03-22-21 Regular Meeting of the La Porte City Council

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CITY OF LA PORTE, TEXAS Exhibit A-10 NOTES TO FINANCIAL STATEMENTS (continued) Note 1 Î Summary of Significant Accounting Policies (continued) P. Industrial Payments A significant portion of the CityÓs revenue is derived from separate contractual agreements with each industrial company that lies within the CityÓs extraterritorial jurisdiction (known as the Ðindustrial districtÑ). These companies have agreed to pay an amount Ðin-lieu of taxesÑ in the un-annexed area within the CityÓs extraterritorial jurisdiction. In the current contracts, the entities agree to pay the City a percentage of what the ad valorem taxes would have been had the entities land, improvements, and inventory been within the corporate limits of the City. Q. Proprietary Funds Operating and Non-operating Revenues and Expenses Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fundÓs principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operating expenses for the enterprise funds and internal service fund include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues not meeting this definition are reported as non-operating revenues and expenses. R. Budgetary Information Annual budgets are adopted on a basis consistent with GAAP. Annual appropriated budgets are adopted for the general, special revenue funds and debt service funds. All annual appropriations lapse at fiscal year-end. Project length financial plans are adopted for all capital projects funds and are revised annually. S. Deferred Outflows/Inflows of Resources Deferred outflows and inflows of resources are reported in the financial position as described below: A deferred outflow of resources is a consumption of a government's net position (a decrease in assets in excess of any related decrease in liabilities or an increase in liabilities in excess of any related increase in assets) by the government that is applicable to a future reporting period. The City has three items that qualify for reporting in this category: Deferred outflows or resources for refunding - Reported in the government-wide statement of net position, this deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Draft 3-12-21 43 Fiscal Year 2020 Annual Report