MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the town of Ridgely, Tennessee we offer readers of the town of Ridgely,
Tennessee’s financial statements this narrative overview and analysis of the financial activities
of the town of Ridgely for the fiscal year ended June 30, 2007. We encourage readers to
consider the information presented in conjunction with additional information that we have
furnished in the basic financial statements and the accompanying notes to those financial
statements. All amounts, unless otherwise indicated, are expressed in actual dollars.
FINANCIAL HIGHLIGHTS
Management believes the town of Ridgely’s financial condition is sufficiently strong to
provide services to its citizens in the future. The town is within its budget for the current year
and plans to monitor all funds frequently to assure compliance with policies set forth by the
Mayor and Board of Aldermen. The following are key financial highlights.





The assets of the town of Ridgely exceeded liabilities at the close of the most recent
fiscal year by $3,854,406. Of this amount, $968,600 (unrestricted net assets) may be
used to meet the government’s ongoing obligation to citizens and creditors. The
town’s total net assets increased by $144,812.
At June 30, 2007, the town’s governmental funds reported combined ending fund
equity of $455,973, a decrease of $59,830 in comparison with the prior year. The
decrease was primarily due to expenditures exceeding revenues in the town’s general
fund. The undesignated fund equity of $431,310 is available for spending at the
government’s discretion (unreserved fund equity).
At June 30, 2007 unreserved fund equity for the general fund was $151,909, or 21.1%
of total general fund expenditures. The unreserved fund equity for the solid waste
fund was $98,915, or 82.3% of total solid waste fund expenditures.
The town’s total long-term debt decreased by $10,051 during the year ended June 30,
2007. Of this amount, general long-term debt increased by $5,580; water and sewer
long-term debt decreased by $15,631.
The town’s capital assets increased by $221,693 during the year ended June 30, 2007.
This was due to general infrastructure improvements, buildings and equipment of
$186,075; water and sewer improvements of $35,618.
OVERVIEW OF THE FINANCIAL STATEMENTS
Management’s Discussion and Analysis (MD&A) serves as an introduction to, and should be
read in conjunction with, the financial statements and supplementary information. The MD&A
represents management’s examination and analysis of the town’s financial condition and
activities. Summary financial statement data, key financial and operational indicators, budget
and other management tools were used for this analysis. The Town’s basis financial statements
comprise three components: 1) government-wide financial statements, 2) fund financial
statements, and 3) notes to the financial statements. This report also contains other
supplementary information in addition to the basis financial statements themselves.
Government-wide financial statements. The government-wide financial statements are
designed to provide readers with a broad overview of the town’s finances, in a manner similar
to a private-sector business.
The Statement of Net Assets presents the financial position of the town on a full accrual,
historical cost basis. The statement of net assets provides information on all the town’s assets
and liabilities, with the difference between the two reported as net assets. Over time, increases
or decreases in net assets may serve as a useful indicator of whether the financial position of
the Town in improving or deteriorating.
The Statement of Activities presents information showing how the government’s net assets
changed during the most recent fiscal year. All changes in net assets are reported as soon as
the underlying event giving rise to the change occurs, regardless of the timing of related cash
flows. Thus, revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused
vacation leave.)
Both of the government-wide financial statements distinguish functions of the town that are
principally supported by taxes and intergovernmental revenues (governmental activities) from
other functions that are intended to recover all or a significant portion of their costs through
user fees and charges (business-type activities). The governmental activities of the town
include general government, public safety, highways and streets, cemetery and sanitation
services. The business-type activities of the Town include the operations of the water and
sewer facilities.
The government-wide financial statements can be found on pages xx-yy of this report.
Fund financial statements. A fund is a grouping of related accounts that is used to maintain
control over resources that have been segregated for specific activities or objectives. The
town, like other state and local governments, uses fund accounting to ensure and demonstrate
compliance with finance-related legal requirements. All of the funds of the town can be
divided into two categories: governmental funds and proprietary funds.
Governmental funds. Governmental funds are used to account for essentially the same
functions reported as governmental activities in the government-wide financial statements.
However, unlike the government-wide financial statements, governmental fund financial
statements focus on near-term inflows and outflows of spendable resources, as well as balances
of spendable resources available at the end of the fiscal year. Such information may be useful
in evaluating a government’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide
financial statements, it is useful to compare the information presented for governmental funds
with similar information presented for governmental activities in the government-wide
financial statements. By doing so, readers may better understand the long-term impact of the
government’s near-term financing decisions. Both the governmental fund equity sheet and the
governmental fund statement of revenues, expenditures, and changes in fund equity provide a
reconciliation to facilitate this comparison between governmental funds and governmental
activities.
The town maintains four individual governmental funds. Information is presented separately
in the governmental fund equity sheet and in the governmental fund statement of revenues,
expenditures, and changes in fund equity for the general fund and solid waste funds, both of
which are considered to be major funds. Data from the other two governmental funds are
combined into a single, aggregated presentation. Individual fund data for each of the nonmajor
funds is provided in the form of combining statements elsewhere in this report.
The town adopts an annual appropriations budget for its general and special revenue funds. A
budgetary comparison statement has been provided for the general fund to demonstrate
compliance with this budget.
The basic governmental fund financial statements can be found on pages xx-yy of this report.
Proprietary funds. The town maintains one type of proprietary fund. Enterprise funds are
used to report the same functions presented as business-type activities in the government-wide
financial statements. The town uses an enterprise fund to account for its Water and Sewer
activities.
Proprietary funds provide the same type of information as the government-wide financial
statements, only in more detail. The proprietary fund financial statements provide information
for the Water and Sewer activities of the town, which is considered to be a major fund.
The basic proprietary fund financial statements can be found on pages xx-yy of this report.
Notes to the financial statements. The notes to the financial statements provide required
disclosures and other information that are essential to a full understanding of material data
provided in the government-wide and fund financial statements. The notes present information
about the town’s accounting policies, significant account balances and activities, material risks,
obligations, commitments, contingencies and subsequent events, if any. The notes to the
financial statements can be found on pages 16-26 of this report.
Other information. In addition to the basic financial statements and accompanying notes, this
report also presents certain statistical and other supplementary information. The combining
statements referred to earlier in connection with nonmajor governmental funds are presented
immediately following the notes to the financial statements as well as other schedules of
revenue, expenditures, grant activity and debt service requirements. These fund statements and
schedules can be found beginning on page 27 of this report.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of a government’s
financial position. In the case of the town of Ridgely, assets exceeded liabilities by $3,854,406
at the close of the most recent fiscal year.
By far the largest portion of the town’s net assets (74.0%) reflects its investment in capital
assets (e.g., land, buildings, machinery, utility plant and equipment) less any related debt used
to acquire those assets that is still outstanding. The town uses these capital assets to provide
services to citizens; consequently, these assets are not available for future spending. Although
the town’s investment in its capital assets is reported net of related debt, it should be noted that
the resources needed to pay this debt must be provided from other sources, since the capital
assets themselves cannot be used to liquidate these liabilities.
Condensed Statement of Net Assets
Governmental activities
2007
Current and other assets
Capital assets
Total assets
$
Net Assets:
Invested in capital assets, net of
related debt
Restricted
Unrestricted
Total net assets
2006
$
730,736
415,020
2007
$
647,594
2,915,191
Total
2006
$
2007
$ 1,311,291
3,501,369
1,270,594
3,397,031
$ 4,812,660
$ 4,667,625
$ 1,145,756
$ 3,562,785
$ 3,521,869
27,545
207,724
21,965
214,933
621,820
101,165
640,145
71,325
$
649,365
308,889
711,470
$
958,254
$
235,269
$
558,633
9,607
446,366
$ 1,014,606
$
236,898
$
722,985
$
2006
539,858
2,982,011
$ 1,249,875
Long-term liabilities outstanding
Other liabilities
Total liabilities
663,697
586,178
Business-type activites
662,110
286,258
$
948,368
393,055
21,586
494,217
2,293,371
24,195
522,234
2,341,866
24,195
434,338
2,852,004
33,802
968,600
2,734,921
45,781
928,555
908,858
$ 2,839,800
$ 2,800,399
$ 3,854,406
$ 3,709,257
At year end $33,802 of the town’s net assets represented resources that are subject to external
restrictions on how they may be used. The remaining balance of $968,600 in unrestricted net
assets may be used to meet the government’s ongoing obligations to citizens and creditors.
At June 30, 2007, the town is able to report positive balances in all three categories of net
assets, both for the government as a whole, as well as for its separate governmental and
business-type activities.
Condensed Statement of Changes in Net Assets
Governmental Activities
2007
2006
Business-type activities
2007
2006
Total
2007
2006
Revenues:
Program Revenues:
Charges for Services
Operating grants and contributions
Capital grants and contributions
General Revenues:
Local taxes
Intergovernmental
Interest on investments
Other
Total revenues
$
184,134
54,433
50,575
$
225,609
155,384
7,746
44,224
174,637
50,633
64,711
$
221,463
156,451
7,631
33,523
409,771
32,355
$
21,717
8,500
411,322
101,375
$
593,905
54,433
82,930
12,064
4,550
225,609
155,384
29,463
52,724
221,463
156,451
19,695
38,073
722,105
$
709,049
$
472,343
$
529,311
$ 1,194,448
$ 1,238,360
$
143,178
272,672
56,145
36,831
107,531
-
$
182,724
272,625
75,980
28,341
110,520
-
$
433,279
$
409,300
$
$
$
616,357
$
670,190
$
433,279
$
409,300
$ 1,049,636
$ 1,079,490
Increase in net assets
Net assets - July 1, 2005
Prior period adjustment
$
105,748
908,858
-
$
38,859 $
39,064
881,661
2,800,399
(11,662)
337
$
120,011
2,674,333
6,055
$
$
Net assets - June 30, 2006
$ 1,014,606
$
908,858
$ 2,800,399
Total expenses
$ 2,839,800
143,178
272,672
56,145
36,831
107,531
433,279
144,812
3,709,257
337
$ 3,854,406
The government’s net assets increased $144,812 during the current fiscal year. Of this,
governmental net assets increased $105,748. Business-type activity (water and sewer fund) net
assets increased $39,064, due primarily to capital grant proceeds used for utility
improvements. Prior period adjustment increased business-type activities by $377.
Governmental activities. Governmental activities increased the town of Ridgely’s net assets
by $105,748, which accounts for 73.0% of the total increase in the net assets of the town of
Ridgely in FY 2007. Key elements of this increase are as follows:

Decreases in current and other assets amounted to $67,039
Increases in governmental funds investment in infrastructure and capital assets
provided an increase in net assets of $171,158.
Decreases in liabilities also increased the net assets by $1,629.
Business-type activities. Business-type activities increased the town’s net assets by $39,064
accounting for a 27.0% of the total increase in the government’s net assets. Key elements of
the increase are as follows:

585,959
50,633
166,086
$
Expenses:
General government
Public Safety
Highway and Streets
Drug Enforcement
Cemetery
Sanitation
Water and sewer


$
Revenues exceeded expenditures in the water/sewer fund by $39,064. Although net
assets increased, the FY2007 increase was $80,947 less that the previous year.
182,724
272,625
75,980
28,341
110,520
409,300
158,870
3,555,994
(5,607)
$ 3,709,257
Financial Analysis of the Government’s Funds
As noted earlier, the town uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
Governmental funds. The focus of the town’s governmental funds is to provide information
on near-term inflows, and balances of spendable resources. Such information is useful in
assessing the Town’s financing requirements. In particular, unreserved fund equity may serve
as a useful measure of a government’s net resources available for spending at the end of the
fiscal year.
As of the end of the current fiscal year, the town’s governmental funds reported combined
ending fund equity of $455,973, a decrease of $59,830 in comparison with the prior year. Of
this amount $431,310 constitutes unreserved fund equity, which is available for spending at the
government’s discretion.
The general fund is the chief operating fund of the town. At the end of the current fiscal year,
unreserved fund equity of the general fund was $141,909. As a measure of the general fund’s
liquidity, it may be useful to compare both unreserved fund equity and total fund equity to total
fund expenditures. Unreserved fund equity represents 21.0% of total general fund
expenditures, while total fund equity represents 24.8% of that same amount.
The fund equity of the town’s general fund decreased $92,636 during the current fiscal year.
Key factors in this decrease are:



General operating expenditures for capital outlay items totaled $200,659.
Grant and note proceeds increased equity by $73,947.
Prior period adjustment increased fund equity by $3,556.
The solid waste fund had total fund equity of $98,915, all of which may be used for the
payment of solid waste related expenses. The net increase in fund equity during the current
fiscal year in the solid waste fund was $17,368, with revenues slightly exceeding expenditures.
Proprietary funds. The town’s proprietary fund provides the same type of information found
in the government-wide financial statements, but in more detail.
Unrestricted net assets of the Water and Sewer fund at the end of the year amounted to
$522,234. The total increase in net assets for the Water and Sewer fund was $39,401. Other
factors concerning the finances have been addressed in the discussion of the town’s businesstype activities.
General Fund Budgetary Highlights
Differences between the original budget and the final amended budget can be briefly
summarized as follows:


Local taxes and licenses were not amended during the year.
General government expenditures were amended to reflect increased expense in capital
outlay items in the state street aid category
Capital Asset and Debt Administration
At the end of fiscal year 2007, the town had $3,501,369 (net of accumulated depreciation)
invested in a broad range of capital assets. This investment includes land and improvements,
general infrastructure, buildings, furniture and equipment, utility plant in service and
construction in progress. The total increase in the town’s investment in capital assets for the
current period (exclusive of depreciation expense) amounted to $221,693.
Major capital asset events during the current fiscal year included the following:


Infrastructure improvements of $117,024; buildings of $57,909; and replacement of
vehicles and equipment of $14,281.
Construction in progress in the water and sewer fund of $32,479.
Additional information on the town’s capital assets can be found in Note 4(B) on page 30 of
this report.
The following tables summarize the town’s capital assets, and changes therein, for the year
ended June 30, 2007. These changes are presented in detail in Note 4 to the financial
statements.
Governmental
Activities
Land (not depreciated)
Infrastructure
Buildings
Vehicles and equipment
Furniture and equipment
Utility plant in operation
Construction in progress
$
Total Capital Assets
Less: Accum. Deprec.
$
Total, net of Deprec.
$
2007
220,600
132,222
155,795
282,749
-
$
791,366 $
(205,188)
586,178
$
2006
220,600
15,198
97,886
271,607
-
Business-type
Activities
2007
$
84,340
177,141
4,561,843
32,479
2006
$
84,340
174,002
4,561,843
-
Total
$
605,291 $ 4,855,803 $ 4,820,185 $
(190,271)
(1,940,612)
(1,838,174)
415,020
$ 2,915,191
$ 2,982,011
$
2007
304,940
132,222
155,795
282,749
177,141
4,561,843
32,479
2006
304,940
15,198
97,886
271,607
174,002
4,561,843
-
5,647,169 $
(2,145,800)
3,501,369
$
5,425,476
(2,028,445)
3,397,031
Long-term debt. At the end of the current fiscal year, the town had total bonded debt
outstanding of $649,365. Of this amount $27,545 comprises debt backed by the full faith and
credit of the government and $621,8220 represents bonds secured primarily by a specified
revenue source with a full faith and credit pledge.
Town of Ridgely, Tennessee's Outstanding Debt
General Obligation and Revenue Bonds
Governmental
Activities
2007
General obligation bonds
Revenue bonds
Total
Business-type
Activities
2006
2007
Total
2006
2007
$
27,545
-
$
21,965
-
$
621,820
$
637,451
$
27,545
621,820
$
27,545
$
21,965
$
621,820
$
637,451
$
649,365
2006
21,965
637,451
$
659,416
The town’s total bonded debt decreased $10,051 during the current fiscal year. Of this amount,
general obligation debt increased by $505803, while water and sewer bonded debt decreased by
$15,631. Total amount due within one year is $28,037.
Additional information on the town’s long-term debt can be found in Note D. on pages 32-33.
Economic Factors and Next Year’s Budget and Rates
Factors considered in preparing the town’s budget for the 2008 fiscal year include the following:



The 2007 unemployment rate for Ridgely and Lake County was 7.0%, compared to the
State’s rate of 5.3% and the national average unemployment rate of 5.0%.
Inflationary trends in health care costs and energy fuels have resulted in significant cost
increases in next year’s budget projections.
The town will continue to rely on fund balance reserves in the short-term in order to fund
necessary operating and capital outlay expenditures.
At June 30, 2007 the unreserved fund equity in the general fund was $259,208 while the
unreserved fund equity in the solid waste fund was $98,915. The town has approved an operating
budget for the general fund of $516,310 for fiscal year 2008 with a planned reduction of $25,640
in unreserved general fund equity. The property tax remained the same at $1.67 per $100 of
assessed value of property. One cent on the property tax brings in about $1,050 in tax revenue.
Water and Sewer rates remained the same as in the previous year. Solid waste fees also remained
the same for the new budget year.
CONTACTING THE TOWN’S FINANCIAL MANAGEMENT
This financial report is designed to provide a general overview of the town’s finances for all those
with an interest in the government’s finances. Questions concerning any information provided in
this report or requests for any additional information should be directed to the Office of the City
Recorder, Town of Ridgely, 140 N. Main Street, Ridgely, Tennessee 38080.