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Financial & Management


101-F Mounts Bay Rd.
Williamsburg, VA 23185

P.O. Box 8784
Williamsburg, VA

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P: 757-253-6630
F: 757-253-6840




Suzanne R. Mellen
Director, FMS


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Comprehensive Annual Financial Report for 2005 - Letter of Transmittal


October 3, 2005


The Members of the Board of Supervisors and the Citizens of James City County:


We are pleased to submit to you the Comprehensive Annual Financial Report of James City County, Virginia (the County), for the fiscal year ended June 30, 2005, as required by the Code of Virginia. The Department of Financial and Management Services has prepared this report in accordance with accounting principles generally accepted in the United States of America (GAAP) and the standards of financial reporting prescribed by the Governmental Accounting Standards Board, the Financial Accounting Standards Board and the Auditor of Public Accounts of the Commonwealth of Virginia. Section 15.1-67 of the Code of Virginia (1950, as amended) requires the County to have an annual audit of the books of account, financial records, and the transactions of the County. KPMG LLP was selected and approved by the Board of Supervisors to perform the required audit. The unqualified report of KPMG LLP, the highest possible result of the audit process, accompanies the financial statements in this report.


Responsibility for both the accuracy of the presented data and the fairness of the presentation, including all disclosures, rests with the County. We believe the data, as presented, is accurate in all material respects; that it is presented in a manner designed to fairly set forth the financial position and the results of operations of the various funds of the County; and that all disclosures necessary to enable the reader to gain maximum understanding of the County's financial activity have been included. The Comprehensive Annual Financial Report is presented in four sections; introductory, financial, statistical, and compliance. The introductory section includes this letter of transmittal, the Certificate of Achievement for Excellence in Financial Reporting, the government's organizational diagram and a list of principal officials. The financial section includes the report of independent auditors on the basic financial statements, the management's discussion and analysis, the basic financial statements, required supplementary information, and other supplementary information. The statistical section includes selected financial and demographic information, generally presented on a multi-year basis.


The County government is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act of 1996, as amended, and U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Information related to this single audit, including the schedule of expenditures of federal awards, the schedule of findings, and questioned costs, and the auditors' reports on internal control and compliance with applicable laws and regulations, are included in the single audit of this report.


GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The County's MD&A can be found immediately following the report of the independent auditors on pages 3-10 of this report.


Profile of the Government

The County is located in southeastern Virginia and partially surrounds the City of Williamsburg: Although much of the County's 144 square miles consists of developed suburban areas, it has retained a considerable amount of undeveloped agricultural and forest land. There are no incorporated towns within the County. The County is empowered to levy a property tax on both real and personal properties located within its boundaries.


The County is organized under the County Administrator form of government (as defined under Virginia Law). Under this form of government, the Board of Supervisors appoints a County Administrator to serve as the Chief Executive Officer of the County. The Administrator serves at the pleasure of the Board of Supervisors, implements its policies, appoints department heads, and directs business and administrative procedures.


The Board of Supervisors is a five-member body, elected by the voters of the Electoral Districts in which they live to staggered terms. The Chairman of the Board is elected annually by its members. Each member serves a four-year term. This body enacts ordinances, appropriates funds, sets tax rates, and establishes policies for the administration of the County's public services.


The County provides a full range of services, including law enforcement, fire protection, and recreational activities. Water and Sewer services are provided through the legally separate James City Service Authority (JCSA). The Board of Supervisors of James City County serves as the board of directors of the JCSA. The financial activity of the JCSA is included as an integral part of the County's financial statements. The County is also financially accountable for the legally separate Williamsburg-James County School Board and the legally separate James City County Economic Development Authority, both of which are reported separately as discretely presented component units within the County's financial statements. Additional information on each of these legally separate entities can be found in note 1(a) in the notes to the basic financial statements.


The annual budget serves as the foundation for the County's financial planning and control. In the spring of each year, departments and agencies of the County are required to submit requests for appropriation to the County Administrator. The county Administrator then submits to the Board of Supervisors a proposed operating and capital budget for the fiscal year commencing the following July 1. The operating budget and capital budget include proposed expenditures and the means of financing them. Public hearings are conducted to obtain citizen comments.


Prior to June 30, the budget is legally enacted through passage of an Appropriations Resolution. The Appropriations Resolution places legal restrictions on expenditures at the fund and function level. The appropriation for each fund and function can be revised only by the Board of Supervisors; however, the County Administrator may amend the budget within functions. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 60-64 as part of the required supplementary information other than management's discussion and analysis. For governmental funds, other than the general fund, with appropriated budgets, this comparison is presented in the other supplementary information subsection of this report which starts on page 67.


Economic Condition and Outlook

James City County has a strong, diverse and growing economic base. The value of taxable real property grew by 12.6% from July 2004 to July 2005, and an even larger increase is expected over the next 12-month period. Real property taxes are expected to increase, which is attributed to projected growth in new construction.  This projection continues the trends the County has seen over the past few years as real estate market values continue to rise and new construction activity increases in both residential and commercial sectors.


Continuing commercial investment in the GreenMount, Stonehouse and New Town areas of the County has and will create additional jobs, and the unemployment rate in the County (3.2%) is lower than state and federal averages. Significant new investment in road infrastructure and continuing development of both the state and federal properties at Jamestown are expected to continue, anticipating the 400th anniversary of the English colony at Jamestown in 2007.


The County enjoys bond ratings of AA2 from Moody's, AA from Standard and Poor's, and an AA+ from Fitch. These bond ratings are based on analyst recommendations after a review of economic and fiscal performance, fiscal policies and practices, current debt outstanding and evidence of financial planning to meet future capital needs. These ratings are excellent for a community the size of James City County and give the County additional leverage in the bond market for potential bond buyers and investors.


Major Initiatives

In FY 2005, the County continued to utilize its Strategic Management Plan as a framework for planning and accountability and continued to seek out new partnerships to help achieve its goal.


The County continues to manage finances wisely and encourage a balanced economy.  County voters overwhelmingly approved a $39.82 million bond referendum for a new high school.  Bonds were sold in May based on new ratings that helped lower interest costs.


Improving the lives of citizens and fostering a sense of community is also very important to the County.  The Strengthening Families Program offered a program that focused on communication, peer pressure and setting limits.  Ground was broken on the Warhill Site for the construction of the new high school, the Historic Triangle Campus of Thomas Nelson Community College and the JCC Community Sports Stadium Facility.  The fire department, in coordination with Citizens Corps, offered Community Emergency Response Team (CERT) training to prepare citizens to help themselves and their neighborhoods during emergencies.


The County continues to plan responsibility for the needs of a growing, diverse community.  Construction began on the new Emergency Communications Center (ECC) in Toano that will house 911 operations and the new 800 MHz radio system.  Police officers received training relating to Alzheimer’s patients, search management and Project Lifesaver, enabling them to better resolve situations involving patients.  The Board of Supervisors approved its share of funding for a new elementary school and renovations to existing schools to accommodate enrollment growth in grades K-5.


The County continues to steward the natural environment and historic heritage.  Archaeological work at Freedom Park provided evidence of one of the first free black settlements in Virginia.  Evidence of colonial developments, revolutionary and civil war encampments and Native American settlements from several thousand years ago have also been found.  Design was completed for a stream restoration project that will improve the quality and stop erosion in the Powhatan Creed watershed.


Providing outstanding customer service is imperative to the County.  The County partnered with Virginia Department of Motor Vehicles to open DMV Select at Satellite Services.  The James City Clean County Commission’s 24th annual Spring Cleanup involved 253 volunteers who collected 72,360 pounds of litter and debris.


Economic Development

During FY 2005, an improving economy continued to support business expansions and relocations.  In James River Commerce Center, Jeanne Reed’s acquired property to construction its own facility with a capital investment of $700,000.  In addition, Coresix Precision Glass, a manufacturer of optical quality glass components for equipment, constructed a $2.5 million facility and employs 50 workers.


Stonehouse Commerce Park experienced capital investments during the year, and new jobs should be added in the County.  Wythe Will Distributing moved into a $4.5 million facility, where it expects to employ an additional 55 workers over the next few years.  Nicewood Enterprises, Inc., relocated into a $1.94 million facility, and expects to create an additional 23 new jobs.  Lumber Liquidators moved its headquarters, manufacturing, distributions, and call center operations to the County.  The hardwood flooring company acquired an $8 million building where it will house $4.5 million in equipment, and expects to bring up to 300 jobs.  Citizens and Farmers Bank plans to move its operations center and invest $3.75 million in acquisition and renovation.  They expect to employee up to 150 workers over the next five years.  Energy Services Group and LaTienda partnered in purchasing a building for $2.55 million.


Financial Planning

The Board of Supervisors has established a Comprehensive Statement of Fiscal Goals. Included in this is a goal to keep the fund balance designated for Fiscal Liquidity at the end of the fiscal year, equal to, no less than 8%, with a target of 12% of the total operating budget (General Fund plus the County's share of the Component Unit Schools). At June 30, 2005, the fund balance designated for Fiscal Liquidity is 9.6% of the total general governmental expenditures.


Capital Improvement Program

James City County will continue to face challenges over the next several years. Several years of population growth have produced demands for public services and facilities. The five-year Capital Improvement Program totals $96,326,958 and focuses on a wide variety of needs. An indication of anticipated impacts can be seen in the adopted budget and capital improvements program for the fiscal year beginning July 1, 2005.


In FY 2006, funding is included for design and engineering costs for the third high school, eighth elementary school and renovations of other school facilities. Funding is also provided for a new ambulance and the first investment of a three-year program for mobile data terminals.  A $15 million referendum is proposed for November 2005 for improvements to three parks - the Warhill Sports Complex, Freedom Park, and the Chickahominy Riverfront Park.  Future planning includes continued improvements to other parks, expansion of the fitness area at the James City/Williamsburg Community Center, acquisition of greenspace, a community stadium, and a new middle school.


Debt Administration

The Board of Supervisors has three targets relating to debt administration in its Statement of Fiscal Goals.


1)   Debt will be no more than 3% of assessed valuation of property.

The County's debt was 1.3% of assessed valuation of property at June 30, 2005 and can be found on Table IX in page 85 of this document.

2) Debt service costs will not exceed 10 to 12% of total operating expenditures, including the County's share of the Component Unit - Public Schools.

The County's debt service for FY 2005 equaled $10,686,133, or 6.91% of total general governmental expenditures. This can be found on Table X on page 86 of this document.

3)  Debt per capita will not exceed $2,000.

The County's debt per capita equaled $1,749 and can be found on Table IX on page 85 of this document.

All of these targeted goals were met well within the guidelines for FY 2005.


James City Service Authority

The financial statements of the JCSA are included in this report in accordance with accounting principles generally accepted in the United States of America. The JCSA, for legal and management purposes, issues its own comprehensive annual financial report which is audited and available from the Department of Financial and Management Services.


The Board of Directors has authorized water and sewer operations for the JCSA within the Primary Service Area (PSA) in the County. The JCSA also provides water and/or sewer service to limited sections of York County and the City of Williamsburg with the concurrence of the appropriate governing bodies. The JCSA's operating funds are self-supporting, and the JCSA receives no share of any local or property tax levies.


The JCSA's water system includes the central water system with 21 well facilities and eight independent water systems with nine well facilities. There are approximately 305 miles of water transmission and distribution lines throughout the entire system. The water system facilities supply approximately 4.1 million gallons of water per day to 16,531 water customers.


The JCSA's sewer system includes 76 pump stations with approximately 352 miles of sewer collection lines. The sewer system facilities collect and move approximately 3.8 million gallons of sewage per day for 17,357 sewer customers. The JCSA has no sewage treatment facilities. Sewage treatment for areas served by the JCSA, as well as for other Hampton Roads communities, is provided by the Hampton Roads Sanitation District.


The JCSA currently has groundwater permits for its central system to withdraw 7.0 million gallons per day to support the residential and commercial customers.  With the current rate of growth, it is estimated that this amount of water will meet the County’s needs through 2013.  The JCSA is pursuing separate initiatives to meet its long-term water demand by participating in a regional effort to supplement the JCSA groundwater with surface water from the proposed King William Reservoir or the construction of a second groundwater desalination facility.  Water conservation is also an important component of meeting the future water needs.  The JCSA has initiated the “Let’s be Water Smart” program which is a partnership with local businesses involved in the landscape industry.  The partnership promotes the importance of using water wisely.


In FY 2005, the JCSA completed the first phase of a 5.0 million gallon per day groundwater treatment facility which has reverse osmosis technology to treat water from the Potomac Aquifer.  The first phase of the project is capable of treating 2.5 mgd which is projected to meet the JCSA’s water needs through 2013.  The JCSA is proceeding with the construction of the second phase of the project which will increase the facility to its ultimate capacity of 5.0 mgd.  The expansion will cost between $1.5 and $2.0 million and is being accelerated to meet peak demands in the summer.  The additional water capacity should be available in 2007.


The JCSA also completed a major upgrade project for the Lift Station 1-2 (John Tyler Highway) service area.  This rather large service area is developing rapidly, and the existing collection and conveyance system is currently operating near maximum capacity.  During FY 2005, the JCSA identified the need to replace the Powhatan Creek Interceptor which serves a very large portion of central James City County.  While the costs to replace the line have not been fully established, it may cost $5 million.  In FY 2007, a phased plan will begin to replace this very critical sewer line.


Treasury Management

A conservative cash management system is carried out by the County Treasurer. Temporary idle funds are automatically invested overnight in repurchase agreements that are secured or collateralized by government securities as required by the Code of Virginia. Funds that are available for a longer period of time are part of a comprehensive investment strategy that maximizes short-and medium-term interest rate.


Risk Management

In our opinion, the County maintains a practical insurance program through a variety of vendors which affords adequate protection against loss and includes comprehensive public liability insurance for bodily injury and property damage.


Awards of Achievement

The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to James City County for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2004.


In order to be awarded a Certificate of Achievement, the County must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such reports must satisfy both accounting principles generally accepted in the United States of America and applicable legal requirements.


A Certificate of Achievement is valid for a period of one year only. We believe our current report continues to conform to Certificate of Achievement Program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.



The County has established and continues to maintain a strong and stable financial position through progressive management of financial operations and through sound accounting and financial reporting practices. Appreciation is expressed to the Members of the James City County Board of Supervisors and all of the Constitutional Officers for their interest and support in planning and conducting the financial operations of the County in a responsible and progressive manner.


The preparation of this report could not have been accomplished without the extensive effort and efficient services of the staff of Financial and Management Services. We would like to express our appreciation to each employee of the Department who assisted with the annual audit and preparation of the financial statements.


Respectfully submitted,

Sanford B. Wanner
County Administrator

John E. McDonald
Manager of Financial and Management Services

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