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12-2016 Base Village Metro Dist No 1 Financial Statements BASE VILLAGE METROPOLITAN DISTRICT NO.1 Pitkin County,Colorado FINANCIAL STATEMENTS December 31,2016 TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Position 1 Statement of Activities 2 Fund Financial Statements: Balance Sheet - Governmental Funds 3 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 4 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 5 General Fund - Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 6 Notes to Financial Statements 7 SUPPLEMENTARY INFORMATION 23 Capital Projects Fund - Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 24 Schedule of Assessed Valuation. Mill Levy and Property Taxes Collected 25 I BARNES GRIGGS ; I 1 • = & ASSOCIATES PC: Certified Public Accountants and Business Consultants INDEPENDENT AUDITOR'S REPORT To the Board of Directors Base Village Metropolitan District No. 1 Pitkin County, Colorado We have audited the accompanying financial statements of the governmental activities and each major fund of Base Village Metropolitan District No. 1 (the District) as of and for the year ended December 31 , 2016, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of Base Village Metropolitan District No. 1 , as of December 31 , 2016, and the respective changes in financial position thereof, and the budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Barnes Griggs & Associates, PC 12136 West Bayaud Ave., Suite 300• Lakewood, Colorado 80228 303.202.1800 Office•303.237.01 55 Fax•www.barnesgriggs.com Other Matters Required Supplementary Information Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statement in an appropriate operation, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The supplementary information as listed in the table of contents is presented for purposes of legal compliance and additional analysis and is not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 4Am-t/P-A; Lakewood, Colorado August 20, 2017 I I BASIC FINANCIAL STATEMENTS BASE VILLAGE METROPOLITAN DISTRICT NO. 1 STATEMENT OF NET POSITION December 31, 2016 Governmental Activities ASSETS Cash and investments $ 97,490 Cash and investments - Restricted 82,916 Accounts receivable 6,250 Receivable from County Treasurer 326 Prepaid expense 48,045 Due from other governments 5,341 Property taxes receivable 112,268 Capital assets, net 22,537,574 Total assets 22,890,210 LIABILITIES Accounts payable 186,495 Due to other governments 5,150 Noncurrent liabilities Due in more than one year 9,266,711 Total liabilities 9,458,356 DEFERRED INFLOWS OF RESOURCES Property tax revenue 112,268 Total deferred inflows of resources 112,268 NET POSITION Net investment in capital assets 17,737,212 Restricted for: Emergency reserves 24,000 Capital projects 58,916 Unrestricted (4,500,542) Total net position $ 13,319,586 These financial statements should be read only in connection with the accompanying notes to financial statements. 1 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 STATEMENT OF ACTIVITIES Year Ended December 31, 2016 Net (Expense) Revenue and Changes in Program Revenues Net Position Charges Operating Capital for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Activities Primary government: Government activities: General government S 1.575.397 S 446,584 $ 218.039 $ - $ (910,774) Interest and related costs on long-term debt 424,170 - - - (424,170) S 1.999,567 S 446.584 S 218.039 $ - (1,334,944) General revenues: Property taxes 114,600 Specific ownership taxes 3,789 Investment income 1,385 Total general revenues 119,774 Change in net position (1.215,170) Net position - Beginning 14,534,756 Net position - Ending $ 13.319.586 These financial statements should be read in connection with the accompanying notes to financial statements. 2 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2016 Total Capital Governmental General Projects Funds ASSETS Cash and investments $ 97,490 $ - $ 97,490 Cash and investments - Restricted 24,000 58,916 82,916 Accounts receivable 6,250 - 6,250 Receivable from county treasurer 326 - 326 Prepaid expense 48,045 - 48,045 Due from other governments 5,341 - 5,341 Property taxes receivable 112,268 - 112,268 TOTAL ASSETS $ 293,720 $ 58,916 $ 352,636 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES Accounts payable $ 186,495 $ - $ 186,495 Due to other governments 5,150 - 5,150 Total liabilities 191 ,645 - 191,645 DEFERRED INFLOWS OF RESOURCES Property tax revenue 112,268 - 112,268 Total deferred inflows of resources 112,268 - 112,268 FUND BALANCES Nonspendable 48,045 - 48,045 Restricted for emergency reserves (TABOR) 24,000 - 24,000 Assigned to: Capital projects - 58,916 58,916 Unassigned (82,238) - (82,238) Total fund balances (10,193) 58,916 48,723 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 293,720 $ 58,916 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Capital assets, net 22,537,574 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Developer advance payable (5,434,730) Accrued interest on Developer advance (3,831,981) Net position of governmental activities $ 13,319,586 These financial statements should be read only in connection with the accompanying notes to financial statements. 3 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended December 31 , 2016 Total Capital Governmental General Projects Funds REVENUES Property taxes $ 114,600 $ - $ 114,600 Specific ownership tax 3,789 - 3,789 Intergovernmental revenue 218,039 - 218,039 Investment income 1 ,385 - 1 ,385 Transit center revenue 297 - 297 Parking garage user fees 421 ,287 - 421 ,287 Conference center revenue 25,000 - 25,000 Total revenues 784,397 - 784,397 EXPENDITURES Current Accounting 51 ,705 - 51 ,705 Administrative 25,000 - 25,000 Audit 9,700 - 9,700 County Treasurer's fees 5,730 - 5,730 Insurance and bonds 43,110 - 43,110 Legal services 112,140 - 112,140 Utilities 5,811 - 5,811 Bank and Merchant fees 521 - 521 Miscellaneous 136 - 136 Conference center operations 120,911 - 120,911 Parking garage operations 404,212 - 404,212 Transit center operations 213,102 - 213,102 Capital outlay - 58,704 58,704 Total expenditures 992,078 58,704 1 ,050,782 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (207,681) (58,704) (266,385) OTHER FINANCING SOURCES (USES) Developer advance (repayment) 176,000 - 176,000 Total other financing sources (uses) 176,000 - 176,000 NET CHANGE IN FUND BALANCE (31 ,681) (58,704) (90,385) FUND BALANCES - BEGINNING OF YEAR 21 ,488 117,620 139,108 FUND BALANCES - END OF YEAR $ (10,193) $ 58,916 $ 48,723 These financial statements should be read only in connection with the accompanying notes to financial statements. 4 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended December 31, 2016 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - Total governmental funds $ (90,385) Governmental funds report capital outlays as expenditures. In the statement of activities, capital outlay is not reported as an expenditure. However, the statement of activities will report as depreciation expense the allocation of the cost of any depreciable asset over the estimated useful life of the asset. Depreciation (583,319) Capital outlay 58,704 Long-term debt (e.g. Developer advances) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. The net effect of these differences in the treatment of long-term debt is as follows: Developer operations advance (176,000) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Accrued interest on Developer advance payable (424,170) Changes in net position of governmental activities $ (1 ,215,170) These financial statements should be read only in connection with the accompanying notes to financial statements. 5 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Year Ended December 31, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES Property taxes $ 114,600 $ 114,600 $ 114,600 $ - Specific ownership tax 3,440 3,800 3,789 (11) Intergovernmental revenue 217,631 218,039 218,039 - Investment income 150 1 ,385 1,385 - Transit center revenue 2,011 300 297 (3) Parking garage user fees 399,500 421 ,287 421,287 - Conference center revenue 25,000 25,000 25,000 - Total revenues 762,332 784,411 784,397 (14) EXPENDITURES Current Accounting 38,000 52,000 51 ,705 295 Administrative 25,750 25,000 25,000 - Audit 9,700 9,700 9,700 - County Treasurer's fees 5,730 5,730 5,730 - Insurance and bonds 43,130 43,110 43,110 - Legal services 35,000 112,140 112,140 - Utilities 500 6,000 5,811 189 Bank and Merchant fees 1 ,150 700 521 179 Miscellaneous 8,129 200 136 64 Conference center operations 116,039 125,000 120,911 4,089 Parking garage operations 408,415 410,000 404,212 5,788 Transit center operations 189,349 214,420 213,102 1 ,318 Total expenditures 880,892 1,004,000 992,078 11 ,922 EXCESS OF REVENUE OVER (UNDER) EXPENDITURES (118,560) (219,589) (207,681) 11,908 OTHER FINANCING SOURCES (USES) Developer advance _ 110,000 225,000 176,000 (49,000) Total other financing sources (uses) 110,000 225,000 176,000 (49,000) NET CHANGE IN FUND BALANCE (8,560) 5,411 (31 ,681) (37,092) FUND BALANCES - BEGINNING OF YEAR 31 ,550 21 ,488 21,488 - FUND BALANCES - END OF YEAR $ 22,990 $ 26,899 $ (10,193) $ (37,092) These financial statements should be read only in connection with the accompanying notes to financial statements. 6 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 1 - DEFINITION OF REPORTING ENTITY Base Village Metropolitan District No. 1 (the District) was organized by Court Order in December 2004, to provide financing for the design, acquisition, installation and construction of streets, drainage, traffic and safety controls, park and recreation, transportation, and mosquito and pest control. The District's service area is located entirely within the Town of Snowmass Village (the Town), in Pitkin County, Colorado. Under the Consolidated Service Plan (Amended and Restated Consolidated Service Plan approved October 17, 2006), the District is the Service District and is related to Base Village Metropolitan District No. 2 (Base Village No. 2), which serves as the Financing District. The Service District is responsible for management of the construction of all facilities and improvements and for operation and maintenance of all improvements not conveyed to the Town. The Service District, together with the Financing District, provides the funding for infrastructure improvements and the tax base needed to support ongoing operations. The District follows the Governmental Accounting Standards Board (GASB) accounting pronouncements that provide guidance for determining which governmental activities, organizations and functions should be included within the financial reporting entity. GASB pronouncements set forth the financial accountability of a governmental organization's elected governing body as the basic criterion for including a possible component governmental organization in a primary government's legal entity. Financial accountability includes, but is not limited to, appointment of a voting majority of the organization's governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benefits or burdens and fiscal dependency. The District has no employees and contracts for all of its management and professional services. The District is not financially accountable for any other organization, nor is the District a component unit of any other primary governmental entity. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The more significant accounting policies of the District are described as follows: Government-wide and Fund Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These financial statements include all of the activities of the District. The effect of interfund activity has been removed from these statements. Governmental activities are normally supported by taxes and intergovernmental revenues. The statement of net position reports all financial and capital resources of the District. The difference between the sum of assets and deferred outflows and the sum of liabilities and deferred inflows is reported as net position. 7 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The statement of activities demonstrates the degree to which the direct and indirect expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment. and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Depreciation is computed and recorded as an operating expense. Expenditures for capital outlay are shown as increases in assets and repayment of Developer advances are recorded as a reduction in liabilities. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The major sources of revenue susceptible to accrual are property taxes, specific ownership taxes. and intergovernmental revenues. All other revenue items are considered to be measurable and available only when cash is received by the District. The District determined that Developer advances are not considered as revenue susceptible to accrual. Expenditures, other than interest on long-term obligations are recorded when the liability is incurred or the long-term obligation is due. The District reports the following major governmental funds: The General Fund is the District's primary operating fund. It accounts for all financial resources of the general government. except those required to be accounted for in another fund. The Capital Projects Fund accounts for financial resources to be used for the acquisition or construction of major capital facilities. 8 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Budgets In accordance with the State Budget Law, the District's Board of Directors holds public hearings in the fall each year to approve the budget and appropriate the funds for the ensuing year. The appropriation is at the total fund expenditures and other financing uses level and lapses at year end. The District's Board of Directors can modify the budget by line item within the total appropriation without notification. The appropriation can only be modified upon completion of notification and publication requirements. The budget includes each fund on its basis of accounting unless otherwise indicated. The District amended its annual budget for the year ended December 31 , 2016. Pooled Cash and Investments The District follows the practice of pooling cash and investments of all funds to maximize investment earnings. Except when required by trust or other agreements, all cash is deposited to and disbursed from a single bank account. Cash in excess of immediate operating requirements is pooled for deposit and investment flexibility. Investment earnings are allocated periodically to the participating funds based upon each fund's average equity balance in the total cash. Investments are carried at fair value. Property Taxes Property taxes are levied by the District's Board of Directors. The levy is based on assessed valuations determined by the County Assessor generally as of January 1 of each year. The levy is normally set by December 15 by certification to the County Commissioners to put the tax lien on the individual properties as of January 1 of the following year. The County Treasurer collects the determined taxes during the ensuing calendar year. The taxes are payable by April or if in equal installments, at the taxpayer's election, in February and June. Delinquent taxpayers are notified in August and generally sales of the tax liens on delinquent properties are held in November or December. The County Treasurer remits the taxes collected monthly to the District. Property taxes, net of estimated uncollectible taxes, are recorded initially as a deferred inflow of resources in the year they are levied and measurable. The deferred property tax revenues are recorded as revenue in the year they are available or collected. Deficits The General Fund report a deficit in the fund financial statements as of December 31 , 2016. The deficit will be eliminated with the receipt of funds by parking garage user fees. 9 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets Capital assets, which include property and infrastructure assets (e.g. roads, bridges, sidewalks, facilities and similar items), are reported in the government-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated acquisition value at the date of donation. Capital assets which are anticipated to be conveyed to other governmental entities are recorded as construction in progress, and are not included in the calculation of net investment in capital assets. Depreciation expense has been computed using the straight-line method over the following estimated economic useful lives: Equipment 5 years Conference center 39 years Parking garage 50 years Main Street Bridge 50 years Skier funnel bridge 50 years Transit center 39 years The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Improvements that will be dedicated to other governmental entities are not depreciated. Deferred Inflow of Resources In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources. represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, deferred property tax revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. Equity Net Position For government-wide presentation purposes when both restricted and unrestricted resources are available for use, it is the District's practice to use restricted resources first, then unrestricted resources as they are needed. 10 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Balance Fund balance for governmental funds should be reported in classifications that comprise a hierarchy based on the extent to which the government is bound to honor constraints on the specific purposes for which spending can occur. Governmental funds report up to five classifications of fund balance: nonspendable, restricted, committed, assigned, and unassigned. Because circumstances differ among governments, not every government or every governmental fund will present all of these components. The following classifications describe the relative strength of the spending constraints: • Nonspendable fund balance — The portion of fund balance that cannot be spent because it is either not in spendable form (such as prepaid amounts or inventory) or legally or contractually required to be maintained intact. • Restricted fund balance — The portion of fund balance that is constrained to being used for a specific purpose by external parties (such as bondholders), constitutional provisions, or enabling legislation. • Committed fund balance — The portion of fund balance that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority, the Board of Directors. The constraint may be removed or changed only through formal action of the Board of Directors. • Assigned fund balance — The portion of fund balance that is constrained by the government's intent to be used for specific purposes, but is neither restricted nor committed. Intent is expressed by the Board of Directors to be used for a specific purpose. Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts that are classified as committed. • Unassigned fund balance — The residual portion of fund balance that does not meet any of the criteria described above. If more than one classification of fund balance is available for use when an expenditure is incurred, it is the District's practice to use the most restrictive classification first. NOTE 3 - CASH AND INVESTMENTS Cash and investments as of December 31 , 2016, are classified in the accompanying financial statements as follows: Statement of net position: Cash and investments $ 97,490 Cash and investments — Restricted 82,916 Total cash and investments $ 180,406 11 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 3 - CASH AND INVESTMENTS (CONTINUED) Cash and investments as of December 31 , 2016, consist of the following: Cash on hand $ 1 ,500 Deposits with financial institutions 99,899 Investments 79,007 Total cash and investments $ 180A06 Deposits with Financial Institutions The Colorado Public Deposit Protection Act (PDPA) requires that all units of local government deposit cash in eligible public depositories. Eligibility is determined by state regulators. Amounts on deposit in excess of federal insurance levels must be collateralized. The eligible collateral is determined by the PDPA. PDPA allows the institution to create a single collateral pool for all public funds. The pool for all the uninsured public deposits as a group is to be maintained by another institution or held in trust. The market value of the collateral must be at least 102% of the aggregate uninsured deposits. The State Commissioners for banks and financial services are required by statute to monitor the naming of eligible depositories and reporting of the uninsured deposits and assets maintained in the collateral pools. At December 31 , 2016, the District's cash deposits had a carrying and bank balance of $99,899. Investments The District follows state statutes regarding investments, and as such, has not adopted a formal policy. The District generally limits its concentration of investments to those noted with an asterisk (*) below, which are believed to have minimal credit risk, minimal interest rate risk and no foreign currency risk. Additionally, the District is not subject to concentration risk or investment custodial risk disclosure requirements for investments that are in the possession of another party. Colorado revised statutes limit investment maturities to three or five years or less (depending upon the type of investment) unless formally approved by the Board of Directors. Such actions are generally associated with a debt service reserve or sinking fund requirements. Colorado statutes specify investment instruments meeting defined rating and risk criteria in which local governments may invest which include: Obligations of the United States, certain U.S. government agency securities and securities of the World Bank General obligation and revenue bonds of U.S. local government entities Certain certificates of participation Certain securities lending agreements Bankers' acceptances of certain banks Commercial paper 12 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 3 - CASH AND INVESTMENTS (CONTINUED) Written repurchase and reverse repurchase agreements collateralized by certain authorized securities Certain money market funds Guaranteed investment contracts Local government investment pools Fair Value Measurement and Application The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. Investments not measured at fair value and not categorized include governmental money market funds (PFM Funds Governmental Select series); money market funds (generally held by Bank Trust Departments in their role as paying agent or trustee); and CSAFE which record their investments at amortized cost. As of December 31 , 2016, the District had the following investments: Investment Maturity Fair Value Colorado Surplus Asset Fund Trust (CSAFE) Weighted average under 60 days $ 79.007 CSAFE The District invested in the Colorado Surplus Asset Fund Trust (CSAFE), which is an investment vehicle established by state statute for local government entities to pool surplus assets. The State Securities Commissioner administers and enforces all State statutes governing CSAFE. CSAFE is similar to a money market fund, with each share valued at $1 .00. CSAFE may invest in U.S. Treasury securities, certain money market funds and highest rated commercial paper, and repurchase agreements collateralized by U.S. Treasury securities. A designated custodial bank serves as custodian for CSAFE's portfolio pursuant to custodian agreements. The custodian acts as safekeeping agent for CSAFE's investment portfolio and provides services as the depository in connection with direct investments and withdrawals. The custodian's internal records segregate investments owned by CSAFE. CSAFE is rated AAAm by Standard & Poor's. 13 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 4 - CAPITAL ASSETS An analysis of the changes in capital assets for the year ended December 31 , 2016, follows: Balance at Balance at December 31, December 31, 2015 Increases Decreases 2016 Governmental Activities: Capital assets, being depreciated: Conference center $ 3,668,310 $ - $ - $ 3,668,310 Parking garage 14,273,432 58,704 - 14,332,136 Main Street bridge 3,279,140 - - 3,279,140 Skier funnel bridge 1,750,157 - - 1 ,750,157 Transit center 3,913,294 - - 3,913,294 Total capital assets, being depreciated 26,884,333 58,704 - 26,943,037 Less accumulated depreciation for: Conference center (651 ,104) (95,434) - (746,538) Parking garage (1,996,683) (286,957) - (2,283,640) Skier funnel bridge (262,523) (35,003) - (297,526) Main Street Bridge (360,706) (65,583) - (426,289) Transit center (551 ,128) (100,342) - (651 ,470) Total accumulated depreciation (3,822,144) (583,319) - (4,405,463) Governmental activities capital assets, net $ 23,062,189 $ (524,615) $ - $ 22,537,574 Capital assets were paid for, acquired by, or reimbursed by the District and a portion of the assets were conveyed to other governmental entities. Costs are recorded as construction in progress until placed in service by the District or conveyed to other governmental entities. The costs of all capital assets transferred to other governmental entities were removed from the District's financial records. 14 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 5 - LONG-TERM OBLIGATIONS The following is an analysis of changes in long-term obligations for the year ended December 31 , 2016: Balance at Balance at Due December 31, December 31, Within 2015 Net Issues Retirements 2016 One Year Developer advances: Advance and Reimbursement Agreement $ 776,288 $ 176,000 $ - $ 952,288 $ - Infrastructure Acquisition and Reimbursement Agreement 4,482,442 - - 4,482,442 Accrued interest 3,407,811 424,170 - 3,831,981 $ 8,666,541 $ 600,170 $ - $ 9,266,711 $ - Advance and Reimbursement Agreement The District entered into that certain "Advance and Reimbursement Agreement" dated July 27, 2005, which was amended on April 3, 2008 (First Amendment), and June 25, 2008 (Second Amendment)(collectively, "the Agreement"), with Intrawest/Brush Creek Development Company, LLC (Intrawest), whereby Intrawest agreed to advance funds for costs associated with the organization and development of the District and for the services and improvements related to the construction of capital infrastructure for which the District is authorized. The District was to reimburse Intrawest, subject to annual appropriation and budget approval, from funds available within any fiscal year and not otherwise required for operations, capital improvements and debt service costs and expenses of the District. Reimbursement was to include interest at the rate of 8% per annum. The obligation was declared to be subordinate to any District bonded indebtedness. On March 1 , 2007, Intrawest assigned the Agreement to Base Village Owner LLC. Under this assignment, all prior amounts due to Intrawest were payable to Base Village Owner LLC. On September 28, 2012, the Agreement was assigned to Snowmass Acquisition Company LLC (SAC). On December 22, 2016, the amounts owing under the Agreement were assigned to SV Bond Holdings, LLC (SV Bond), an affiliate of the Developer (see Note 7) pursuant to the Omnibus Reimbursement Agreement whereby Base Village No. 2 is no longer obligated to repay the advances. As of December 31 , 2016, outstanding advances under the Agreement totaled $952,288 for operations and accrued interest totaled $285,201 . 15 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 5 - LONG-TERM OBLIGATIONS (CONTINUED) Infrastructure Acquisition and Reimbursement Agreement The District entered into that certain "Infrastructure Acquisition and Reimbursement Agreement" (IARA) dated October 19, 2007, with Base Village Owner LLC. Base Village No. 2 was a party to the IARA for purposes of providing funding for payment of obligations to the Developer. On September 28, 2012, the obligations were assigned to Snowmass Acquisition Company LLC. Per the IARA, the District was obligated to reimburse the Developer for those improvements that are determined to be "District Eligible Costs". District Eligible Costs was defined to mean any and all costs that may be lawfully funded by the District under the Special District Act and the Districts' Service Plan. District Eligible Costs would be accepted by the District after cost and engineer certifications are issued. With respect to District Eligible Costs for which the District became obligated to reimburse the Developer but which remained unpaid, interest would accrue at 8% per annum from the date of acceptance. Under the Omnibus Reimbursement Agreement (described below), District No. 2 was released from the reimbursement obligation under the IARA, and the District is the sole entity obligated to make reimbursement. Also, pursuant to the Omnibus Reimbursement Agreement, the party entitled to be reimbursed was established as SV Bond. As of December 31, 2016, outstanding obligations totaled $4,482,442 and accrued interest totaled $3,546,780. Omnibus Funding and Reimbursement Agreement On November 28, 2016, the District and SV Bond entered into that certain "Omnibus Funding and Reimbursement Agreement" effective December 22. 2016, the date of issuance Base Village No. 2's bonds, (the "Omnibus Reimbursement Agreement") which consolidates the reimbursement agreements previously described. In the Agreement, the District agreed to repay amounts due under these agreements, and Base Village No. 2 was relieved of its repayment obligation. The Agreement provides that from the date thereof, interest shall accrue at the rate of 8% per annum simple interest, to the earlier of the date a reimbursement obligation is issued or repayment is made. The obligation to pay these amounts terminates 40 years from the date of the agreement. The Agreement states that it evidences the District's intent to repay SV Bond, but that the obligation shall not constitute a debt or indebtedness of the District within the meaning of any constitutional or statutory provision. The District's agreement to repay SV Bond is subject to annual appropriation by the District. However, the Agreement does contemplate the issuance of long-term debt obligations to SV Bond to provide for payment (Reimbursement Obligations). Reimbursement Obligations may only be issued in accordance with the limitations of the Capital Pledge Agreement (see Note 8). In the Capital Pledge Agreement, the District acknowledges and agrees that its obligations under the Capital Pledge Agreement are prior and superior to all obligations of the District under the Omnibus Reimbursement Agreement. 16 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 5 - LONG-TERM OBLIGATIONS (CONTINUED) Debt Authorization On November 7, 2006, a majority of the qualified electors of the District authorized the issuance of indebtedness in an amount not to exceed $112,000,000 at an interest rate not to exceed 12% per annum. At December 31 , 2016, the District had authorized but unissued indebtedness in the following amounts allocated for the following purposes: Authorized Remaining at November 6, Authorization December 31, 2007 Election Used 2015 Streets $ 20,000,000 $ - $ 20,000,000 Public transportation 6,000,000 - 6,000,000 Fire protection 2,000,000 - 2,000,000 Traffic and safety 28,000,000 - 28,000,000 Parks and recreation 28,000,000 - 28,000,000 Mosquito control 28,000,000 - 28,000,000 $ 112,000,000 $ - $ 112,000.000 Pursuant to the Amended and Restated Consolidated Service Plan, the Districts are permitted to issue bond indebtedness of up to $48,700,000 in par-amount, excluding underwriter discount, credit enhancement costs, other costs of issuance, and payments made by guarantors under any pledge agreement or for direct bond payments. As of December 31 , 2012, Base Village No. 2 has issued $47,750,000 (inclusive of $4,179,943 of costs excludable as described above) of General Obligation Bonds and $2,200,000 in the form of a Developer Subordinate Note. During 2013, Base Village No. 2 refunded its Series 2008A bonds, repaid its Developer Subordinate Note, and reduced its 2011 Guarantor Bond obligation through the issuance of the Series 2013A Senior Limited Tax Refunding Loan and the Series 2013B Subordinate Limited Tax Refunding Bonds. No additional authorization was used as Base Village No. 2 issued less debt than was previously issued with the 2008 obligations and Subordinate Note. During 2016, Base Village No. 2 refunded its outstanding 2013 A Bonds and a portion of its 2013B Bonds with the issuance of its 2016A General Obligation Limited Tax Refunding Bonds and its 2016B General Obligation Limited Tax Subordinate Bonds. The 2011 Guarantor Bonds and the remaining portion of the 2013B Bonds were forgiven by the Bondholders and are deemed canceled and paid in full. No additional authorization was used by Base Village No. 2. 17 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 6 - NET POSITION The District has net position consisting of three components — net investment in capital assets, restricted, and unrestricted. Net investment in capital assets consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of bonds, developer advances, note. or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. As of December 31, 2016, the District had net investment in capital assets in the amount of $17,737,212. Restricted assets include net position that are restricted for use either externally by creditors, grantors, contributors, or laws and regulations of other governments: or imposed by law through constitutional provisions or enabling legislation. As of December 31, 2016, the District had restricted net position of$24,000 for Emergency Reserves and $58.916 for Capital Projects. The District has a deficit in unrestricted net position. This deficit amount is a result of the District being responsible for the repayment of debt issued for public improvements which were conveyed to other governmental entities and which costs were removed from the District's financial records. NOTE 7 - RELATED PARTIES On September 22, 2016, SAC (the "Prior Developer") entered into a purchase and sale contract with East West Partners. Inc.. a Colorado corporation ("East West") for the sale of the Prior Developer's interest. East West formed of a joint venture to acquire the Prior Developer's interest, the members of which is expected an affiliate of Aspen Skiing Company and an affiliate of KSL Capital Partners, LLC ("KSL"). The joint venture is Snowmass Ventures, LLC (the "Developer"). East West assigned its interest in the Purchase Agreement to the Developer on December 7, 2016. The Developer also acquired Snowmass Hospitality, LLC ("SH") which provides property management services and created a new entity to provide such services in the future, SV Snowmass Hospitality. LLC. During 2016, the District paid SH for management services in the amount of$344,983. The five positions on the Board of Directors are occupied by Developer representatives. Such Board members may have potential conflict of interest with respect to actions taken in their capacity as Board members. Disclosure of any potential conflicts of interest is made in accordance with Colorado law, in advance of each Board meeting. 18 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 8 - DISTRICT AGREEMENTS Intergovernmental Agreement with Base Village No. 2 In connection with the issuance of the Series 2008A and Series 2008B bonds by Base Village No. 2, the District and Base Village No. 2 entered into that certain "Amended and Restated District Public Improvements Joint Financing, Construction and Service Agreement" (the "Joint Financing Agreement") dated June 25, 2008. The Joint Financing Agreement superseded and replaced an earlier agreement between the parties providing for District to coordinate the financing, construction, operation and maintenance of public improvements and services of benefit to the Districts. The Joint Financing Agreement made certain changes to accommodate the issuance of the Series 2008A and Series 2008B bonds, and the issuance of additional debt, including the 2013A Loan and 2013B bonds of District No. 2. During 2016, the District received $218,039 of net property taxes from Base Village No. 2 to pay for the costs of operations associated with public infrastructure. The Districts terminated this Agreement on November 28, 2016 and now operate under the Operations Agreement. Operations Agreement The District and Base Village No. 2 entered into an Operation, Maintenance and Administrative Services Agreement dated as of November 28, 2016 and effective December 22, 2016 (the "Operations Agreement"). The Operations Agreement replaces the Joint Financing Agreement. The Operations Agreement establishes certain rights and obligations of the Districts with respect to the provision of operations, maintenance and administrative services of the Districts. The Operations Agreement obligates the District to continue to serve as the administrative agent for Base Village No. 2 with respect to statutory annual requirements that are required of Base Village No. 2, and also to operate and maintain public infrastructure owned by the District and/or as to which the District has operations and maintenance responsibilities pursuant to easements or other property interests. The Operations Agreement obligates Base Village No. 2 to levy six mills until such time as the District mill levy (in the amount of 43.5 mills less the Capital Levy under the Capital Pledge Agreement) is sufficient to meet a single year's operations. maintenance and administrative expenses. at which point Base Village No. 2 will no longer be obligated to fund any such expenses. Base Village Intergovernmental Agreement On September 30, 2006, the Districts and Snowmass Village General Improvement District No. 1 (the GID) entered into that certain "Base Village Intergovernmental Agreement" dated as of September 30, 2006 (the Base Village IGA) in order to establish the total aggregate mill levies that are to be imposed by the Districts and the GID, and certain other related matters. Under the Base Village IGA, the mill levies of the Districts may not exceed 49.500 mills annually. Base Village No. 2 was allowed to levy 29.500 mills in 2006, 2007. and 2008 for operations and maintenance and thereafter no more than 6.000 mills. Commencing in 2009, Base Village District No. 2 was to levy 37.5 mills until certain subordinate debt expected to be issued to the Developer and the Town was paid (only the Developer Subordinate Note was issued however). The Developer Subordinate Note was paid in connection with the issuance of the 2013 bonds. Accordingly, under the Base Village IGA, Base Village District No. 2 is allowed to levy up to 37.5 mills for debt service. 2014, Base Village No. 2 levied a debt service mill levy of 37.5 mills. The GID was permitted to levy 20.000 mills in 2006, 2007, and 2008 for operations and maintenance expenses and thereafter not more than 10.000 mills thereafter. 19 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 8 - DISTRICT AGREEMENTS (CONTINUED) Capital Pledge Agreement Between the District and Base Village No. 2 On December 22, 2016, the District and Base Village No. 2 entered into an agreement (the -Capital Pledge Agreement") in connection with Base Village No. 2's issuance of its 2016A and 2016B Bonds. In the Capital Pledge Agreement, the District acknowledges and agrees that its obligations under the Capital Pledge Agreement are prior and superior to all obligations under the Operations Agreement, and that the District will first determine and impose ad valorem property taxes for Shortfall Payments in satisfaction of its Payment Obligation under the Capital Pledge Agreement up to the maximum mill levy required thereunder, without taking into account any mill levy to be imposed under the Operations Agreement. In addition, the Base Village No. 2's pledge of revenue under the Operations Agreement derived from its imposition of six mills is fully subordinate to the pledge of such revenue to its outstanding Bonds. In the event of a Shortfall, the District is obligated by the Capital Pledge Agreement to pay to Base Village No. 2 an amount equal to the lesser of (i) the amount of the Shortfall for the applicable Senior Bond year or (ii) the Capital Levy Revenue received by the District in such Senior Bond Year. If a Shortfall occurs. the Base Village No. 2 will be depending on the District to comply with the terms of the Capital Pledge Agreement in order to fund the Shortfall. Transit Center Joint Operating Agreement On November 1, 2010, the District entered into an operating agreement with the Town of Snowmass Village, Colorado, with regard to the Metro District Transit Center Facilities (Facilities). Per the agreement, the District shall be responsible for the operation and maintenance of the Facilities, and the Town shall be responsible for the operation and maintenance costs associated with the Transit Office. The Town will manage bus operations in the Facilities for the purposes of carrying out public transportation, which is limited to the Town's shuttles and Roaring Fork Transportation Authority buses, and those otherwise allowed by written consent from the Town. Conference Center Management Agreement On October 9, 2013, the District entered into an Independent Contract Agreement with the Snowmass Acquisition Company, LLC, dba Viceroy Snowmass, for the purpose of providing services to the Conference Center, including sales, marketing, booking and operations. This agreement renews automatically unless terminated by parties. The contract was assigned to SW Snowmass Hospitality, LLC on December 22, 2016. 20 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 8 - DISTRICT AGREEMENTS (CONTINUED) Management Agreement The District and SH were parties to that certain "Second Amended and Restated Public Facilities Management Agreement" dated January 1, 2014, as extended on November 18, 2015, and on November 28, 2016 (the "Management Agreement"). Pursuant to this agreement, SH agreed to operate and maintain the Main Parking Garage, Transit Center and other public improvements owned, leased or controlled by the District. SH was an entity that was affiliated with the Prior Developer. The Management Agreement was assigned to SV Snowmass Hopitality, LLC in connection with the acquisition of the project by the Developer in December of 2016. The current agreement expires on December 31, 2017. Under the Management Agreement, SV Bond is paid a fixed fee (subject to increase each January 1 by the greater of 2% or the Consumer Price Index) in the amount of $45,000 for administering parking fees, $10.000 for maintaining the Conference Center, $15,000 for managing the Transit Center and $25.000 for administering the Districts. In addition, the District agrees to pay the costs of third party contractors and suppliers engaged by SV Bond to perform any management services. Operations Guaranty Agreement The District and Snowmass Ventures, LLC (Snowmass Ventures) a party related to the current Developer) entered into that certain "Operations Guaranty Agreement,' dated as of November 28, 2016 for the purpose of establishing a source of supplemental funding for operating costs of the Districts incurred pursuant to the Operations Agreement. Snowmass Ventures is obligated to provide operating funds to the District provided that the Districts certify the full amount of the property tax mill levy required and authorized to be levied by the Districts for operating costs, and otherwise use every reasonable effort to collect other revenues to fund such costs. The District is obligated to reimburse such advances from available funds, subject to annual appropriation. Exclusion Agreement The Districts and Snowmass Ventures entered into that certain "Exclusion Agreement" dated as of November 28, 2016 by which the parties agreed to certain procedures to be followed to ensure that future commercial development was considered within the taxing boundaries of the District, and not part of the taxing boundaries of Base Village No. 2. NOTE 9 - RISK MANAGEMENT The District is exposed to various risks of loss related to torts; thefts of, damage to. or destruction of assets: errors or omissions; injuries to employees; or acts of God. The District is a member of the Colorado Special Districts Property and Liability Pool (Pool). The Pool is an organization created by intergovernmental agreement to provide property, liability, public officials' liability, boiler and machinery and workers compensation coverage to its members. Settled claims have not exceeded this coverage in any of the past three fiscal years. 21 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS December 31, 2016 NOTE 9 - RISK MANAGEMENT (CONTINUED) The District pays annual premiums to the Pool for liability, property and public officials' liability coverage. In the event aggregated losses incurred by the Pool exceed amounts recoverable from reinsurance contracts and funds accumulated by the Pool, the Pool may require additional contributions from the Pool members. Any excess funds which the Pool determines are not needed for purposes of the Pool may be returned to the members pursuant to a distribution formula. NOTE 10 - TAX, SPENDING AND DEBT LIMITATIONS Article X, Section 20 of the Colorado Constitution, referred to as the Taxpayer's Bill of Rights (TABOR), contains tax. spending, revenue and debt limitations which apply to the State of Colorado and all local governments. Spending and revenue limits are determined based on the prior year's Fiscal Year Spending adjusted for allowable increases based upon inflation and local growth. Fiscal Year Spending is generally defined as expenditures plus reserve increases with certain exceptions. Revenue in excess of the Fiscal Year Spending limit must be refunded unless the voters approve retention of such revenue. TABOR requires local governments to establish Emergency Reserves. These reserves must be at least 3% of Fiscal Year Spending (excluding bonded debt service). Local governments are not allowed to use the Emergency Reserves to compensate for economic conditions, revenue shortfalls, or salary or benefit increases. On November 4. 2004, a majority of the District's electors authorized the District to collect and spend or retain in a reserve, all currently levied taxes and fees of the District without regard to any limitations under TABOR. The District's management believes it is in compliance with the provisions of TABOR. However, TABOR is complex and subject to interpretation. Many of the provisions. including the interpretation of how to calculate Fiscal Year Spending limits, will require judicial interpretation. This information is an integral part of the accompanying financial statements. 22 SUPPLEMENTARY INFORMATION 23 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Year Ended December 31, 2016 Variance with Original and Final Budget Final Budget Actual Positive Amounts Amounts (Negative) REVENUES Total revenues $ - $ - $ - EXPENDITURES Current Contingency 17,620 - 17,620 Legal services - - - Capital outlay 100,000 58,704 41 ,296 Total expenditures 117,620 58,704 58,916 NET CHANGE IN FUND BLANCE (117,620) (58,704) 58,916 FUND BALANCES - BEGINNING OF YEAR 117,620 117,620 - FUND BALANCES - END OF YEAR $ - $ 58,916 $ 58,916 24 BASE VILLAGE METROPOLITAN DISTRICT NO. 1 SCHEDULE OF ASSESSED VALUATION, MILL LEVY AND PROPERTY TAXES COLLECTED December 31, 2016 Prior Year Assessed Valuation for Current Mills Levied Percentage Year Ended Year Property Debt Total Property Taxes Collected December 31, Tax Levy Operations Service Levied Collected to Levied 2013 $ 3,604,940 43.500 0.000 $ 156,815 $ 155,616 99.24% 2014 $ 2,874,520 43.500 0.000 $ 125,042 $ 123,735 98.95% 2015 $ 2,858,120 43.500 0.000 $ 124,328 $ 124,328 100.00% 2016 $ 2,634,480 43.500 0.000 $ 114,600 $ 114,600 100.00% Estimated for the year ending December 31 , 2017 $ 2,580,880 43.500 0.000 $ 112,268 Property taxes collected in any one year include collection of delinquent property taxes levied in prior years. Information received from the County Treasurer does not permit identification of specific year of levy if delinquent taxes are collected. 25