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1990 Annual Comprehensive Financial Report (90-007)PERMANENT RECORD DO NOT DESTROY GS50-03D-02, Rev. 1 (CAFR) w :A \1R0 o 00-1 City of Federal Way, Washington 1990 Comprehensive Annual Financial Report FOR THE PERIOD ENDED DECEMBER 31, 1990 CITY OF FEDERAL WAY Memorandum TO: Mayor, City Councilmembers, City Manager FROM: John Moir, Finance Director�� DATE: July 29, 1991 The City's first Comprehensive Annual Financial Report (CAFR) for the 10 month period ending December 31, 1990 is attached. Staff will make a formal presentation of this material to you in the near future. The "bottom -line" is as follows: • The City has received an unqualified ("clean") audit opinion from the State Auditor. • The overall financial position of the City is excellent with revenues exceeding expenditures resulting in strong year-end unobligated cash balances (unreserved/undesignated fund balances). ■ General Fund unreserved/undesignated fund balance (the City's general purpose "savings account") was $851,348 or 10.6% of 1990 revenues. • Overall revenues outperformed the original budget estimates by $2.7 million or about 23%. • Overall expenditures were under the original budget by $5.6 million or about 40%. Budgetary reporting in the CAFR compared actual performance to the ORIGINAL budget adopted by the City Council for 1990. As a standard practice, the original budget is revised to reflect updated information. The budgetary performance relative to revised budget estimates is summarized as follows: ■ Revenues exceeded estimates and expenditures were less than estimated in the General Fund, Arterial Street Fund, and Real Estate Excise Tax (Capital Outlay) Fund. Year-end unreserved/undesignated fund balances exceeded expectations. 0, Expenditures in the Street Fund and Surface Water Management Fund exceeded revised estimates. The expenditures were the result of increasing maintenance activities and the impact of storms in the fourth quarter of 1990. Revenues exceeded estimates in the Street Fund. Surface Water Management Fund revenues were below the amounts estimated. Year-end unreserved/undesignated fund balances were slightly below estimate in the Street Fund and substantially below expectations in the Surface Water Management Fund ($218,968). • The impact of the unfavorable performance in the Surface Water Management Fund relative to revised estimates will be offset by reductions in the amount reserved in the original 1991 budget for other undesignated capital projects ($302,613 had been set aside for this purpose). We have submitted the CAFR to the Government Finance Officers Association (GFOA) of the United States and Canada as well as the Washington Finance Officers Association (WFOA) for the Certificate of Achievement for Excellence in Financial Reporting. The GFOA and WFOA have rigorous requirements for such certification and staff is hopeful of receiving such recognition. The attached document has been prepared with these requirements in mind. Please review it carefully with special attention to the "footnotes." The notes contain substantial supplemental and clarifying information, which is considered essential to a full understanding of the numbers on the combined financial statements. The transmittal letter in the CAFR is intended to help the non -finance user understand the significance of the financial statements, schedules, and notes. We appreciate your constructively critical comments so we can make improvements in the document for next year. cc: Management Team City of Federal Way, Washington COMPREHENSIVE ANNUAL FINANCIAL REPORT Period Ended December 31, 1990 CITY OF Prepared by Accounting Division DEPARTMENT OF FINANCE John Moir, Director COOF-�� 7 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Period Ended December 31, 1990 Table of Contents INTRODUCTORY SECTION Statement Reference Paige Letter of Transmittal .......................................... iii City Officials and Administrative Officers 1 City Functional Organization Chart ................................. 2 Finance Department Organization Chart .............................. 3 FINANCIAL SECTION Auditor's Opinion ............................. ............. 7 COMBINED FINANCIAL STATEMENTS - OVERVIEW ("Liftable" General Purpose Finance Statements) 9 Combined Balance Sheet - All Fund Types and Account Groups ............... 1 10 Combined Statement of Revenues, Expenditures, and Changes in Fund Balance - All Government Fund Types .................................... 2 13 Combined Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General, Special Revenue and Debt Service Fund Types ...... 3 14 Notes to the Financial Statements .................................. 17 COMBINING, INDIVIDUAL FUND, AND ACCOUNT GROUP STATEMENTS AND SCHEDULES General Fund .............................................. 45 Balance Sheet ............................................ 47 Statement of Revenue, Expenditures, and Changes in Fund Balance ........... 48 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ........................................ 49 Schedule of Expenditures Compared to Budget 50 Special Revenue Funds ........................................ 53 Combining Balance Sheet ..................................... 55 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance ... 56 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual ............................... . . . . 58 Table of Contents (Cont'd) INDIVIDUAL FUND STATEMENTS Table Pdge Debt Service Funds .......................................... 63 Balance Sheet ............................................. 65 Statement of Revenues, Expenditures, and Changes in Fund Balance ........... 66 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual ....................................... 67 Capital Project Fund ......................................... 69 1990 Capital Project Fund Balance Sheet .......................................... 71 Statement of Revenues, Expenditures, and Changes in Fund Balance ......... 72 Trust and Agency (Fiduciary) Funds ............................... 73 Combining Balance Sheet ...................................... 75 Federal Way Retirement System Expendable Trust Fund Balance Sheet .......................................... 76 Statement of Revenues, Expenditures, and Changes in Fund Balance ......... 77 Combining Statement of Changes in Assets and Liabilities - All Agency Funds ................................. ....... 78 General Fixed Assets Account Group ............................... 79 Schedule of General Fixed Assets - By Source ........................ 81 Schedule of General Fixed Assets - By Function and Activity ............... 82 Schedule of Changes in General Fixed Assets - By Function and Activity ........ 83 STATISTICAL SECTION General Governmental Expenditures by Function ......................... 1 87 Schedule of Major Revenues by Source .............................. 2 88 Tax Revenue by Source ........................................ 3 89 Property Tax Levies and Collections ................................ 4 90 Assessed and Estimated Actual Value of Taxable Property ................... 5 91 Property Tax Levies - All Overlapping Governments ...................... 6 92 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capita . 7 93 Computation of Limitation of Indebtedness ............................ 8 94 Computation of Direct and Overlapping Debt ........................... 9 95 Demographic Statistics ......................................... 10 96 Property Value, Construction, and Bank Deposits ........................ 11 97 Principal Taxpayers ........................................... 12 98 Schedule of Insurance in Force .................................... 13 99 Salaries and Surety Bonds of Principal Officials ......................... 14 100 Miscellaneous Statistical Data ..................................... 15 101 T CITY OF ■ ■ 33530 1 ST WAY SOUTH . FEDERAL WAY, WASHINGTON 98003 July 29, 1991 Honorable Mayor, City Councilmembers, and City Manager City of Federal Way, Washington Dear Mayor, Council, and Manager: This letter transmits the first Comprehensive Annual Financial Report (CAFR) of the City of Federal Way for the ten month period ending December 31, 1990. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to accurately present the financial position and results of operations of the various funds and account groups of the City. All disclosures necessary to enable the readers to gain an understanding of Federal Way's financial activities have been included. The Comprehensive Annual Financial Report is presented in three sections: introductory, financial, and statistical. The introductory section includes this transmittal letter, the City's organizational chart, the finance department's organizational chart, and a list of principal officials. The financial section includes the general purpose financial statements and the combining and individual fund and account group financial statements and schedules, as well as the State Auditor's report on the financial statements and schedules. The statistical section includes selected financial and demographic information, generally presented on a multi -year basis. This report includes all funds and account groups agencies and boards controlled by or dependent upon the City of Federal Way. As an aid to the reader, the major sections of this report have been segregated by divider pages which provide introductions to the sections. In the same manner, fund categories are segregated within the Combining/Individual Financial Statements Section of the CAFR, and the fund types are presented in the combined general purpose statements in the same sequence in which they appear in the combining section. The City of Federal Way did not receive federal or state grants and did not have debt service payments for general obligation bonds in 1990. THE REPORTING ENTITY AND ITS SERVICES The City of Federal Way incorporated on February 28, 1990. The City is the sixth largest city in Washington State with a population of 70,660 (as of April 1, 1991). Federal Way is located on a plateau adjacent to the Puget Sound in King County, eight miles north of downtown iii Tacoma and 25 miles south of downtown Seattle. The City occupies approximately 19 square miles. The City has a Council -Manager form of government. The City Council has seven members, elected at large. The Council elects the Mayor from its members. The current City Council is an interim council with two-year terms ending December 31, 1991. All present council seats will be filled at the November 5, 1991 election. Four members will be elected to serve four- year terms and three members will be elected to serve two-year terms. Candidates for City Council must file by July 26, 1991. A primary election will be held September 17, 1991. The two candidates receiving the highest number of votes for each council seat will run in the general election. The City Manager is hired by the City Council and serves at its pleasure. The City provides a limited range of local government services (primarily by contracting). These services include police protection; construction and maintenance of streets; building inspection; jail services; planning and zoning; public health services; surface water management; municipal court; and general administration and finance. The City developed the foundation of a park and recreation staff in 1990 to phase -in city assumption of park maintenance effective January 1, 1991, and recreation programs in September 1991. Fire protection and emergency medical services are provided by Fire District No. 39. King County provided park maintenance and recreation programs within the City during 1990. The Federal Way Water and Sewer District provides water and sewer services. Metro provides public transportation services. Public housing services are provided by the King County Housing Authority. The King County Library System provides library and reference services for city residents. School District No. 210 provides educational services for kindergarten through high school, in addition to vocational training. ECONOMIC CONDITION AND OUTLOOK The City is characterized as a high - quality residential area with strong retail and commercial sectors. Over the last decade, the Federal Way area has experienced extensive growth. Federal Way should z w continue to experience a growing and r_ healthy economy for the foreseeable o future. The population in the area now known as the City of Federal Way CITY OF FEDERAL WAY POPULATION TRENDS 1970 TO 2000 - has increased to 70,660 in 1991 1970 1980 YEAR 1990 2000 according to the State Office of Financial Management --a 58 percent increase since 1980 and 168 percent increase since 1970. iv In 1990, there were 27,982 housing units in Federal Way; 58% were single family and 42% were multi -family units. Housing units experienced a 67 percent increase since 1980 and 260 percent increase since 1970. A moderate growth scenario indicates that by the year 2000 population should increase to 79,000 and the number of housing units should grow to 34,000. Ninety percent of employment in Federal Way is in the retail and services sector dealing with the needs of the local market area population. Employment was estimated at 10,349 in 1988 and is projected to grow to 14,500 by the year 2000--a forty percent increase. In 1990, new improvements to real estate totalled approximately $185,134,000 or 6.4 % of the City's assessed valuation. The City's annualized taxable retail sales were estimated to be $647 million in 1990. A total of 1,746 building permits were issued in 1990 with a total valuation of $55,889,445. Permits for single family residential housing totalled 247 and were valued at $39,989,429--an average of $161,900 each. Commercial permits included $5,835,000 for a new Fred Meyer retail store. The retail sector is anchored by the SeaTac regional mall, Costco, the new Fred Meyer store (which will officially open in 1991), as well as many businesses adjacent to the city center. Numerous commercial businesses are located in Federal Way including branches of financial institutions and major stock brokerages, the Washington Education Association, U.S. Postal Service bulk mail center, St. Francis regional hospital, Virginia Mason Clinic, and the regional distribution center for the Wall Street Journal. MAJOR INITIATIVES The City Council worked diligently during the pre -incorporation period (from September 1989 to February 27, 1990) to establish the foundation for a graceful transition from unincorporated King County to a municipal corporation. • Contracts were completed with King County to provide for services in the following areas: police protection, street construction and maintenance, surface water management, municipal court, jail, public health, animal control, and processing of building permits issued by King County, among others. • The City annexed into the King County Library District and the Federal Way Fire Protection District No. 39. • Major arterial street improvement projects were continued through King County and Washington State for 356th Street and 16th Avenue South for completion during the period 1992-1993. v • Federal Way's share of the King County open space bond issue program totalled approximately $5.4 million. The projects involved the acquisition of land in the following areas: Hylebos Park, Adelaide/Lakota, SW 363rd, Spring Valley, Lutherland, and Camelot Park. King County is administering the program and initiated some appraisal work in 1990. The City is controlling acquisition negotiations, which are financed by King County bond proceeds. • In response to growth management issues, the City enacted its zoning code and developed a full-time planning and building inspection staff as well as a contractual hearing examiner function to resolve land use applications. • A full-time, permanent city management team was recruited and hired in 1990. Foundation staff were developed in the following areas: administration, finance, public works, parks and recreation, personnel, and law. A financial planning and budgeting process was developed. No less than twelve public hearings and workshops were conducted prior to adopting the 1991 Budget. The 1991 Budget was adopted based on an effective tax rate slightly below that of the prior year as unincorporated King County. • The transition of parks maintenance from King County to the City was completed. • The City Council established a Planning Commission and Human Services Commission. ■ An interim Comprehensive Plan was completed as well as an interim Transportation Improvement Plan. 6 A comprehensive park and recreation plan was initiated (to be completed in 1991). • The City became an entitlement city under the federal Community Development Block Grant Program. • The City established its own defined contribution retirement system in lieu of social security, using an institutional investment approach. • The City retired its short term debt --a $1 million Tax Anticipation Note and $50,000 state loan --and limited its interfund borrowing to $1,255,500. • The City leased a City Hall, which is located in commercial office space. The lease is for a five-year period with two five-year options to renew. • The City issued $1.710 million in limited tax general obligation bonds to acquire a neighborhood park and capital improvements to improve and equip the City Hall facility. The bonds will be retired over five years commencing in 1991. vi • Financial policies were established to provide a solid foundation for the development of city services. FINANCIAL POLICIES The City Council adopted the following policies as recommended by the staff: • Undesignated fund balances will not be classified as revenues in the budget and will not be used to pay for annually recurring operating costs. • A non -appropriated General Fund reserve will be maintained equivalent to not less than 5 % of annual revenues. • Revenue estimates are based on inflationary growth and tax rate changes only. Real growth will not be assumed. • An appropriated General Fund contingency equivalent to 6 % of annual revenues will be maintained in 1991. • Internal service funds will be established in 1991 to support data processing/telecommunications, risk management, fleet, building, and central stores functions. ® Depreciation expense will be included in the internal service fund rates based on the expected useful life of the assets. The amounts set aside from depreciation charges will not be appropriated until the assets are scheduled for replacement. • A self-insurance reserve will be initiated in 1991 with the intent to incrementally develop resources to deal with future risk management needs. • Debt service will be pre -funded by setting aside current year revenues to pay for the next subsequent year's debt service. • Working capital is maintained as a non -appropriated reserve based on the projected pro forma cash flows (collection of revenues and expenditures). Bonded debt will be structured to conform with the type of asset acquired, not to exceed the useful life of the asset. FINANCIAL INFORMATION The City of Federal Way is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft, or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial vii statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that: 1) the cost of a control should not exceed the benefits likely to be derived; and 2) the evaluation of the relative costs and benefits of the control system requires estimates and judgments by management. Budgeting Controls In addition, the City of Federal Way maintains budgetary controls in accordance with the Revised Code of Washington (RCW) 35A.33. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. As demonstrated by the statements and schedules included in the financial section of this report, the City meets its responsibility for sound financial management. Highlights of 1990 operating results reflected on the accompanying financial statements are discussed in the following paragraphs. THE ORIGINAL ADOPTED BUDGET AND THE MODIFIED ACCRUAL BASIS OF ACCOUNTING The adopted budget was presented on a cash -basis and did not conform to the modified accrual basis of accounting. Therefore, adjustments were required to present the numbers in accordance with accounting standards. These adjustments are summarized as follows: The original budget presented repayment of the tax anticipation note (TAN) and state loan as expenditures. However, these transactions impact balance sheet accounts and do not affect the operating statements of governmental funds. Therefore, the repayment of the $1 million TAN and $50,000 state loan are not treated as expenditures in 1990, but rather as reductions in liabilities (intergovernmental loan payable and tax anticipation notes payable) and cash. • The cash resulting from the estimated unexpended proceeds of the tax anticipation note as of February 27, 1990 ($787,000) and interfund street loan ($2,562,700) were presented as revenues in the adopted budget. However, these transactions should be treated as increases to cash and liabilities (tax anticipation notes payable and interfund loans payable). Revenues measurable and available, but not yet distributed by the county or state governments were recognized as 1990 revenues and accrued as "taxes receivable" or "amounts due from other governments" on the balance sheet. These revenue accruals totalled $1,504,884 and are summarized below: viii • Local Sales Tax $ 622,356 • Local Criminal Justice Sales Tax 64,213 • Sales Tax Interest Earnings 2,850 • Camper Excise Tax 2,157 • Motor Vehicle Excise Tax 236,637 • State Criminal Justice Grant 59,911 • Sales & Use Equalization Payment 201,283 • Liquor Excise Tax 54,223 Subtotal General Fund $1,243,630 • Right of Way Permits 717060 • Diverted Road Tax 33,498 • Motor Fuel Tax 85,271 Subtotal Street Fund $ 189,830 • Motor Fuel Tax 40,064 Subtotal Arterial Street Fund $ 40,064 • Real Estate Excise Tax 31,360 Subtotal REET Fund $ 31,360 Total Revenue Accruals $1,504,884 * This amount excludes delinquent property taxes of $156,203 recognized as deferred revenues. • A portion of the diverted road taxes were recognized as a pre -incorporation receivable as of February 27, 1990. Therefore, $642,248 was treated as a revenue to the pre -incorporation period and was not a 1990 revenue. In the pre - incorporation period there was only one fund --the General Fund. The adopted budget for 1990 provided for all diverted road taxes to be deposited in the Street Fund. Therefore, an interfund transfer of $642,248 was made to the Street Fund from the General Fund in 1990. This transaction was presented as an "other financing use" in the General Fund and "other financing source" in the Street Fund. • Interfund transfers totalled $1,178,248 and are summarized below: Real Estate Excise Tax Fund to the Debt Service Fund for 1991 debt service payments: $416,000. Street Fund to the Surface Water Management Fund for surface water management fees attributable to street impervious surfaces: $120,000. General Fund to the Street Fund for diverted road taxes receivable at the end of the preincorporation period: $642,248. ix GENERAL GOVERNMENT FUNCTIONS Overall financial performance in the general, special revenue, and debt service funds was very favorable with revenues and other sources exceeding expenditures and other uses by $6,060,619. Year end fund balances totalled 1990 FINANCIAL PERFORMANCE: GENERAL, $6,264,303, of which $1,676,800 was SPECIAL REVENUE, & DEBT SERVICE FUNDS reserved and $4,587,503 was unreserved/undesignated. 18 1s,5ss,s27 __ 1990 FINANCIAL PERFORMANCE -GENERAL FUND Revenues Expenditures Fund Balance The General Fund performance exceeded original budget estimates. Revenues were I Revenues Expenditures Fund Balance over budget by $2, 690, 896. Expenditures were under budget by $895,716. Year end fund balance totalled $856,648, of which $5,300 was designated and $851,348 was unreserved/undesignated. REVENUE SUNMARY The following data present_ a summary_ of general, special revenue, -and -debt service- fund revenues for the period ending December 31, 1990 and the amount and percentage increase/decrease in those revenues relative to the original adopted budget. These numbers do not include other financing sources. Overall revenues exceeded budget estimate by 23.1 %. 1990 REVENUES: GENERAL, SPECIAL REVENUE, AND DEBT SERVICE FUNDS Service Charges (6.8%) Property Tax (24.2%) Licenses/Permits (3.5°% Other Taxes (7 X Fines/Forfeits (0.8%) Sales Tax (31.4%) Miscellaneous (2.4%) Intergovernmental (23.0%) G10"XL, SPECIAL REVENUE, AND DEBT S)MVICE; FUNDS Revenu.es'.Y 'sus Original Budget (Tn ThoowA&) Revenues Biiod:. Actual ActuaVolw (UIlder) Budget o af'�4r�ig d `' Taxes $7,514 $9,143 $1,629 121.7 % Licenses/Permits 771 510 (261) 66.1 % Intergovernmental 1,937 3,315 1,378 171.1 % Service Charges 915 982 67 107.3 % Fines/Forfeitures 546 117 (429) 21.4 % Interest Earnings 20 259 239 1295.0 % Miscellaneous 0 81 81 na Total Revenues $11,703 $14,407 $2,704 123.1% Sales tax revenues, real estate excise tax revenues, and cable television franchise payments accounted for the favorable performance of tax revenues over budget. Favorable intergovernmental revenue performance was attributable to motor vehicle excise taxes, the sales and use tax equalization payment, real estate excise tax, motor fuel taxes. Plan review fees resulted in favorable service charges relative to budget estimate. Interest earnings far exceeded the original budget estimate. Favorable "miscellaneous" revenues resulted primarily from right of way permits. The favorable revenue performance more than offset the unfavorable performance in building permits, fines/forfeitures, and surface water management fees. The building permit shortfall was mostly attributable to the inclusion of plan review fees in the original budget estimate --in essence a technical revenue reclassification. Fines/forfeitures revenue was substantially below budget, which was caused by the delay in enacting the City's traffic and criminal codes (this resulted in savings in filing fee expenditures). The City adopted its criminal and traffic codes in March and April of 1991. Surface water management fees were below budget estimates, primarily attributable to the treatment of the Street Fund payment as an interfund transfer. EXPENDITURE SUMMARY The following data present a summary of the general fund, special revenue funds, and debt service fund expenditures for the period ending December 31, 1990 and the amount of percentage increase/decrease relative to the original adopted budget. These numbers do not include other financing uses. Overall expenditures were below budget estimates by $5.6 million or 41.3%. xi 1990 EXPENDITURES BY FUNCTION General and Special Revenue Funds Economic Environmery '`" ^ ` Other (0. Transportation (19.6%) Health (3.91 , General Government �io.i-ro) Public Safety (45.9%) Culture & Recreation (2.0%) GENERAL, SPECT AL REVENUE, AND DEBT SER V- jCE . F - 9 Expenditures By Auniefian;Un 'niousantq) ' "'' Function Actual Actual (0i,er) ...::. ceder ljdget o of $udgei General Government $ 2,469 $1,316 $1,154 53.3% Public Safety 3,897 3,837 60 98.5% Physical Environment 21 14 7 66.7 % Transportation 5,948 1,637 4,310 27.5% Economic Development 907 1,017 (110) ll2.1 Health 402 322 80 80.1 % Culture & Recreation 337 165 172 49.0% Debt Service -Interest 21 39 (18) 185.7% Capital leases 8 (8) na Total Expenditures $14,003 $8,355 $51648 59.7% Xll GENERAL, SPECUL REVENUE ; AND.DEBT SER'VI.. TUND5 Expen4itures By Objmt. ti»n . . . otijezx Actual o Personal Services $ 1,255 15.0% Supplies 200 2.4 % Other Services 1,010 12.1 % Intergovernmental 5,709 68.3 % Capital Outlay 134 1.6 % Other 48 .6 % Total $ 8,355 100.0 1990 EXPENDITURES BY OBJECT General and Special Revenue Funds Other Services (12.1 %) personal Services (15.0%) Supplies (2.4%) Other (2.2%) Intergovernmental Services (68.3%) This favorable performance was attributable to the following events: The use of the General Fund contingency and strategic reserve accounts was not required. • Delay in major public works maintenance and construction projects administered by King County. Y Savings attributable to jail services costs, public defender costs, and filing fees. • Lower than projected health service utilization rates. • Savings from park and recreation staffing startup costs. These savings more than offset increased costs for planning consulting contract services, police services, and other general government functions. UNRESERVED/UNDESIGNATED FUND BALANCE Overall unreserved/undesignated fund balances in the general and special revenue funds totalled $4.6 million in the following funds. This amount exceeded original budget projections by $4.2 million. Fund Amount General Fund $ 851,348 Street Fund 2,523,701 Arterial Street Fund 447,555 Real Estate Excise Tax Fund 374,819 Surface Water Management Fund 388,032 Paths & Trails Fund 2,048 Total $4,587,503 The original adopted budget for the General Fund included a projected unreserved/undesignated fund balance of $353,000 as of December 31, 1990. The General Fund actual unreserved/undesignated fund balance exceeded the budget estimate by $498, 348 or 141.2 % . Unreserved/undesignated fund balances were not anticipated in the original adopted budget in_ the various special revenue funds. PENSION TRUST FUND OPERATIONS The City of Federal Way exercised its option as a newly incorporated municipality to create a substitute retirement plan in lieu of participating in the Social Security program. Under the City's defined contribution retirement plan, the City matches employee contributions equivalent to 6.2 % of gross taxable earnings up to Social Security earnings limits. As a part of its matching contribution, the City pays insurance premiums for survivors, disability, and lump sum death benefits. The remaining portion of the City's contribution (approximately 5.2 % of gross taxable earnings) constitutes cash payments to the expendable trust fund. The plan design uses the institutional method for investments. The trust fund assets were placed in the State Investment Pool pending determination of financial advisor, investment policies, asset allocation strategy, and money managers. The assets earned a rate of return equivalent to 7.99 % for 1990. x1v DEBT ADMINISTRATION A tax anticipation note (TAN) for $1 million was issued in November of 1989 and an interest - free loan of $50,000 was received from Washington State. The loans provided interim financing for the transition between the pre -incorporation period and the collection of normal revenues. The state loan was repaid in October 1990 and the TAN was retired in November 1990. No additional temporary financing was required for cash management purposes. The original budget estimated an interfund loan of $2,562,700 from the Street Fund to the General Fund. However, favorable revenue performance permitted a reduction of $1,307,200 in this interfund loan. By year-end 1990, General fund assets existed to repay the loan entirely ($1,255,500). The City of Federal Way issued $1,710,000 in bank qualified limited tax general obligation bonds in October 1990. The issue was non -rated and sold at competitive sale. The issue matures serially over five years commencing in 1991. Eleven bids were received and the bonds were issued with a true interest cost of 6.25 %. The City's outstanding debt is .055 % of its assessed valuation. As of December 31, 1990, the City's remaining debt capacities are summarized below: Use Capacity • General Government Use • Non -voted: $ 21,968,698 • Financing Leases: 23,256,792 • Voted: 31,016,930 Subtotal General $ 76,242,420 • Park and Open Space Use • Voted: 77,542,326 • Utility System Use • Voted: 77,542,326 Total Capacity $231, 327, 072 Non -voted (councilmanic) general obligation bonds and financing leases are reductions in the general government debt capacity. To the extent that such debt is issued, the City's voted debt capacity will be reduced. CASH MANAGEMENT The City had $7,453,164 invested in the State Local Government Investment Pool at year-end 1990. The Pool investments included bankers acceptances (84 %), repurchase agreements (15 %), and certificates of deposit (1 %). Pool investments had an average term to maturity of 37 days. xv The state charges an administrative fee equivalent to five basis points (.05 %). The 1990 average monthly earnings rate was approximately 8.05 % after deducting the administrative fee. Investments were fully guaranteed by federal and state investment insurance programs. RISK MANAGEMENT The City of Federal Way directly paid all unemployment compensation claims during 1990. The City participated in the Washington Government Entity Pool to meet its general liability, public officials liability, property, and automobile insurance requirements in 1990. The City's industrial (workers compensation) insurance is provided by Washington State Department of Labor and Industries. SUBSEQUENT EVENTS Significant financial events occurred in January and February of 1991. The City of Federal Way issued $12.5 million in limited tax general obligation bonds dated February 1. The bonds were issued to acquire land for park and other municipal purposes. The bonds were sold at competitive sale and were issued with a true interest cost of 6.82%. The City of Federal Way received a bond rating of "A" from Standard and Poor's, Moody's, and Fitch investor services. The City enacted a .25 % real estate excise tax on the sale of real property located within its corporate limits. The purpose of the excise tax is to finance debt service payments and other capital projects. The City withdrew from the Washington Government Entity Pool and purchased substantially equal insurance from the Public Entities National Company at reduced cost. INDEPENDENT AUDIT State law requires an annual audit of all City books of account, financial records, and transactions by the State Auditor (an independent elected State official). The 1990 audit of the City has now been completed and was made in conformance with generally accepted auditing standards. The financial statements of all City Funds and Account Groups have been included in this audit. The City has been given an unqualified opinion for 1990. Please see the Auditor's Opinion at the beginning of the Financial Section of this Report. ACKNOWLEDGEMENTS Preparation of this report could not have been accomplished without the professional, efficient and dedicated services of the entire staff of the Finance Department and the various department heads and other city staff who assisted in and contributed to its preparation. Special appreciation is extended to the City management and City Council for their encouragement, interest, and xvi support in conducting the financial operations of the City in a sound and progressive manner. The efficient assistance of the State Auditor's Office is greatly appreciated. Several dedicated staff members deserve special recognition for the preparation of the City's first Comprehensive Annual Financial Report. Accounting Manager J. Richard Scott was responsible for the production of this report. Mr. Scott's efforts were assisted by John Caulfield, Brenda Trent, Rebecca Metcalf, and Teri Mendenhall. Heartfelt thanks are expressed to these dedicated professionals. Respectfully submitted, J John Moir Finance Director xvii City of Federal Way / 1 CITY OFFICIALS DEBRA ERTEL MARY GATES Mayor Deputy Mayor JOEL MARKS Councilmember ROBERT STEAD Councilmember JAMES HANDMACHER Councilmember --� _ �.i LYNN TEMPLETON Councilmember J. BRENT McFALL City Manager OTHER ADMINISTRATIVE OFFICERS i JAMES WEBSTER Councilmember Assistant City Managers - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - . . . Steve Anderson . . . . . . . . . . . . . . . . Ken Nyberg City Attorney . . - . . . . . . . . . . . . . . . . . . . Sandra Driscoll City Clerk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - . Maureen Swaney Finance Director . . . . . . . . . - - . - . . . John Moir Acting Parks Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . .Jennifer Schroeder Public Works Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . - - - . . James Shanks 2 / City of Federal Way I FUNCTIONAL ORGANIZATION CHART City of Federal Way, Washington ASSISTANT CITY MANAGER Building, Urban Design Comprehensive Planning Environmental Coordination Land Use Review/Code Permit Administration/Processing Inspections/Enforcement Transportation Planning PUBLIC WORKS Transportation Surface Water Utility Engineering Real Property Services Maintenance FIRE DISTRICT Fie Suppression Emergency Medical Services Fie Prevention Public Education Hazardous Materials Dispotc h/Communications Disaster Preparedness WATER AND SEWER Water Supply/Pumping/Distribution Sewage Collection/Purnping/Tronsniissio Sewage Treatment System Maintenance/Construction Utility Billing/Administrotion Residential Street Lighting CITY COUNCIL CITY MANAGER HEARING EXAMINER CITY ATTORNEY Advise Council. Community Councils, Boards and Commissions Advice & Drafting Prosecution Civil Litigation ASSISTANT CITY MANAGER I FINANCE r City Clerk Accounting, Treasury, Budgeting Data Processing Purchasing Risk Management Financial Planning Central Stores PERSONNEL Employee Programs Pay do Benefit Administration Personnel Policy Recruitment & Retention City —Wide Training Employee Assistance Program Wellness Program Ell Recreation Grounds Maintenance Porks/Open Space Acquisition Park Operations/Development Cultural/Performing Arts Human Services POLICE Drug Awareness Resistance Education Crime Analysis Crime Prevention Traffic Enforcement Investigation Proactive/Reactive Patrol City of Federal Way / 3 FINANCE DEPARTMENT City of Federal Way, Washington DIRE City —Wide Financial Planning Department Management Financial Consulting General Financial Administration Municipal Employees' Benefit Trust Internal Administration Budget Preparation { ACCOWnNG Accounts Payable Advance Travel Administration State Audit Liaison Budget Performance Control Monitoring do Reporting Enterprise Accounting A Reporting Payroll do Benefit Administrolian State Tax Reports Systems Evaluation/Maintenance/Development Labor Cost Distribution Systems Internal Audit Accounts Receivable Banking dr Cash Management General City Debt Administration Gant Accounting Investment Program LID Financial Administration Refunds do Disbursements Self —Insurance Accounting Central Cashiering Non—lllility Billing Servictrs Debt Service Fund Administration Comprehensive Financial Report Preparation Chart of Accounts Management Special Reports/Reseorch & Analysis 1 CITY. CLERK ■ Keeper of Official Records License Administration Election:; Records Management Clerk of the Council f PURCHASING .1 Bid Processing Contract Administration Maintenance Contracts Equipment Inventory Personal Property Inventory Purchasing Surplus Property Disposal Travel Coordination Purchase Order Distribution Risk Management Central Stores Motor Pool Network k Telecommunications Administration/ Support/Product Evaluation S TAT E AU "ITOR'S OFFI E Robert V. Graham STATE AUDITOR Jack Heinricher ASSISTANT STATE AUDITOR INDEPENDENT AUDITOR'S REPORT July 29, 1991 Honorable Mayor and City Council City of Federal Way Federal Way, Washington We have audited the general purpose financial statements of the City of Federal Way, King County, Washington, as of and for the period ended December 31, 1990, as listed in the table of contents. These financial statements are the responsibility of the city's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was performed pursuant to the Revised Code of Washington 43.09.260, under which a full report on the results of this audit will be issued. This report may include findings and recommendations on compliance matters, internal control procedures, and questionable costs or contingencies that would not be material in relation to the general purpose financial statements taken as a whole. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the City of Federal Way, King County, Washington, at December 31, 1990, and the results of its operations for the period then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining, individual fund, and account group financial statements listed in the table of contents are presented for purposes of additional analysis, and are not a required part of the general purpose financial statements of the City of Federal Way, King County, Washington. The information has been subjected to the procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. The other data included in this report, designated as the statistical section in the table of contents, has not been audited by us and, accordingly, we express no opinion on such data. Very trul rs, ROBERT V. GRAHAM STATE AUDITOR a i g'Reu LEGISLATIVE BUILDING AS-21 9 OLYMPIA WA 98504-0421 9 (206) 753-5277 CITY OF G _r_ E� CSTY OF G GENERAL PURPOSE FINANCIAL STATEMENTS 10 / City of Federal Way COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS December31, 1990 Statement 1 Government Fund Types Special Debt Capital General Revenue Service Projects ASSETS Cash and equivalents (Note 4) $ 1,719,651 $ 4,450,748 $ 418,032 $ 528,904 Cash - Deferred Compensation - _ - Receivables (net): Taxes 689,419 221,061 Unbilled - 47,547 Accounts and contracts - 20 Due from other governments 554,211 148,848 Interfund loans receivable (Note 5) 1,255,500 Property/equipmentrimprovements (net) (Note 6) - Amount available in debt service funds Amount to be provided for retirement of long-term debt - - TOTAL ASSETS $ 2,963,281 $ 6,123,724 $ 418,032 $ 528,904 LIABILITIES AND FUND EQUITY Liabilities: Accounts payable $ 47,501 $ 255,188 $ $ 255,890 Vouchers payable 630,787 374,995 139,422 Payroll payable 3,251 86 - Interest payable - - 2,032 Due to other governments 169,594 345,597 Interfund loans payable (Note 5) 1,255,500 Deferred compensation payable - Custodial accounts Deposits payable General obligation bonds payable (Note 13) _ Compensated absenses payable Capital leases _ Deferred revenues 156,203 - TOTAL LIABILITIES 2,106,633 1,132,069 2,032 395,312 Fund equity: Investment in general fixed assets - - Fund balance: Reserved for: Interfund loans - 1,255,500 - Debt service - 416,000 Unreserved: Designated for petty cash 300 Designated for advance travel 5,000 - Undesignated 851,348 3,736,155 - 133,592 TOTAL FUND EQUITY 856,648 4,991,655 416,000 133,592 TOTAL LIABILITIES & FUND EQUITY $ 2,963,281 $ 6,123,724 $ 418,032 $ 528,904 See accompanying notes to financial statements. Page 1 of 2 City of Federal Way / 11 Statement 1 (Continued) Fiduciary Account Groups Totals Trust and General General Long- (Memorandum Agency Fixed Assets term Debt Onlv) $ 214,855 $ $ $ 7,332,190 127,873 127,873 - 910,480 47,547 20 703,059 1,255,500 1,202,016 - 1,202,016 416,000 416,000 - 1,338,723 1,338,723 $ 342,728 $ 1,202,016 $ 1,754,723 $ 13,333,408 $ $ $ $ 558,579 1,145,204 3,337 2,032 80,095 595,286 - 1,255,500 127,873 127,873 12,529 12,529 28,107 28,107 1,710,000 1,710,000 38,817 38,817 5,906 5,906 - - 156,203 248,604 1,754,723 5,639,373 1,202,016 1,202,016 1,255,500 416,000 - 300 5,000 94,124 - 4,815,219 94,124 1,202,016 - 7,694,035 $ 342,728 $ 1,202,016 $ 1,754,723 $ 13,333,408 Page 2 of 2 CITY OF G City of Federal Way / 13 Statement 2 COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS For the Period Ended December 31,1990 Governmental Fund Types Fiduciary Totals Special Debt Capital Expendable (Memorandum General Revenue Service Projects Trust only) REVENUES: Taxes $ 4,858,409 $ 4,284,749 $ $ $ $ 9,143,158 Licenses and permits 438,481 71,060 - 509,541 Intergovernmental 1,988,286 1,326,975 3,315,261 Service charges and fees 259,402 722,386 - 981,788 Fines and forfeitures 117,136 - - - 117,136 Miscellaneous 337,182 3,313 - - 97,838 438,333 TOTAL REVENUES $ 7,998,896 $ 6,408,483 $ $ - $ 97,838 $ 14,505,217 EXPENDITURES: Current: General government $ 1,310,423 $ 5,471 $ $ $ 3,714 $ 1,319,608 Public safety 3,836,555 3,836,555 Physical environment 13,592 - 13,592 Transportation - 1,637,605 1,637,605 Economic environment 1,016,869 1,016,869 Health 321,673 - 321,673 Culture and recreation 165,194 165,194 Debt Service: Interest and fiscal charges 39,378 39,378 Capital projects - general government - 1,572,304 1,572,304 Capital leases - general government 8,300 - - 8,300 TOTAL EXPENDITURES 6,711,984 1,643,076 1,572,304 3,714 9,931,078 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 1,286,912 4,765,407 - (1,572,304) 94,124 4,574,139 OTHER FINANCING SOURCES (USES): Capital leases 8,300 - - - 8,300 Bond proceeds - - 1,705,896 1,705,896 Operating transfers in (Note 14) - 762,248 416,000 - 1,178,248 Operating transfers out (Note 14) (642,246) (536,000) (1,178,2,18) TOTAL OTHER FINANCING SOURCES (USES) (633,948) 226,248 416,000 1,705,896 1,714,196 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES 652,964 4,991,655 416,000 133,592 94,124 6,288,335 FUND BALANCES AT BEGINNING OF PERIOD 203,684 - - - 203,684 FUND BALANCES (DEFICIT) AT END OF PERIOD $ 856,648 $ 4,991,655 $ 416,000 $ 133,592 $ 94,124 $ 6,492,019 See accompanying notes to financial statements. 14 / City of Federal Way Statement 3 COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE, AND DEBT SERVICE FUND TYPES FOR WHICH ANNUAL BUDGETS HAVE BEEN LEGALLY ADOPTED For the Period Ended December 31, 1990 General Fund Special Revenue Fund Types Variance Variance Favorable Favorable Budget- Actual (Unfavorable) Budget Actual (Unfavorable) REVENUES: Taxes $ 2,992,000 $ 4,858,409 $ 1,866,409 $ 4,522,000 $ 4,284,749 $ (237,251) Licenses and permits 771,000 438,481 (332,519) - 71,060 71,060 Intergovernmental 958,000 1,988,286 1,030,286 979,000 1,326,975 347,975 Service charges and fees 21,000 259,402 238,402 894,000 722,386 (171,614) Fines and forfeitures 546,000 117,136 (428,864) - - Miscellaneous: Interest 20,000 259,397 239,397 - - Other - 77,785 77,785 3,313 3,313 TOTAL REVENUES $ 5,308,000 $ 7,998,896 $ 2,690,896 $ 6,395,000 $ 6,408,483 $ 13,483 EXPENDITURES: Current: General government $ 2,022,400 $ 1,310,423 $ 711,977 $ 447,000 $ 5,471 $ 441,529 Public safety 3,897,000 3,836,555 60,445 - - - Physical environment 21,000 13,592 7,408 - - - Transportation - - - 5,948,000 1,637,605 4,310,395 Economic environment 907,300 1,016,869 (109,569) - Health 402,000 321,673 80,327 Culture and recreation 337,000 165,194 171,806 - Debt service: Interest and fiscal charges 21,000 39,378 (18,378) Capital leases - general government - 8,300 (8,300) - - TOTAL EXPENDITURES 7,607,700 6,711,984 895,716 6,395,000 1,643,076 4,751,924 EXCESS (DEFICIENCY) OF -REVENUES OVER EXPENDITURES (2,299,700) 1-1286,912 3,586,612 - 4,765,,407 OTHER FINANCING SOURCES (USES): Proceeds from loans/notes (Note 3) 3,349,700 (3,349,700) - - Repayment of loan/notes (Note 3) (1,050,000) - 1,050,000 Capitalized leases - 8,300 8,300 - - Operating transfers in - - 762,248 762,248 Operating transfers out - (642,248) (642,248) (536.000) (536,000) TOTAL OTHER FINANCING SOURCES (USES) 2,299,700 {633,948) (2,933.648) 226,248 226,248 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES - 652,964 652,964 4,991,655 4,991,655 FUND BALANCES AT BEGINNING OF PERIOD 203,684 203,684 - - FUND BALANCES AT END OF PERIOD $ - $ 856,648 $ 856,648 $ - $ 4,991,655 $ 4,991,655 See accompanying notes to financial statements. Page 1 of 2 City of Federal Way / 15 Statement 3 (Continued) Totals Debt Service Fund Typee (Memorandum Only) Variance Variance Favorable Favorable Budget Actual (Unfavcrable) Budget Actual (Unfavorable)_ $ $ $ $ 7,514,000 $ 9,143,158 $ 1,629,158 - 771,000 509,541 (261,459) • 1,937,000 3,315,261 1,378,261 915,000 981,788 66,788 - 546,000 117,136 (428,864) 20,000 259,397 239,397 81,098 81,098 $ $ $ $ 11,703,000 $ 14,407,379 $ 2,704,379 $ $ $ $ 2,469,400 $ 1,315,894 $ 1,153,506 3,897,000 3,836,555 60,445 21,000 13,592 7,408 5,948,000 1,637,605 4,310,395 907,300 1,016,869 (109,569) 402,000 321,673 80,327 337,000 165,194 171,806 21,000 39,378 (18,378) 8,300 (8,300) 14,002,700 8,355,060 5,647,640 (2,299,700) 6,052,319 8,352,019 3,349,700 (3,349,700) (1,050,000) - 1,050,000 _ 8,300 8,300 418,000 418,000 1,178,248 1,178,248 - (1,178,248 (1,178,248) 415,000 418,000 2,299,700 8,300 (2,291,400) • 418,000 418,000 - 6,080,619 6,060,619 _ 203,684 203,684 $ - $ 416,000 $ 416,000 $ - $ 6,264,303 $ 6,264,303 Page 2 of 2 CITY OF �. �� A?r City of Federal Way / 17 NOTES TO THE FINANCIAL STATEMENTS December 31, 1990 TABLE OF CONTENTS Note Page 1 Summary of Significant Accounting Policies ................... 18 Reporting Entity ................. ............ . . .. 18 Basis of Presentation --Fund Accounting ................... 19 Basis of Accounting ............................... 20 Budgets and Budgetary Accounting ..................... 21 Assets, Liabilities and Equities ........................ 23 Cash and Equivalents ........................... 23 Temporary Investment .................. .. . . . . . .. 23 Receivables ................................. 23 Amounts Due to and from Other Governments; Interfund Loans . 24 Inventories ... ..... . .. . ...... ...... ... . .. . . .. 24 Fixed Assets ...... . . . . . .. . . .. ..... . .. . .. . ... . 24 Other Assets and Debits ................. .. ... . ... 24 Compensated Absences -Accrued Employee Vacation ........ 24 Long -Term Debt ....................... . .. . . .. 25 Deferred Revenues ... ...................... .... 25 Fund Equity -Reserves and Designation .............. . .. 25 Interfund Transactions ............................. 25 Comparative Data ................................ 25 Total Columns on Combined Statements - Overview ........... 25 Pre -Incorporation Fund Balance ....................... 26 2 Stewardship, Compliance and Accountability .................. 26 3 Supplemental Appropriations . . . . . .... ....... . .. ... . . . . .. 26 4 Cash and Investments ................................ 28 5 Receivables (Property Taxes and Interfund Transactions) .. . . .. . .. . . 29 6 Fixed Assets and Depreciation ........................... 30 7 Pension Plans ..................................... 31 8 Other Personnel Benefits .............................. 35 9 Compensated Absences ............................... 35 10 Risk Management ................................... 36 11 Leases and Other Contractual Commitments ................... 37 12 Estimated Arbitrage Rebate ............................. 39 13 Long -Term Debt ................................... 39 14 Operating Transfers .................................. 43 15 Contingencies and Litigation .............. .... ... ... . .. . 43 16 Subsequent Events ........ . ... ............ .. .... .. . . 44 18 / City of Federal Way Notes to The Financial Statements For the Period Ended December 31, 1990 NOTE 1: Summary of Significant Accounting Policies The City of Federal Way, King County, Washington was incorporated on February 28, 1990 and operates under the Revised Code of Washington applicable to an Optional Municipal Code City (RCW 35A) with a Council -Manager form of government. Under the Council -Manager form of government, the voters elect, at large, a seven -member City Council, and the Council elects one of its members to serve as Mayor. The first council will serve a two-year term and in the fall of 1991 all seven positions will be up for election for staggered terms of two and four years. Thereafter, all terms will be for a period of four years allowing for Council Member consistency and staggered elections. The City Manager is appointed by the Council to act as the chief executive officer of the City and is responsible to the Council for proper administration of all City affairs. The City of Federal Way (hereafter referred to as the "City") is a general purpose government with a current 10 month reporting period. In turn, during this period, the majority of the City's services were still provided by King County and other organizations. The accounting and reporting policies of the City conform to generally accepted accounting principles for governm,-nts, and are regulated by the Washington State Auditor's Office, Division of Municipal Corporations. The City's significant accounting policies are described below. Reporting Entity The City's Comprehensive Annual Financial Report (CAFR) includes all funds, account groups, agencies and boards controlled by or dependent on the City. Under Section 2100 of the Governmental Accounting Standards Board's (GASB) 1990 Codification, the primary basis of determining whether outside agencies and organizations should be considered component units of the City and included in the City's financial statements is a manifestation of oversight authority. Criteria used in making a determination of oversight authority include whether the City has the authority to adopt the organization's budget, approve expenditures, appoint the governing body, approve selection of key management staff, significantly influence operating decisions or whether the City can be heldaccountablefor related fiscal -natters and outstanding debt obligations. Component unit status may also be assigned to organizations having a special financing relationship with the City or conducting activities benefitting the City and/or its citizens within the City's geographic boundaries that are generally available to all residents. There are no instances in which factors other than oversight responsibility are so significant in the relationship between a particular organizations and the City that the exclusion of such organization would be misleading. Based on application of the above criteria for a component unit, and the criteria for defining joint ventures set forth under section J50.101 of the 1990 Codification, none of the privately -owned and government entities listed below meet the criteria for inclusion as component units and, therefore, are not reported in the accompanying financial statements. Although these organizations have a common name and provide services to residents generally within the City's geographic boundaries, the City does not have the ability to influence their daily operations and does not approve their budgets, provide funding for their activities or have any responsibility for their outstanding financial obligations. Federal Way Community Center Federal Way District Pool Federal Way Fire District #39 Federal Way Library System Federal Way Medical Center Federal Way School District #210 Federal Way Senior Center Federal Way Water and Sewer Federal Way Youth and Family Services City of Federal Way / 19 Basis of Presentation - Fund Accounting The accounts of the City are organized on the basis of funds and account groups. Each fund is a separate accounting entity with a self -balancing group of accounts. The account groups are financial reporting devices used to provide accounting control for certain assets and liabilities not recorded in the funds because they do not directly affect net expendable available financial resources. Under the current governmental accounting model, there are three broad fund categories, seven generic fund types within those categories and two account groups. A description of the three fund categories and the generic fund types included in each category is provided below. The individual city funds in each generic fund type are described on pages preceding the combining and individual financial statements for that fund type, later in the document. Governmental Funds Tvges Governmental funds are used to account for activities typically associated with state and local government operations. All governmental fund types are accounted for on a spending or "financial flows" measurement focus, which means that typically only current assets and current labilities are included on related balance sheets. The operating statements for governmental funds measure changes in financial position, rather than net income. They present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. The four generic fund types in this category are described in the following paragraphs. The General Fund is the general operating fund of the City and accounts for all activities not required to be accounted for in some other fund. Special revenue funds account for the proceeds of specific revenue sources, other than expendable trusts or revenues designated for major capital projects, that are legally restricted to expenditures for specific purposes. Debt service funds account for the accumulation of resources for and the payment of general long-term debt. Effective with the implementation of GASB Statement 6 in 1988, principal and interest for special assessment debt are included in this category. Capital projects funds account for the acquisition or construction of major capital facilities except those financed by proprietary funds and trust funds. Effective with the implementation of GASB Statement 6 in 1988, local improvement district construction and interim financing activities are included in this category. Proprietary Funds Proprietary funds are used to account for activities similar to those found in the private sector where the intent of the governing body is to finance the full cost of providing services, including depreciation, primarily through user charges or where the periodic determination of net income is considered necessary for sound financial administration. The measurement focus for these funds is based on the commercial model which uses a flow of economic resources approach. Under this approach, the operating statements for the proprietary funds focus on a measurement of net income (revenues and expenses) and both current and non -current assets and liabilities are reported on related balance sheets. As described below, there are two generic fund types in this category. Enterprise funds account for operations that are financed and operated in a manner similar to private business enterprises - where the intent of the City is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. The acquisition, maintenance and improvement of the physical plant facilities required to provide these goods and services are financed from existing cash resources, the issuance of bonds (revenue or general obligation), Federal grants and other City funds. Internal service funds account for business -like activities where related goods or services are primarily provided to other departments or funds of the City on a cost -reimbursement basis. 20 / City of Federal Way Fiduciary Funds Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments or other funds. These funds share characteristics with both the governmental and proprietary funds and therefore, as described below, use the measurement focus and basis of accounting most appropriate to their specific operations. This fund category includes expendable trust, nonexpendable trust, pension trust, and agency funds. The City uses funds in two of these subclassifications to account for its current financial activities: 1) an expendable trust fund, where both the principal and revenues earned on that principal may be expended for purposes designated by the trust agreement; and 2) several agency funds which account for assets that the City holds for other funds, governments or individuals. Expendable trust funds are accounted for in essentially the same manner as govern mental funds, having a flow of current financial resources measurement focus and using the modified accrual basis of accounting. Agency funds are custodial in nature (assets equal liabilities) and do not measure the results of operations; the City has no equity position. (See "Basis of Accounting" below for a definition.) Account Grou To facilitate the measurement of the sources and uses of current financial resources in the governmental funds, separate account groups are used to account for related non -current or non -financial resources, such as general fixed assets and unmatured general long-term debt. On this basis, the City uses the following account groups to establish accounting control over related assets and liabilities not recorded in the governmental funds. The General Fixed Assets Account Group accounts for all fixed assets of the City other than those accounted for in the proprietary funds. The General Long-term Debt Account Group accounts for all long-term debt of the City other than debt accounted for in the proprietary funds. Basis of Accounting Basis of accounting refers to "when" revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of measurements made, regardless of the nature of the measurement. The accrual basis of accounting recognizes transactions when they occur, regardless of the timing of related cash receipts and disbursements. Revenues are recognized when earned, if measurable, and expenses are recognized when incurred, if measurable. 'Expenses" are defined as "outflows or other using up of assets or incurrences of liabilities. .. during a period from ... activities that constitute the entity's ongoing major and central operations." The modified accrual basis of accounting is the accrual basis adapted to the governmental fund -type measurement focus. Under it, revenues and other financial resource increments are recognized when they become susceptible to accrual, i.e., when the related funds become both "measurable" and "available" to finance expenditures of the current period. To be considered "available", revenue must be collected during the current period or soon enough thereafter to pay current liabilities. As for expenditure recognition under this method, "expenditures" rather than "expenses" is the key consideration. Expenditures are for the most part recognized on an accrual basis because they are measurable when they are incurred, that is, when a fund incurs the related liability. NCGA-1 defines expenditures as "reductions in the net financial resources" of a fund and concludes that most expenditures and operating transfers should be recorded when the related liability is incurred. Since the recognition of depreciation does not reduce net financial resources, it is not considered an expenditure. Other exceptions include (1) inventories of materials and prepaid items are reported as expenditures when purchased, (2) interest on long-term debt is not accrued but is recorded as an expenditure when due, (3) accumulated unpaid vacation and sick pay are considered expenditures when paid. City of Federal Way / 21 Governmental, expendable trust, and agency funds use the modified accrual basis of accounting. Proprietary fund types, pension trust funds and nonexpendable trust funds use the accrual basis of accounting. Major revenues recorded on the modified accrual basis are: Property Taxes - King County acts as the City's collection agent for these taxes. At the end of each day, the County electronically transmits to the City the taxes which it has collected on the City's behalf in the prior day. On this basis, property taxes collected by the County at the end of December are considered both measurable and available and are therefore recognized as revenue in the current year, even though the City does not receive the related funds until the following January. During 1990, the City received property taxes levied by King County for road and street maintenance. These are referred to as diverted road taxes. Other Locally Levied Taxes - King County also acts as the City's collection agent for the 1/4 % Real Estate Excise Tax. Although a time lag occurs in payment of these taxes to the City, since the taxes are actually collected by King County in December and receipted to the City within 10 days after the end of the year, they are considered to be both measurable and available, and are, therefore, accrued as revenue at year end. Grant Revenues - Under Section G60.109 of the 1990 Codification, revenues for cost reimbursement grants are determined to be earned and, therefore, available at the time related expenditures are incurred. For this reason, grant revenues to be received as reimbursement for expenditures incurred in the current year are also recognized as revenue in that year. Shared Revenues - Revenues that have been collected but not remitted by an intermediary collection agency to the City are considered measurable and available. Other Revenue Sources - Other items recognized as revenue in the current year on the modified accrual basis include investment interest earned but not received at year end; operating transfers, interfund, and intergovernmental service billings related to services provided in the current year which are outstanding at year end; and any other material revenue amounts determined to be both measurable and available under current modified accrual accounting practices. Revenues not considered to meet the criteria for recognition on the modified accrual basis include sales tax, business and occupation tax, licenses and permits, fines and forfeitures, and other miscellaneous revenues which are generally not measurable until received. Budgets and Budgetary Accounting Scope of Budget - Annual appropriated budgets are adopted for the general and special revenue funds and for all proprietary funds on the modified accrual basis of accounting. For governmental funds, there are no differences between the budgetary basis and generally accepted accounting principles. Budgetary accounts are integrated in fund ledgers for all budgeted funds, but the financial statements include budgetary comparisons for annually budgeted govern mental funds only. Budgets for debt service and capital project funds are adopted at the level of the individual debt issue or project and for fiscal periods that correspond to the lives of debt issues or projects. Since these funds are not budgeted on an annual basis, budgetary comparisons are not presented. NCGA Statement 1 does not require, and the financial statements do not present, budgetary comparisons for proprietary fund types. Legal budgetary control is established at the fund level, i.e., expenditures for a fund may not exceed the total appropriation amount. The City Manager may authorize transfers of appropriations within a fund, but the City Council must approve by ordinance any increase in total fund appropriations. Any unexpended appropriation balances for annually budgeted funds lapse at the end of the year. Appropriations for other special purpose funds that are non - operating in nature are adopted on a "project -length" basis and, therefore, are carried forward from year to year without reappropriation until authorized amounts are fully expended or the designated purpose of the fund has been accomplished. 22 / City of Federal Way The individual funds within each fund type which are included in the City's annual operating budget are listed below. For each governmental fund, a "Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual" is provided in this document to demonstrate the fund's legal budget compliance for the year. Funds Budgeted on an Annual Basis: General Fund Special Revenue Funds: Street Fund Arterial Street Fund Real Estate Excise Tax Fund Surface Water Management Fund Paths and Trails Reserve Fund Procedures for Adopting the Original Budget - The City's budget process and the time limits under which the budget must be prepared are defined by the Revised Code of Washington (RCW) 35A.33. The procedures followed in establishing the annual budget are described below: • A preliminary budget forecast is prepared by the Finance Director in February. • By early June the official budget call is made by the Finance Director for current level service budgets. By late July, Departments submit their preliminary expenditure estimates and the Finance Department updates the preliminary revenue estimates to define resources available to finance coming year expenditure programs. m Prior to the first Tuesday in September, the City Manager submits a proposed budget to the City Council. This budget is based on priorities established by the Council and estimates provided by City departments during the preceding months, and balanced with revenue estimates made by the Finance Director. g City Council conducts workshops and public hearings on the proposed budget between mid -September and mid - December. No later than the first Monday in October, the City Council must adopt an ordinance to establish the amount of property taxes to be levied in the coming year. e By October 31, the City Manager files a preliminary budget with the City Clerk. Copies of the preliminary budget are provided to staff and the City Council and made available to the public. e During the first two weeks of November, the City Clerk publishes a notice of the filing of the preliminary budget and notices of public hearings to be held during preliminary budget deliberations. o Two public hearings on the proposed budget are also held during November and December. Final hearings on the budget must begin on or before the first Monday of December, and may continue until the 25th day prior to beginning of the next fiscal year. • By December 31, the City Council makes its adjustments to the proposed budget and adopts a final budget by ordinance. The final operating budget, as adopted, is published and distributed within the first three months of the following year. Copies of the adopted budget are made available to the public. City of Federal Way / 23 Amending the Budget - The City Manager is authorized to transfer budgeted amounts between departments within any fund; however, any revisions that alter the total expenditures of a fund must be approved by the City Council. When the City Council determines that it is in the best interest of the City to increase or decrease the appropriation for a particular fund, it may do so by ordinance approved by a simple majority. The budget amounts shown in the financial statements are the final authorized amounts as revised during the year. Assets, Liabilities and Equities Cash and Eauivalents It is the City's policy to invest all cash not immediately required for disbursement. At December 31, 1990, the State Treasurer was holding $7,453,164 in short-term investments of cash. This amount is classified on the balance sheet as cash and equivalents in various funds. The interest on these investments is credited to the General Fund with the exception of Federal Way Retirement System Fund earnings that were receipted to that Fund. The amounts reported as cash and equivalents also include compensating balances maintained with certain banks in lieu of payments for services rendered. The average compensating balances maintained during 1990 were approximately $76,292. The City's deposits are entirely covered by federal depository insurance (FDIC and FSLIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). Temporary Investments The City is authorized by State law to purchase certificates of deposit issued by Washington State depositories that participate in a state insurance pool managed by the Washington Public Deposit Protection Commission; securities purchased by the Washington State Investment Pool; U.S. Treasury and Agency securities, banker's acceptances trading in the secondary market; and repurchase agreements with dealers that use authorized securities as collateral. All investments, except assets in the deferred compensation plan, are recorded on an amortized cost basis, under guidance provided by ARB 43 which states that marketable debt securities should be reported at cost, unless there is a significant and permanent decrease in market value, in which case, market value should be used. The value of investments reported on the financial statements, therefore, reflects par value adjusted by the unamortized portion of premiums or discounts realized at purchase. Assets in the City's deferred compensation plan are reported at market value because the employer's liability to each participant is measured by the participants share of the market value of the plan assets. Receivables Taxes receivable consist of measurable and available locally levied taxes and related interest and penalties. Included are diverted road/property taxes, the local option sales tax, the local real estate excise tax, and motor vehicle fuel taxes. The Due From Other Governments receivable reflects measurable and available intergovernmental grants, entitlements, or State shared revenues (taxes/charges levied and collected by an intermediary collecting government and distributed on some basis); loans; and charges for services rendered by the City for another government unit. (On December 31, 1990 there were no grants or entitlements receivable; only State shared revenues.) (Though the City had no accrued interest receivable at year end, an interest receivable account would normally consist of amounts earned on investments, notes, and contracts.) 24 / City of Federal Way Amounts Due to and from Other Funds; Interfund Loans These accounts include all interfund receivables and payables. A separate schedule of interfund loans receivable and payable is furnished in Note 5. Loans between funds must be specifically authorized by Council resolution. In the governmental funds, loans to other funds are offset by a corresponding reservation of fund balance to indicate that the outstanding loan amounts do not constitute "available spendable resources" and are, therefore, not available for appropriation. Inventories Inventories in the governmental funds are recorded as expenditures at the time of purchase. Amounts re -ii n to Q at year end are immaterial and, therefore, are not reflected on the balance sheets of those funds. Fixed Assets The accounting and reporting treatment of fixed assets is determined by the measurement focus used by the fund which acquires them. Fixed assets purchased or constructed by a governmental fund are recorded as expenditures in that fund at the time related purchases are made; however, the associated fixed asset is recorded in the General Fixed Assets Account Group. All purchased fixed assets are valued at cost. Donated fixed assets are valued at their estimated fair market value on the date received. The City does not capitalize "infrastructure" assets such as roads, bridges, curbs and gutters, streets and sidewalks, and lighting systems. Costs of normal maintenance and repair for general fixed assets are also not capitalized. However, any improvement that increases an asset's value, or materially extends its life or potential uses is added to that asset's capitalized cost. Equipment items acquired through capital lease agreements and land purchased through conditional sales contracts are recorded in the General Fixed Assets Account Group at the time that related contracts are approved. Other Assets and Debits These accounts reflect future resources needed to retire general long-term debt principal and amounts currently available in debt service or other funds to retire general long-term debt. Compensated A sences-Ao rued Em to ee Vacation Employee vacation leave is accumulated monthly at rates ranging from 10 to 15 days per year depending on seniority. Employees may accumulate up to a maximum of 180 hours of vacation leave. All outstanding vacation leave is payable upon termination of employment. Under guidance provided by NCGA-4 and FASB 43, the City records a liability for all outstanding vacation pay. Accrued vacation pay for governmental fund employees is recorded in the General Long -Term Debt Account Group, since it is not considered due and payable at year end from expendable available financial resources. Sick leave may be accumulated up to a maximum of 720 hours, per City policy. The monthly accrual rate for City employees is 8 hours per month. Accumulated sick leave is not payable upon termination of employment. During 1990, City employees were not represented by bargaining units and therefore no exceptions to the above policies exist. Outstanding sick leave at year end is not accrued by the governmental funds due to the difficulty in estimating the portion of existing balances likely to result in expenditures in future periods. City of Federal Way / 25 Lono-term Debt As previously explained, long-term liabilities expected to be paid by the govenu, ental funds are recorded in the General Long-term Debt Account Group. Long-term debt for proprietary funds will be recorded as a liability by the fund responsible for the related debt repayment. Long-term debt outstanding at year end is outlined in Note 13. Deferred Revenues The deferred revenues account is used to offset receivables established in the governmental funds for certain revenues that are measurable but not considered available to finance payment of current obligations and, therefore, are not susceptible to accrual on the modified accrual basis. When the receivable amounts are collected in future periods, this liability account is reduced and corresponding revenue is recorded. Revenues presented in this manner on the accompanying financial statements are delinquent property taxes. Fund Equity -Reserves and Desianations Reserves represent portions of fund equity that are legally restricted for a specific future purpose or not available for appropriation because they do not represent a current expendable resource. Designations of fund balance identify amounts set aside by management for tentative future purposes or administrative convenience. Fund balance in the governmental funds legally restricted for future purposes include reserves for: a) future general fund contingencies; b) future equipment replacement; and c) future debt service/LID default obligations. Fund equity not available for expenditure in the governmental funds consists of the outstanding balances of current interfund loans. For purposes of 1990, the City was not able to levy property taxes which are a major funding source of general governmental services, due to the timing of incorporation. Since the County did levy diverted road taxes for the Federal Way area, however, a temporary interest -bearing loan was made by the Street Fund to the General Fund. Th;s is expected to be repaid within three years. In addition to the reserved equity amounts, a portion of the fund balance in the General Fund has been designated by management for Petty Cash and Advance Travel purposes. Interfund Transactions There are four types of transactions between funds - interfund loans, quasi -external transactions, interfund reimbursements, and interfund transfers. Interfund loans are temporary borrowings of cash which do not affect operating statements, but which may incur interest expense or expenditure to the borrowing fund. Quasi -external transactions are equivalent to buying goods or services from an outside vendor. They are accounted for by the related funds as revenues, expenditures or expenses. Interfund reimbursements are repayments to a fund for expenditures or expenses which belong to another fund. Only expenditures or expense accounts are involved by the funds. Interfund transfers are either residual equity in nature or operating transfers. Operating transfers are the equivalent of operating subsidies. They are accounted for as "other financing sources and uses" in all funds and are therefore included in the operating statements. Comparative Data Comparative totals for the prior years are not presented on financial statements, as the City was incorporated during 1990. Future financial statements will provide this comparative data. Total Columns on Combined Statements - Overview Total columns on the general purpose financial statements are provided to facilitate financial analysis. This data, however, is captioned "Memorandum Only" to indicate that it does not present financial position, results or operations or changes in financial position for the governmental unit as a whole in accordance with generally accepted accounting principles. Data contained in these columns is not comparable to a consolidation, and interfund eliminations have not been made in aggregating reported values. 26 / City of Federal Way Pre -Incorporation Fund Balance As previously disclosed, the City of Federal Way was incorporated on February 28, 1990. The incorporation election, however, was held on March 14, 1989 and the City Council election took place on September 19, 1989. "Incorporation Proceedings" authorized an interim period, prior to the date of incorporation, during which the newly elected officials would exercise various limited powers to facilitate the transition to becoming a city and to ensure continuity of services after incorporation. The City's interim period began September 19, 1989 and ended February 27, 1990. During this interim period, certain governmental operations took place and therefore both revenues and expenditures were incurred. As of February 27, 1990, financial statements were prepared for this interim period. A $203,684 ending fund balance in the General Fund existed at that time, and this became the General Fund's "Fund Balance at the Beginning of the Period" in the 1990 Statement of Revenues, Expenditures, and Changes in Fund Balance. NOTE 2: Stewardship, Compliance and Accountability Legal Budgetary Compliance There have been no material violations of finance -related legal or contractual provisions, and there have been no expenditures exceeding legal appropriations in any of the funds of the City. NOTE 3: Supplemental Appropriations Operating Budget Funds Appropriations established during 1990 for the City's operating budget funds are provided below. As explained in Note 1, both original and supplemental appropriations are adopted by the City Council by ordinance. Appropriation amounts shown on the accompanying financial statements reflect final budget values, including all adopted adjustments to original budget amounts. The 1990 budget for the General Fund included revenue estimates of $3,349,700 for proceeds from tax anticipation notes and a loan from the Street Fund; and expenditure appropriations of $1,050,000 reflecting the repayment of principal on both tax anticipation notes and an incorporation start-up loan from the State of Washington. The actual transactions were treated in accordance with the modified accrual basis of accounting and, therefore, were not recognized as revenues or expenditures. The transactions reflected changes in cash, intergovernmental loan payable and tax anticipation notes payable. City of Federal Way / 27 1990 1990 SUPPLEMENTAL ORIGINAL BUDGET APPROPRIATIONS 1990 FINAL BUDGET General Fund $ 8,657,700 -- S 8,657,7UU Special Revenue Funds: Street Fund 4,663,000 --- 4,663,000 Arterial Street Fund 391,000 — 391,000 Real Estate Excise Tax Fund 447,000 --- 447,000 Surface Water Management Fund 894,000 --- 894,000 6,395,000 --- 6,395,000 Total $15,052,700 -0- $15,052,700 Funds Budgeted on a Project -Length Basis During 1990, the City Council adopted appropriations for funds budgeted on a "project -length" basis. As explained in Note 1, appropriations for these funds are continuing in nature and do not lapse at the end of the year. Amounts appropriated during 1990 and total appropriations through December 31, 1990 for the funds budgeted in this manner are provided below: 1990 TOTAL APPROPRIATIONS APPROPRIATIONS THROUGH DEC. 31, 1990 Capital Project Funds: 1990 Capital Project Fund $1,710,000 $1,710,000 28 / City of Federal Way NOTE 4: Cash and Investments As required by state law, all deposits and investments of the City's funds are obligations of the U.S. Government, the State Treasurer's Investment Pool, bankers' acceptances, or deposits with Washington State banks and savings and loan institutions. In 1990 the City utilized the State Investment Pool and deposits in Washington State banks. The City's investment policies are described in Note 1. Cash and Deposits At December 31, 1990, the carrying amount of the City's fully insured temporary investments with the State Pool was $7,453,164. The City's checking account balance was $(126,274). No deposits were uninsured or uncollateralized. Insurance coverage up to $100,000 is through federal depository insurance and the Washington Public Deposit Protection Commission (WPDPC) for amounts over $100,000. Under State statute, members of WPDPC, a multiple -financial institution collateral pool, may be assessed on a prorated basis if the pool's collateral is insufficient to cover a loss. Except for interest earned by the City's Retirement Expendable Trust, all interest earnings were credited to the General Fund. At December 31, 1990, the City's total deposits and investments consisted of the following: Puget Sound Bank, Checking Account Assets in ICMA Deferred Compensation Plan Investments Petty Cash and Other Total Cash and Investments Investments $ ( 126,274) 127,873 7,453,164 5,300 $7,460,063 Categorization of the City's investments is not applicable since its investments are through the State Pool. Such investments are not evidenced by securities that exist in physical or book entry form. All temporary investments are stated at cost plus accrued interest which approximates market. (In accordance with generally accepted accounting principles applicable to regulated industries, reductions in market value are not reflected on the financial statements. Similarly, gains or losses on bond swaps are deferred and amortized over the life of the replacement investment. Other gains or losses on investments sold or exchanged are recognized at the time the transactions are completed.) City of Federal Way / 29 NOTE 5: Receivables Property Taxes The King County Treasurer is responsible for collecting all property taxes levied in the County by taxing districts. Amounts collected by the County on the City's behalf are remitted daily. In 1990, property taxes reflected diverted road taxes levied by the County before incorporation. As described in Note 1, taxes are levied and become an enforceable lien against properties as of January 1. At December 31, 1990, the total balance of property taxes receivable recorded by the City was $190,139. Of this, $156,203 is recorded as a deferred revenue, since it was not collected within the first 60 days of 1991. The property tax levy calendar in 1990 was: PROPERTY TAX CALENDAR January 1 Taxes are levied and become an enforceable lien against properties. February 14 Tax bills are mailed. April 30 First of two equal installment payments is due. May 31 Assessed value of property established for next year's levy at 100 percent of market value. October 31 Second installment is due. Property taxes are recorded as a receivable when levied, offset by a deferred revenue. During the year, property tax revenues are recognized when cash is collected. At year-end, property tax revenues are recognized for collections expected to occur within 60 days. No allowance for uncollectible taxes is established because delinquent taxes are considered fully collectible. Under State Law, cities may levy up to $3.60 per $1,000 of assessed valuation for general governmental services, subject to two limitations: 1. Washington State law in RCW 84.55.010 limits the growth of regular property taxes to 6 percent per year, after adjustments for new construction. If the assessed valuation increases by more than 6 percent due to revaluation, the levy rate will be decreased. 2. The Washington State Constitution limits the total regular property taxes to I % of assessed valuation or $10 per $1,000 of value. If the tars of all districts exceed this amount, each is proportionately reduced until the total is at or below the 1 % limit. Though State Law allows the above property tax levy by cities, the City of Federal Way was not incorporated when the 1990 property tax levy was certified to the County. However, the area of Federal Way was part of incorporated King County, and therefore subject to the County's diverted road levy for road construction and maintenance. The County's levy was $1.83 per $1,000 of assessed valuation. At the time of levy certification, the total levy assessed valuation of Federal Way property was $2,370,009,348. Upon the City's incorporation, the County transferred to it a levy of $4,298,526. 30 / City of Federal Way Interfund Loans and Advances The balances of outstanding interfund loans as of December 31, 1990 are provided below: General Fund Special Revenue Funds: Street Fund Total NOTE 6: INTERFUND LOANS INTERFUND LOANS RECEIVABLE PAYABLE $1,255,500 1,255,500 --- $1,255,500 $1,255,500 Fixed Assets and Depreciation General Policies Major expenditures for fixed assets, including capital leases and major repairs that increase useful lives, are capitalized. Maintenance, repairs, and minor renewals are accounted For as expenditures or expenses when incurred. (Obligations under capital leases are disclosed in Note 11.) The City has adopted a general fixed asset capitalization policy where an item's cost must equal or exceed $1,000. All fixed assets are valued at historical cost (or estimated cost, where historical cost is not known/or estimated market value for donated assets). General Fixed Assets General fixed assets are long-lived assets of the City as a whole. When purchased, leased, or constructed, such assets are recorded as expenditures in the governmental funds and capitalized in the general fixed assets account group. No depreciation has been provided on general fixed assets, nor has interest been capitalized. General fixed assets that are infrastructure assets (such as roads, bridges, curbs, and sidewalks) are considered public property and are not accounted for in the general fixed assets account group. City of Federal Way / 31 A summary of changes in general fixed assets follows: BALANCE FEBRUARY 28, 1990 ADDITIONS Land $ --- $ 508,492 Machinery & Equipment 685,224 Assets Under Capital Lease - Equipment --- 8,300 Total $ •-- $1,202,016 NOTE 7: PENSION PLANS BALANCE DELETIONS DECEMBER 31, 1990 $ --- $ 508,492 685,224 8,300 $ _-- $1,202,016 Substantially all City full-time and qualifying part-time employees participate in one of the following statewide local government retirement systems administered by the Department of Retirement Systems, under cost -sharing multiple - employer public employee retirement systems. Total Pension Benefit Obligation Less Net Assets Available for Benefits Unfunded (Surplus) Actuarial Present Value of Accumulated Plan Benefits SUMMARY OF SYSTEMS' ACTUARIAL DATA (In Millions of Dollars) As of December 31, 1989 PERS LEOFF $7,259 $3,318 6,222 2,484 $1,037 $ 834 VOLUNTEER FIREFIGHTERS $ 38 44 $(6) The amount shown as total pension benefit obligation is the actuarial present value of credited projected benefits, adjusted for the effects of projected salary increases and any step -rate benefits (LEOFF only) estimated to be payable in the future as a result of employee service to date. Use of the standardized measure enable readers of Washington's financial statements to: (a) assess on an ongoing basis the funding status of each system; (b) assess progress made in accumulating sufficient assets to pay benefits when due; and (c) make comparisons among other states or other retirement systems. The standardized disclosure method is independent of the actuarial funding method used to determine contributions to the retirement system. Historical trend information showing each system's progress in accumulating sufficient assets to pay benefits when due is presented in the State of Washington's June 30, 1990 comprehensive annual financial report. Please refer to said report for detailed trend information. 32 / City of Federal Way Public Employees' Retirement System (PERS) The state legislature established PERS in 1947 under Chapter 41.40 RCW. PERS is a cost -sharing multiple -employer system. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than judges); employees of legislative committees; college and university employees not in national higher education retirement programs; judges of district and municipal courts; noncertificated employees of school districts; and employees of local government. Approximately 50 percent of PERS members are state employees. PERS contains 2 "plans". (As used in this context, the term "plans" refers to tiers within PERS. The actual plan is PERS.) Participants who joined the system by September 30, 1977, are Plan I members. Those joining thereafter are enrolled in Plan H. Retirement benefits are financed from employee and employer contributions and investment earnings. Retirement benefits in both Plan I and Plan II are vested after completion of 5 years of eligible service. Plan I members are eligible for retirement after 30 years of service, or at the age of 60 with 5 years of service, or at the age of 55 with 25 years of service. The annual pension is 2 percent of the final average salary per year of service, capped at 60 percent. Plan II members may retire at the age of 65 with 5 years of service, or at 55 with 20 years of service, with an allowance of 2 percent per year of service of the final average salary. Plan H retirements prior to 65 are actuarially reduced. There is no cap on years of service credit and a cost -of -living allowance is granted, capped at 3 percent annually. During the 1989 Washington Legislative session a cost of living adjustment (COLA) was granted to Plan I members, effective July 1, 1989. The COLA is initiated when the annuitants real purchasing power of the monthly benefit is less than 60 percent of the benefit at age 65. The COLA is 3 percent capped by the consumer price index (CPI). The City's covered payroll for year ending December 31, 1990 was $991,423. The City's total current -year payroll for all employees was $1,015,406. Each biennium the legislature establishes Plan I employer contribution rates and Plan H employer and employee contribution rates. Employee contribution rates for Plan I are established by legislative statute and do not vary from year to year. Employer rates for Plan I are not necessarily adequate to fully fund the system. The employer and employee contribution rates for Plan II are developed by the Office of State Actuary to fully fund the system. All employers are required to contribute at the level established by the legislature. The methods used to determine the contribution requirements were established under state statute. The City's contribution rates expressed as a percentage of covered payroll, as of December 31, 1990 were: PERS Plan I PERS Plan II REQUIRED ACTUAL REQUIRED ACTUAL Employer 7.00% 7.39% 7.00% 7.39% Employee 6.00% 6.00% 4.33% 4.70% Total 13.00% 13.39% 11.33% 12.09% City of Federal Way / 33 The actuarially -determined contribution requirement and actual contribution for the year ending December 31, 1990 were: PERS Plan I PERS Plan II REQUIRED ACTUAL REQUIRED ACTUAL Employer $14,774 $15,597 $54,625 $57,669 Employee 12,664 12,664 33,790 36,677 Total $27,438 $28,261 $88,415 $94,346 The City's actuarially determined employer contribution requirement represents approximately .028 percent of the total for all employers covered by PERS. Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) As of December 31, 1990, the City had no LEOFF Plan employees since it purchased police services from King County and its residents voted to annex to Fire District #39 for fire services. LEOFF Plan information is therefore provided as supplemental information to the reader, as those entities providing police and fire services to Federal Way have LEOFF Plan employees. LEOFF was established in 1970 by the legislature under Chapter 41.26 RCW. LEOFF is a cost -sharing multiple - employer retirement system. Membership includes all full-time, fully compensated, local law enforcement officers and fire fighters. Retirement benefits are financed by employee and employer contributions, investment earnings and legislative appropriation. LEOFF is comprised solely of non -State employees. LEOFF system contains 2 plans. Participants who joined the system by September 30, 1977, are Plan I members. Those who joined thereafter are enrolled in Plan H. Retirement benefits are vested after completion of 5 years of eligible service. Plan I participants are eligible to retire with 5 years of service at age 50. The benefit per year of service is as follows: TERM OF SERVICE PERCENT OF FINAL AVERAGE 20 + 2.0% 10-20 1.5 5-10 1.0 The final average salary is based on salary received during the last 2 years of service. Substantial disability and death benefits are provided by the plan. Retirement benefits are indexed to the Seattle area consumer price index. Plan II participants are eligible to retire at the age of 50 with 20 years of service or at 58 with 5 years of service. Retirement benefits prior to age 58 are actuarially reduced. The benefit is 2 percent of average salary per year of service. The average salary is based on the highest 5-year period. Retirement benefits are indexed to the consumer price index with a cap of 3 percent annually. Death and disability benefits are also provided. These benefit provisions were established under the authority of legislative statute. LEOFF had no material changes in benefit provisions for this year. 34 / City of Federal Way Employer and employee contribution rates for Plan H are developed by the Office of State Actuary to fully fund the system. Plan II employers and employees are required to pay at the level established by the legislature. Plan I employers and employees are required to contribute at a rate of 6 percent and the State is responsible for the balance of the funding. The methods used to determine the contribution requirements were established under the authority of legislative statute. Other Local Government Pension Systems - City of Federal Way Employees' Retirement System The City is also the administrator of a defined contribution pension retirement system called the Federal Way Retirement System. The system is shown as an expendable trust fund in the financial reports of the City. As of December 31, 1990, there were a total of 56 individuals covered by this system of which 50 were currently still employed and none were drawing benefits. Effective June 1, 1990, the Federal Way City Council established the Federal Way Employees' Retirement System, per City ordinance 90-74 and as authorized by the Federal Social Security Act (42 USCA, Section 418 (g)). The Retirement System is a defined contribution pension plan which was established as an alternative to the Federal Social Security System. All employees of the City of Federal Way are required to participate in the system, with the City matching the employee's required contribution. The employee pays 6.2 % and this is matched by the composite of a cash match (approximately 5.2 %) and insurance payments (1 %) for disability, survivor, and lump sum death benefit coverages. The City's contribution mix is actuarily determined annually. Contributions into the plan are tax deferred until such time as withdrawal. Employees are entitled to make voluntary contributions to the plan, assuming that highly compensated and non -highly compensated employees are treated equally. Each payroll period, employees may make a voluntary contribution equal to a minimum of I % of the participant's compensation, not to exceed 14 % of the participant's compensation. Covered payroll for 1990 was $840,664 and total City payroll was $1,015,406. Actual City contributions for the year were $43,502. Actual employee contributions were $51,978. All contributions were invested in the State Pool during 1990. Retirement System assets are not the property of the City and are not subject to the claims of the City's general creditors. The consulting actuary firm of Milliman & Robertson, Inc. has been contracted to provide recordkeeping, administrative and consulting services related to the Plan. Actuarial determinations are not required because long-term disability, survivor income insurance and the lump sum death benefit are provided by a group insurance policy with Standard Insurance Company; and benefits paid to participants upon retirement are limited to (a) a nonforfeitable, nontransferable annuity contract purchased by the plan's trustee, (b) retirement benefits paid from the employee's account to which no contributions by the City or the participant can be added after retirement, or (c) a single lump -sum pay men t equal to the accumulated balance in the employee's account as of his retirement date. City of Federal Way / 35 NOTE 8: Other Personnel Benefits Deferred Compensation The City offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. This multi jurisdictional plan administered by the ICMA Retirement Corporation permits employees to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, or unforeseeable emergency; or upon death, to their beneficiaries. Compensation deferred under the plan and all income attributable to the plan are solely the property of the City. The City's rights to this property are subject only to the claims of the City's general creditors until paid to the employee or other beneficiary and are not restricted to the benefit provisions under the plan. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prudent investor. The City believes that it is highly unlikely that it will use the assets to satisfy the claims of general creditors in the future. (At December 31, 1990, $127,873 of the plan's balance was applicable to the City. Deferred compensation plan investments are recorded at market value, along with the corresponding liability, in the Deferred Compensation agency fund.) NOTE 9: Compensated Absences As explained in Note 1, the City's liability for accrued employee vacation balances for governmental fund employees is recorded in the General Long-term Debt Account Group. The total liability by fund type for accrued employee vacation as of December 31, 1990, is provided below: Governmental Funds (recorded in the General Long-term Debt Account Group) $38,817 36 / City of Federal Way NOTE 10: Risk Management The City of Federal Way during 1990 purchased insurance from commercial enterprises as well as the Washington Governmental Entity Pool. This Pool is classified as a risk -sharing pool, and was formed in 1988 to manage and fund third -party liability claims against its members. A summary of coverages in force during 1990 follows: NAME OF COMPANY COVERAGE LIABILITY LIMITS Washington Governmental Entity Pool Public Officials Liability $5,000,000 Aggregate Deductible - $2,500 General Liability $5,000,000/Claim Deductible - $250 Property - Buildings $570,000 Property - Contents $830,000 Property - Expense $ 90,000 Property - Papers $ 25,000 Miscellaneous Property $ 3,250 Deductible - $250 Auto Coverage $5,000,000/Claim Collision Deductible - $250 Comprehensive Deductible - $100 The Fidelity & Deposit Company of Public Official Bonds: $250,000 Each Maryland Finance Director and City Manager Employee Dishonesty $1,000,000 Deductible - $2,500 Contributions to the Casualty Budgetary Fund and Casualty Cumulative Reserve Fund of the Pool are made annually by its members. Members agree to continue membership in the Pool for one year, and thereafter can withdraw from the Pool with a 60 day written notice. Members withdrawing within the first six years of Pool membership may receive a partial refund of their contributions to the Casualty Cumulative Reserve Fund. The Washington Government Entity Pool used American Risk Pooling Consultant as the Pool administrator. The Pool had a self -insured retention of $250,000 which was fully reserved for this purpose. Liability claims exceeding $250,000 were reinsured by APEEP (American Public Entity Excess Pool) in an amount not to exceed $1,750,000 per claim and $5,000,000 in aggregate per year. In the event a series of retained losses, including non -reinsured automobile physical damage losses, exhausts the Pool's Casualty Budgetary Fund and Casualty Cumulative Reserve Fund, APEEP also provides "excess of funds available" coverage up to $5,000,000 per year, subject to the per -claim limits as noted in the preceding sentence. City of Federal Way / 37 Crawford and Company provided loss control and claims services for the Pool. The Washington Pool used modified cash basis accounting. Members of the Pool had a "Claims Paid Contract" wherein if the City left the pool, it would take with it all unsettled and future claims. The City had no material claims outstanding at the end of 1990. During 1990, the City used the General Fund to account for its risk financing activities. It is the opinion of the City's legal staff that at year end there were no outstanding claims that met expenditure accrual or loss disclosure criteria specified in GASB 10. The City's industrial insurance is provided by Washington State and is administered by the Department of Labor and Industries. Coverage is purchased by means of standard rates per working hour and is computed by the total number of hours worked by employees multiplied by the basic premium rate assigned to the business risk classification. The following are benefits provided by industrial insurance: medical services, damaged clothing, travel expenses, time -loss payments, vocational rehabilitation, partial disability awards, pension awards and survivor benefits. NOTE 11: Leases and Other Contractual Commitments Capital Leases To account for financing leases, lease purchases and installment purchase contracts in governmental funds, the City charges payments made or due during the fiscal period as debt service. In the year that the asset is received, the City records the present value of future lease payments as a capital outlay expenditure and as an offsetting other financing source. The present value of payments due in future periods is shown as a liability in the general long-term debt account group and the cost of the asset is recorded in the general fixed asset account group. The current balance of assets acquired through capital leases and capital lease obligations to be paid by Governmental Funds in future years are summarized below. Assets Acquired Through Capital Lease Agreements: Machinery and Equipment GENERAL FIXED ASSETS ACCOUNT GROUP $8,300 38 / City of Federal Way Future Minimum Lease Payment by Year, as of December 31, 1990: 1991 1992 1993 1994 Total Minimum Lease Payments Less Interest Present Value of Minimum Lease Payments Operating Leases LONG-TERM DEBT ACCOUNT GROUP $4,875 1,458 558 93 $6,984 1,078 $5,906 The City has various current lease commitments for rental of office space and facilities and miscellaneous equipment items not intended to be purchased when the lease term is ended. Leases of real property currently extend into 1995. The following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1990: GENERAL FUND" 1991 $1 12,084 1992 142,299 1993 150,947 1994 151,849 1995 162,279 Note: Payments subsequent to 1990 will be through internal service funds. Other Contractual Commitments As of December 31, 1990, the City had other outstanding contractual commitments of $245,795 for engineering and other professional services. The City's total outstanding contract obligations by fund type, as of December 31, 1990, are summarized below: General Fund Special Revenue Funds Total Contractual Commitments $ 24,387 $221,368 $245,755 City of Federal Way / 39 NOTE 12: Estimated Arbitrage Rebate The Federal Tax Reform Act of 1986 requires issuers of tax-exempt debt of over $5 million to make payments to the United States Treasury of investment interest received at yields that exceed the issuer's tax-exempt borrowing rates. Payments of arbitrage rebate amounts due under these regulations must be made to the U.S. Treasury every five years. The City's estimated rebatable arbitrage amount as of December 31, 1990 is $-0- for all tax-exempt debt subject to the Tax Reform Act issued through that date. NOTE 13: Long -Term Debt The various categories of long-term debt reflected on the City's financial statements are briefly described in the following paragraphs. General Obligation bonds are backed by the City's full faith and credit. Proceeds are typically used for the acquisition or construction of major capital facilities or equipment. "Councilmanic Bonds" are general obligation bonds issued by City Council without voter approval. Under State law, repayment of these bonds must be financed from general City revenues since no additional property taxes can be levied to support related debt service payments. General Obligation bonds approved by the voters are typically repaid through an annual "excess" property tax levy authorized for this purpose by State statute. At year end 1990 the City had no voter approved bonds outstanding. Although general obligation bonds may be issued to support proprietary fund activity, the City has issued these bonds for general government purposes only. Therefore, associated debt is recorded in the General Long-term Debt Account Group and annual principal and interest payments are recorded as expenditures by the City's debt service funds. Other long-term debt incurred by the governmental funds include conditional sales contracts issued for the purchase of land and facilities, and capital lease agreements. General govemmen.t obligations are recorded in the General Long-term Debt Account Group. Since pending loss claims are immaterial and fully covered by purchased insurance, they are not accrued in the General Long-term Debt Account Group. On November 1, 1990, the City issued $1,710,000 in limited tax general obligation bonds, which will mature serially over the five year life of the issue. The last bonds will mature on December 1, 1995. The bonds carry a face interest rate ranging from 5.9 % to 6.3 %, but were issued at a discount of $4,104 resulting in a True Interest Cost (TIC) of 6.252002% and a net Interest Cost (NIC) of 6.249283 %. The following two statements of long-term debt provide a listing of the outstanding debt of the City and summarizes the City's debt transactions for 1990: 40 / City of Federal Way STATEMENT OF GENERAL LONG-TERM DEBT December 31, 1990 Amounts Available to be Provided for the Payment of General Long -Term Debt Amount to be Provided for the Retirement of: G.O. Bonds Compensated Absences Lease Contracts Amount Available in Debt Service Funds Total Amount Available and to be Provided General Long -Term Debt Payable General Obligation Bonds Compensated Absences - Vacation Lease Contracts Total General Long -Term Debt $1,294,000 38,817 5,906 $ 416,000 $1,754,723 $1,710,000 38,817 5,906 $1,754,723 STATEMENT OF CHANGES IN LONG-TERM DEBT Period Ended December 31, 1990 fin Thousands of Dollars) CAPITALIZED GENERAL LEASE ACCRUED VACATION, OBLIGATION BONDS OBLIGATIONS CLAIMS & JUDGMENTS TOTAL Outstanding at $ $ -- $ __ $ --- February 28, 1990 New Debt Issued or Acquired: 1990 G.O. Bonds 1,710.0 - 1,710.0 Capitalized Lease Obligations — 8.3 --- 8.3 Accrued Vacation --- — 38.8 38.8 TotalAd '<l'.ns $1,710.0 $ 8.3 $38.8 $1,757.1 Debt Retired: Capitalized Lease Obligations (2.4) --- (2.4) Total Reductions $ --- $ (2.4) $ --- $ (2.4) Outstanding at December 31, 1990 $1,710.0 $ 5.9 $38.8 $1,754.7 City of Federal Way / 41 Presented below is a summary of the City's debt service requirements to maturity by year for all outstanding debt other than compensated absences: 1991 1992 1993 1994 1995 TOTAL ANNUAL DEBT SERVICE PAYMENTS TO MATURITY (In Thousands of Dollars) GENERAL OBLIGATION BONDED DEBT $ 413.2 406.8 407.6 411.9 409.3 $2,048.8 CAPITAL LEASE OBLIGATIONS $4.9 1.5 .5 .1 $7.0 TOTAL DEBT $ 418.1 408.3 408.1 412.0 409.3 $2,055.8 Note: At December 31, 1990, the City had $416,000 available in debt service funds to service the general bonded debt. YEAR PRINCIPAL SCHEDULE OF ANNUAL DEBT SERVICE REQUIREMENTS TO MATURITY GENERAL OBLIGATION BONDS INTEREST TOTAL ANNUAL REQUIREMENTS 1991 $ 300,000 $113,235 $ 413,235 1992 320,000 86,825 406,825 1993 340,000 67,625 407,625 1994 365,000 46,885 411,885 1995 385,000 24,255 409,255 $1,710,000 $338,825 $2,048,825 42 / City of Federal Way SCHEDULE OF OTHER LONG-TERM DEBT OUTSTANDING DECEMBER 31, 1990 DEBT ISSUE MATURITY ORIGINAL OUTSTANDING DATE DATE DEBT ISSUE INTEREST DECEMBER 31, 1990 Capital Leases: Puget Sound Leasing 1990 1992 $3,516 $1,031 $2,485 Puget Sound Leasing 1990 1992 3,517 1,185 2,332 Pitney Bowes 1990 1994 1,267 178 1,089 Total Capital Leases $8,300 $2,394 $5,906 Total Other Long -Term Debt $8,300 $2,394 $5,906 Computation of Legal Debt Margin Under Washington State law (RCW 39.36.020), a City may incur general obligation debt for general city purposes in an amount not to exceed 2-1/2 percent of the value of all taxable property within the City. State law requires all property to be assessed at 100 percent of its true and fair value. Unlimited tax general obligation debt requires an approving vote of the people, and any election to validate such general obligation debt must have a voter turnout of at least 40 percent of those who voted in the last State general election and of those voting, 60 percent must be in the affirmative. The City Council may, by ordinance, authorize the issuance of limited tax general obligation debt in an amount up to 3/4 percent of the valuation within the City without a vote of the people. No combination of limited or unlimited tax debt may exceed 2-1/2 percent of the valuation. The debt service on unlimited tax debt is secured by excess property tax levies, whereas the debt service on limited tax debt is secured by property taxes collected with the City's councilmanic levy. The City's legally remaining debt capacities are: General Government (no vote required) $21,968,698 General Government Financing Leases (no vote required)* $23,256,792 General Government (3/5 majority vote required) $31,016,930 Parks and Open Space (3/5 majority vote required) $77,542,326 Utilities (3/5 majority vote required) $77,542,326 *Note: A separate section of the State Law provides for an additional Lease Financing (Lease Purchase) capacity of .75 % of total assessed valuation. This capacity can be authorized without a public vote under essentially the same terms as for the current councilmanic capacity. Under a 1990 revision of the State Law, only the principal portion of lease purchase contracts is counted in making related debt limit calculations. City of Federal Way / 43 NOTE 14: Operating Transfers Operating Transfers Operating transfers are legally authorized contributions of resources from one fund to another to subsidize designated activities or expenditures. These amounts are classified as "other financing sources or uses" on governmental fund type operating statements. Operating transfers recorded during 1990 were as follows: FUND CATEGORY General Special Revenue Debt Service Total Operating Transfers TRANSFERS IN $ --- 762,248 416,000 $1,178,248 NOTE 15: Contingencies and Litigation TRANSFERS OUT $ 642,248 536,000 $1,178,248 As of December 31, 1990, there were a small number of claims for damages and lawsuits pending against the City. In the opinion of the City Attorney, however, neither the potential liability for any single claim or lawsuit, nor the aggregate potential liability arising from all actions currently pending would materially affect the financial condition of the City. Due to both their uncertainty and immateriality, no liabilities or estimated liabilities have been included in the City's financial statements. 44 / City of Federal Way NOTE 16: Subsequent Events 1. G.O. Bonds Issued - On February 19, 1991, the City issued limited tax general obligation bonds (dated February 1) in the amount of $12,500,000. These bonds were issued for the purpose of providing funds for the acquisition of land for park and other municipal purposes. 2. Optional Real Estate Excise Tax - On January 8, the City exercised its option to levy a .25 % real estate excise tax on the sale of real property located within the corporate limits of the City, for the purpose of funding local capital improvements. 3. Insurance/Risk Management - On January 15, the City Council authorized withdrawal from the Washington Governmental Entity Pool and the purchase of substantially equal insurance from Public Entities National Company (PENCO) at a much reduced cost. 4. Unemployment Compensation Self -Insurance - On January 1 the City utilized a self-insurance fund for the State mandated unemployment compensation insurance coverage. 5. By June, 1991 the City hired staff for two vacant Department Director Positions: Public Works Director Philip Keightley Parks, Recreation & Human Services Director Joe Stevens City of Federal Way / 47 GENERALFUND BALANCE SHEET December 31, 1990 1990 ASSETS 'Cash and equivalents $ 1,719,651 Taxes receivable (net) 689,419 Due from other governments 554,211 TOTAL ASSETS $ 2,963,281 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $ 47,501 Vouchers payable 630,787 Payroll payable 3,251 Due to other governments 169,594 Interfund loan payable 1,255,500 TOTAL LIABILITIES 2,106,633 Fund balance: Unreserved: Designated for petty cash 300 Designated for travel advance 5,000 Undesignated 851,348 TOTAL FUND BALANCE 856,648 TOTAL LIABILITIES AND FUND BALANCE $ 2,963,281 48 / City of Federal Way GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Period Ended December 31, 1990 REVENUES: Taxes Licenses and permits Intergovernmental Service charges and fees Fines and forteitures Miscellaneous: Interest Other TOTAL REVENUES EXPENDITURES: Current: General government Public safety Physical environment Economic environment Health Culture and recreation Debt Service: Interest and fiscal charges Capital leases - general government TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Capital leases Operating transfers out TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCE AT BEGINNING OF PERIOD FUND BALANCE (DEFICIT) AT END OF PERIOD 1990 $ 4,858,409 438,481 1,988,286 259,402 117,136 259,397 77,785 7,998,896 1,310,423 3,836,555 13,592 1,016,869 321,673 165,194 39,378 8,300 6,711,984 1,286,912 8,300 (642,248) (633,948) 652,964 203,684 $ 856,648 City of Federal Way / 49 REVENUES: Taxes Licenses and permits Intergovernmental Service charges and fees Fines and forteitures Miscellaneous: Interest Other TOTAL REVENUES GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Period Ended December 31, 1990 Budget $ 2,992,000 $ 771000 958,000 21,000 546,000 20,000 5,308,000 Actual 4,858,409 $ 438,481 1,988,286 259,402 117,136 259,397 77,785 7,998,896 Variance Favorable (Unfavorable) 1,866,409 (332,519) 1,030,286 238,402 (428,864) 239,397 77,785 2,690,896 EXPENDITURES: Current: General government 2,022,400 1,310,423 711,977 Public safety 3,897,000 3,836,555 60,445 Physical environment 21,000 13,592 7,408 Economic environment 907,300 1,016,869 (109,569) Health 402,000 321,673 80,327 Culture and recreation 337,000 165,194 171,806 Debt Service: Interest and fiscal charges 21,000 39,378 (18,378) Capital leases - general government - 8,300 (51300) TOTAL EXPENDITURES 7,607,700 6,711,984 895,716 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (2,299,700) 1,286,912 3,586,612 OTHER FINANCING SOURCES (USES): Proceeds from loans/notes (Note 3) 3,349,700 - (3,349,700) Repayment of loan/notes (Note 3) (1,050,000) 1,050,000 Capitalized leases 8,300 8,300 Operating transfers out (642,248) (642,248) TOTAL OTHER FINANCING SOURCES (USES) 2,299,700 (633,948) (2,933,648) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES - 652,964 652,964 FUND BALANCE AT BEGINNING OF PERIOD 203,684 203,684 FUND BALANCE (DEFICIT) AT END OF PERIOD $ $ 856,648 $ 856,648 50 / City of Federal Way GENERALFUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET Period Ended December 31, 1990 GENERAL GOVERNMENT SERVICES LEGISLATIVE: Personal services Supplies Other services and charges TOTAL LEGISLATIVE JUDICIAL: Intergovermental services TOTAL JUDICIAL EXECUTIVE: Personal services Supplies Other services and charges TOTAL EXECUTIVE FINANCIAL, RECORDS, AND CENTRAL SERVICES: Personal services Supplies Other services and charges TOTAL FINANCIAL, RECORDS, AND CENTRAL SERVICES LEGAL: Personal services Supplies Other services and charges TOTAL LEGAL PERSONNEL: Personal services Supplies Other services and charges TOTAL PERSONNEL OTHER GENERAL GOVERNMENTAL SERVICES: Personal services Supplies Other services and charges Intergovermental services Capital outlay Debt service - Interest Capital leases TOTAL OTHER GENERAL GOVERNMENTAL SERVICES TOTAL GENERAL GOVERNMENT VARIANCE FAVORABLE BUDGET ACTUAL (UNFAVORABLE) $ 34,000 $ 29,565 $ 4,435 10,000 737 9,263 2,000 8,254 (6,254) 46,000 38,556 7,444 160,000 71,971 88,029 160,000 71,971 88,029 157,750 143,110 14,640 15,000 11,076 3,924 643,650 50,695 592,955 816,400 204,881 611,519 213,900 193,041 20,859 28,000 32,771 (4,771) 129,100 119,487 9,613 371,000 345,299 25,701 66,892 (66,892) 13,455 (13,455) 250,000 102,027 147,973 250,000 182,374 67,626 37,500 60,022 (22,522) 6,000 4,506 1,494 24,500 15,759 8,741 68,000 80,287 (12,287) 28,383 (28,383) 46,945 (46,945) 280,000 195,539 84,461 31,000 24,350 6,650 91,838 (91,838) 21,000 39,378 (18,378) 8,300 (8,300) 332,000 434,733 (102,733) 2,043,400 1,358,101 685,299 Page 1 of 3 City of Federal Way / 51 GENERALFUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET Period Ended December 31, 1990 (Continued) SECURITY OF PERSONS AND PROPERTY LAW ENFORCEMENT: Supplies Intergovermental services TOTAL LAW ENFORCEMENT DETENTION AND/OR CORRECTION: Intergovermental services TOTAL DETENTION AND/OR CORRECTION TOTAL SECURITY OF PERSONS AND PROPERTY PHYSICAL ENVIRONMENT NATURAL RESOURCES: Intergovernmental services TOTAL NATURAL RESOURCES TOTAL PHYSICAL ENVIRONMENT ECONOMIC ENVIRONMENT WELFARE: Other services and charges TOTAL WELFARE PLANNING AND COMMUNITY DEVELOPMENT: Personal services Supplies Other services and charges TOTAL PLANNING AND COMMUNITY DEVELOPMENT HOUSING AND COMMUNITY DEVELOPMENT: Personal services Supplies Other services and charges TOTAL HOUSING AND COMMUNITY DEVELOPMENT TOTAL ECONOMIC ENVIRONMENT VARIANCE FAVORABLE BUDGET ACTUAL (UNFAVORABLE) 81 (81) 3,667,000 3,836,474 (169,474) 3,667,000 3,836,555 (169,555) 230,000 230,000 230,000 0 230,000 3,897,000 3,836,555 60,445 21,000 13.592 7,408 21,000 13,592 7,408 21,000 13,592 7,408 67,300 56,905 10,395 67,300 56,905 10,395 300,000 345,791 (45,791) 30,000 41,301 (11,301) 110,000 279,298 f169.298) 440,000 666,390 (226,390) 300,000 244,660 55,340 30,000 25,783 4,217 70.000 23,131 46,869 400.000 293,574 106,426 907,300 1,016,869 (109,569) Page 2of3 52 / City of Federal Way GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET Period Ended December 31, 1990 (Continued) MENTAL AND PHYSICAL HEALTH PUBLIC HEALTH: Intergovernmental services TOTAL PUBLIC HEALTH TOTAL MENTAL AND PHYSICAL HEALTH CULTURE AND RECREATION PARTICIPANT RECREATION Personal services Supplies Other services and charges Intergovermental services Capital outlay TOTAL PARTICIPANT RECREATION PARK FACILITIES: Personal services Supplies Other services and charges Capital outlay TOTAL PARK FACILITIES TOTAL CULTURE AND RECREATION OTHER FINANCING USES Repayment of loan/notes (Note 3) Operating transfers out TOTAL OTHER FINANCING USES TOTAL GENERAL FUND VARIANCE FAVORABLE BUDGET ACTUAL (UNFAVORABLE 402,000 321,673 80,397 402,000 321,673 80,327 402,000 321,673 80,327 127,000 56,640 70,360 30,000 3,796 26,204 50,000 48,746 1,254 80,000 80,000 31,488 (31,488) 287,000 140,670 146,330 5,337 (5,337) 13,104 (13,104) 50,000 1,083 48,917 5,000 (5,000) 50,000 24,524 25,476 337,000 165,194 171,806 1,050,000 1,050,000 - 642,248 (642,248) 1,050,000 642,248 407,752 $ 8,657,700 $ 7,354,232 $ 1,303,468 Page 3 of 3 City of Federal Way / 55 SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET December 31, 1990 Paths and Arterial Real Estate Surface Water Trails Street Street Excise Tax Management Reserve Total ASSETS Cash and equivalents $ 2,962,662 $ 407,491 $ 343,484 $ 735,063 $ 2,048 $ 4,450,748 Receivables: Taxes 189,701 31,360 - 221,061 Unbilled 47,547 - - 47,547 Accounts and contracts - - 20 20 Due from other governments 108,784 40,064 148,848 Interfund loans receivable 1,255,500 - - - - 1,255,500 TOTAL ASSETS $ 4,564,194 $ 447,555 $ 374,844 $ 735,083 $ 2,048 $ 6,123,724 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 255,188 $ $ $ - $ $ 255,188 Vouchers payable 373,516 25 1,454 374,995 Payroll payable 86 - 86 Due to other governments 345,597 345,597 Deferred revenues 156,203 - 156,203 TOTAL LIABILITIES 784,993 25 347,051 1,132,069 Fund balances: Reserved for interfund loan 1,255,500 - 1,255,500 Unreserved-undesignated 2,523,701 447,555 374,819 388,032 2,048 3,736,155 TOTAL FUND BALANCES 3,779,201 447,555 374,819 388,032 2,048 4,991,655 TOTAL LIABILITIES AND FUND BALANCES $ 4,564,194 $ 447,555 $ 374,844 $ 735,083 $ 2,048 $ 6,123,724 56 / City of Federal Way SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES Period Ended December 31, 1990 REVENUES: Taxes Licenses and permits Intergovernmental Service charges and fees Miscellaneous: Interest Other TOTAL REVENUES EXPENDITURES: Current: General government Transportation TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Operating transfers in Operating transfers out TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCES AT BEGINNING OF PERIOD FUND BALANCES AT END OF PERIOD Arterial Street Street $ 3,490,243 $ 71,060 877,372 3,065 4,441,740 1,784 1,183,003 1,184,787 3,256,953 642,248 (120,000) 522,248 3,779,201 447,555 447,555 447,555 447,555 $ 3,779,201 $ 447,555 Page 1 of 2 City of Federal Way / 57 Real Estate Surface Water Paths and Excise Tax Management Trails Reserve Total $ 794,506 $ $ $ 4,284,749 71,060 2,048 1,326,975 722,386 722,386 248 248 3,065 794,506 722,634 2,048 6,408,483 3,687 5,471 454,602 1,637,605 3,687 454,602 1,643,076 790,819 268,032 2,048 4,765,407 120,000 762,248 (416,000) (536,000) (416,000) 120,000 226,248 374,819 388,032 2,048 4,991,655 $ 374,819 $ 388,032 $ 2,048 $ 4,991,655 Page 2 of 2 58 / City of Federal Way SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Period Ended December 31, 1990 REVENUES: Taxes Licenses and permits Intergovernmental Service charges and fees Miscellaneous: Interest Other TOTAL REVENUES EXPENDITURES: Current: General government Transportation TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Operating transfers in Operating transfers out TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCES AT BEGINNING OF PERIOD FUND BALANCES AT END OF PERIOD Street Fund Variance Favorable Budget Actual (Unfavorabla) $ 4,075,000 $ 3,490,243 $ (584,757) - 71,060 71,060 588,000 877,372 289,372 - 3,065 3,065 4,663,000 4,441,740 (221,260) - 1,784 (1,784) 4,663,000 1,183,003 3,479,997 4,663,000 1,184,787 3,478,213 3,256,953 3,256,953 642,248 642,248 (120,000) (120,000) 522,248 522,248 3,779,201 3,779,201 $ $ 3,779,201 $ 3,779,201 Page 1 of 4 City of Federal Way / 59 SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Period Ended December 31, 1990 (Continued) Arterial Street Fund Variance Favorable Budget Actual (Unfavorable) 391,000 391,000 391.000 391,000 447,555 56,555 447,555 56,555 Real Estate Excise Tax Fund Variance Favorable Budget Actual (Unfavorable) $ 447,000 $ 794,506 $ 347,506 447,000 794,506 347,506 - 447,000 3,687 443,313 391,000 - - 391,000 447,000 3,687 443,313 447,555 447,555 790,819 790,819 (416,000) (416,000) (416,000) (416,000) 447,555 447,555 $ $ 447,555 $ 447,555 374,819 374,819 $ $ 374,819 $ 374,819 Page 2 of 4 60 / City of Federal Way SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Period Ended December 31, 1990 (Continued) REVENUES: Taxes Licenses and permits Intergovernmental Service charges and fees Miscellaneous: Interest Other TOTAL REVENUES EXPENDITURES: Current: General government Transportation TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Operating transfers in Operating transfers out TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCES AT BEGINNING OF PERIOD FUND BALANCES AT END OF PERIOD Surface Water Management Fund Variance Favorable Budget Actual (Unfavorable) 894,000 722,386 (171,614) 248 248 894,000 722,634 (171,366) 894,000 454,602 439,398 894,000 454,602 439,398 - 268,032 268,032 120,000 120,000 120,000 120,000 388,032 388,032 $ $ 388,032 $ 388,032 Page 3 of 4 City of Federal Way / 61 SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Period Ended December 31, 1990 (Continued) Paths and Trails Reserve Fund Variance Favorable Budget Actual (Unfavorable) 2,048 2,048 2,048 2,048 2,048 2,048 2,048 2,048 $ - $ 2,048 $ 2,048 Totals (Memorandum Only) Variance Favorable Budget Actual (Unfavorable) $ 4,522,000 $ 4,284,749 $ (237,251) 71,060 71,060 979,000 1,326,975 347,975 894,000 722,386 (171,614) - 248 248 - 3,065 3,065 6,395,000 6,408,483 13,483 447,000 5,471 441,529 5,948,000 1,637,605 4,310,395 6,395,000 1,643,076 4,751,924 - 4,765,407 4,765,407 762,248 762,248 (536,000) (536,000) 226,248 226,248 4,991,655 4,991,655 $ $ 4,991,655 $ 4,991,655 Page 4 of 4 c ITY OF City of Federal Way / 65 DEBT SERVICE FUND BALANCE SHEET December 31, 1990 ASSETS 1990 Cash and equivalents $ 418,032 TOTAL ASSETS $ 418,032 LIABILITIES AND FUND BALANCE Liabilities: Interest payable $ 2,032 TOTAL LIABILITIES 2,032 Fund balance: Reserved for debt service 416,000 TOTAL FUND BALANCE 416,000 TOTAL LIABILITIES AND FUND BALANCE $ 418,032 66 / City of Federal Way DEBT SERVICE FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE For the Period Ended December 31, 1990 REVENUES: TOTAL REVENUES EXPENDITURES: TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Operating transfers in TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCE AT BEGINNING OF PERIOD FUND BALANCE AT END OF PERIOD 1990 416,000 416,000 416,000 $ 416,000 City of Federal Way / 67 DEBT SERVICE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL Period Ended December 31, 1990 REVENUES: TOTAL REVENUES EXPENDITURES: TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Operating transfers in TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCES AT BEGINNING OF PERIOD FUND BALANCES AT END OF PERIOD VARIANCE FAVORABLE BUDGET ACTUAL (UNFAVORABLE) 416,000 416,000 416,000 416,000 $ $ $416,000 $ $416,000 CITY OF Y � 7 City of Federal Way / 71 1990 CAPITAL PROJECT FUND BALANCE SHEET December 31, 1990 ASSETS Cash and equivalents TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Vouchers payable TOTAL LIABILITIES Fund balance: Unreserved-undesignated TOTAL FUND BALANCE TOTAL LIABILITIES AND FUND BALANCE 1990 $ 528,904 $ 528,904 $ 255,890 139,422 395,312 133,592 133,592 $ 528,904 72 / City of Federal Way REVENUES: 1990 CAPITAL PROJECT FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE Period Ended December 31, 1990 TOTAL REVENUES EXPENDITURES: Capital projects: General government TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Bond proceeds TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES: FUND BALANCE AT BEGINNING OF PERIOD FUND BALANCE AT END OF PERIOD 1990 1,572,304 1,572,304 (1,572,304) 1,705,896 1,705,896 133,592 $ 133,592 City of Federal Way / 75 TRUST AND AGENCY FUNDS COMBINING BALANCE SHEET December 31, 1990 Expendable Trust Fund Agency Funds Federal Way Fees and Retirement Deferred Taxes Clearing Performance System Compensation Fund Bonds Total ASSETS Cash and equivalents $ 94,124 $ - $ 92,624 $ 28,107 $ 214,855 Cash - deferred compensation - 127,873 127,873 TOTAL ASSETS $ 94,124 $ 127,873 $ 92,624 $ 28,107 $ 342,728 LIABILITIES AND FUND BALANCES Liabilities: Deferred compensation payable 127,873 127,873 Due to other governments 80,095 80,095 Custodial accounts 12,529 12,529 Deposits payable - 28,107 28,107 TOTAL LIABILITIES - 127,873 92,624 28,107 248,604 Fund Balances: Reserved for employee retirement 94,124 - - - 94,124 TOTAL FUND BALANCES 94,124 - - 94,124 TOTAL LIABILITIES AND FUND BALANCES $ 94,124 $ 127,873 $ 92,624 $ 28,107 $ 342,728 76 / City of Federal Way EXPENDABLE TRUST FUND FEDERAL WAY RETIREMENT SYSTEM BALANCE SHEET December 31, 1990 ASSETS 1990 Cash and equivalents $ 94,124 TOTAL ASSETS $ 94,124 LIABILITIES AND FUND BALANCE Liabilities: $ TOTAL LIABILITIES Fund balance: Reserved for employee retirement 94,124 TOTAL FUND BALANCE 94,124 TOTAL LIABILITIES AND FUND BALANCE $ 94,124 78 / City of Federal Way COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS December 31, 1990 MAI AMP= RAI AML`F DEFERRED COMPENSATION FUND ASSETS: Cash with ICMA $ $ 127,873 $ - $ 127,873 LIABILITIES: Deferred compensation payable $ - $ 127,873 $ - $ 127,873 FEES & TAXES CLEARING FUND ASSETS: Cash $ $ 107,394 $ 14,770 $ 92,624 LIABILITIES: Due to other governments $ $ 94,365 $ 14,270 $ 80,095 Custodial accounts 13,029 500 12,529 107,394 14,770 92,624 PERFORMANCE BONDS ASSETS: Cash $ $ 43,107 $ 15,000 $ 28,107 LIABILITIES: Customer deposits $ $ 43,107 $ 15,000 $ 28,107 TOTAL - ALL AGENCY FUNDS ASSETS: Cash Cash with ICMA TOTAL ASSETS LIABILITIES: Due to other governments Deferred compensation payable Custodial accounts Customer deposits TOTAL LIABILITIES $ $ 150,501 $ 29,770 $ 120,731 127,873 - 127,873 $ $ 278,374 $ 29,770 $ 248,604 $ $ 94,365 $ 14,270 $ 80,095 127,873 - 127,873 13,029 500 12,529 43,107 15,000 28,107 $ $ 278,374 $ 29,770 $ 248,604 City of Federal Way / 77 EXPENDABLE TRUST FUND FEDERAL WAY RETIREMENT SYSTEM STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Period Ended December 31, 1990 REVENUES: Miscellaneous: Member contributions Employer contributions Employee contributions Investment income TOTAL REVENUES EXPENDITURES: Employee contributions refunded TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): TOTAL OTHER FINANCING SOURCES (USES): EXCESS (DEFICIENCY/) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES: FUND BALANCES AT BEGINNING OF PERIOD FUND BALANCES AT END OF PERIOD 1990 $ 43,503 52,697 1,638 97,838 3,714 3,714 94,124 94,124 $ 94,124 City of Federal Way / 81 SCHEDULE OF GENERAL FIXED ASSETS BY SOURCE December 31, 1990 GENERAL FIXED ASSETS (A) Land Equipment Assets under capital lease - equipment 1990 $ 508,492 685,224 8,300 TOTAL GENERAL FIXED ASSETS $ 1,202,016 INVESTMENT IN GENERAL FIXED ASSETS FROM: Capital Projects Funds: General obligation bonds $ 1,097,467 General Fund: General revenues 92,271 Capital leases 8,300 Special Revenue Funds: General revenues 3,978 TOTAL INVESTMENT IN GENERAL FIXED ASSETS $ 1,202,016 (A) Excludes all public domain assets such as streets, sidewalks, gutters, bridges, drainage facilities and lighting systems. 82 / City of Federal Way FUNCTION/ACTIVITY SCHEDULE OF GENERAL FIXED ASSETS BY FUNCTION AND ACTIVITY(A) December 31, 1990 OTHER TOTAL LAND BUILDINGS IMPROVEMENTS EQUIPMENT GENERAL GOVERNMENT Judicial $ 1,466 $ - $ $ $ 1,466 Misc General Government 1,167,279 508,492 658,787 TOTAL GENERAL GOVERNMENT $ 1,168,745 $ 508,492 $ $ $ 660,253 CULTURE AND RECREATION 33,271 - 33,271 TOTAL GENERAL FIXED ASSETS BY FUNCTION $ 1,202,016 $ 508,492 $ $ $ 693,524 CONSTRUCTION IN PROGRESS $ - TOTAL GENERAL FIXED ASSETS $ 1,202,016 (A) Excludes all public domain assets such as streets, sidewalks, gutters, bridges, drainage facilities and lighting systems City of Federal Way / 83 SCHEDULE OF CHANGES IN GENERAL FIXED ASSETS BY FUNCTION AND ACTIVITY(A) For the Period Ended December 31, 1990 GENERAL GENERAL FIXED ASSETS FIXED ASSETS FUNCTION/ACTIVITY 2/28/90 ADDITIONS DEDUCTIONS 12/31/90 GENERAL GOVERNMENT Judicial $ $ 1,466 $ $ 1,466 Misc General Government 1,167,279 1,167,279 TOTAL GENERAL GOVERNMENT $ $ 1,168,745 $ $ 1,168,745 CULTURE AND RECREATION 33,271 33,271 TOTAL GENERAL FIXED ASSETS BY FUNCTION $ $ 1,202,016 $ $ 1,202,016 TOTAL GENERAL FIXED ASSETS $ $ 1,202,016 $ $ 1,202,016 (A) Excludes all public domain assets such as streets, sidewalks, gutters, bridges, drainage facilities and lighting systems. CITY fFC_-jV GENERAL GOVERNMENTAL EXPENDITURES AND OTHER USES BY FUNCTION (A) Table 1 GENERAL, SPECIAL REVENUE, AND DEBT SERVICE FUNDS HIGHWAYS CULTURE OTHER FISCAL TOTAL GENERAL PUBLIC PHYSICAL AND ECONOMIC AND DEBT FINANCING YEAR EXPENDITURES GOVERNMENT SAFETY ENVIRONMENT STREETS ENVIRONMENT HEALTH RECREATION SERVICE USES 1990 $9,533,308 $1,324,194 $3,836,555 $13,592 $1,637,605 $1,016,869 $321,673 $165,194 $39,378 $1,178,248 (A) All expenditures are reported on the modified accrual basis. General Government expenditures include capital leases of $8,300. NOTE: The City was incorporated on February 28, 1990. Therefore, no history of expenditures exists. n 0 cb m 00 V (A) (B) SCHEDULE OF MAJOR REVENUES AND OTHER FINANCING SOURCES BY SOURCE (A) Table 2 GENERAL, SPECIAL REVENUE, AND DEBT SERVICE FUNDS LICENSES INTER- CHARGES OTHER FISCAL TOTAL AND GOVERNMENTAL FOR FINES AND MISCELLANEOUS FINANCING YEAR REVENUE TAXES (B) PERMITS REVENUE SERVICES FORFEITURES REVENUE SOURCES 1990 $15,585,627 $9,143,158 $509i541 $3,315,261 $981,788 $117,136 $340,495 $1,178,248 Revenues'are recorded on the modified accrual basis. See Table 3 for further detail. 00 00 n 0 1b m m City of Federal Way / 89 FISCAL YEAR TAX REVENUE BY SOURCE GENERAL, SPECIAL REVENUE AND DEBT SERVICE FUNDS GENERAL BUSINESS AND PROPERTY GENERAL UTILITY OCCUPATION TOTAL TAXES TAXES SALES TAX TAXES TAXES 1990 $9,143,158 $3,490,242 $4,529,165 Table 3 MISCELLANEOUS OTHER TAXES AND ASSESSMENTS (A) (A) Includes real estate excise, local criminal justice, gambling excise, and other taxes and related assessments. $1,123,751 90ZCity o Federal Way 20 B(A # ««z � �LUC - 0 a� f kZk§2L � § P ML k ©0 2 � z 2 § _job. . 0LU / 3 �.2% Q Q � z ■ z 7 0 $ w �� e °/ k I Q f 3 § % o w f � 22§ , § 2 2 L � a LU a £ m U- j aoo § 4) Z 2 IL } J z E� �o ■ 7� LU§ 2 2° a �e \k k� { a � LU 2 | �� )§ .. eAft ■ ■ Cc U) � K to � r,� A 2 E City of Federal Way / 91 ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY* Table 5 ASSESSED AND ESTIMATED ACTUAL VALUE* PERCENT FISCAL PERSONAL STATE PUBLIC INCREASE YEAR REAL PROPERTY PROPERTY SERVICE PROPERTY TOTAL (DECREASE 1990 $2,928,672,425 $100,236,709 $72,783,925 $3,101,693,059 * Real, personal, and state public service properly has been assessed at 100% of the estimated value. NOTE: These figures includes all final tax adjustments, omits and senior citizen exempted property. This total assessed value was reduced by senior citizen exemptions (no tax amounts) of $8,165,008 yielding a regular levy value of $3,093,528,051. These assessed valuations are the basis for the following year's tax levy. Source: King County Assessor's Office. PROPERTY TAX LEVIES —ALL OVERLAPPING GOVERNMENTS FEDERAL WAY FISCAL CITY OF SCHOOL KING WASHINGTON GREEN RIVER PORT OF FIRE DISTRICT YEAR FEDERAL WAY DISTRICT #210 COUNTY1 STATE FLOOD ZONE SEATTLE #39 TAX RATES PER $1,000 OF ASSESSED VALUATION 1990 1.48 3.51 1.73 3.38 0.04 0.32 1.50 TAX LEVIES Table 6 LIBRARY TOTAL 0.49 12.45 1990 $4,298,526 $15,925,824 $227,501,671 $345,030,325 $410,769 $32,888,668 $6,654,058 $23,078,915 $655,788,756 Source: King County Assessor's Office and King County Department of Finance. NOTE: The above noted values reflect 'total" tax levy rates and levies for each jurisdiction. These are comprised of basic and public voted amounts, the levy rates for which are identified below: FEDERAL WAY CITY OF SCHOOL KING WASHINGTON GREEN RIVER PORT OF FIRE DISTRICT FEDERAL WAY DISTRICT #210 COUNTY, STATE FLOOD ZONE SEATTLE #39 LIBRARY Basic Rate 1.48 1.22 3.38 0.04 0.28 1.30 0.41 Voted Rate - 3.51 0.51 - 0.04 0.20 0.08 RATIO OF NET GENERAL BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA FISCAL ASSESSED GROSS YEAR POPULATION (A) VALUE (B) BONDED DEBT 1990 67,304 $3,093,528,051 $1,710,000 LESS DEBT NET SERVICE FUNDS BONDED DEBT RATIO OF NET BONDED DEBT TO ASSESSED VALUE $416,000 $1,294,000 0.0004 Table 7 NET BONDED DEBT PER CAPITA $19.23 (A) Sources: U.S. Census Bureau; State of Washington Office of Program Planning and Fiscal Management, Population Study Division; and the City's Community Development Department. (B) The final certified Regular Levy assessed value of taxable property which was used by the King County Assessor's Office for use in calculating levy rates for the following yea tax roll. COMPUTATION OF LIMITATION OF INDEBTEDNESS December 31, 1990 GENERAL DEBT CAPACITY EXCESS LEVY EXCESS LEVY (Limited) FINANCING (Unlimited) OPEN SPACE UTILITY DESCRIPTION COUNCILMANIC LEASES EXCESS LEVY AND PARK PURPOSES Statutory debt limit: (AV=$3,101,693,059) (A) .75% AV @ 100% $23,262,698 $23,262,698 ($46,525,396) 2.50% AV @ 100% 77,542,326 $77,542,326 S77,542,326 Add: Cash on hand for debt redemption (B) 416,000 Less: Bonds outstanding (1,710,000) Principal on equipment lease/purchase contracts (5,906) REMAINING DEBT CAPACITY $21,968,698 $23,256,792 $31,016,930 $77,542,326 $77,542,326 TOTAL REMAINING "GENERAL" CAPACITY $76,242,420 (A) This figure represents the City's final total taxable assessed valuation (AV) for 1990 which will be used to determine the 1991 properly tax levy. (B) Reflects year-end balances available in the Debt Service Fund. Table 8 TOTAL DEBT $232,626,978 416,000 (1,710,000) (5,906) $231,327,072 City of Federal Way / 95 COMPUTATION OF DIRECT AND OVERLAPPING DEBT Table 9 December31, 1990 GROSS GENERAL PERCENTAGE AMOUNT OBLIGATION DEBT APPLICABLE TO APPLICABLE TO JURISDICTION OUTSTANDING (A) FEDERAL WAY (B) FEDERAL WAY CITY OF FEDERAL WAY $ 1,710,000 100.00% $ 1,710,000 KING COUNTY 475,070,000 3,03% 14,394,621 PORT OF SEATTLE 24,800,000 3.03% 751,440 SCHOOL DISTRICT #210 43,828,000 67.70% 29,671,556 GREEN RIVER FLOOD ZONE 0.94% FIRE DISTRICT #39 3,160,000 69.88% 2,208,208 LIBRARY 34,355,000 7.32% 2,514,786 TOTAL DIRECT AND OVERLAPPING DEBT $ 51,250,611 (A) Total general obligation bonds outstanding on December 31, 1990, exclusive of refunded bonds. Source is Fling County Department of Finance. (B) Determined by ratio of 1990 assessed valuation of property subject to taxation in overlapping unit to valuation of property subject to taxation in reporting unit. 96 / City of Federal Way FISCAL PER CAPITA YEAR POPULATION INCOME (A) 1990 67,304 $ 23,708 DEMOGRAPHIC STATISTICS Table 10 EDUCATION LEVEL IN YEARS MEDIAN OFFORMAL SCHOOL UNEMPLOYMENT AGE SCHOOLING ENROLLMENT (B) RATE (C) 29 13.0 18,167 3.4% (A) Per Capita Income values reflect those for King County, as City information is not available. (B) Includes both public and private school enrollment. Kindergarten is included though not State mandated. (C) Unemployment rates reflect the annual average for King County. Sources: Population data was obtained from the State Office of Financial Management. School data was provided by the Federal Way School District. Per Capita Income was obtained from the Puget Sound Council of Governments. Unemployment rate data was received from the State of Washington Employment Security Department PROPERTY VALUE, CONSTRUCTION AND BANK DEPOSITS Table 11 Commercial Construction (A) Residential Construction (A) Residential Construction (A) Bank Deposits (B) Property Assessed Valuation (C) New Value New Value New Value King County Total Taxable Exemptions Non -Taxable Year Units (In Thousands) Units (In Thousands) Units (In Thousands) (In Thousands) (In Thousands) (In Thousands) (In Thousands) 1990 104 $ 7,564 247 $ 39,989 161 $ 3,500 $ 19,300 $ 3,101,693 $ 16,985 $ 8,165 (A) Source: Federal Way Community Development Department. Commercial construction includes alterations. (B) Source: Federal Reserve Bank of San Francisco. (C) Source: King County Assessor's Office. See Table 5 for further assessed value information. 98 / City of Federal Way PRINCIPAL TAXPAYERS Table 12 December31, 1990 Percentage 1990 Of Total Assessed Assessed Taxpayer Type of Business Valuation Valuation (A) Sea Tac Mall Associates Shopping Center $ 44,022,843 1.42% U.S. West Communications/Telephone 35,604,774 1.15% Weyerhaeuser Real Estate Co. Real Estate 34,570,385 1.11 % Puget Power and Light Power Utility 29,124,573 0.94% Cushman & Wakefield Real Estate Management 18,570,300 0.60% Quadrant Corporation Real Estate Management 12,125,691 0.39% Flanagan-Bal/Century Square Center Shopping Center 12,069,760 0.39% Inter Co-op USA/Manpower Temporary Services 10,458,000 0.34% Virginia Mason Clinic Medical Services 9,903,054 0.32% Costco Food/Merchandise 8,759,159 0.28% $ 215,208,539 6.94% (A) 1990 assessed valuations for taxes collected in 1991. Total 1990 assessed valuation for the City is $3,101,693,059. Source: King County Assessor. SCHEDULE OF INSURANCE IN FORCE December 31, 1990 NAME OF COMPANY POLICY NUMBER POLICY PERIOD DETAILS OF COVERAGE LIABILITY LIMITS Washington Governmental WPO39904614000047 2/23/90 Public Officials Per claim - $5,000,000 Entity Pool to Liability Coverage In aggregate - $5,000,000 2/23/91 Deductible - $2,500 The Fidelity and Deposit 30269606 4/16/90 Public Official Bond Coverage Limit - $250,000 Company of Maryland to Finance Director 1/1/91 The Fidelity and Deposit 30269607 4/16/90 Public Official Bond Coverage Limit - $250,000 Company of Maryland to City Manager 1/1/91 Washington Governmental WP041904614000047 2/23/90 Municipal General Per claim - $5,000,000 Entity Pool to Liability Coverage Deductible - $250 2/23/91 Washington Governmental WP026904614000047 2/23/90 Municipal Property Buildings - $570,000 Entity Pool to Coverage Building contents - $83,000 2/23/91 Extra expense - $90,000 The Fidelity and Deposit 30268610 & 9/28/89 Public Employee Company of Maryland 30269608 to Dishonesty Coverage 1/1/91 (Council Included) Washington Governmental WP0269046640000 8/1/90 Auto Liability Entity Pool to 2/28/91 Misc property - $3,250 Valuable papers - $25,000 Deductible on each - $250 Coverage Limit - $1,000,000 Deductible - $ 2,500 Table 13 ANNUAL PREMIUM $ 4,688 $ 699 $ 890 $ 12,453 $ 1,771 $ 1,616 Per claim - $5,000,000 $ 1,587 Physical damage deductible - $250 Comprehensive deductible - $250 $ 23,704 9 100 / City of Federal Way SALARIES AND SURETY BONDS OF PRINCIPAL OFFICIALS December 31, 1990 POSITION MAYOR COUNCILMEMBERS POSITION CITY MANAGER ASSISTANT CITY MANAGER/ PERSONNEL DIRECTOR ASSISTANT CITY MANAGER/ COMMUNITY DEVELOPMENT DIRECTOR CITY ATTORNEY CITY CLERK FINANCE DIRECTOR PARKS, RECREATION & HUMAN SERVICES DIRECTOR PUBLIC WORKS DIRECTOR LEGISLATIVE BODY EMPLOYEE DEBRA ERTEL MAf1Y CATES JIM HANDMACHER JOEL MARKS BOB STEAD LYNN TEMPLETON JIM WEBSTER ADMINISTRATIVE STAFF EMPLOYEE J. BRENT MC FALL STEVE ANDERSON KEN NYBERG SANDRA DRISCOLL MAUREEN SWANEY JOHN MOIR VACANT VACANT Table 14 ANNUAL SALARY $ 6,000 $ 4,800 $ 4,800 $ 4,800 $ 4,800 $ 4,800 $ 4,800 ANNUAL SALARY $ 84,000 $ 59,856 - 73,008 $ 59,856 - 73,008 $ 59,856 - 73,008 $ 44,664 - 54,420 $ 54,288 - 66,144 $ 54,288 - 66,144 $ 54,288 - 66,144 NOTE: In accordance with State of Washington legal statutes, individual fidelity coverage of not less than $100,000 exists for both the City Manager and Finance Director. City of Federal Way / 101 MISCELLANEOUS STATISTICAL DATA December 31, 1990 TYPE OF GOVERNMENT Council - City Manager ORGANIZATION STRUCTURE LeQi sl ative Executive Mayor 1 City Manager 6 Councilmembers 2 Assistant City Managers CORPORATE INFORMATION Administrative 5 Organization Directors/City Officials Table 15 The City of Federal Way is a noncharter optional code City. It was incorporated as an optional code city on February 28, 1990, and will be governed under the provisions of the Optional Municipal Code of the Revised Code of Washington. Optional Code City status increases the City's operating authority by extending to it the powers of all four city classifications which exist in Washington law. LOCATION AND AREA Federal Way, the sixth largest city in the State of Washington, encompasses an area of 19.0 square miles. It is located in south King County approximately 25 miles south of downtown Seattle and 8 miles north of downtown Tacoma. The community is residential and commercial, with the populace employed locally and in neighboring cities such as SeaTac, Kent, Tacoma, Bellevue, Seattle. The city has approximately 24,200 housing units. It is 6 miles from the Port of Tacoma and 9 miles south of SeaTac International Airport. The city is served by Interstate 5 and state highways 99 and 509. Frequent Metro public bus service is available to both Seattle and Tacoma throughout Federal Way. Three express park -and -ride lots are provided. POPULATION, REGISTERED VOTERS AND EMPLOYMENT WITHIN CITY LIMITS The population of Federal Way is presently 67,304, of which 24,181 are registered voters. A total of 14,738 (est.) people are employed within the City limits. NUMBER OF CITY EMPLOYEES December 31, 1990, the City employed 47 full time salaried and 3 part-time hourly employees. There were no commissioned police officers or uniformed firefighters. No unions represented City employees during 1990. (continued on next page) 102 / City of Federal Way MISCELLANEOUS STATISTICAL DATA December 31, 1990 (continued) RECREATIONAL FACILITIES 13 Developed park sites covering 217 acres. 3 Undeveloped park sites covering 233 acres. 18 Public courts, two which are owned by the City. 1 Recreation facility. 2 Public swimming pools, both which are owned by King County. OTHER CITY -OWNED FACILITIES 1 Park maintenance facility. 1 5 acre undeveloped site. PUBLIC EDUCATION 19 Elementary schools with enrollment of ................... 10,528 5 Middle schools with enrollment of ...................... 3,951 3 High schools with enrollment of 3,371 3 Alternative schools with enrollment of .... , .............. _ 317 TOTAL ENROLLMENT .... . ...................... 18,167 933 Certified teachers. 60 Certified administrative staff. 829 Full-time college faculty and administrative staff classified employees. 15 Part-time college faculty and administrative staff classified administrators. MILES OF STREETS, ETC. Streets (approximate) ............................ 250 miles SIGNALS/STREET LIGHTS Traffic signals maintained by Department of Transportation 22 Traffic signals maintained by King County ................... 23 Street lights owned by City of Federal Way .................. 128 Street lights owned by Puget Power ....................... 653 (continued on next page) City of Federal Way / 103 MISCELLANEOUS STATISTICAL DATA December 31, 1990 (continued) LOCAL TAXES ON BUSINESS Franchise Tax - Cable TV ......... _ . ............... 5.00 % Gambling.......... .................... ... 10.00 % Local Sales Tax ................................. 1.00 % (Collected by the Spate) POLICE INFORMATION Offenses: Citations: 1990 Rape.......................................... 72 Robbery ........................................ 99 Homicide........................................4 Assault ...................................... ... 134 Auto Theft ......................... ........496 Burglary ............. ......---.............905 Larceny ...................................... 3,383 Traffic . . . .............................. ..... . 7,849 Judicial System: Handled by District Court .......................... 5,681 Jail Facility: King County Jail used at $36.68 per day per person, plus $71.59 booking fee per person. FIRE AND MEDIC 1 INFORMATION 1990 Fire Responses: .................... ..... . ....... 1,757 Medic I Responses: ................ . , ............. 4,441 (Fire and Medic I information reflects the greater Federal Way area, which is served by Fire District #39.) (continued on next page) 104 / City of Federal Way MISCELLANEOUS STATISTICAL DATA December 31, 1990 (continued) BUILDING RELATED PERMITS AND VALUES 1990 Building permits ....... . . . . ........................ 512 Estimated Value (In Million $) ....................... . . 51.1 Total Building Related Permits 1,746 Estimated Value (In Million $) ............ I ...... I ... $55,889 TAXABLE RETAIL SALES 1990 Retail Sales (In Million $) ........................... 538.8