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Management's Discussion and Analysis <br /> As Town of Palisade Trustees,we offer readers of the Town of Palisade financial statements this narrative overview and analysis <br /> of the financial activities of the Town for the year ended December 31,2009. <br /> Financial Highlights <br /> • Town of Palisade's assets ($27 million) exceeded liabilities ($7.4 million) by$19.8 million at the end of 2009. Of this <br /> amount, $5 million may be used to meet the Town's ongoing obligations to citizens. Of the remaining amount, $14.7 <br /> million is invested in capital assets such as land and improvements, buildings, vehicles, furniture and equipment and <br /> $100,000 is held for emergencies in compliance with Article X of the Colorado State Constitution. <br /> • The town's sales tax revenue increased 9% over 2008 but with the 22% decrease in county sales tax revenue, the town <br /> suffered an overall 19%loss in combined town and county sales tax revenue. Approximately 44%of the Town's General <br /> Fund Revenue is derived from sales tax. <br /> • The Town has five outstanding long-term debt obligations. Two loans are with the Water Conservation Board. The first <br /> loan was for the use on the Cabin Reservoir expansion project. This loan was structured with 40 annual installments of <br /> $50,523 with the interest rate of 4%. The outstanding principal as of December 31, 2009 is 533,677. The second loan is <br /> for the repair and replacement of the cottonwood creek water line. This loan was structured with 21 annual installments <br /> of$53,319 with the interest rate of 4%. The outstanding principal as of December 31,2009 is$474,067. The Town also <br /> received a 12-year impact loan from the Division of Local Governments to complete an addition to the Palisade sewer <br /> lagoons. This loan has an annual payment of$58,437 with an interest rate of 5%. The outstanding principal as of <br /> December 31, 2009 is $55,655. The Town received two loans from the Drinking water revolving fund disadvantaged <br /> community loan program through the Colorado Water Resources &Power Development Authority to re-build the water <br /> treatment plant. The first loan is a 30-year no interest loan for $2,000,000 with two annual payments of$33,333 due <br /> annually on the first of May and the first of November. The outstanding principal as of December 31, 2009 is <br /> $1,800,000.The second loan is a 21-year loan with an interest rate of 3.47%for$4,000,000. Payments of$57664 are due <br /> semi-annually on the first of February and the first of August. The outstanding principal as of December 31, 2009 is <br /> $3,657,523. <br /> Overview of the Financial Statements <br /> This discussion and analysis is intended to serve as an introduction to the Town of Palisade's basic financial statements,which are <br /> comprised of: 1. Government-wide financial statements. 2. Fund financial statements. 3. Notes to the financial statements. This <br /> report also contains other supplementary information in addition to the basic financial statements themselves. <br /> Government-wide Financial Statements <br /> The government-wide financial statements are designed to provide readers with a broad overview of the Town of Palisade finances <br /> and in a manner similar to a private sector business. <br /> ' The statement of net assets presents information on all of the Town's assets and liabilities, with the difference between the two <br /> reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial <br /> position of the Town is improving or deteriorating. <br /> The statement of activities presents information showing how the Town's net assets changed over the past year.All changes in net <br /> assets are reported as soon as an"event" causing a change occurs, regardless of when related cash flows actually take place. As a <br /> result, revenues and expenses are reported in this statement for some items that will only result in cash flows in future financial <br /> periods;for example,grants not yet reimbursed or vacation leave,which has been earned but not used. <br /> Both of the government-wide financial statements distinguish activities of the Town of Palisade that are primarily supported by <br /> taxes and state/federal monies(intergovernmental activities) from activities that are intended to be funded primarily from user fees <br /> and charges (business-type activities). The governmental activities of the town include general government, public safety, and <br /> public works.The business-type activities of the Town include water,sewer,and refuse. <br /> 1 <br /> 3 <br />