Governmental Funds ............................................................... 95 Changes in Fund Balances, Governmental Funds ..................................................... 96 Revenue Capacity ................................................................................ 97 Property Tax Levies and Collections ............................................................... 99 Assessed and Estimated Actual Value of Taxable Property .............................................. 99 Direct and Overlapping Property Tax Rates .......................................................... 100 Principal Property Taxpayers ..................................................................... 100 Debt Capacity ................................................................................... 102 Ratios of Outstanding Debt by Type, Primary Government ............................................. 104 Ratios of General Bonded Debt Outstanding ......................................................... 105 Direct and Overlapping Governmental Activities Debt ................................................. 106 Legal Debt Margin Information ................................................................... 106 Pledged Revenue Coverage ...................................................................... 106 Demographic and Economic Information ............................................................. 108 Demographic and Economic Statistics .............................................................. 110 Principal Employers ............................................................................ 111 Operating Information ............................................................................ 112 Full Time Equivalent Employees by Function ........................................................ 114 Operating Indicators by Function/Program .......................................................... 115 Capital Asset Statistics by Function/Program ........................................................ 116 IV Introductory Section • Letter of Transmittal • Certificate of Achievement — Government Finance Officers Association • Organization Chart (THIS PAGE INTENTIONALLY LEFT BLANK) CITY OF BALTIMORE DEPARTMENT OF FINANCE EDWARD GALLAGHER, Director 469 City Hall MARTIN O’MALLEY, Mayor Baltimore, Maryland 21202 Honorable President and Members of December 8, 2006 The Board of Estimates City of Baltimore, Maryland In compliance with Article VII, Section 8, of the revised City Charter (November, 1964), submitted herewith is the Comprehensive Annual Financial Report (CAFR) of the City of Baltimore, Maryland, (the City) for the year ended June 30, 2006. The CAFR was prepared by the City’s Department of Finance. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe that the data, as presented, is accurate in all material aspects; that it is presented in a manner designed to fairly set forth the financial position and changes in financial position of the City; and, that all disclosures necessary to enable the reader to gain the maximum understanding of the City’s financial affairs have been provided. The CAFR is presented in three sections: introductory, financial, and statistical. The introductory section includes this transmittal letter, the City’s organizational chart and the certificate of