2010 Annual Comprehensive Financial Report (10-001)CITY OF FEDERAL WAY,
WASHINGTON
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED DECEMBER 31, 2010
Prepared by
Finance Department
City of Federal Way History -
The earliest recorded accounts of the Federal Way area tell of Native American families who resided in the area of the
Muckleshoot Reservation on the east side of the Green River Valley and traveled west to the shores of Puget Sound for the
plentiful fisheries resources. Generations of Muckleshoot Indians wore a westward trail across the heavily forested plateau to the
area which is now Saltwater State Park. The arrival of the white man in the nineteenth century resulted in a steady decline in the
Indian population and by 1890, nearly the entire population had disappeared from the area. Isolated on a triangular shaped plateau
rising steeply from Puget Sound, the Federal Way area had little waterfront access or roadways and accordingly, was sparingly
developed compared to Tacoma and Seattle. As late as the turn of the century, the original settlers at Dash Point and Dumas Bay
had to row to Tacoma for supplies and mail. Old Military Road, constructed around 1856 and extending north from Fort
Steilacoom, past Star Lake to Seattle and Fort Lawton, was the first road through the area.
Over time, narrow dirt roads were added to provide east/west access and by 1900, a road was constructed between Star Lake and
Redondo. The second crossroad, the "Seattle Road," connected old Military Road and Kent. The Seattle -Tacoma Interurban Line,
completed in 1901, provided a fast and easy way to reach these urban cities. Improved access brought many visitors to the area
and Star Lake became a popular summer recreation site.
By the 1920s, Federal Highway 99, the interstate that linked the western states from north to south, was complete. At this time,
Federal Way was still primarily forest and farmland. Fred Hoyt had a cabin on Dumas Bay and started a road to Tacoma (still
called Hoyt Road). The timber companies, which had a major logging operation going, built an early railroad line and were
instrumental in getting Marine View Highway (now Dash Point Road) built in the early 1920s. This roadway spurred
development along the coastline. Soon thereafter, Peasley Canyon Road was built to connect Military Road with the Auburn
Valley. This road later became known as South 320th Street. In these early days, roadways set the stage for development in the
area and they still play an important role in the City today.
By the start of World War II, a number of small, thriving communities made up the area that is now Federal Way. Some
communities were clustered around lakes, such as Steel Lake, Star Lake, and Lake Geneva. Others were sited to take advantage of
the view of Puget Sound, like Adelaide and Buenna. As each of these communities grew, residents built small schoolhouses for
their children. By the late 1940s, King County consolidated the many individual red schoolhouses into the Federal Way School
District, from which the City gets its name. During this same period, a library was built along the edge of Highway 99, and
between 308`" Street and 320th Street, a small "downtown" developed with a general store, lumber yard, realty office, beauty
parlor, feed store, and gas station. By the end of the 1950s, the ten blocks between 308th and 320th Streets became the first
roadside commercial district. One of the more unique developments was Santa Faire, a family oriented theme park. New shopping
areas were added around the park, helping to create a "community focus" for the residents of the area.
As this commercial area developed, the rest of Federal Way was changing as well. The Boeing Company expanded their
operations in Renton and the Kent Valley and began advertising nationally for engineers. Those engineers in turn began roaming
the wooded acreage in Federal Way in search of housing. One of the earliest residential developments was Marine Hills, built in
1958 overlooking Puget Sound. Weyerhaeuser, one of the early timber companies, had large land holdings in the area and began
to develop their land into high quality housing with amenities like golf courses.
Weyerhaeuser's development company also began developing commercial property, creating the West Campus business park.
The plan was to integrate offices and businesses with lush landscaping. Though initially the corporate office market was not
strong, West Campus has grown almost to capacity, providing space for many civic buildings such as City Hall, the police station,
the area's major health care centers, and higher density housing.
Another major landmark in the area is SeaTac Mall (now The Commons), built in the mid-1970s on what was farmland south of
320th Street. The Mall is one of the largest in South King County and is the anchor for retail development in the area. The Mall
was a result of population growth in the region and its location was determined by the 320th Street intersection with Interstate 5.
The Interstate supplanted Highway 99 as the main artery for commuter traffic in the County.
By the mid 1980s, South King County was growing quickly. Retail growth occurred along Highway 99, especially at the 320th
Street intersection. Roads and office space were developed to accommodate the increased growth. Residential growth was also
prominent, following plans developed by King County, with a large number of apartment homes. The changes to the community,
with increased housing and traffic, created a movement for greater self-determination. In 1989, the citizens of this area voted for
incorporation and the City of Federal Way was born, incorporating on February 28, 1990.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
For the Year Ended December 31, 2010
Table of Contents
INTRODUCTORY SECTION
Page
Letterof Transmittal................................................................................................................................... iii
City Officials and Administrative Officers............................................................................................... 1
City Functional Organization Chart ............................................................................................................ 2
GFOA Certificate of Achievement............................................................................................................. 3
FINANCIAL SECTION
IndependentAuditor's Report ....................................................................................................................
Management's Discussion and Analysis.....................................................................................................
Basic Financial Statements:
Government -wide Financial Statements:
Statementof Net Assets.......................................................................................................... 18
Statementof Activities.......................................................................................................... 19
Fund Financial Statements:
Balance Sheet — Governmental Funds....................................................................................
20
Statement of Revenues, Expenditures, and Changes in Fund Balances —
GovernmentalFunds.........................................................................................................
22
Reconciliation of the Statement of Revenues, Expenditures, and Change
In Fund Balances of Governmental Funds to the Statement of Activities .......................
24
Statement of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual
GeneralFund...................................................................................................................
25
StreetFund......................................................................................................................
26
UtilityTax Fund..............................................................................................................
27
Statement of Net Assets — Proprietary Funds...................................................................................
28
Statement of Revenues, Expenses and Changes in Fund Net Assets — Proprietary Funds .....
29
Statement of Cash Flows — Proprietary Funds........................................................................
30
Notes to the Financial Statements.................................................................................................... 31
Combining and Individual Fund Statements and Schedules — Nonmajor Governmental Funds:
FundDescription............................................................................................................................. 61
CombiningBalance Sheet............................................................................................................... 63
Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........................ 67
Statement of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual
ArterialStreet Fund......................................................................................................... 71
Solid Waste & Recycling Fund....................................................................................... 72
Hotel/Motel Lodging Tax Fund....................................................................................... 73
Federal Way Community Center Fund............................................................................ 74
TrafficSafety Fund.......................................................................................................... 75
Paths& Trails Fund......................................................................................................... 76
Individual Fund Statements and Schedules — Debt Service Fund:
FundDescription............................................................................................................................. 77
BalanceSheet.................................................................................................................................. 79
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ............ 80
Combining and Individual Fund Statements and Schedules — Internal Service Funds:
FundDescription.............................................................................................................................. 81
Combining Statement of Net Assets................................................................................................. 82
Combining Statement of Revenues, Expenditures and Changes in Fund Net Assets ...................... 83
Combining Statement of Cash Flows............................................................................................... 84
Capital Assets Used in the Operation of Governmental Funds:
Comparative Schedules by Source................................................................................................... 88
Schedule by Function and Activity.................................................................................................. 89
Schedule of Changes by Function and Activity.............................................................................. 90
STATISTICAL SECTION
NetAssets by Component.....................................................................................................................
93
Changesin Net Assets...........................................................................................................................
94
Government -wide Revenues by Source and Expenditures by Function ................................................
95
Fund Balances, Governmental Funds....................................................................................................
96
Changes in Fund Balances, Governmental Funds.................................................................................
97
TaxableSales by Category.....................................................................................................................
98
Assessed and Estimated Actual Value of Taxable Property..................................................................
99
Property Rates and Levies, Direct and Overlapping Governments........................................................
100
PrincipalTaxpayers...............................................................................................................................
101
Property Tax Levies and Collections.....................................................................................................
102
Ratio of Outstanding Debt by Type.......................................................................................................
102
Ratio of General Obligation Bonded Debt to Assessed Value and
Net General Obligation Bonded Debt Per Capita.............................................................
104
Computation of Direct and Overlapping Debt.......................................................................................
105
Computation of Limitation of Indebtedness..........................................................................................
106
Ratio of Annual Debt Service Expenditures for General Obligation Bonded Debt to
Total General Governmental Expenditures Net of Debt Service Expense ........................
107
DemographicStatistics..........................................................................................................................
108
PrincipalEmployers..............................................................................................................................
109
Property Value, Construction and Bank Deposits.................................................................................
110
CapitalAssets by Function....................................................................................................................
I I I
Operating Indicators by Function..........................................................................................................
112
City Government Employees Full -Time Equivalent - History...............................................................
113
Salaries & Surety Bonds of Principal Officials.....................................................................................
114
Miscellaneous Statistical Information...................................................................................................
115
ii
40k
OF
Federal Way
June 29, 2011
People of the City of Federal Way
Honorable Mayor and City Council
THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
OF THE
CITY OF FEDERAL WAY
The Comprehensive Annual Financial Report (CAFR) of the City of Federal Way for the year ended December 31,
2010 is hereby submitted. 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 present fairly the financial position and
results of operations of the various funds of the City. All disclosures necessary to enable the reader to gain an
understanding of the City's financial activities have been included.
FINANCIAL REPORTING STANDARDS AND FORMAT
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 and a list of officials. The financial
section includes the basic financial statements, and the combining statements of nonmajor funds, internal service funds,
and schedules of capital assets of governmental funds, as well as the State Auditor's report on the basic financial
statements. The statistical section includes selected financial and demographic information, generally presented on a
multi -year basis.
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, divider pages have been used to separate the various components of
the financial section. Generally Accepted Accounting Principles (GAAP) require that management provide narrative
introduction, overview, and analysis to accompany the basic financial statements in the form of MD&A. This
transmittal letter is designed to compliment the MD&A and should be read in conjunction with it. The City's MD&A
can be found immediately following the Independent Auditor's Report.
REPORTING ENTITY
The City is a noncharter Optional Code City with a Mayor -Council form of government. It was incorporated on
February 28, 1990, and is 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 it to the powers of all four
city classifications which exist in Washington Law.
The City Council consists of seven council members, all of whom are elected at large by citizens of Federal Way to
serve four-year terms. In November 2009, the citizens of Federal Way approved Proposition 1 to change the form of
government from a City Manager -Council run government to an elected Mayor -Council government. Federal Way
voters elected former state representative Skip Priest as mayor on November 2, 2010.
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City services provided include: police protection, construction and maintenance of streets, building inspection,
municipal court services, jail services, planning and zoning, park services, emergency management services, surface
water management and general administration, including finance. Services for a land use hearing examiner are
contracted. The City continues to have nine major departments consisting of the Mayor's Office; Law; Finance; Human
Resources; Information Technology; Municipal Court, Parks & Public Works; Police; and Community Development.
Parks and Public Works became one department in mid 2009. Fire protection and emergency medical services are
provided by South King Fire & Rescue. The Lakehaven Utility District delivers water and sewer services. Metro
provides public transportation services. Public housing services are the primary focus of the King County Housing
Authority. The King County Library System engages City residents through its library and reference services. School
District No. 210 offers educational programs for kindergarten through high school students, in addition to vocational
training.
ECONOMIC FACTORS AFFECTING FINANCIAL CONDITION
The Great Recession that began in December 2007 is the most serious national economic downturn since the 1930s.
During the second quarter of 2007, $16 trillion in household wealth was lost due to the near -collapse of the financial
markets along with burst of the housing bubble. Although the National Bureau of Economic Research noted that the
recession had ended in June of 2009, the economic recovery has been extremely slow.
Nationally, the U.S. Bureau of Economic Analysis (BEA) reports that the economy is even weather than previously
thought. BEA had revised the estimate of inflation adjusted Gross Domestic Product (GDP) growth for the first quarter
of the year from 2.6% to 1.7%. The rate of growth is not high enough to create enough jobs to keep up with the
population growth, let along absorb the millions unemployed.
Unemployment in the Puget Sound region has been hit harder during this recession compared to the last recession.
Unemployment remains at approximately 8% down from the peak of 9%. During the 2001 recession, it took six years
to return to the same number of jobs that had existed before the recession began. The Puget Sound region was most
affected by the 2001 recession which was a combined effort of the "dot.com" collapse and the 9/11 terror attacks on
commercial airplane industry both of which are prominent for the Pacific Northwest. Many of the jobs eliminated in the
Great Recession will not likely come back, at least not anytime soon. This is especially true of jobs lost in
manufacturing, financial services, and construction.
A key difference between the Great Recession of 2007 and the previous recessions is the sharp decline in the housing
market. Housing development and prices grew steadily through the 2000s, fed by low interest rates and the widespread
availability of mortgages to marginally -qualified buyers. Homes in King County tripled its value between 1994 and
2006. However, by 2009 home prices has fallen an average of 40% and leaving homeowners with mortgages owing
more than their homes are worth. Even with the lower prices of homes along with excess inventory, buyers are hesitant
to purchase until the economy improves.
ECONOMIC TRENDS
Federal Way is the eighth largest city, tied with City of Kent, in Washington State with a population of 88,760 as of
April 1, 2010. The City is located on a plateau adjacent to Puget Sound in King County, eight miles north of downtown
Tacoma and 25 miles south of downtown Seattle. The City occupies approximately 22.5 square miles and is served by
Interstate 5 and state highways 99 and 509.
In 2010 there were 35,357 housing units in Federal Way, an increase of approximately less than 1% over 2009. Of
these units, 56% were single family homes, 40% multi -family units, and 4% mobile homes and trailers.
The community is residential and commercial, with the populace employed locally and in the neighboring cities such as
SeaTac, Kent, Tacoma, Bellevue, and Seattle. Employment in Federal Way is highly concentrated in retail and services
sectors which respond primarily to the needs of the local market area population. The employment figure for 2010 is
estimated at 28,810. Major employers are; Federal Way Public Schools, Weyerhaeuser, St. Francis Community
Hospital, World Vision, Lifebridge Incorporated, and Wild Waves Theme Park.
iv
Sales tax collected in 2010 total $10.7 million, and is above 2009 by $126 thousand. The retail sector of the local
economy is anchored by two areas; the first is South 348`" and Pacific Highway 99 including Wal-Mart Super Center,
Wholesale Sports, Costco, Lowe's Home Improvement Center, and Home Depot. The second is The Commons
regional mall including Target, TJ Max, Best Buy, and many other small businesses adjacent to the area. According to
a listing of businesses registered with the City of Federal Way and sorted by the Standard Industrial Classification, the
business economy appears to be configured as follows: retail trade 53%; services 23%; construction 8%; wholesale
trade 4%; information 6%, manufacturing 1%, and other 5%.
In 2010, new improvements to real estate totaled $59.3 million or approximately 0.1% of the City's 2010 assessed
valuation. The total assessed value of taxable property in Federal Way was $8.3 billion, which is approximately 4.1%
lower than the 2009 assessed valuation of $8.6 billion. Real Estate sales decreased 12% to approximately $238 million
in 2010 as compared to $271 million in 2009. A total of 545 building permits and 2,423 other building related permits
were issued in 2010. Estimated valuation was $53.4 million and $5.9 million respectively. Significant building permits
include: Discount Tire, Chase Bank, Crossing West Self Storage Buildings A-C, Federal Way Public Schools Service
Center Facilities & Maintenance Buildings, Cottages West Senior Housing Duplex & Quadplex, Our Savior's Baptist
Church addition, and St. Luke's Lutheran Church Addition.
LONG-TERM PLANNING
The City's fiscal policy requires the City to prepare long-range projections for six years beyond the current budget
period. The projection extends current operations to the future to see if the services are sustainable and the magnitude
of, if any, future financing gaps. This glimpse into the future allows the City to proactively plan and implement
corrective measures over time to avoid sudden drastic changes in service levels or in revenue/tax policies. In addition,
the City's fiscal policy requires the City to balance its ongoing services with ongoing revenues.
MAJOR INITIATIVES AND ACCOMPLISHMENTS
The City took a move from the county's animal services model upon hearing that the price to contract with King County
Animal Care and Control was expected to increase while services were expected to decrease. The Animal Services Unit
was created within the Police Department in July of 2010. The city -operated unit is more affordable and reliable and
can provide a higher service level than what was offered with the county. Sheltering is offered through The Humane
Society for Tacoma and Pierce County.
The City also contributed $100 thousand in a business incubator which is designed to assist start-ups and companies
looking to expand. The South Sound Regional Business Incubator (SSRBI) is a step toward revitalizing Federal Way's
business sector. The incubator offers business owners resources and services to launch their business and keep it going.
Another major development is the "Triangle" interchange groundbreaking which is the long-awaited road improvements
to Federal Way's Triangle Project. The Triangle project is the interchange in southern Federal Way where Highway
161, Highway 18, and Interstate 5 meet. The interchange has long held a reputation of being dangerous and hair-raising
for drivers. Federal Way and King County officials have worked to fund the project for more than a decade.
The former downtown Toys "R" Us property located at 31510 20'h Avenue South was purchased by the City for $5.375
million. The City was able to secure a $5 million state grant to use toward the purchase of the land. By accepting the
grant, the City has agreed to build a civic center on the former Toys "R" Us property by December 31, 2020. To fund
the remainder of the purchase, the City plans to apply $437 thousand from a previous state grant toward the purchase
and the balance will come out of the Downtown Redevelopment capital improvement projects fund.
Like many other cities, Federal Way has seen the number of abandoned and foreclosed homes increase in the past
couple of years. At one point, the City had 600 homes in foreclosure or bank owned at one point. In light of the
situation, the City applied for the Neighborhood Stabilization Program (NSP) which is funded by stimulus money. The
City was allocated $651,688 at the end of 2009 and used the money in conjunction with the Washington State Housing
Finance Commission (WSHFC) launched House Key Federal Way, a down payment assistance program. The House
Key Federal Way loan is a 0 percent interest, deferred payment second mortgage that must be used in conjunction with
the WSHFC's House Key First mortgage program. Applicants may qualify for up to $50 thousand and the money can
V
be used for a down payment and closing costs on foreclosed, bank -owned, 90-plus days delinquent or abandoned single
family residences, including condominiums in Federal Way. As of the program's conclusion in September 2010, 11
homes had been purchased and another 20 homebuyers were in negotiations to purchase Federal Way foreclosures.
In November of 2009, Federal Way residents voted for a change in the form of government from City Manager -Council
to Mayor -Council. In November of 2010, Mayor Skip Priest became the first elected mayor.
OUTLOOK FOR THE FUTURE
Council identified the following set of goals for the City which was adopted on March 7, 2006.
1. Integrate the public safety strategy in all facets of City operations, building on a strong community -based
approach.
2. Create a multi -use urban city center that is pedestrian friendly, linked to neighborhoods and parks, and services
as the social and economic hub of the City.
3. Establish Federal Way as an economic leader and job center in South King County by attracting regional
market for high quality office and retail businesses.
4. Maintain the capital facilities plan and provide financing options for transportation and surface water
improvements, parks, recreation, and cultural arts and public facilities.
5. Ensure a responsive service culture within the City organization where employees listen carefully, treat citizens
and each other respectfully and solve programs creatively, efficiently, and proactively.
6. Position Federal Way as a regional leader by working collaboratively with other local and regional
jurisdictions in order to leverage resources.
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 statements in conformity with generally accepted accounting
principles. The internal control structure is designed to provide reasonable, but not absolute, 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 relative costs and benefits of the control system requires estimates
and judgments by management.
Budgetary Control
The City maintains budgetary controls in accordance with the Revised Code of Washington (RCW 35A.33). The
objectives of these budgetary controls are to ensure compliance with legal provisions embodied in the annual
appropriated budget approved by the City Council. Activities of the General Fund, some Special Revenue Funds, and
Debt Service Fund are included in the annual appropriated budget. The level of budgetary control at which
expenditures cannot legally exceed the appropriated amount is established at the individual fund level. The project -
length based Special Revenue Funds, and the Capital Projects, Enterprise and Internal Service funds are management
budgets only and therefore these budgets are not represented in the CA-FR. The City also maintains an encumbrance
accounting system as one technique of accomplishing budgetary control. All appropriations lapse at year-end.
Vi
Basis of Accounting
All governmental funds are accounted for using the modified accrual basis of accounting. Under the modified accrual
basis, revenues are recorded when received in cash, except for revenues susceptible to accrual. Revenues considered
susceptible to accrual are those that are measurable and available to finance the government operation during the current
period. Expenditures, other than accrued interest on general long-term debt, are recorded at the time liabilities are
incurred.
All proprietary funds use the accrual basis of accounting. Under the accrual basis, revenues are recorded when they are
earned and expenses are recorded as soon as they result in liabilities for benefits received.
Independent Audit
State law requires an annual audit of all City books of account, financial records, and transactions by the State Auditor,
an independently elected state official. In addition to meeting the requirements set forth under state law, the audit was
also designed to meet the requirements of the federal Single Audit Act of 1984 and related OMB Circular A-133. The
2010 audit of the City has been completed in conformance with generally accepted auditing standards. The financial
statements of all City funds have been included in this audit. The City has been given an unqualified opinion for 2010;
which is the 17t' consecutive year receiving a clean audit. The State Auditor's report on the basic financial statements is
included in the financial section of this report.
AWARDS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of
Achievement for Excellence in Financial Reporting to the City of Federal Way for its comprehensive annual financial
report (CAFR) for the year ended December 31, 2009. The City of Federal Way has received a Certificate of
Achievement for the last twenty years (fiscal years ended 1990 — 2009). In order to be awarded a Certificate of
Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial
report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual
financial report continues to meet Certificate of Achievement Program's requirements, and we are submitting it to the
GFOA to determine its eligibility for another certificate.
The City of Federal Way also received the Government Finance Officers Association Distinguished Budget
Presentation Award for its biennial budget for the years beginning January 1, 2009 and 2010. In order to receive this
award, a governmental unit must publish a budget document that meets program criteria as a policy document, a
financial plan, an operations guide, and a communications medium.
ACKNOWLEDGEMENTS
The preparation of this report would not have been possible without the efficient and dedicated services of the entire
staff of the finance division, in particular Phung Huynh (Financial Analyst II), Chase Donnelly (Financial Analyst I) and
Heidi Horton (Accounting Supervisor). In addition, staff in all City departments should be recognized for responding so
positively to the requests for detailed information which accompany each audit. The role of the State Auditor's Office
should also be acknowledged as a significant contribution to a fine product. Finally, we wish to express our
appreciation to the Mayor and City Council for their ongoing support and for providing the firm foundation for the
pursuit of excellence in all realms of professional endeavors.
Respectfully submitted,
OV9)gkLa�
Tho Kraus
Finance Director
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CITY OF
Federal Way
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SKIP PRIEST
Mayor
(11/24/2010 — Present)
CITY OFFICIALS
JIM FERREL LINDA KOCHMAR MIKE PARK
Councilmember Councilmember Councilmember
(Mayor 1/1/2010—11/23/2010)
JEANNE BURBIDGE JACK DOVEY ROGER FREEMAN DINI DUCLOS
Councilmember Councilmember Councilmember Councilmember
OTHER ADMINISTRATIVE OFFICERS
CityAttorney......................................................................................................................................... Patricia Richardson
Community Development Director........................................................................................................................... Vacant
Economic Development Director................................................................................................................ Patrick Doherty
FinanceDirector...................................................................................................................................................Tho Kraus
Financial Services Administrator......................................................................................................................Bryant Enge
Human Resources Director....................................................................................................................................... Vacant
Parks and Public Works Director..................................................................................................................... Cary M. Roe
Police Chief/City Manager (5/5/2009-11/23/2010) and Police Chief (11/24/20 1 0-present) .......................Brian J. Wilson
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Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Federal Way
Washington
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
December 31, 2009
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
President
Executive Director
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CITY OF
Federal Way
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Washington State Auditor
Brian Sonntag
INDEPENDENT AUDITOR'S REPORT
June 29, 2011
Mayor and City Council
City of Federal Way
Federal Way, Washington
We have audited the accompanying financial statements of the governmental activities, the
business -type activities, each major fund and the aggregate remaining fund information of the
City of Federal Way, King County, Washington, as of and for the year ended December 31,
2010, which collectively comprise the City's basic financial statements as listed in the table of
contents. These financial statements are the responsibility of the City's management. Our
responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. 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 opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business -type activities, each
major fund and the aggregate remaining fund information of the City of Federal Way, King
County, Washington, as of December 31, 2010, and the respective changes in financial position
and, where applicable, cash flows thereof, and the respective budgetary comparison for the
General, Street and Utility Tax funds for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we will also issue our report dated
June 29, 2011, on our consideration of the City's internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements and other matters. That report will be issued under separate cover in the City's
Single Audit Report. The purpose of that report is to describe the scope of our testing of internal
control over financial reporting and compliance and the results of that testing, and not to provide
an opinion on the internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.
Insurance Building, P.O. Box 40021 • Olympia, Washington 98504-0021 • (360) 902-0370 • TDD Relay (800) 833-6388
FAX (360) 753-0646 • http://www.sao.wa.gov
The management's discussion and analysis on pages 7 through 16 not a required part of the
basic financial statements but are supplementary information required by the Governmental
Accounting Standards Board. We have applied certain limited procedures, which consisted
principally of inquiries of management regarding the methods of measurement and presentation
of the required supplementary information. However, we did not audit the information and
express no opinion on it.
Our audit was performed for the purpose of forming opinions on the financial statements that
collectively comprise the City's basic financial statements. The accompanying information listed
as combining financial statements and supplemental information on pages 63 through 93 is
presented for purposes of additional analysis and is not a required part of the basic financial
statements. This information has been subjected to auditing procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
The information identified in the table of contents as the Introductory Section and the Statistical
Section is presented for purposes of additional analysis and is not a required part of the basic
financial statements of the City. Such information has not been subjected to the auditing
procedures applied in the audit of the basic financial statements and, accordingly, we express
no opinion on it.
Sincerely,
BRIAN SONNTAG, CGFM
STATE AUDITOR
Federal Wav / 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section of the City of Federal Way's annual financial report provides a narrative overview of the City's financial activities
for the fiscal year ended December 31, 2010. This information should be read in conjunction with the preceding letter of
transmittal, the financial statements and notes to the financial statements that follow.
FINANCIAL HIGHLIGHTS
• The total assets of the City of Federal Way exceeded its liabilities at December 31, 2010 by $583.3 million. Capital Assets
(net of depreciation and related debt) account for 89% of this amount with a value of $516.2 million. Of the remaining net
assets of $67.1 million or 11%, $49.6 million may be used to meet the government's ongoing obligations to citizens and
creditors, without legal restriction.
• The City's total net assets increased by $13.1 million, or 2% in 2010. Governmental activities provided $13.3 million, and
is offset by business -type activities decreased in net assets of $122 thousand.
The overall increase in net assets is due to the City purchasing land in the sum of $5.4 million for the future location of a
civic center -performing arts center. In addition, right-of-way land purchases of $1.3 million were for State Route 99 HOV
Lanes Phase 4. Invested in capital assets, net of related debt and unrestricted net assets for governmental activities shows
an increase of $23 million and decrease of $12 million respectively compared to 2009. This is due to changing the
calculation for Invested in capital assets, net of related debt to not take into consideration of the City's joint ventures. If
the calculation was changed in 2009, the changed in net assets for Invested in capital assets, net of related debt and
unrestricted net assets for government activities would show an increase of $8.3 million and an increase of $2.7 million
respectively compared to 2009.
• Restricted Net Assets shows a decrease of $10.0 million or 57.5% is mainly due to reclassifying $12.6 million of capital
projects to unrestricted net assets. The change is due to implementation of GASB 54.
• Governmental fund balances at year-end were $44.9 million, a 12% increase over the prior year. Of this amount, a total of
$26.9 million, or 60% of the governmental fund balance is unrestricted and available to fund ongoing activities. The
remaining $4.6 million is earmarked for debt service, paths & trails reserve, hotel/motel lodging tax, police special funds,
petty cash/change funds, court trust fund, and advance travel.
• Unrestricted fund balance in the general fund was $8.2 million, an increase of $50 thousand or 1 % from the prior year.
• The City debt decreased by $864.7 thousand during the current fiscal year. General obligation debt decreased by $682.1
thousand while public works trust fund loan decreased by $182.7 thousand. The decreases reflect the annual debt service
payments and compensated absences.
OVERVIEW OF FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City of Federal Way's basic financial statements.
The basic financial statements are comprised of three components:
1) government -wide financial statements,
2) fund financial statements, and
3) notes to the financial statements.
In addition to the required components, the City's annual report also includes other supplementary information. The first set
of supplementary information is the Combining Statements. These provide Balance Sheets, Statement of Revenues,
Expenditures, and Changes in Fund Balances with Budget to Actual Comparisons, Statement of Net Assets, and Cash Flows
for all Non -Major Funds. The other set of supplementary information is the Statistical Section. This section provides a four to
ten-year view of the City's revenues, expenditures, debt obligations and capacity, the City's largest taxpayers, and those
entities with the largest employment within the City of Federal Way. This section provides a long-term perspective on the
City's economy.
Government -wide Financial Statements
The government -wide financial statements are designed to provide readers with a broad overview of the City of Federal
Way's finances, in a manner similar to a private -sector business.
ON ofFederal Wav / 8
The statement of net assets presents information on all of the City of Federal Way's assets and liabilities, with the difference
between the two reported as net assets. This statement serves a purpose similar to that of a balance sheet in private business.
Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is
improving or deteriorating.
The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year.
All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing
of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash
flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the government -wide financial statements distinguish functions of the City of Federal Way that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover
all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities
of the City of Federal Way include law enforcement and public safety, construction and maintenance of streets, building
inspection, municipal court services, jail services, community planning and development services, parks and recreation
facilities, other community services and general administration. The business -type activities of the City include surface water
management and the control and operation of Dumas Bay Centre, a multi -use facility that offers business and retreat
accommodations, recreation and cultural arts classes and a performing arts facility.
The City has no separately identified component units included in the government -wide financial statements. The City has
reported its investment in two governmental joint ventures: Valley Communications Center and South Correctional Entity
(SCORE). Descriptions of these joint ventures are found in note 14 of the notes to the financial statements.
The government -wide financial statements can be found immediately following this MD&A.
Fund Financial Statements
The annual financial report includes fund financial statements in addition to the government -wide financial statements. While
the government -wide statements present the City's finances based on the type of activity, general government versus business -
type, the fund financial statements are presented by fund type such as the general funds, special revenue funds, and proprietary
funds. A fund is a specific fiscal and accounting entity with a self -balancing set of accounts used to account for specific
activities or meet certain objectives. Funds are often set up in accordance with special regulations, restriction or limitations.
The City of Federal Way uses fund accounting to ensure and show compliance with finance -related legal requirements. The
City's funds are divided into two categories: governmental funds and proprietary funds.
Governmental Funds
Governmental funds are used to account for essentially the same functions as are reported in governmental activities in the
government -wide financial statements. However, unlike the government -wide financial statements, governmental fund
financial statements focus on near -term inflows and outflows of spendable resources as well as on balances of spendable
resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term
financing requirements.
Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to
compare the information presented for governmental funds with similar information presented for government -wide financial
statements. By doing so, readers may better understand the long-term impact of the government's near -term financing
decisions. Both the expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between
governmental funds and governmental activities.
The City of Federal Way maintains seventeen individual governmental funds. The City's six major governmental funds, the
general fund, street fund, utility tax fund, debt service fund, downtown redevelopment fund, and the transportation fund, are
presented separately in the governmental fund balance sheet and the governmental fund statement of revenues, expenditures,
and changes in fund balances. The remaining governmental funds are combined into a single column labeled nonmajor
governmental funds. Individual fund data for each of the nonmajor governmental funds can be found in combining statements
later on in this report.
The City maintains control over its operating funds through the adoption of the biennial budget. Budgets are adopted at the
fund level and according to state law. A budgetary comparison statement is presented for the General, Street, and Utility Tax
Fund as a basic financial statement.
The basic governmental fund financial statements can be found on pages after the government -wide statements of this report.
Federal Wav / 9
Proprietary Funds
The City of Federal Way maintains two types of proprietary funds. Enterprise funds are used to report the same functions
presented as business -type activities in the government -wide statements. The City uses enterprise funds to account for its
surface water management and control and the Dumas Bay Centre. Internal service funds are an accounting device used to
accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account
for its risk management and self-insurance program, information systems, mail and duplication services, fleet of vehicles and
motorized equipment, and facilities management.
Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The
proprietary fund financial statements provide separate information for the Surface Water Management fund and for the Dumas
Bay Centre. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial
statements. Individual fund data is provided in the form of combining statements elsewhere in this report.
The basic proprietary fund financial statements can be found following the governmental fund statements of this report.
Notes to the Financial Statements
The notes provide additional information that is essential to the full understanding of the data provided in the government -wide
and fund financial statements. The notes to the financial statements can be found immediately following the basic financial
statements.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents the combining statements for
nonmajor governmental funds, internal service funds, and capital assets of governmental funds.
GOVERNMENT -WIDE FINANCIAL ANALYSIS
Statement of Net Assets
The statement of net assets can serve as a useful indicator of the City's financial position. The City of Federal Way's net assets
at December 31, 2010 total $583.3 million. The following is a condensed version of the government -wide statement of net
assets.
The largest component of the City's net assets, 89% or $516.2 million, in its investment in capital assets net any related
outstanding debt issued to acquire those assets. These capital assets such as land, streets, trails, parks, police vehicles, and
parks equipment are used to provide services to the citizens. Consequently, these assets are not available to sell and convert to
cash for future spending.
Current and other assets
Capital assets and CIP,
net of accumulated depreciation
Total assets
Long-term liabilities
Other liabilities
Total liabilities
Net assets:
Invested in capital assets,
net of related debt
Restricted
Unrestricted
Total net assets
CONDENSED STATEMENT OF NET ASSETS
Governmental Activities Business -Type Activities Total
2010 2009 2010 2009 2010 2009
$ 83,706,625 $ 77,184,439 $ 5,627,082 $ 5,585,975 $ 89,333,707 $ 82,770,414
478,651,345 471,917,351 51,773,132 51,971,043 530,424,477 523,888,394
562,357,970 549,101,790 57,400,214 57,557,018 619,758,184 606,658,808
30,216,587 30,719,470 1,273,197 1,471,696 31,489,784 32,191,166
4,414,309 3,918,567 539,142 375,032 4,953,451 4,293,599
34,630,896 34,638,037 1,812,339 1,846,728 36,443,235 36,484,765
465,671,345
442,704,401
50,563,097
50,578,649
516,234,442
493,283,050
17,442,323
27,476,530
9,411
16,366
17,451,734
27,492,896
44,613,406
44,282,822
5,015,367
5,115,275
49,628,773
49,398,097
$ 527,727,074 $
514,463,753
$ 55,587,875 $
55,710,290
$ 583,314,949 $
570,174,043
Approximately 4% or $26.1 million of the total net assets of the city are earmarked for construction improvement projects.
$17.5 million of the $26.1 million earmarked for construction improvement projects are restricted and the remainder is
committed to construction improvement projects. Some of the major projects include the Annual Transportation System Safety
Improvements, S 348th St at 1st Ave S, SR99 Phase III, S 352nd St Ext from SR99-SR161, S 320th St at I-5 S Ramp, SR99
Citv ofFederal Wav / 10
HOV Lanes PH IV, and Downtown Redevelopment. During the year, the City funded renovation and improvement of
neighborhood parks and open space parks such as Saghalie Park and various playground improvements. The City attempts to
fund capital construction projects on a pay-as-you-go basis, aggressively pursuing transportation grant funding and cost sharing
with developers to construct large projects in the City that impact the transportation system.
The remaining balance of restricted net assets is divided among restrictions for: $249.5 thousand for police special funds, petty
cash/change funds and advance travel, $81.1 thousand for municipal court trust fund, $3.4 million for debt service prefunding,
$557.5 thousand Special Contracts/Studies, $215.7 thousand for Hotel/Motel lodging tax, and $136.4 thousand for Path &
Trails Reserve. The business -type activities portion of $5 million, $4.8 million can only be spent on surface water management
and the remaining $142.4 thousand on improvements to Dumas Bay Centre and Knutzen Family Theatre. Maintenance of
catch basins, pump stations, storm drain flushing, and other capital construction projects such as West Branch Lakota Creek
Restoration are examples of utility activities. Other functions of the City may access the remaining $32.3 million to meet
ongoing obligation to citizens and creditors. Examples of other City obligations which these net assets may be used for are
public safety, parks maintenance, and ongoing street maintenance.
At the end of the fiscal year, the City of Federal Way reported positive balances in all three categories of net assets, for the
government as a whole, as well as for the separate governmental and business -type activities.
Changes in Net Assets
The changes in net assets table illustrates the increases or decreases in net assets of the City resulting from its operating
activities. The City's net assets increased approximately $13.1 million in 2010. The increase is mainly due to general
governmental activities which are offset by a decrease in business type activities.
The following is a condensed version of the City's changes in net assets. The table shows the revenues, expenses, and related
changes in net assets in tabular form for the governmental activities separate from the business -type activities. The graphs that
follow compare program revenues to program expenses and illustrate the revenues by source separately for the governmental
and business -type activities.
Governmental activities contributed $13.3 million or 101 % of the total change in net assets of $13.1 million. There was
minimal increase in overall expenditures from 2009; however revenues increased $13.4 million which includes the increase in
land and overall grant revenues.
In 2010, the City purchased the old Toys "R" Us site for $5.4 million; $5 million of which was state grant funded. In addition,
the City received a total of $15.5 million in federal/state grants (includes the $5 million state grant) which is an increase of over
$8.0 million from 2009. The following are highlights of increases or new grant funding received in 2010:
■ Neighborhood Stabilization Program (CDBG) - $331 thousand increase from 2009
■ Highway Planning and Construction (passthru WSDOT) - $1.9 million increase from 2009
■ Community Development Block Grant ARRA Entitlement Grants (CDBG-R) - $107 thousand
■ Performing Arts Grant (WA Dept of Commerce)- $5.4 million
■ Urban Vitality Grant (WA Dept of Commerce) - $918 thousand
Total expenditures increase of $572.5 thousand or 1 % from 2009. The increase in expenditures is mainly due to additional
expenditures which have offsetting grant revenues (as noted above) and jail usage/rate increases for the City's jail services.
The City currently does not have its own jail facility and is partnering with seven Cities to control its jail expenditures through
a joint venture by building the SCORE facility which is slated to be open in the fall of 2011. Further information in regards to
this joint venture is found on Note 14.
Citv ofFederal Wav / 11
Governmental Activities - Revenues
Charges for
services, 22.1%
Other, 4.4%
Other taxes, 3.2% Operating grants
Sales tax, 26.7% &contributions,
4.7%
Property tax, Capital grants and
20.5% contributions,
18.3%
Governmental Activities - Expenditures
Security of
Health and
Persons &
human services
Property
1.4%
48.6%
Transportation
Physical
17.5%
environment
1 Culture and
Economic
0.8%
Interest on
General -teen debt ong recreatiogovernmedn
environment
.
2.3% 150%
6.6%
8.5%
CHANGES IN NET ASSETS RESULTING FROM CHANGES IN REVENUES AND EXPENSES
Revenues:
Program revenues:
Charges for services
Operating grants & contributions
Capital grants and contributions
General revenues:
Property tax
Sales tax
Utility tax
Real estate excise tax
Other taxes
Other
Total Revenue
Expenses:
General government
Security of Persons & Property
Transportation
Physical environment
Economic environment
Health and human services
Culture and recreation
Interest on long-term debt
Surface Water Management
Dumas Bay Center
Total Expenses
Governmental Activities Business -Type Activities Total
2010 2009 2010 2009 2010 2009
$ 10,817,501 $
10,180,139 $
4,246,235 $ 4,183,012 $ 15,063,736 $
14,363,151
9,718,920
2,172,168
- - 9,718,920
2,172,168
9,044,477
8,452,149
9,044,477
8,452,149
9,609,740
9,443,649
9,609,740
9,443,649
12,410,071
12,327,191
12,410,071
12,327,191
12,890,310
13,549,472
12,890,310
13,549,472
1,403,361
1,428,985
1,403,361
1,428,985
813,034
1,496,238
813,034
1,496,238
1,045,608
2,045,381
17,646 46,736 1,063,254
2,092,117
67,753,022
61,095,372
4,263,881 4,229,748 72,016,903
65,325,120
4,865,827
4,591,087
4,865,827
4,591,087
26,842,240
26,341,614
26,842,240
26,341,614
9,781,800
9,448,397
9,781,800
9,448,397
451,470
450,914
451,470
450,914
3,175,005
3,560,620
3,175,005
3,560,620
767,108
776,954
767,108
776,954
8,073,804
8,089,242
8,073,804
8,089,242
685,214
811,124
685,214
811,124
-
-
3,384,352 3,345,027 3,384,352
3,345,027
-
-
849,176 984,103 849,176
984,103
54,642,468
54,069,952
4,233,528 4,329,130 58,875,996
58,399,082
Change in net assets before transfers
13,110,554
7,025,420
30,353
(99,382)
13,140,907
6,926,038
Transfers
152,768
(200,907)
(152,768)
200,907
-
-
Change in net assets
13,263,322
6,824,513
(122,415)
101,525
13,140,907
6,926,038
Netassets- beginning
514,463,753
509,808,009
55,710,290
55,608,765
570,174,043
565,416,774
Adjustment for retroactive capitalization of infrastructure
under GASB 34 and other adjustments
-
(2,168,769)
-
-
-
(2,168,769)
Net Assets at beginning of the year, restated
514,463,753
507,639,240
55,710,290
55,608,765
570,174,043
563,248,005
Netassets - ending
$ 527,727,075
$ 514,463,753 $
55,587,875 $
55,710,290
$ 583,314,950 $
570,174,043
Citv ofFederal Wav / 12
Business -type activities of the City's Surface Water Management system and Dumas Bay Centre decreased the City's net
assets by $122.4 thousand. Surface Water Management Fund increased by $103.0 thousand which was offset by a decrease in
Dumas Bay Centre Fund net assets by $214.7 thousand.
Surface Water Management increase is due to acquiring the King County Conservation Futures Grant which was used to
purchase 7.15 acres of land for the Hylebos Creek Project to conserve the wetlands. In addition to this, in 2010 the City and
residences collaborated to form Lake Management District (LMD) Number Two for North Lake. The ten-year LMD was
developed to generate revenue for ongoing management of aquatic vegetation, water quality education and related projects in
North Lake. The district was designed to improve the quality of life in and around North Lake.
The decrease in Dumas Bay Centre is due to awarding the managing and operations of the Knutzen Family Theatre to
Centerstage starting July 1st, 2010. The City continues to pay for repair and maintenance for the Knutzen Family Theatre
without offsetting revenues.
Business -Types Activities - Revenues 1I Business -Type Activities - Expenditures
Dumas Bay
Cen'
23,
Charges for
services, 98.8%
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
Surface Water
Management
77%
As noted earlier, the City of Federal Way uses fund accounting to ensure and demonstrate compliance with finance -related
legal requirements.
Governmental funds
The focus of the City of Federal Way's governmental funds is to provide information on near -term inflows, outflows, and
balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,
unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the
fiscal year.
As of the end of 2010, the City's governmental funds had a combined ending fund balance of $44.9 million which is an
increase of $4.7 million from the prior year. Approximately 18% or $8.2 million of this amount constitutes unrestricted
General Fund balance, which is available for spending at the City Council's discretion. The remainder of the fund balance is
restricted to indicate that it is not available for new spending because it has already been committed for debt service payments,
capital projects, police special funds and petty cash/change fund/advance travel.
The General Fund is the chief operating fund of the City. Total fund balance increased $192.9 thousand or 2%. The overall
increase in fund balance is due to the general fund bringing in more revenues while spending less in 2010 as compared to 2009.
The Utility Tax fund was established to account for the utility tax receipts which include 6% collected for capital, debt, and
other maintenance & operations as determined by Council and the remaining 1.75% is for Voter Approved enhanced Police
and Community Safety in 2007. Total fund balance increased $679.6 thousand or 22% from 2009 is due to an overall increase
in Utility tax revenues when compared to 2010 adjusted budget. The Utility Tax transfers out are based on the 2010 adjusted
budget and not the actual revenues received. Thus, the increased in Utility tax revenues contributed to the ending fund balance
increase.
Citv ofFederal Wav / 13
The Debt Service Fund has a total fund balance of $3.4 million which is a decrease of $785.1 thousand from 2009. The overall
decrease is mainly due to the overall decrease in real estate excise tax available for transfer for construction in progress projects
along with debt payments.
The Downtown Redevelopment fund was established to accumulate resources and set aside funding for downtown projects.
Overall, there is a decrease in ending fund balance of $45.5 thousand or I%.
The Transportation Fund is used to improve existing traffic signals, new signalization, major roadways and arterials involving
the design and construction of new sections of streets, the widening of roadways to provide additional vehicle lanes, the
installation of sidewalks and landscaping. The major source of revenue for this fund is grants from other agencies and
contributions from other funds. Total ending fund balance increased $3.7 million or 23%.
Proprietary funds
The City of Federal Way's proprietary funds provide the same type of information found in the government -wide, but in more
detail. Unrestricted net assets of the Surface Water Management Fund at the end of the year amounted to $4.8 million, and
those for Dumas Bay Centre amounted to $126.4 thousand. The total change in net assets for both funds was $103 thousand
increase and $214.7 thousand decrease, respectively. Other factors concerning the finances of these two funds have already
been addressed in the discussion of the City of Federal Way's business -type activities.
GENERAL FUND BUDGETARY AND ACTUAL HIGHLIGHTS
The City of Federal Way budgets on a biennial basis with each budget beginning in an odd numbered year. Appropriations for
operating funds are authorized for two years, but must be reviewed and reauthorized by the City Council in the middle of the
biennial period. In 2010, the City made seven budget adjustments due to the economic climate. The following discussion is
reflective only of the current year of the biennium.
The General Fund expenditure budget decrease of $994.2 thousand between the original budget for the fiscal year 2010. The
following is the major changes for the 2010 budget:
o A total of 12.68 FTEs were eliminated in 2010 and account for $1.1 million decrease in the General Fund.
These positions included: Building Inspector 1.0 FTE, Development Specialist 1.0 FTE, Administrative
Assistant 0.38 FTE, Assistant City Manager/Chief Operating Officer 1.0 FTE, ICMA Intern 1.0 FTE, Deputy
City Attorney 1.0 FTE, Police Records Specialist 2.0 FTE. Parks Athletic Assistance 0.50 FTE. Parks Office
Technician 0.80 FTE. Recreation Superintendent 1.0 FTE. Park Planner 1.0 FTE (partial capital funded),
Senior Planner 1.0 FTE, and Community Resource Manager 1.0 FTE.
o A total of 6.0 FTEs were frozen in 2010 and account for $563 thousand decrease in the General Fund. These
positions included: Court Clerk 1.0 FTE, Police Officer 3.0 FTE, Police Lieutenant Overhire 1.0 FTE, and
Records Specialist 1.0 FTE.
o Eliminate 2010 cost of living adjustment (COLA) of $612 thousand
o Added $441 thousand for future deductibles
o Added $1.2 million to the contingency reserve fund
o Added $448 thousand for police grants
o Added $300 thousand for animal services start-up
o Added $110 thousand for recovery grant
o Added $25 thousand for General Parks transfer to Federal Way Community Center for facility charge
o Added $133 for pension savings in 2009
o Added $150 thousand for special elections
o Reclassified $323 thousand for other cuts
o Added $234 thousand for other police programs such as seizure, explorer donations, replacement reserves,
special operations unit start-up
o Added $690 thousand for other Carryforward items such as human services contract, Shoreline masterplan,
nuisance abatement, education assistance, outside counsel, temporary help, and permit system upgrade
o Reduced Street subsidy transfer by $356 thousand
Citv ofFederal Wav / 14
Adjustments to revenues and other sources budget include: Adjustments to beginning balance of $3.9 million, decrease in taxes
of $2.8 million, decrease in franchise fees of $35 thousand, decrease in building and electrical permits of $267 thousand,
increase in intergovernmental revenues of $47 thousand, increase in grant revenues of $635 thousand, increase in charges for
services revenues of $34 thousand, increase in miscellaneous receipts of $42 thousand, decrease in interest earnings of $300
thousand, and increase in interfund transfers of $722 thousand.
Year-end actual revenues exceeded budget by $211.8 thousand or 0.68%. Property tax, sales tax, intergovernmental revenues,
park/general recreation fees, court revenues, and buildings permits/fees all exceeded year end budget projections by $852.1
thousand. However, these are offset by gambling taxes shortfall of $615.5 thousand. The shortfall in gambling tax is due to a
major establishment closing mid -year 2010.
Year-end expenditures were $3.9 million or 9.2% below budget. Of the $3.9 million savings, $1.3 million were carried
forward for continuation of existing projects, $420 thousand savings due to pension rate change, and unspent $1.2 million in
Contingency Reserve Funds, and some of the savings is due to General Fund Department's implementing cost savings
measures during mid -year 2010.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The City of Federal Way's investment in capital assets for its governmental and business -type activities as of December 31,
2010 amounts to $530.4 million (net of accumulated depreciation). This investment in capital assets includes land, buildings,
improvements, machinery and equipment, infrastructure, park facilities and construction in progress. For more details, please
see Note 8.
CAPITAL ASSETS AT YEAR-END, NET OF DEPRECIATION
Governmental
Business -Type
Total
Activities
Activities
2010
2009
Land
$ 301,270,211
$ 10,307,661 $
311,577,872 $
304,645,676
Building & Improvements
42,398,416
37,842,941
80,241,357
83,336,482
Machinery and equipment
5,077,382
21,171
5,098,553
5,305,952
Infrastructure
113,711,396
1,835,169
115,546,565
96,361,173
Construction in progress
16,193,940
1,766,190
17,960,130
34,239,110
Total Capital Assets
$ 478,651,346
$ 51,773,130 $
530,424,476 $
523,888,393
Major capital asset events during the current fiscal year included the following: expanding and improving the City streets and
traffic corridors for a total of $6.2 million and general capital and various park improvements for $226 thousand. Additional
information on the City of Federal Way's capital assets can be found in Note 8 of the Notes to the Financial Statements.
Long-term debt
At the end of 2010, the City of Federal Way had total bonded debt outstanding of $48.6 million for future principal and interest
payments which are backed by the full faith and credit of the government. The remainder of the City's debt represents Public
Works Trust Fund Loans.
LONG-TERM DEBT (FUTURE PRINCIPAL AND INTEREST PAYMENTS)
General obligation bonds
Public works trust fund loan
Total
Governmental Business -Type
Activities Activities Total
47,379,536
- $ 47,379,536
- 1,261,913 1,261,913
$ 47,379,536 $ 1,261,913 $ 48,641,449
The City's total debt decreased by $1.4 million due to annual debt service payments.
Citv ofFederal Wav / 15
The City of Federal Way maintains an Al rating from Moody's as of August 2009 for its general obligation bonds. In 2010,
Moody underwent its migration from its municipal scale ratings to its new global scale ratings, in which the City's Long Term
Go Bond ratings went from Al to AA3.
Washington State statutes limit the amount of debt a government entity may issue to 7.5% of its total assessed valuation,
subject to 60% majority vote of qualified electors. Of the 7.5% limit, 2.5% is for general purposes, 2.5% for open space/park
facilities, and 2.5% for utilities. Non -voted general purpose indebtedness is limited to 1.5% of assessed valuation and
combination of voted and non -voted general purpose indebtedness cannot exceed 2.5% of assessed valuation.
The City's assessed valuation for 2010 was $8,268 billion and the total amount of debt the City may issue is $593.2 million.
Remaining legal debt capacities as of December 31, 2010 are:
General Government (no vote requirement) $ 100,803,450
General Government (3/5 majority vote required) 82,063,550
Parks & Open Space (3/5 majority vote required) 205,158,874
Utilities (3/5 majority vote required) 205,158,874
Total Capacity $ 593,184,748
Additional information on the City of Federal Way's long-term debt can be found in Note 11 and in the Statistical Section of
this report.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
During 2010, data suggests a slowing pace of growth in the national economy. The economy remains on track to continue to
expand, though it will likely be characterized by slowing growth and subdued underlying inflations. U.S. households and
businesses remain cautious, partly restrained by uncertainty regarding fiscal and regulatory policy. The recovery still remains
fragile. The European debt crisis is still a risk that may impact the U.S. banking sector and economic growth that is still below
average.
Like the rest of the nation, the Puget Sound area economy overall economic activity continues to weaken. The current
financial crisis and economic recession that is gripping the entire nation is impacting our state and local economy. The state,
many cities and counties have announced employee layoffs and major reduction in services to their citizens due to the severe
fiscal challenges that they are faced with.
Local home prices, sales volume, and housing have all declined since 2007. Consumer spending has increased in the last 4
quarters, but households are also increasing their rate of savings. Another major obstacle is the condition of the housing
markets. Home prices has fallen an average of 40% and leaving homeowners with mortgages owing more than their homes are
worth. Another factor is that this recovery has been weaker than the previous ones because the differences in the downturn —
previous downturns were caused by central bank's efforts to reverse or prevent inflation by hiking short-term interest rates,
when the central bank succeeded, it lowered those rates and the economy was able to bounce back. The current downturn is
due to mispricing of risk, which lead to excessive leverage and high prices and when those price bubbles burst, the household
lost substantial wealth and financial markets became dysfunctional.
Federal Way's fiscal outlook is similar to that of the Puget Sound region and of the nation. Current and predicted economic
conditions will crimp funding sources, making it challenging to maintain City services at current levels over the next six years.
Thus, the City's 2011/2012 adopted budget includes one-time funding of many positions and essential programs.
Out of the City's nearly $39 million General Fund operating budget, sales tax accounts for 28% of the revenues, utility taxes
19% and property taxes 24%. Overall revenues have declined over the last several years. Sales tax, gambling tax, and utilities
tax revenues have all declined contributing to the projected gap of approximately $4.2 million and $4.6 million in 2011 and
2012, respectively.
Even with the projected revenue growth after 2013, overall City revenue growth is not expected to keep pace with inflation.
Two of the City's main revenue generators, sales tax receipts and utility taxes, are expected to show minimal growth through
2016. Projected operating revenues will not be sufficient to cover operating expenditures starting in 2013 and beyond.
Citv ofFederal Wav / 16
Considering all these factors, we approached 2011/12 revenue projection with heightened caution. The City is proceeding with
caution and restraint, so that it is not overly susceptible to and minimizes the local economy slump without huge fluctuations in
services to our citizens. Staff will closely monitor and assess economic impacts experienced around our state and within our
local economy to anticipate any negative impact on critical City revenues.
REQUEST FOR INFORMATION
This financial report is designed to provide a general overview of the City of Federal Way's finances for all those with an
interest in the government's finances. Questions concerning any of the information provided in this report or requests for
additional financial information should be addressed to Finance Department, City of Federal Way, 33325 8"' Avenue South,
Federal Way, Washington 98003, telephone 253-835-2523, or visit the City's website at www.cityoffederalway.com.
Citv ofFederal Wav / 17
BASIC FINANCIAL STATEMENTS
Citv ofFederal Wav / 18
STATEMENT OF NET ASSETS
December 31, 2010
ASSETS
Cash & cash equivalents and investments
Receivables (net)
Due from other governments
Prepaid items
Restricted assets:
Cash with escrow agent
Seizure Funds/Petty Cash/Advance Travel/Retainage
Investment in joint venture
Capital assets not being depreciated:
Land
Construction in progress
Capital assets net of accumulated depreciation:
Buildings/structures
Improvements other than buildings
Machinery and equipment
Infrastructure
Total Assets
LIABILITIES
Accounts payable and accruals
Unearned revenue
Retainage payable
Retainage payable - with escrow agent
Due to other governments
Customer deposits
Noncurrent Liabilities:
Due within one year
Due in more than one year
Due to other governments
Total Liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Customer deposit
Debt service prefunding
Capital projects
Steel Lake & North Lake Mgmt District
Other
Unrestricted
Total Net Assets
Governmental
Business -type
Activities
Activities
Total
$ 58,011,292
$ 5,177,229
$ 63,188,521
2,247,650
305,019
2,552,669
3,930,628
144,834
4,075,462
29,203
-
29,203
232,452
-
232,452
574,848
-
574,848
18,680,552
-
18,680,552
301,270,211
10,307,661
311,577,872
16,193,940
1,766,190
17,960,130
11,900,764
1,158,092
13,058,856
30,497,651
36,684,849
67,182,500
5,077,383
21,171
5,098,554
113,711,396
1,835,169
115,546,565
562,357,970
57,400,214
619,758,184
2,163,464
108,743
2,272,207
500,110
403,488
903,598
325,304
-
325,304
-
4,952
4,952
191,858
17,372
209,230
1,233,573
4,587
1,238,160
633,167
184,691
817,858
14,075,470
1,088,506
15,163,976
15,507,950
-
15,507,950
34,630,896
1,812,339
36,443,235
465,671,345
50,563,097
516,234,442
-
4,587
4,587
3,379,426
-
3,379,426
13,488,049
-
13,488,049
-
4,824
4,824
574,848
-
574,848
44,613,406
5,015,367
49,628,773
$ 527,727,074 $ 55,587,875 $ 583,314,949
The notes to the financial statements are an integral part of this statement.
City
of Federal Way / 19
STATEMENT OF ACTIVITIES
For the Year ended December 31,
2010
Program Revenues
Net (Expense) Revenue & Changes in Net Assets
Operating
Capital
Charges for
Grants and
Grants and
Governmental
Business -type
Expenses
Services
Contributions
Contributions
Activities
Activities
Total
Functions/Programs
Governmental Activities:
General Government
$ 4,865,827
$ 975,515
$ 8,555,514
$ -
$ 4,665,202
$
$ 4,665,202
Security of Persons & Property
26,842,240
5,381,407
34,350
-
(21,426,483)
(21,426,483)
Transportation
9,781,800
1,961,083
1,129,056
9,044,477
2,352,816
2,352,816
Physical Environment
451,470
90,512
-
-
(360,958)
(360,958)
Economic Environment
3,175,005
636,534
(2,538,471)
(2,538,471)
Health
767,108
153,792
(613,316)
(613,316)
Culture & Recreation
8,073,804
1,618,659
(6,455,145)
(6,455,145)
Interest on long-term debt
685,214
-
(685,214)
(685,214)
Total governmental activities
54,642,468
10,817,501
9,718,920
9,044,477
(25,061,570)
(25,061,570)
Business -type Activities:
Surface Water Management
3,384,352
3,745,696
-
-
361,344
361,344
Dumas Bay Centre
849,176
500,539
(348,637)
(348,637)
Total business -type activities
4,233,528
4,246,235
-
-
12,707
12,707
Total
$ 58,875,996
$ 15,063,736
$ 9,718,920
$ 9,044,477
(25,061,570)
12,707
(25,048,863)
Property tax
Sales tax
Utility tax
Real estate excise tax
Gambling tax
Hotel/Motel tax
Other taxes
Other revenue
Investment earnings
Disposition of capital assets
Transfers
Total general revenues and transfers
Change in net assets
Net assets at beginning of year
Net assets at end of year
9,609,740
9,609,740
12,410,071
12,410,071
12,890,310
12,890,310
1,403,361
1,403,361
493,486
493,486
149,058
149,058
170,490
170,490
899,092
899,092
160,805
18,568
179,373
(14,289)
(922)
(15,211)
152,768
(152,768)
-
38,324,892
(135,122)
38,189,770
13,263,322
(122,415)
13,140,907
514,463,753
55,710,290
570,174,043
$527,727,074
$55,587,875
$ 583,314,949
The notes to the financial statements are an integral part of this statement.
Citv ofFederal Wav / 20
BALANCESHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2010
Debt
General
Street
Utility Tax
Service
ASSETS
Equity in pooled cash & investments
$ 7,654,461 $
943,677
$ 2,244,503 $
3,330,998
Prepaid insurance/debt service
24,203
-
-
-
Retainage in escrow
-
-
-
Receivables (net):
Taxes
492,388
1,463,018
210,498
Accounts and contracts
70,901
-
-
-
Restricted cash
249,544
2,750
-
-
Due from other governments
1,209,219
85,011
2,660
-
Interfund loans receivable
366,000
-
-
-
TOTAL ASSETS
10,066,716
1,031,438
3,710,181
3,541,496
LIABILITIES AND FUND BALANCES
Liabilities:
Vouchers payable
615,489
122,581 - 4,600
Accounts/payroll payable
16,531
- -
Retainage payable
-
2,750 - -
Due to other governments
191,858
- - -
Deposits payable
370,525
747,717 - -
Interfund loans payable
-
- - -
Deferred revenue
434,194
58,390 - 157,470
TOTAL LIABILITIES 1,628,597 931,438 162,070
Fund balance:
Nonspendable 81,146 -
Restricted 168,398 - - 3,379,426
Committed - - 3,710,181 -
Assigned - 100,000 - -
Unassigned 8,188,575 - - -
TOTAL FUND BALANCES 8,438,119 100,000 3,710,181 3,379,426
TOTAL LIABILITIES AND
FUND BALANCE $ 10,066,716 $ 1,031,438 $ 3,710,181 $ 3,541,496
The notes to the financial statements are an integral part of this statement.
CitvofFederal Wav/21
BALANCESHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2010
(continued)
Downtown Nonmajor
Redevelopment Transportation Governmental TOTAL
ASSETS
Equity in pooled cash & investments
$ 3,032,681 $
19,328,897 $
5,963,895 $ 42,499,112
Prepaid insurance/debt service
-
-
- 24,203
Retainage in escrow
100,000
132,452
232,452
Receivables (net):
Taxes
15
-
2,165,919
Accounts and contracts
-
-
- 70,901
Restricted cash
-
320,554
2,000 574,848
Due from other governments
30,624
1,646,968
928,640 3,903,122
Interfund loans receivable
-
-
- 366,000
TOTAL ASSETS 3,163,320 21,428,871 6,894,535 49,836,557
LIABILITIES AND FUND BALANCES
Liabilities:
Vouchers payable
57,500 1,007,070 157,341
1,964,581
Accounts/payroll payable
- - -
16,531
Retainage payable
320,554 2,000
325,304
Due to other governments
- - -
191,858
Deposits payable
100,000 - 15,331
1,233,573
Interfund loans payable
- - 366,000
366,000
Deferred revenue
14 - 161,943
812,011
TOTAL LIABILITIES 157,514 1,327,624 702,615 4,909,858
Fund balance:
Nonspendable
- - - 81,146
Restricted
2,771,202 8,494,148 3,132,191 17,945,365
Committed
234,604 11,607,099 3,059,728 18,611,612
Assigned
- - - 100,000
Unassigned
- - 8,188,575
TOTAL FUND BALANCES 3,005,806 20,101,247 6,191,920 44,926,699
TOTAL LIABILITIES AND
FUND BALANCE $ 3,163,320 $ 21,428,871 $ 6,894,535
Amounts reported for governmental activities in the statement of net assets are different because:
Capital assets are used in governmental activities are not financial resources and, therefore,
are not reported in the funds.
461,776,487
Investment in joint venture is not a financial resource and, therefore, not reported in the funds
18,680,552
Other long-term assets are not available to pay for current -period expenditures and, therefore,
are deferred in the funds
428,936
Internal service funds are used by management to charge the costs of insurance, information systems,
mail and duplication, fleet, and building management to individual funds. The assets and liabilities
of the internal service funds are included in governmental activities in the statement of net assets.
32,130,988
Long-term liabilities, including bonds payable, are not due and payable in the current period
and, therefore, are not reported in the funds.
(30,216,587)
Net assets of governmental activities $
527,727,074
The notes to the financial statements are an integral part of this statement.
Citv ofFederal Wav / 22
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
For the Year Ended December 31, 2010
REVENUES
Taxes
Licenses and permits
Intergovernmental
Service charges and fees
Fines and forfeitures
Interest
Other
TOTAL REVENUES
EXPENDITURES
Current:
General government
Security of persons and property
Transportation
Physical environment
Economic environment
Health
Culture and recreation
Debt service:
Principal
Interest/fiscal charges/admin fees
Capital outlay
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
TOTAL OTHER FINANCING
SOURCES (USES)
NET CHANGE IN FUND BALANCES
FUND BALANCES - BEGINNING
FUND BALANCES - ENDING
Debt
General
Street
Utility Tax
Service
$ 22,523,502
$ -
$ 12,890,310 $
1,403,361
2,129,649
118,006
-
-
1,897,710
1,118,083
2,948,617
210,449
1,272,922
-
-
-
87,516
1,326
5,906
6,018
609,313
26,839
-
-
31,469,229
1,474,703
12,896,216
1,409,379
4,275,138
-
64,622
-
26,889,269
-
-
-
4,106,447
3,021,756
765,963
3,805,998
-
-
494,250
-
-
685,214
161,894
35,197
-
-
38,920,018
4,141,644
64,622
1,179,464
(7,450,789)
(2,666,941)
12,831,594
229,915
9,535,090
2,666,941
1,061,684
1,976,716
(1,891,377)
-
(13,213,723)
(2,991,684)
7,643,713
2,666,941
(12,152,039)
(1,014,968)
192,924
-
679,555
(785,053)
8,245,196
100,000
3,030,626
4,164,479
$ 8,438,119
$ 100,000
$ 3,710,181 $
3,379,426
The notes to the financial statements are an integral part of this statement.
CitvofFederal Wav/23
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
For the Year Ended December 31, 2010
(continued)
Downtown
Nonmajor
Redevelopment
Transportation Governmental
TOTAL
REVENUES
Taxes
$ 10
$ $
304,886 $
37,122,069
Licenses and permits
-
300,000
2,547,655
Intergovernmental
61,249
8,929,179
6,642,528
18,648,749
Service charges and fees
-
621,851
1,705,715
5,486,632
Fines and forfeitures
-
-
1,510,292
2,783,214
Interest
5,261
27,123
6,548
139,698
Other
23,836
-
239,104
899,092
TOTALREVENUES
90,356
9,578,153
10,709,073
67,627,109
EXPENDITURES
Current:
General government
-
-
517,417
4,857,177
Security of persons and property
2,938
26,892,207
Transportation
1,593,827
5,700,274
Physical environment
450,971
450,971
Economic environment
140,064
3,161,820
Health
-
765,963
Culture and recreation
2,051,623
5,857,621
Debt service:
Principal
-
494,250
Interest/fiscal charges/admin fees
-
-
-
685,214
Capital outlay
465,648
7,798,672
5,788,090
14,249,501
TOTAL EXPENDITURES
465,648
7,798,672
10,544,930
63,114,998
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
(375,292)
1,779,481
164,143
4,512,1 1 1
OTHER FINANCING SOURCES (USES)
Transfers in
1,255,000
3,043,709
2,933,988
22,473,128
Transfers out
(925,250)
(1,106,737)
(2,190,954)
(22,319,725)
TOTAL OTHER FINANCING
SOURCES (USES)
329,750
1,936,972
743,034
153,403
NET CHANGE IN FUND BALANCES
(45,542)
3,716,453
907,177
4,665,514
FUND BALANCES -BEGINNING
3,051,348
16,384,798
5,284,743
40,261,189
FUND BALANCES -ENDING
$ 3,005,806
$ 20,101,247 $
6,191,920 $
44,926,699
The notes to the financial statements are an integral part of this statement.
Citv ofFederal Wav / 24
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
For the Year Ended December 31, 2010
Amounts reported for governmental activities in the statement of activities (page 19) are 2010
different because:
Net change in fund balances --total governmental funds $ 4,665,514
Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which 7,922,502
capital outlays exceeded depreciation in the current period.
Revenues in the statement of activities that do not provide current financial resources
are not reported as revenues in the funds. 4,448
The issuance of long-term debt provides current financial resources to governmental
funds, while the repayment of the principal of long-term debt consumes the
current financial resources of governmental funds. Neither transaction, however,
has any effect on net assets. Also, governmental funds report the issuance
proceeds of new debt as current financial resources and payment as the use
of current resources, whereas these amounts reduce the net assets. 529,000
Internal service funds are used by management to charge costs of risk management,
information systems, mail & duplication, fleet, and building systems to the funds. 118,860
Some expenses reported in the statement of activities do not require the use of current
financial resources and, therefore, are not reported as expenditures in the funds. 22,998
Change in net assets of governmental activities $ 13,263,321
The notes to the financial statements are an integral part of this statement.
CitvofFederal Wav/25
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
REVENUES
Taxes
$ 25,583,000 $
22,761,370 $
22,523,502 $
(237,868)
Licenses and permits
2,291,000
2,039,000
2,129,649
90,649
Intergovernmental
1,262,000
1,943,801
1,897,710
(46,091)
Service charges and fees
2,743,590
2,777,175
2,948,617
171,442
Fines and forfeitures
1,223,000
1,227,469
1,272,922
45,453
Interest
416,000
116,000
87,516
(28,484)
Other
404,580
392,580
609,313
216,733
TOTALREVENUES 33,923,170 31,257,395 31,469,229 211,834
EXPENDITURES
Current:
General government
Security of persons and property
Economic environment
Health
Culture and recreation
Capital outlay
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
4,846,765
7,074,401
4,275,138
2,799,263
28,119,146
27,660,295
26,889,269
771,026
3,509,169
3,388,177
3,021,756
366,421
784,683
813,170
765,963
47,207
4,280,576
3,872,787
3,805,998
66,789
-
60,154
161,894
(101,740)
41,540,339 42,868,984 38,920,018 3,948,966
(7,617,169) (11,611,589) (7,450,789) 4,160,800
9,152,092 9,873,604 9,535,090 (338,514)
(2,685,756) (2,351,292) (1,891,377) 459,915
TOTAL OTHER FINANCING SOURCES (USES)
6,466,336
7,522,312
7,643,713 121,401
NET CHANGE IN FUND BALANCES
(1,150,833)
(4,089,277)
192,924 4,282,201
FUND BALANCES - BEGINNING
8,245,195
8,245,195
8,245,195 -
FUND BALANCES - ENDING
$ 7,094,362 $ 4,155,918 $ 8,438,119 $ 4,282,201
The notes to the financial statements are an integral part of this statement.
Citv ofFederal Wav / 26
STREET FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
REVENUES
Licenses and permits
$ 146,000 $
113,000 $
118,006 $
5,006
Intergovernmental
1,196,000
1,213,525
1,118,083
(95,442)
Service charges and fees
391,000
236,000
210,449
(25,551)
Interest
31,000
1,250
1,326
76
Other
27,000
27,000
26,839
(161)
TOTAL REVENUES
1,791,000
1,590,775
1,474,703
(116,072)
EXPENDITURES
Current:
Transportation 4,909,135 4,700,336 4,106,447 593,889
Capital outlay 37,600 17,600 35,197 (17,597)
TOTAL EXPENDITURES 4,946,735 4,717,936 4,141,644 576,292
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (3,155,735) (3,127,161) (2,666,941) 460,220
OTHER FINANCING SOURCES (USES)
Transfers in 3,155,735 3,127,161 2,666,941 (460,220)
TOTAL OTHER FINANCING SOURCES (USES) 3,155,735 3,127,161 2,666,941 (460,220)
NET CHANGE IN FUND BALANCES - - - -
FUND BALANCES - BEGINNING 100,000 100,000 100,000 -
FUND BALANCES - ENDING
$ 100,000 $ 100,000 $ 100,000 $ -
The notes to the financial statements are an integral part of this statement.
Citv ofFederal Wav / 27
UTILITY TAX FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Taxes
Interest
TOTAL REVENUES
EXPENDITURES
Current:
General government
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ 15,538,011 $ 13,966,853 $ 12,890,310 $ (1,076,543)
66,951 66,951 5,906 (61,045)
15,604,962 14,033,804 12,896,216 (1,137,588)
64,622 314,622 64,622 250,000
64,622 314,622 64,622 250,000
15,540,340 13,719,182 12,831,594 (887,588)
- 1,061,684 1,061,684 -
(15,726,670) (13,454,895) (13,213,723) 241,172
TOTAL OTHER FINANCING SOURCES (USES)
(15,726,670)
(12,393,211)
(12,152,039) 241,172
NET CHANGE IN FUND BALANCES
(186,330)
1,325,971
679,555 (646,416)
FUND BALANCES - BEGINNING
3,030,626
3,030,626
3,030,626 -
FUND BALANCES - ENDING
$ 2,844,296 $ 4,356,597 $ 3,710,181 $ (646,416)
The notes to the financial statements are an integral part of this statement.
ON ofFederal Wav / 28
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
December 31, 2010
ASSETS
Current Assets
Equity in pooled cash and investments
Prepaid items
Receivables (net):
Accounts and contracts
Due from other governments
TOTAL CURRENT ASSETS
Property, plant and equipment:
Land
Building/structures
Machinery/furniture/equipment
Infrastructure
Construction in progress
Less accumulated depreciation
TOTAL NONCURRENT ASSETS
TOTAL ASSETS
LIABILITIES AND FUND EQUITY
Current liabilities:
Vouchers/payroll payable
Retainage payable - with escrow agent
Due to other government
Deposits payable
Deferred revenue
Public works trust fund loan payable
Compensated absences payable
TOTAL CURRENT LIABILITIES
Long-term liabilities:
Public works trust fund loan payable
Compensated absences payable
TOTAL LONG-TERM LIABILTIES
TOTAL LIABILITIES
Governmental
Business -type Activities - Enterprise Funds
Activities
Surface Water Dumas Bay
Internal
Management Centre TOTAL
Service
$ 4,787,512 $ 328,422 $ 5,115,934
$ 15,573,475
5,000
284,991
20,028 305,019
10,830
144,834
- 144,834
27,506
5,217,337
348,450 5,565,787
15,616,811
8,198,021
2,109,640
10,307,661
-
19,849
3,576,592
3,596,441
16,193,560
48,528,302
106,643
48,634,945
14,529,672
1,916,645
-
1,916,645
-
1,382,959
383,231
1,766,190
(11,931,567)
(2,517,183)
(14,448,750)
(13,848,373)
48,114,209
3,658,923
51,773,132
16,874,859
53,331,546 4,007,373 57,338,919 32,491,670
74,254 34,489
108,743 182,352
4,952 -
4,952 -
17,372 -
17,372
- 4,587
4,587 -
258,666 144,822
403,488 67,920
182,359 -
182,359 -
2,332
2,332
539,935 183,898 723,833 250,272
1,027,676 - 1,027,676 -
43,260 17,570 60,830 49,115
1,070,936 17,570 1,088,506 49,115
1,610,871 201,468 1,812,339 299,387
Invested in capital assets, net of related debt 46,904,174 3,658,923 50,563,097 16,874,859
Restricted for:
Customer deposits - 4,587 4,587 -
Steel Lake & North Lake Mgmt District 4,824 - 4,824 -
Unrestricted 4,811,677 142,395 4,954,072 15,317,424
TOTAL NET ASSETS $ 51,720,675 $ 3,805,905 55,526,580 $ 32,192,283
Adjustment to reflect the consolidation of internal service fund activities related
to enterprise funds 61,295
NET ASSETS OF BUSINESS -TYPE ACTIVITIES $ 55,587,875
The notes to the financial statements are an integral part of this statement.
CitvofFederal Wav/29
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
For the Year Ended December 31, 2010
OPERATING REVENUES:
Service charges and fees
Intergovernmental
Miscellaneous
TOTAL OPERATING REVENUES
OPERATING EXPENSES:
Personal services
Materials and supplies
Services and charges
Intergovernmental
Depreciation
Interfund charges
TOTAL OPERATING EXPENSES
OPERATING INCOME (LOSS)
NON -OPERATING REVENUES (EXPENSES)
Governmental
Business -type Activities - Enterprise Funds Activities
Surface Water Dumas Bay Internal
Management Centre TOTAL Service
$ 3,431,160 $ 500,539 $ 3,931,699 $ 5,499,666
298,735 - 298,735 20,833
15,801 - 15,801 138,469
3,745,696 500,539 4,246,235 5,658,968
1,619,209
295,808
1,915,017
967,733
79,244
99,861
179,105
542,681
692,160
220,679
912,839
2,081,669
178,641
4,707
183,348
122,601
499,486
181,998
681,484
2,123,464
291,809
45,143
336,952
-
3,360,549 848,196 4,208,745 5,838,148
385,147 (347,657) 37,490 (179,180)
Gain (Loss) from disposal of capital assets
- -
-
(15,211)
Interest income
16,488 718
17,206
22,469
Interest expense
(13,924) -
(13,924)
-
TOTAL NON -OPERATING REVENUES (EXPENSES)
2,564 718
3,282
7,258
INCOME (LOSS) BEFORE TRANSFERS
387,711 (346,939)
40,772
(171,922)
Capital contributions
Transfers in
Transfers out
CHANGE IN NET ASSETS
TOTAL NET ASSETS - BEGINNING
TOTAL NET ASSETS - ENDING
Adjustment to reflect the consolidation of internal service fund
activities related to enterprise funds
CHANGE IN NET ASSETS OF BUSINESS -TYPE ACTIVITIES
- - - 280,997
600,000 132,232 732,232 177,192
(885,000) - (885,000) (177,827)
102,711 (214,707) (111,996) 108,440
51,617,964 4,020,612 32,083,844
$ 51,720,675 $ 3,805,905 $ 32,192,283
(10,419)
$ (122,415)
The notes to the financial statements are an integral part of this statement.
Citv ofFederal Wav / 30
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
For the Year Ended December 31, 2010
Governmental
Business -type Activities - Enterprise Funds Activities
Surface Water
Dumas Bay
Internal
CASH FLOWS FROM OPERATING ACTIVITIES:
Management
Centre
TOTAL
Service
Cash received from users
$ 3,205,806
$ 544,378
$ 3,750,184
$ 5,557,313
Cash payments to claimants
-
-
-
(476,107)
Cash payments to suppliers for goods/services
(769,152)
(307,184)
(1,076,336)
(1,801,574)
Cash payments to employees
(1,635,872)
(295,285)
(1,931,157)
(989,536)
Cash payments to other funds for goods and services
(291,809)
(45,143)
(336,952)
(106,217)
Cash payments for other services/charges
(406,820)
Cash payments to other governments for goods and services
(179,692)
(4,707)
(184,399)
(122,855)
Cash payments for damage deposits
-
214
214
-
Other operating receipts
405,704
-
405,704
138,468
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
734,985
(107,727)
627,258
1,792,672
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in
Transfers out
NET CASH PROVIDED BY NONCAPTTAL FINANCING
CASH FLOWS FROM CAPITAL AND CAPITAL -
RELATED FINANCING ACTIVITIES:
Principal paid on debt service
Interest paid on debt service
Acquisition of capital asset/construction work in progress
Proceeds from the sale of capital assets
NET CASH USED FOR CAPITAL
AND CAPITAL -RELATED FINANCING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts of interest
NET CASH PROVIDED BY INVESTING ACTIVTTES
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Operating income (loss)
Adjustments to reconcile operating income to
net cash provided (used) by operating activities:
Depreciation expense
(Increase)/decrease in accounts receivable
(Increase)/decrease in due from other governments
Increase/(decrease)in vouchers/accounts payable
Increase/(decrease)in retainage payable
Increase/(decrease) in due to other government
Increase/(decrease) in deposits payable
Increase/(decrease)in deferred revenue
Increase/(decrease)in accrued payroll/compensated absences payable
TOTAL ADJUSTMENTS
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Non -cash investing, capital, and financing activities:
Other contributions of capital assets
600,000 132,232 732,232 177,192
(885,000) - (885,000) (177,827)
(285,000) 132,232 (152,768) (635)
(182,359) (182,359)
(13,924) (13,924)
(483,573) (483,573) (809,338)
- 17,604
(679,856) (679,856) (791,734)
16,488 718 17,206 22,464
16,488 718 17,206 22,464
(213,383) 25,223 (188,160) 1,022,767
5,000,895 303,199 5,304,094 14,550,706
4,787,512 328,422 5,115,934 15,573,475
385,147
(347,657)
37,490
(179,180)
499,486
181,998
681,484
2,123,464
(284,991)
25,851
(259,140)
(10,830)
91,168
-
91,168
(27,506)
18,441
13,356
31,797
(159,391)
(16,189)
-
(16,189)
(1,051)
(1,051)
-
214
214
-
59,637
17,988
77,625
67,920
(16,663)
523
(16,140)
(21,803)
349,838
239,930
589,768
1,971,854
$ 734,985
$ (107,727)
$ 627,258
$ 1,792,672
$ 280,997
The notes to the financial statements are an integral part of this statement.
Ci
Federal Wav / 31
NOTES TO THE BASIC FINANCIAL STATEMENTS
December 31, 2010
INDEX
Note
1 Summary of Significant Accounting Policies...............................................................................
ReportingEntity...................................................................................................................
Government -wide and Fund Financial Statements...............................................................
Measurement Focus, Basis of Accounting, and Financial Statement Presentation ...............
BudgetaryInformation.........................................................................................................
Assets, Liabilities and Equities.............................................................................................
Cash and Investments...................................................................................................
Receivables..................................................................................................................
Amounts Due to and from Other Funds; Interfund Loans ...........................................
Inventories....................................................................................................................
CapitalAssets...............................................................................................................
Compensated Absences Payable..................................................................................
Long -Term Liabilities..................................................................................................
DeferredRevenue........................................................................................................
Fund Balance Classification.........................................................................................
Interfund Transactions.................................................................................................
2 Reconciliation of Government -wide & Fund Financial Statements ..............................................
3 Stewardship, Compliance and Accountability..............................................................................
4 Supplemental Appropriations........................................................................................................
5 Deposits and Investments..............................................................................................................
6 Receivables and Due from Other Governments............................................................................
7 Due To Other Governments..........................................................................................................
8 Capital Assets................................................................................................................................
9 Pension Plans................................................................................................................................
10 Risk Management..........................................................................................................................
11 Long -Term Liabilities...................................................................................................................
12 Interfund Transactions..................................................................................................................
13 Contingencies and Litigation........................................................................................................
14 Joint Ventures...............................................................................................................................
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Citv ofFederal Wav / 32
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Year Ended December 31, 2010
NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Federal Way have been prepared in conformity with generally accepted accounting
principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted
standard setting body for establishing governmental accounting and financial reporting principles. The significant accounting
policies are described below.
REPORTING ENTITIES
The City's Comprehensive Annual Financial Report (CAFR) includes the funds, agencies and boards controlled by or
dependent on the City. In conformance with Governmental Accounting Standards Board (GASB) Statement 14, "The
Financial Reporting Entity", the primary basis of determining whether outside agencies and organizations should be
considered component units of the City is Financial Accountability. Financial Accountability is dependence on the City's
obligation to redeem the organization's debts, to finance the organization's deficits, and the extent to which subsidies from the
City constitute a major portion of the organization's total resources. Applying these criteria, as outlined in GASB Statement
14, the City has no relationships that qualify as component units.
Financial Accountability
Financial accountability is defined as appointment of a voting majority of an agency's or organization's board, and either the
City's ability to impose will on the agency or organization or the possibility that the agency or organization will provide a
financial benefit to or impose a financial burden on the City.
Joint Ventures
A joint venture is a legal entity or organization which results from a contractual arrangement that is owned, operated, or
governed by two or more participants as a separate activity subject to joint control, in which participants retain an ongoing
financial interest or an ongoing financial responsibility. The City participates in two joint ventures: Valley Communications
Center and South Correctional Entity (SCORE). See Note 14, Joint Venture, which more fully describes these organizations.
GOVERNMENTAL -WIDE AND FUND FINANCIAL STATEMENTS
The government -wide financial statements (i.e. the statement of net assets and the statement of activities) report information
on all activities of the primary government. For the most part, the effect of interfund activity has been removed from these
statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported
separately from business -type activities, which rely to a significant extent on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by
program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Our policy is to
allocate indirect costs to specific function or segment. Program revenues include 1) charges to customers or applicants who
purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grant and
contributions that are restricted to meeting the operational or capital requirements or a particular function or segment. Taxes
and other items not properly included among program revenues are reported instead as general revenues. Separate fund
financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and
major individual enterprise funds are reported as separate columns in the fund financial statements.
MEASUREMENT FOCUS, BASIS OF ACCOUNTING, FINANCIAL STATEMENT PRESENTATION
The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis
of accounting, as are the proprietary fund statements. Revenues are recorded when earned and expenses are recorded when a
liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for
which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by
the provider have been met.
Citv ofFederal Wav / 33
Governmental Funds
Governmental fund financial statements are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues
are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of
the current period. For this purpose, the City of Federal Way considers revenues to be available if they are collected within 30
days of the end of the current fiscal period with an exception to Utility Taxes in which we extend this period to 60 days.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when
payment is due.
Property taxes, licenses, and interest associated within the current period are all considered to be susceptible to accrual and so
have been recognized as revenues of the current fiscal period. Only the portion of special assessment receivable due within
the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are
considered to be measurable and available only when cash is received by the City.
The City reports the following major governmental funds:
General Fund
This is the City's general operating fund. It accounts for all financial resources of the general government, except
those required to be accounted for in another fund.
Street Fund
This fund accounts for receipt and disbursement of State -levied "unrestricted" motor vehicle fuel taxes which must
be accounted for in a separate fund and expended for street -oriented engineering, construction and maintenance
purposes only.
Utility Tax Fund
This fund was established to account for all utility tax receipts. These receipts will subsequently be distributed to
various funds (Debt Service, Capital Improvement Projects, etc.) for project expenditure as determined by the City
Council.
Debt Service Fund
This fund accounts for the accumulation of resources for the payment of general obligation and assessment bond
principal, interest and related costs.
Downtown Redevelopment CIP Fund
This fund was established to accumulate resources to set aside for downtown projects.
Transportation CIP Fund
This fund accounts for receipts and disbursements related to acquisition, design, construction and any other related
street project expenditures.
The City reports the following fund groups as non -major funds:
Special Revenue Funds
These funds are to be used to account for the proceeds of revenues and sources (other than special assessments,
expendable trust or major capital projects) that are legally restricted to expenditures for specified purposes.
Capital Project Funds
These funds account for the acquisition or construction of major capital facilities with the exception of those facilities
financed by the proprietary and trust funds. The major sources of revenues for this fund are general obligation bond
proceeds, grants from other agencies, local taxes and contributions from other funds.
Citv ofFederal Wav / 34
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. 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 the related balance sheets.
Private sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both
the government -wide and proprietary fund financial statements to the extent that those standards to not conflict with or
contradict guidance of the Governmental Accounting Standards board. Governments also have the option of following
subsequent private -sector guidance for their business -type activities and enterprise funds, subject to the same limitation. The
City of Federal Way has elected not to follow subsequent private -sector guidance.
As a general rule the effect of the interfund activity has been eliminated for the government -wide financial statements.
Amounts reported as program revenue include 1) charges to customers, 2) operating grants and contributions, and 3) capital
grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather
than program revenues. General revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from non -operating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal
ongoing operations. The principal operating revenues of the enterprise and internal service funds are primarily user charges,
the cost of providing goods or services to the general public on a continuing basis. Operating expenses for enterprise funds
and internal service funds includes the cost of sales and services, administrative expenses, and depreciation on capital assets.
All revenues and expenses not meeting this definition are reported as non -operating revenues and expenses.
The City reports the following major proprietary funds:
Enterprise Funds
The City uses enterprise funds to account for government activities that are financed and operated in a manner similar to
private business. Costs of providing services to the general public are primarily financed by user fees.
Surface Water Management Fund
This fund was established to administer and account for all receipts and expenditures related to the City's surface and
storm water management system.
Dumas Bay Centre Fund
This fund was established to account for the revenues and expenses related to the acquisition, capital improvements
maintenance and operations of the City -owned Dumas Bay Centre and Knutzen Family Theatre.
Internal Service Funds
The City uses Internal Service Funds to account for the financing of goods or services provided by one department or agency
to other departments or agencies of a government, or to other governments, on a cost -reimbursement basis.
A description of each individual Internal Service Fund included in the Comprehensive Annual Financial Report is provided
below:
Risk Management Fund
This fund accounts for the City's risk financing activities established to minimize adverse effects of losses associated
with property and casualty, medical and dental, unemployment and worker's compensation claims. Both risk control
(to minimize the losses that strike and organization) and risk financing (to obtain finances to provide for or restore
the economic damages of those losses) are involved. The City is currently self -insuring only State Unemployment
Compensation. Related premiums received by the fund are used to reimburse the unemployment benefits paid to
eligible individuals and to establish reserves for the payment of estimated future unemployment claims liability. The
City is also currently recovering costs and building reserves for general liability including property, casualty, errors
and omissions and fidelity coverage.
Citv ofFederal Wav / 35
Information Systems Fund
This fund was established to account for all costs associated with data processing, telecommunications and the
Geographical Information System (GIS). This fund will own and depreciate all non-proprietary fund assets related to
these functions, and will charge equipment/software users for both maintenance and operating costs and equipment
replacement charges based on depreciation schedules.
Support Services Fund
This fund accounts for duplication, graphics and other general support services provided to departments and funds
throughout the City.
Fleet and Equipment Fund
This fund accounts for the cost of maintaining City vehicles and other motorized equipment. Rates charged to user
departments are based on the full cost of maintaining equipment items, including the recovery of related depreciation
expense.
Buildings and Furnishin sg Fund
This fund accounts for all costs associated with the operation and maintenance of specified City buildings. City
building facilities and furnishings will be owned by this Fund, and both maintenance/operating costs and depreciation
recovery will be charged City departments and funds.
Basis of Accounting
Basis of accounting refers to when revenues and expenditures or expenses are recognized and reported in the financial
statements.
The accrual basis of accounting is used by proprietary funds. Under this method, revenues are recognized when earned, and
expenses are recognized when incurred.
The modified accrual basis of accounting is used by governmental funds. Revenues and other financial resources 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. The City uses thirty days when evaluating the available criteria.
Expenditures are recognized when the related fund liability is incurred. Since the recognition of depreciation does not reduce
net financial resources, it is not considered as 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.
Major revenues recorded on the modified accrual basis are:
Property Taxes - King County acts as the City's collection agent for these taxes. 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
received in January are considered both measurable and available and are therefore recognized as revenue in the current year.
Other Locally Levied Taxes - King County also acts as the City's collection agent for the '/a% and optional 1/a% real estate
excise taxes. 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. The State of Washington acts as the City's
collection agency for the locally levied sales tax. The sales tax is distributed monthly and remitted to the City in the following
month. The Sales Tax remittance in January is considered both measurable and available and is therefore accrued as revenue
at year-end.
Grant Revenues - Under Section G60.109 of the Codification of Governmental Accounting and Financial Reporting
Standards, 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.
Citv ofFederal Wav / 36
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; 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 licenses and permits, fines
and forfeitures, and other miscellaneous revenues which are generally not measurable until received.
FINANCIAL STATEMENT PRESENTATION
In order to obtain an understanding of changes in the City's position and the results of the City's operations, the financial
statements for year end of 2010 should be read in conjunction with the government's financial statements for the year ended
December 31, 2009.
BUDGETARY INFORMATION
Scope of Budget
Annual appropriated budgets are adopted for the general, some special revenue, and debt service funds on the modified
accrual basis of accounting. For governmental funds, there are no differences between the budgetary basis and generally
accepted accounting principles. Budgets for project and grant related special revenue funds and capital project funds are
adopted at the level of the individual project and for fiscal periods that correspond to the lives of 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. 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.
The individual funds within each fund type which are included in the City's annual operating budget (funds budgeted on an
annual basis) are:
General Fund
Special Revenue Funds
Street Fund
Arterial Street
Utility Tax
Solid Waste & Recycling
Federal Way Community Center
Traffic Safety
Hotel/Motel Lodging Tax
Paths & Trails
Debt Service Fund
Procedures for Adopting the Biennial 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:
By late May the official budget call is made by the Finance Director for current level service budgets and a preliminary
financial forecast.
By late June, 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.
Prior to the first Tuesday in September, the Mayor 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.
Citv ofFederal Wav / 37
• City Council conducts workshops and public hearings on the proposed budget between mid -September and mid -
December.
• No later than the third Monday in November, the City Council must adopt an ordinance to establish the amount of
property taxes to be levied in the coming year.
By October 31, the Mayor 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.
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.
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.
Amending the Budget
The Mayor 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. During 2010, the budget was amended four times.
The budget amounts shown in the financial statements are the final authorized amounts as revised during the year.
The financial statements contain the original and final budget information. The original budget is the first complete
appropriated budget. The final budget is the original budget adjusted by all reserves, transfers, allocations, supplemental
appropriations, and other legally authorized changes applicable for the fiscal year.
Encumbrances
An encumbrance system is used for budgetary control purposes to record commitments resulting from approved purchase
orders. During the year, encumbrances are recorded in the accounting system at the time purchase orders are issued for goods
and services. Upon payment, the encumbrance is reversed and the actual cost of the related item is recorded as a fund
expenditure. Outstanding encumbrances lapse at year end, are canceled and rolled over to the next fiscal year. Therefore,
these amounts have not been recorded as current year expenditures unless considered to be susceptible to accrual at the end of
the year. The total encumbrances at year-end for the City were $14,015,815.
ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY
Cash and Investments
The City follows the practice of pooling cash and investments of all funds for investment purposes, except for cash held in
escrow, which is disclosed separately on the balance sheet. Each fund's portion of total cash and investments is summarized
by fund type in the combined balance sheet as equity in pooled cash and investments.
It is the City's policy to invest all cash not immediately required for disbursement. At December 31, 2010, the State Treasurer
was holding $49,159,669 in the State Investment Pool. The State Investment Pool is considered a cash equivalent. The
interest earnings on these investments are allocated to all funds based on the average monthly balance for each fund.
For purposes of the Statement of Cash Flows, the City considers all highly liquid investments with a maturity of three months
or less when purchased, to be cash equivalents. At December 31, 2010, the total cash and cash equivalents were $63,763,370.
Citv ofFederal Wav / 38
The City's deposits are entirely covered by federal depository insurance (FDIC) or by collateral held in a multiple financial
institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC).
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.
In accordance with GASB 31, investments in money market investments and participating interest -earning investment
contracts with a remaining maturity of one year or less at the time of purchase are stated at amortized cost. All other
investments are stated at fair value. There was no material deviation from fair value quoted at year-end.
Receivables
Taxes receivable consists of property taxes and related interest and penalties (see Property Tax Note 6). Accrued interest
receivable consists of amounts earned on investments, notes, and contracts at the end of the year.
Due From Other Governments 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. A separate schedule of Due From Other
Governments is disclosed in Note 6.
Amounts Due to and from Other Funds; Interfund Loans
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are
referred to as either "interfund loans receivable/payable" or "advances to/from other funds." All other outstanding balances
between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental
activities and business -type activities are reported in the government -wide financial statements as "internal balances."
Loans between funds must be authorized by the Mayor. 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. A separate schedule of interfund loans receivable and payable is
furnished in Note 12.
Inventories
Inventories in the governmental funds are recorded as expenditures at the time of purchase. Amounts remaining at year-end
are immaterial and, therefore, are not reflected on the balance sheets of those funds. There were no material inventories at
year-end in the Internal Service or Enterprise Funds.
Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure, are reported in the applicable governmental or
business -type activities columns in the government -wide financial statements.
Pursuant to GASB Statement 34, the City included capitalized retroactive infrastructure assets owned prior to 2003, such as
roads, bridges, curbs and gutters, streets and sidewalks, bridges, and lighting systems, in the year end 2007 financial
statement. The City compiled an inventory of the retroactive infrastructure and recorded these capital assets for year end
2007. The City inventoried current infrastructure assets; performed a condition assessment on the infrastructure assets and
summarized the results using a measurement scale. To arrive at the retroactive infrastructure assets value, the City used a
deflationary factor of the change from the City's assessed value during 1990 through 2006 and multiplied this factor to the
infrastructure to determine the historical cost. The City elected to capitalize all infrastructure assets including pre- 1990 assets
when the City incorporated from unincorporated King County. The City has determined that this method would accurately
reflect capital assets. Infrastructure is the largest asset class of the City and has historically not been reflected nor a measure
of its consumption been charged.
Major expenditures for capital 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. The City has adopted
a general capital asset capitalization policy where an item's cost must equal or exceed $1,000. All capital assets are valued at
historical cost (or estimated cost, where historical cost is not known/or estimated market value for donated assets).
Citv ofFederal Wav / 39
Depreciation on all capital assets is recorded as an allocated expense in the government -wide Statement of Activities and in
the proprietary fund statements. Capital assets are reported net of depreciation. The City uses a combination of group
depreciation and straight-line depreciation over the life of the assets.
The following summarizes the average service lives used to calculate depreciation for specific categories of assets in the City's
Assets:
Asset Class Life in Years
Computers..................................................................................... 5-6
Printers & Faxes................................................................................7
Telecommunications Equipment.......................................................7
Police Radio Equipment..................................................................11
Other Office Equipment..............................................................
4-10
Office Furniture and Fixtures..........................................................10
Recreation Equipment.....................................................................10
ParksEquipment.........................................................................
6-10
PoliceEquipment........................................................................
9-11
Shop/Miscellaneous Equipment ................................................
10-12
Heavy Work Equipment............................................................
10-16
Non -Police Vehicles.........................................................................7
Police Patrol Vehicles.......................................................................5
Police Non -Patrol Vehicles.........................................................
7-10
HeavyTrucks..............................................................................
8-10
Land Improvements........................................................................20
Buildings.........................................................................................20
Storm Drainage Systems.................................................................20
Infrastructure...........................................................................
15 -100
Compensated Absences
The City records a liability for all outstanding vacation pay and accrued compensatory time. In governmental funds, vacation
pay and compensatory time is recorded as expenditures when paid which occurs when used or upon termination. In the entity -
wide statements and the proprietary fund statements, vacation pay and compensatory time is recorded as a liability and
expense in the year earned.
Employee vacation leave is accumulated monthly at rates ranging from 12 to 22.5 days per year depending on term of
employment. Employees may accumulate up to a maximum of 240 hours of vacation leave, except the Police Guild, who can
accrue up to a maximum of 360 hours. Outstanding vacation leave is payable upon termination of employment at the
following rate: City Employees up to 240 hours and Police Guild members is at two years of their accrued rate at the time of
termination.
The differences between the governmental fund statements and the entity -wide statements represent reconciling items between
the fund level and government -wide financial statements. The reconciliations are included as part of the financial statements.
A non-exempt employee may request compensatory time off in lieu of overtime payment. Compensatory time is accrued at a
rate of one and one-half hours for each hour of overtime worked, to a maximum of eighty hours for both City employees and
Police Guild members.
Sick leave may be accumulated up to a maximum of 720 hours for regular City employees per City policy and 1,040 hours for
the Police Guild, per their contract. The monthly accrual rate for City employees is 8 hours per month. Accumulated sick
leave is not payable upon termination of employment. Outstanding sick leave at year-end is not accrued due to the difficulty
in estimating the portion of existing balances likely to result in expenditures in future periods.
Long-term Liabilities
In the government -wide financial statements and the proprietary fund financial statements, long-term debt and other long-term
obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund
statement of net assets. Long-term debt outstanding at year-end is outlined in Note 11.
Citv ofFederal Wav / 40
Deferred Revenues
The deferred revenue 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. The portions of Property Taxes that do not meet the available criteria are recorded as
deferred revenue.
Fund Balance Classification
Pursuant to GASB Statement No. 54, the City has classified their fund balances using the following categories and criteria:
Nonspendable - cannot ever or currently be spent and or has to be legally or contractually kept intact.
Restricted - use of fund balance is subjected to externally enforceable legal restrictions
Committed - use of fund balance are constrained by limitations that the Council imposes upon the City
Assigned - use of fund balance are constrained by intended use of the fund
Unassigned - unassigned fund balance can only be residual of the general fund
2010 Fund Balance Classification
General Street Utility Debt Downtown Transport- Nonmajor
Fiord Balance Fund Tax Service Redevelop. ation Gov't Total
Nonspendable:
Court Trust
$ 81,146
$ $ $ $ $ $ $
81,146
Restricted for:
Police Covert/Seizure
146,798
146,798
Petty Cash/Advance Travel
21,600
21,600
Future debt payments
-
3,379,426
3,379,426
Special Contracts/studies
- 557,474
557,474
Hotel/Motel Lodging Tax
215,657
215,657
Path & Trails Reserves
136,361
136,361
Downtown Redevelopment - REET
2,771,202 -
2,771,202
City Facilities CIP - REET
- 240,877
240,877
Parks CIP - REET/Mitigation/Doantion/Path & Trails
1,981,822
1,981,822
Transportation CIP - REET/Mitigation/Gas Tax
8,494,148 -
8,494,148
Committed to:
Utility Tax
3,012,646 -
3,012,646
Utility Tax - Prop 1
697,535 -
697,535
Transportation CIP
- - 11,607,098
11,607,098
Downtown Redevelopment
234,604 -
234,604
City Facilities CIP
- 436,706
436,706
Arterial Street
561,374
561,374
Solid Waste/Recycling
135,099
135,099
2% for the Arts
293
293
Federal Way Community Center
780,754
780,754
Traffic Safety
833,520
833,520
Parks CIP
- 311,982
311,982
Assigned to:
Snow/Ice Removal
-
100,000 -
100,000
Unassigned:
General Fund
8,188,575
-
8,188,575
Total Fund Balance: $ 8,438,119 $ 100,000 $ 3,710,181 $ 3,379,426 $ 39005,806 $ 209101,246 $ 6,191,919 $ 449926,699
Citv ofFederal Wav / 41
Interfund Transactions
There are four types of transactions between funds - interfund loans, interfund services provided and used, 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. Interfund services provided and used
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 that belong to
another fund. They involve only expenditure or expense accounts.
Except for the Enterprise Fund, transfers are accounted for as "other financing sources and uses" and are therefore included in
the operating statements.
NOTE 2 — RECONCILIATION OF GOVERNMENT -WIDE & FUND FINANCIAL STATEMENTS
Explanation of Certain Differences Between the Governmental Funds Balance Sheet and the Government -Wide
Statement of Net Assets
The governmental funds' balance sheet includes reconciliation between fund balance — total governmental funds and net
assets — governmental activities as reported in the government -wide statement of net assets. One element of that
reconciliation explains that "long-term liabilities, including bonds payable, are not due and payable in the current period, and,
therefore, are not reported in the funds." The details of this $30,216,587 difference are as follows:
Bonds Payable at beginning of year $29,212,950
Plus: Inclusion of compensated absences 1,532,637
Less: Current year reduction of principal portion of debt 52( 9,000)
Net adjustment to reduce fund balance -total governmental
funds to arrive at net assets — governmental activities $30,216,587
Explanation of Certain Differences Between the Governmental Funds Statement of Revenues, Expenditures, and
Changes in Fund Balances and the Government -Wide Statement of Activities
The governmental funds' statement of revenues, expenditure, and changes in fund balances includes reconciliation between
net changes in fund balances — total governmental funds and changes in net assets of governmental activities as reported in
the government -wide statement of activities. One element of that reconciliation explains that "Governmental funds report
capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their
estimated useful lives and reported as depreciation expense." The details of this $7,922,502 difference are as follows:
Capital outlay $13,311,338
Less: Governmental depreciation expense (5,523,232)
Plus: Investment in Joint Venture 134,401
Net adjustment to increase net changes in fund balances —
Total governmental funds to arrive at changes in net assets
of governmental activities $7,922,502
Another element of the reconciliation states that "Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds." This item presents:
Property taxes earned reported as deferred in the fund statements 4 448
Another element of the reconciliation states that "Some expenses reported in the statement of activities do not require the use
of current financial resources and, therefore, are not reported as expenditures in the funds." This item represents:
Compensated absences LZ2 998
NOTE 3 — STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
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.
Citv ofFederal Wav / 42
NOTE 4 — SUPPLEMENTAL APPROPRIATIONS
Operating Budget Funds
Appropriations established during 2010 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. Both original and final budget
appropriations are shown on the accompanying financial statements. The final budget values include all adopted adjustments
to original budget amounts.
FUND
ORIGINAL
BUDGET
2010
SUPPLEMENTAL
APPROPRIATIONS
FINAL
BUDGET
General Fund $
44,226,095
$ 994,180 $
45,220,276
Special Revenue Funds:
Street Fund
4,946,735
(228,799)
4,717,936
Arterial Street Fund
1,968,000
472,063
2,440,063
Utility Tax Fund
15,791,292
(2,021,775)
13,769,517
Solid Waste/Recycling Fund
502,405
(21,264)
481,140
Special Contracts/Studies
-
271,062
271,062
Hotel/Motel Lodging Tax
221,755
148,952
370,707
2% for the Arts
-
293
293
Federal Way Community Center
2,120,343
(1,065)
2,119,278
Traffic Safety
-
880,000
880,000
CDBG
460,512
813,760
1,274,272
Subtotal Special Revenue Funds
26,011,042
313,227
26,324,269
Debt Service Fund
41275,805
(80,316)
4,195,489
Total $
74,512,942
$ 1,227,091 $
75,740,033
NOTE 5 — DEPOSITS 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 2010 the City utilized all the above with the exception of bankers' acceptances as legal authorized investment instruments.
The City's investment policies are described in Note 1.
Cash and Deposits
The City follows the practice of pooling cash and investments of all funds, except restricted funds and funds held with a
trustee or in escrow, for investment purposes as disclosed in Note 1. At December 31, 2010, the equity in pooled cash and
investments was $63,995,822.
At year-end, the City had $63,763,370 in cash and cash equivalents which consisted of investments with the State Pool of
$49,159,669 the City's checking account bank balance prior to outstanding checks was $14,473,846; and petty cash and
change funds, advance travel fund and investigative fund totaling $48,710, and Court Trust of $81,146. No deposits were
uninsured or uncollateralized. Insurance coverage up to $250,000 is through federal depository insurance and the Washington
Public Deposit Protection Commission (WPDPC) for amounts over $250,000. 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. Investments are carried at cost or book value because the City holds all investments until maturity. The fair value of
the positions in the State Investment Pool is the same as the value of the pool shares. The State Investment Pool is managed
by the Treasurer of the State of Washington.
Citv ofFederal Wav / 43
As of December 31, 2010 the City had the following investments and maturities:
SCHEDULE OF INVESTMENTS BY MATURITIES
AS OF DECEMBER 31, 2010
Investment maturities
Book Less than 1 to 2 Greater than
Investment Type Value 1 year years 3 years
State Investment Pool $ 49,159,669 $ 49,159,669 $ - $ -
$ 49,159,669 $ 49,159,669 $ - $ -
Reconciliation to Governmental -Wide Statement of Net Assets:
BofA, checking account per books $ 14,473,846
Petty cash/change fund/Advance travel/Investigative fund 48,710
State Investment Pool 49,159,669
Municipal Court Trust on books 81,146
Subtotal Cash and Cash Equivalents 63,763,370
Cash with escrow agent 232,452
Total cash and investments, Governmental -Wide
Statement of Net Assets $ 63,995,822
Investments
Interest Rate Risk
As a means of limiting its exposure to fair value losses arising from rising interest rate, the City's investments policy states
that "no more than 20% of the portfolio may be invested beyond 12 months, and average maturity of the portfolio may not
exceed 2 years."
Credit Risk
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. This is measured by
the assignment of a rating by a nationally recognized statistical rating organization.
State law and the City's investment policy limits the instruments in which the City may invest. The following are categories
of investments authorized under the City's policy, in general order of safety and liquidity: State Investment Pool; repurchase
agreements; U.S. treasury obligations; U.S. government agencies; U.S. government -sponsored corporations/instrumentalities;
bankers' acceptances (secondary market domestic and foreign); commercial paper (secondary market); insured certificates of
deposit (banks and savings & loans); and uninsured/collateralized certificates of deposit (banks and savings & loans).
The credit risk of the State Investment Pool is limited to obligations of the US Government, government sponsored
enterprises, or insured demand deposit accounts and certificates of deposit.
As of December 31, 2010, all City investments were in the State Local Government Investment Pool. The State Investment
Pool ratings for Long Term Bonds are as follows: Fitch Investors Service, Inc. AA+, Moody's Investors Services Aal, and
Standard & Poor's Ratings AA+.
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of an investment in a single issuer. The City
diversifies its investments by security type and institution. The investment policy states: "no more than 5% of the portfolio
may be invested in the securities of a single issuer, except for the U.S. Treasury, to which no limits apply, and commercial
paper, which is limited to 3% of the portfolio. No more than 30% of the portfolio may be invested in Bankers' Acceptances
and Certificates of Deposit."
Citv ofFederal Wav / 44
Other Information
Below is a schedule of investments by fund type:
SCHEDULE OF INVESTMENTS BY FUND CATEGORY AND INVESTMENT TYPE
AS OF DECEMBER 31, 2010
State
Investment
Fund Type Pool Total
General Fund $ 6,061,680 $ 6,061,680
Special Revenue Funds 7,669,413 7,669,413
Capital Projects Funds 21,328,367 21,328,367
Enterprise Funds 2,084,342 2,084,342
Internal Service Funds 12,015,867 12,015,867
Total $ 49,159,669 $ 49,159,669
NOTE 6 — RECEIVABLES AND DUE FROM OTHER GOVERNMENTS
Property Taxes
The King County Treasurer is responsible for collecting property taxes levied in the County by all taxing districts. Amounts
collected by the County on the City's behalf are remitted daily.
As described in Note 1, taxes are levied and become an enforceable lien against properties as of January 1. Annual tax
billings may be paid in two equal installments, due April 30 and October 31. At December 31, 2010, the total balance of
property taxes receivable recorded by the City was $426,950. Of this, $379,807 is recorded as deferred revenue, since it was
not collected within the first 30 days of 2010. The property tax levy calendar in 2010 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% of market value.
October 31 Second installment is due.
Property taxes are recorded as a receivable when levied, offset by 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 30 days. No allowance for uncollectible taxes is established because delinquent taxes are considered fully collectible.
Under State law, the maximum levy (for general governmental services) is up to $3.60 per $1,000 of assessed valuation,
subject to two limitations, set forth below. Since the City of Federal Way is not a full service city, the City is only allowed
$1.61. The remaining $1.92 is for the fire district ($1.50) and library district ($0.49).
1. Chapter 84.55 of the State RCW was amended most recently by Initiative No. 747 (which was passed by voters on
November 6, 2001), limits the total dollar amount of regular property taxes levied by the City to the amount of such
taxes levied in the three most recent years multiplied by a limit factor, plus an adjustment to account for taxes on new
construction, improvements and state -assessed property at the previous year's rate. As amended by Initiative No.
747, the limit factor is the lesser of 101% or 100% plus the percent change in the Implicit Price Deflator, unless a
greater amount is approved by a simple majority of the voters; and
2. The Washington State Constitution limits the total regular property taxes to 1% of assessed valuation or $10 per
$1,000 of value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or
below the 1 % limit.
The City's regular levy for 2010 was $1.13 per $1,000 on an assessed valuation of $8,623,014,622 for a total regular levy of
$9,690,241.
Citv ofFederal Wav / 45
Deferred Revenue
Deferred revenue reported on the governmental funds balance sheet is in the schedule below. Grant reimbursements and
refuse collection fees are receivable within one year of the end of the fiscal period.
Downtown Debt
General
Street Redevelopment Service
Non Major
Proprietary
Total
Property Tax
$ 379,807
$ $ 14 $
$
$ -
$ 379,821
SWM Fees
-
-
258,666
258,666
Energy Grant (ARRA)
-
67,920
67,920
Public Defender Grant
14,497
-
14,497
King County New Solution Grant
6,403
6,403
Commute Trip Reduction Grant
-
58,390
58,390
PACC Grant Payment
-
-
Refuse Collection Fees
22,720
22,720
Federal Way Community Center Use Fees
139,224
139,224
Federal Way Fire Department Buy -In of ValleyCom
-
157,470
-
157,470
Recreation Programs/Facility Rentals
33,488
- -
-
144,822
178,310
Total by Fund
$ 434,194
$ 58,390 $ 14 $ 157,470
$ 161,943
$ 471,408
$ 1,283,420
Receivables & Due from Other Governments
The receivables for the fiscal year ended December 31, 2010 on the government -wide statement of net assets are detailed in
the following schedule.
Downtown Nonmajor
General Street Utility Tax Debt Service Redevelopment Transportation Govt'1 Proprietary Total
Property Tax $ 426,950 $ - $ - $ - $ 15 $ - $ - $ - $ 426,965
Real Estate Excise Tax - 210,498 210,498
Utility Tax - 1,463,018 - 1,463,018
Gambling Tax 65,438 - 65,438
Recreation Programs/
Facilities 59,431 20,028 79,458
Grants & Contributions 69,494 1,008 30,624 1,646,968 877,821 163,164 2,789,079
Other Receivable 11,470 - - - 20,009 31,479
State Shared Revenue 1,139,724 84,004 2,660 50,819 - 1,277,207
Surface Water Management Fees - - - - - - - 284,991 284,991
Total by Fund $ 1,772,507 $ 85,011 $ 1,465,678 $ 210,498 $ 30,639 $ 1,646,968 $ 928,640 $ 488,192 $ 6,628,134
NOTE 7 - DUE TO OTHER GOVERNMENTS
At December 31, 2010, the City recorded $209,230 as due to other governmental units as follows:
General Fund
King County - Jail Services $ 54,858
King County - 2010 Primary/General Election Cost 137,000
Total Governmental Activities: $ 191,858
Surface Water Mgmt
King County - SWM Fees $ 17,372
Total Business -Type Activities: $ 17,372
Citv ofFederal Wav / 46
NOTE 8 — CAPITAL ASSETS
Capital assets activity for the year ended December 31, 2010 was as follows:
Beginning Balance
Ending Balance
Governmental Activity
1/1/2010
Additions
Deletions
12/31/2010
Capital assets, not being depreciated:
Land
$ 294,568,473 $
6,701,738 $
-
$ 301,270,211
Construction in progress
32,209,930
6,530,101
(22,546,091)
16,193,940
Total capital assets, not being depreciated:
326,778,403
13,231,839
(22,546,091)
317,464,151
Capital assets, being depreciated
Buildings
16,698,395
-
-
16,698,395
Improvements other than buildings
43,166,135
98,082
-
43,264,217
Infrastructure
120,659,730
22,527,507
-
143,187,237
Machinery and equipment
14,074,656
1,090,338
(451,321)
14,713,673
Total capital assets, being depreciated:
194,598,916
23,715,927
(451,321)
217,863,522
Less accumulated depreciation for:
Buildings
(3,910,901)
(886,730)
-
(4,797,631)
Improvements other than buildings
(10,603,355)
(2,163,211)
-
(12,766,566)
Infrastructure
(26,152,892)
(3,322,949)
-
(29,475,841)
Machinery and equipment
(8,792,821)
(1,261,976)
418,506
(9,636,291)
Total accumulated depreciation:
(49,459,968)
(7,634,866)
418,506
(56,676,328)
Total assets being depreciated, net 145,138,948 16,081,061 (32,815) 161,187,194
Governmental activities capital assets, net $ 471,917,351 $ 29,312,900 $ (22,578,906) $ 478,651,345
Beginning Balance
Ending Balance
Business -Type Activities
1/1/2010
Additions
Deletions 12/31/2010
Capital assets, not being depreciated:
Land
$ 10,077,203 $
230,458 $
- $ 10,307,661
Construction in progress
2,029,180
253,115
(516,105) 1,766,190
Total capital assets, not being depreciated:
12,106,383
483,573
(516,105) 12,073,851
Capital assets, being depreciated
Buildings
3,596,441
-
- 3,596,441
Improvements other than buildings
48,012,197
516,105
- 48,528,302
Infrastructure
1,916,645
-
- 1,916,645
Machinery and equipment
106,643
-
- 106,643
Total capital assets, being depreciated:
53,631,925
516,105
- 54,148,030
Less accumulated depreciation for:
Buildings
(2,259,099)
(179,250)
- (2,438,349)
Improvements other than buildings
(11,363,331)
(480,122)
- (11,843,453)
Infrastructure
(62,310)
(19,166)
- (81,476)
Machinery and equipment
(82,526)
(2,946)
- (85,472)
Total accumulated depreciation:
(13,767,266)
(681,484)
- (14,448,750)
Total assets being depreciated, net 39,864,659 (165,379) - 39,699,280
Business Type activities capital assets, net $ 51,971,042 $ 318,194 $ (516,105) $ 51,773,132
Citv ofFederal Wav / 47
At the end of 2010, 55 projects comprise the Construction in Progress for Governmental Activities. Upon completion, the
projects will be capitalized in the Government -wide statements in their appropriate categories. Construction commitments for
Governmental Activities as of December 31, 2010, are as follows:
Governmental Activities Projects
Construction
Remaining
in aro¢ress
Commitment
Downtown Redevelopment
281,430
194,839
New City Hall
688
-
Community Center
-
436,707
Major Facility Rehabilitation
191,182
95,947
Steel Lake Maint Expansion
152,224
-
Performing Arts Center
64,072
956,007
Emergency
1,034,370
3,921
Regional Park Development
300,666
-
Major Maintenance -Parks Facilities
-
216,576
Parks Acquisition -Armstrong Property
-
7,296
Down Town Park
28,950
96,050
Parks - Playgrounds
343,859
281,253
Lakota Park
76,378
90,534
Hylebos Boardwalk Replacement
1,360,755
28,756
Sacajawea Park Masterplan
47,382
701,120
Camp Kilworth
35,929
-
Trail and pedestrian access improvements
3,255
100,000
Community Gathering Spaces/Small CIP
92
-
Planning Fee Study/Open space Mgmt plan
34,779
4,222
Laurelwood
35,344
166,098
Panther 1 Lake Open Space Feasibility Study and Master plan
-
54,200
Celebration Park Maintenance Building
71,583
Annual Transports System Safety Improvements
-
1,277,944
Weyerhauser Way & So 336th
407,068
-
So 348th St @ 1st Ave South Turn Lanes
1,911,991
1,284,339
21st Ave SW/SW 357th st
790,092
-
S 320th St @ 20th Ave South
-
264,822
S 348th St at SR 161 (348TH & Enchanted)
671,322
-
SW 312th ST @ SR509
-
497,437
S 320th St-8th Ave S-SR99
-
187,831
loth Avenue SW / SW 344th St: SW Campus Drive - 21st Ave SW
109,421
202,452
1st Ave South & South 28th Intersection
-
11,648
S 336th St:18th Ave S-I5
-
75
1-5 City Center Access Study
1,880,768
-
S 352nd Street Extension From SR-99 to SR-161
401,828
5,173,609
S 320th St SW at 21st Ave SW
-
4,124
S 320th St: 1st Ave to 8th Ave S
58,285
S 304th St @ 28th Ave S
-
1,435
South 344th st: sr99 - 16th ave south
9,396
-
South 320th st @ 1-5 southbound ramp
289,773
4,952,554
South 356th St: SR99 - SR161
145
18,002
1st Ave South :So 292nd St - So 312th St
-
19
SR99 HOV Lanes Phase 4
5,151,440
10,227,048
South 312th St @ 28th Ave South
-
841
Undergrounding of Ov/Hd X-crossing on SR99
220,299
-
Military Rd S: S Star Lake Rd - S 288th St
-
10,553
SW 320th St @ 47th Ave SW
1,110
SW 336th Way / SW 340th St: 26th PI SW - Hoyt Rd
-
21,285
21ST AVE SW @ SW 336TH ST
103,637
995,257
South 320th Street Utility Underground
104,687
-
Citywide Flashing Yellow Lights Installation
36,550
106,280
SR 99 @ S 312th St
-
63,000
SW 344th St: 12th Ave SW - 21st Ave SW
1,751
Street Lights on 20th Way So
-
-
Citywide Pedestrian Crossing Improvements
114,164
320,456
S 344th Way @ Weyerhaeuser Way S
-
172,000
Total governmental activities
16,193,940
29,359,266
Citv ofFederal Wav / 48
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental and Internal Service Activities
General Government
$ 369,271
Security of Persons & Property
1,178,948
Transportation
3,516, 821
Physical Environment
27,605
Economic Environment
153,102
Health
29,304
Culture & Recreation
2,359,817
Total Depreciation - Governmental Activities
1 $ 7,634,866
Busines-Type Activites
Utilities - Surface Water Management
Culture & Recreation - Dumas Bay Centre
$ 499,486
181,998
Total Depreciation - Business -Type Activities
$ 681,484
NOTE 9 — PENSION PLANS
Washington State Department of Retirement Systems
Substantially all City full-time and qualifying part-time employees participate in one of the following statewide retirement
systems administered by the Washington State Department of Retirement Systems, under cost -sharing multiple -employer
public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems (DRS), a
department within the primary government of the State of Washington, issues a publicly available comprehensive annual
financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS
CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, P.O. Box 48380, Olympia,
WA 98504-8380
The following disclosures are made pursuant to GASB Statement 27, Accounting for Pensions by State and Local Government
Employers.
Public Employees' Retirement System (PERS) Plan I, 2 and 3
Plan Description
PERS is a cost -sharing multiple -employer retirement system comprised of three separate plans for membership purposes:
Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution plan. Membership is
mandatory for all City employees working 70 hours per month for 5 months out of the twelve month period_ Membership in
the system includes elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than
judges in judicial retirement system); employees of legislative committees; community and technical colleges, college and
university employees (not in national higher education retirement programs); judges of district and municipal courts; and
employees of local government. The PERS system includes three plans. Participants who joined the system by September 30,
1977 are Plan 1 members. Those who joined on or after October 1, 1977 and by either, February 28, 2002 for state and higher
education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option
to transfer their membership to Plan 3. PERS participants joining the system on or after March 1, 2002 for state and higher
education employees, or September 1, 2002 for local government employees have the option of choosing membership in
either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. An employee is reported in
Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. PERS defined benefit
retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PERS
retirement benefit provisions are established in state statute and may be amended only by the State Legislature.
Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible
for retirement at any age after 30 years of service, or at age 60 with five years of service, or at age 55 with 25 years of service.
The annual pension is 2 percent of the average final compensation per year of service, capped at 60 percent. The average final
compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. If qualified,
after reaching age 66 a cost -of -living allowance is granted based on years of service credit and is capped at three percent
annually.
Citv ofFederal Wav / 49
Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at
age 65 with five years of service, or at age 55 with 20 years of service, with an allowance of 2 percent per year of service of
the average final compensation per year of service. The average final compensation is based on the greatest compensation
during any eligible consecutive 60-month period. Plan 2 retirements prior to 65 receive reduced benefits. If retirement is at
age 55 or older with at least 30 years of service, a 3 percent per year reduction applies; otherwise an actuarial reduction will
apply. There is no cap on years of service credit; and a cost -of -living allowance is granted (indexed to the Seattle Consumer
Price Index), capped at 3 percent annually.
Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions
finance a defined contribution component. The defined benefit portion provides a benefit calculated at 1 percent of the average
final compensation per year of service. The average final compensation is based on the greatest compensation during any
eligible consecutive 60-month period. Plan 3 members become eligible for retirement if they have: at least ten years of
service; or five years including twelve months that were earned after age 54; or five service credit years earned in PERS Plan
2 prior to June 1, 2003. Plan 3 retirements prior to the age of 65 receive reduced benefits. If retirement is at age 55 or older
with at least 30 years of service, a 3 percent per year reduction applies; otherwise an actuarial reduction will apply. There is no
cap on years of service credit; and Plan 3 provides the same cost -of -living allowance as Plan 2. The defined contribution
portion can be distributed in accordance with an option selected by the member, either as a lump sum or pursuant to other
options authorized by the Employee Retirement Benefits Board.
There are 1,189 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial
valuation date for the plans of June 30, 2010:
Retirees and Beneficiaries Receiving Benefits
74,857
Terminated Plan Members Entitled to But Not Yet Receiving Benefits
28,074
Active Plan Members Vest
105,339
Active Plan Members Nonvested
53,896
Total
262,166
Funding Policy
Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates and Plan 2 employer and
employee contribution rates and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by
statute at six percent and do not vary from year to year. The employer and employee contribution rates for Plan 2 and the
employer contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined
benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature. PERS Plan 3
defined contribution is a non-contributing plan for employers. Employees who participate in the defined contribution portion
of PERS Plan 3 do not contribute to the defined benefit portion of PERS Plan 3. The Employee Retirement Benefits Board
sets Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options are
graduated rates dependent on the employee's age. The methods used to determine the contribution requirements are
established under state statute in accordance with Chapters 41.40 and 41.45 RCW.
The required contribution rates expressed as a percentage of current year covered payroll, as of December 31, 2010, were:
PERS Plan 1 PERS Plan 2 PERS Plan 3
Employer* 5.31%* 5.31% 5.31%**
Employee 6.00% 3.9% ***
* The employer rates include the employer administrative expense fee currently set at 0.16%.
** Plan 3 defined benefit portion only.
*** Variable from 5.0% to 15.0% maximum based on rate selected by the PERS 3 member.
Both the City and employees made the required contributions. The City's required contributions for the years ended
December 31 were:
PERS Plan I PERS Plan II PERS Plan III
2010 $7,826 $571,406 $104,390
2009 $13,646 $745,549 $137,774
2008 $11,410 $764,933 $152,238
Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) Plans 1 and 2
Citv ofFederal Wav / 50
Plan Description
LEOFF is a cost -sharing multiple -employer retirement system comprised of two separate defined benefit plans. Membership
in the system includes all full time, fully compensated, local law enforcement officers and fire fighters. LEOFF is comprised
primarily of non -state employees, with the Department of Fish and Wildlife enforcement officers, who were first included
prospectively effective July 27, 2003 being an exception. LEOFF participants who joined the system by September 30, 1977
are Plan 1 members. Those who joined on or after October 1, 1977 are Plan 2 members. LEOFF retirement benefits are
financed from a combination of investment earnings, employee and employer contributions, and a special funding situation in
which the state pays the remainder through state legislative appropriations. LEOFF retirement benefit provisions are
established in state statute and may be amended only by the State Legislature.
Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible
for retirement with five years of service at the age of 50. The benefit per year of service calculated as a percent of final
average salary is as follows:
Term of Service Percent of Final Average
20 or more years 2.0%
10 but less than 20 years 1.5%
5 but less than 10 years 1.0%
The final average salary is the basic monthly salary received at the time of retirement, provided a member has held the same
position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24
months' salary within the last 10 years of service. If membership was established in LEOFF after February 18, 1974, the
service retirement benefit is capped at 60 percent of final average salary. A cost -of -living allowance is granted (indexed to the
Seattle Consumer Price Index).
Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at
age 50 with 20 years of service, or at age 53 with five years of service, with an allowance of 2 percent of the final average
salary per year of service. The final average salary is based on the highest consecutive 60 months. Plan 2 retirements prior to
the age of 53 are reduced 3 percent for each year that the benefit commences prior to age 53. The benefit is two percent of
average salary per year of service. There is no cap on years of service credit and a cost -of -living allowance is granted
(indexed to the Seattle Consumer Price Index), capped at three percent annually.
There are 372 participating employers in LEOFF. Membership in LEOFF consisted of the following as of the latest actuarial
valuation date for the plans of June 30, 2010:
Retirees and Beneficiaries Receiving Benefits
9,454
Terminated Plan Members Entitled to But Not Yet Receiving Benefits
674
Active Plan Members Vest
13,363
Active Plan Members Nonvested
3,944
Total
27,435
Funding Policy
Starting on July 1, 2000, Plan 1 employers and employees will contribute zero percent as long as the plan remains fully
funded. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plan.
Plan 2 employers and employees are required to pay at the level adopted by the Department of Retirement Systems in
accordance with 41.45 RCW.
All employers are required to contribute at the level required by state law. The Legislature, by means of a special funding
arrangement, appropriated money from the state General Fund to supplement the current service liability and fund the prior
service costs of Plan 1 in accordance with the requirements of the Pension Funding Council. However, this special funding
situation is not mandated by the state constitution and this funding requirement could be returned to the employers by a
change of statute. The methods used to determine the contribution rates are established under state statute in accordance with
Chapters 41.26 and 41.45 RCW.
The required contribution rates expressed as a percentage of current year covered payroll, as of December 31, 2010 were:
LEOFF Plan I
LEOFF Plan II
Employer
0.16% *
5.24% **
Employee
0.00%
8.46%
State
N/A
3.45%
Citv ofFederal Wav / 51
* The employer rates do not include the employer administrative expense fee currently set at 0.19%.
** The employer rate for ports and universities is 7.18%.
Both the City and employees made the required contributions. The City's required contributions for the years ended December
31 were:
LEOFF Plan I LEOFF Plan II
2010 $0 $589,769
2009 $0 $598,194
2008 $0 $586,236
Other Local Government Pension Systems - City of Federal Way
Employees' Retirement System
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 established as an alternative to the Federal Social Security System.
During 2010, there were a total of 331 individuals covered by this system. As of the end of the year, 305 remained as active
employees of the City and two were drawing retirement benefits. The 31 inactive had left the City's employment and either
had been reimbursed their contributions, or the reimbursement was pending, or they elected to have their contributions remain
in the plan if the balance was $1,000 or greater.
All regular 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, accidental death and dismemberment, and lump
sum death benefit coverage. Contributions into the plan are tax deferred.
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 1 % of the participant's compensation, not to exceed 10% of the participant's compensation.
Covered payroll for 2010 was $23,768,752 and total City payroll was $25,689,161. Actual City contributions for the year
were $1,235,978. Actual employee contributions were $1,498,587. All contributions were invested in instruments arranged
through independent investment advisors selected by the Municipal Employers Benefit Trust (MEBT) committee comprised
of the entities of Bellevue, Kirkland, Redmond, Edmonds, Mill Creek, Woodinville, Federal Way, and North East King Conty
Regional Public Safety Communication Agency (NORCOM) but administered by Northwest Plan Services (NWPS).
Retirement System assets are not the property of the City and are not subject to the claims of the City's general creditors. The
Federal Way Retirement System assets are with Security Trust Company, N.A. who invests Plan assets.
In July 1995, the City implemented the hardship withdrawal and loan provision program. Loans receivable as of December
31, 2010 were $1,364,131.
The consulting actuary firm of Northwest Plan Services (NWPS) has been contracted to provide record keeping,
administrative and consulting services related to the Plan Actuarial determinations are not required because accidental death
and dismemberment insurance, 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 payable from
the employee's account to which no contributions by the City or the participant can be added after retirement, or a single
lump -sum payment equal to the accumulated balance in the employee's account as of his retirement date.
NOTE 10 — RISK MANAGEMENT
The City uses the Risk Management Internal Service Fund to account for its risk financing activities. The City maintains
insurance against most normal hazards except for unemployment insurance where it has elected to become fully self -insured.
Related premiums received by the Risk Management Fund are used to reimburse the State Employment Security Department
for unemployment benefits paid to eligible individuals, and to establish reserves for the payment of estimated future
unemployment claims liability. The City faces most of the risks faced by similar sized cities.
Citv ofFederal Wav / 52
Through its Risk Management Fund, the City is also recovering insurance premium costs for general liability coverage and
building reserves for a future general liability self-insurance program. The City's insurance coverage in 2010 remained
relatively similar to the coverage for 2008.
The City of Federal Way is a member of the Washington Cities Insurance Authority (WCIA).
Utilizing Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities
originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for
jointly purchasing insurance, jointly self -insuring, and / or jointly contracting for risk management services. WCIA has a total
of 145 Members.
New members initially contract for a three-year term, and thereafter automatically renew on an annual basis. A one-year
withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its
unresolved loss history incurred during membership.
Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general, automobile, police,
public officials' errors or omissions, stop gap, and employee benefits liability. Limits are $4 million per occurrence self
insured layer, and $16 million per occurrence in the re -insured excess layer. The excess layer is insured by the purchase of
reinsurance and insurance and is subject to aggregate limits. Total limits are $20 million per occurrence subject to aggregate
sublimity in the excess layers. The Board of Directors determines the limits and terms of coverage annually.
Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased
on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self -funded
from the members' deductible to $500,000, for all perils other than flood and earthquake, and insured above that amount by
the purchase of insurance.
In-house services include risk management consultation, loss control field services, claims and litigation administration, and
loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance
brokerage, and lobbyist services.
WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an
outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the
interlocal, WCIA retains the right to additionally assess the membership for any funding shortfall.
An investment committee, using investment brokers, produces additional revenue by investment of WCIA's assets in financial
instruments which comply with all State guidelines. These revenues directly offset portions of the membership's annual
assessment.
A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board
elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA
Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WCIA.
There were no settlements in excess of insurance for commercially insured activities for 1996 through 2010.
The following is a summary of coverage in force in 2010.
COMPANY
POLICY PERIOD
DETAILS OF COVERAGE
LIABILITY LIMITS
General Liability (Auto, General, Police E
WCIA
1/l/10-12/31/10
& O, Employment Practices, & Stop Gap)
$20,000,000 per Occurrence subject to Annual Aggregates and Sublimits. Deductible: $100,000
Crime/Fidelity (Employee Dishonesty,
Faithful Performance of Duty, Forgery or
Alternation, Theft, Disappareance and
Destruction, Robbery and Safe Burglary,
WCIA
1/l/10-12/31/10
and Computer Fraud)
$2,500,000. Deductible $10,000.
Limit $300,000,000 per occurence. Sub -limits: $150,000,000 Earthquake per Occurrence;
$100,000,000 Flood per Occurrence. Deductible: Earthquake 2% of the values involved, subject to
WCIA
1/l/10-12/31/10
Property Coverage
$100,000 min per occurence. Flood $250,0000 per occurrence. All other perils $25,000
Automobile Physical Damage for
WCIA
1/l/10-12/31/10
Scheduled Automobiles
Actual Cash Value. Deductible $5,000 per occurrence for scheduled automobiles
$100,000,000 Maximum Limit; Sub -limits: $10,000,000 Business Interruption; $1,000,000 Extra
Expense; $500,000 Hazardous Waste. Deductilbe $10,000 Combined All Coverge Expect. Turbine
Generator Unites, KP Motors, Pumps, and Deep Water Wells, KVA Transformers, HP A/C and
WCIA
1/l/10-12/31/10
Equipment Breakdown Coverage
Refrigeration Systems adn HP ICE's and Gernerators >=500 HP
Citv ofFederal Wav / 53
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.
The City is self -insured for unemployment compensation. At December 31, 2010 the City had $1,407,109 in reserve.
Unemployment Reserve, Jan. 1 st
Unemployment compensation benefit
Claim payments during the year
Unemployment Reserve, Dec. 31 st
NOTE 11- LONG-TERM LIABILITIES
2009 2010
$ 1,275,903 $
1,318,338
224,096
241,683
(181,661)
(152,911)
$ 1,318,338 $
1,407,109
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 2010 the City had no voter -approved bonds outstanding. All principal and interest payments on general obligation
debts are recorded as expenditures by the City's Debt Service Fund. The compensated absences liability will be liquidated
approximately 90% by the General Fund and 10% by the Street Fund.
The following schedules detail the long-term debt activity and balances of the City.
OUTSTANDING GENERAL OBLIGATION DEBT AND LONG-TERM LIABILITIES - BY TYPE
December 31, 2010
Amount
Beginning
Ending
Bond Rating
Issue
Maturity
Interest
Originally
Outstanding
Amount
Amount
Outstanding
Description at Issuance
Date
Date
Rate
Issued
Debt
Issued
Redeemed
Debt
Governmental Activities:
General Obligation Bonds:
2003 Limited/Community Center AAA -insured
15-Nov-03
1-Dec-33
4.676
$15,000,000
$13,300,000
$
$ 320,000
$12,980,000
Subtotal GO Bonds
15,000,000
13,300,000
320,000
12,980,000
Other Miscellaneous Debt -Intergovernmental:
2000 Limited/Valley Comm. PDA Al
12-Sep-00
1-Dec-15
5.31
2,551,600
1,253,000
209,000
1,044,000
2009 SCORE/Special Obligation Bond Al/AA
4-Nov-09
1-Jan-39
3.00-6.62
14,659,950
14,659,950
-
14,659,950
Total Miscellaneous
17,211,550
15,912,950
209,000
15,703,950
Sub -total Governmental Long -Term Debt
32,211,550
29,212,950
529,000
28,683,950
Compensated Absences
1,506,520
179,198
153,081
1,532,637
Subtotal GO Bonds plus Compensated
32,211,550
30,719,470
179,198
682,081
30,216,587
Business -Type Activities:
Public Works Trust Fund Loan:
PWTL - Kitts Corner Drain Imp
31-Aug-94
1-Jul-14
1.00
233,316
53,439
-
12,936
40,503
PWTL - Kitts Corner Drain Imp
24-Jul-96
1-Jul-14
1.00
1,166,580
326,873
64,680
262,193
PWTL - Kitts Corner Drain Imp
4-Sep-97
1-Jul-14
1.00
155,544
50,885
8,624
42,261
PWTL - SeaTac Mall Drain Imp
31-May-00
1-Jul-19
1.00
412,500
160,200
16,020
144,180
PWTL - SeaTac Mall Drain Imp
14-Au -00
1-Jul-19
1.00
2,062,500
800,997
80,099
720,898
Subtotal PWTFL
4,030,440
1,392,394
182,359
1,210,035
Compensated Absences
79,302
(15,844)
296
63,162
Subtotal PWTFL plus Compensated Absences
4,030,440
1,471,696
(15,844)
182,655
1,273,197
Grand Total All Long -Term Debt
$ 36,241,990
$ 32,191,166
$ 163,354
$ 864,736
$31,489,784
Citv ofFederal Wav / 54
OUTSTANDING GENERAL OBLIGATION DEBT AND LONG-TERM LIABILITIES - BY FUND
December 31, 2010
Amount
Beginning
Ending
Originally
Outstanding
Amount
Amount
Outstanding
Due within
Description
Issued
Debt
Issued
Redeemed *
Debt
one year
Governmental Long -Term Debt:
General Obligation Bonds:
2003 Limited/Community Center
$ 15,000,000
$ 13,300,000 $
$ 320,000
$ 12,980,000
$ 330,000
Total General Obligation Bonds
15,000,000
13,300,000
320,000
12,980,000
330,000
Other Miscellaneous Debt -Intergovernmental:
2000 Limited/Valley Comm. PDA
2,551,600
1,253,000
209,000
1,044,000
196,000
2009 SCORE
14,659,950
14,659,950
-
14,659,950
-
Total Miscellaneous
17,211,550
15,912,950
209,000
15,703,950
196,000
Sub -total Governmental Long -Term Debt
32,211,550
29,212,950
529,000
28,683,950
526,000
Compensated Absences
1,506,520
179,198
153,081
1,532,637
107,167
Total Gov Long -Term Debt plus Comp Abs
32,211,550
30,719,470
179,198
682,081
30,216,587
633,167
Business -Type Long -Term Debt:
Enterprise Funds:
Public Works Trust Fund Loan
4,030,440
1,392,394
-
182,359
1,210,035
182,359
Sub -total Bus -Type Long -Term Debt
4,030,440
1,392,394
182,359
1,210,035
182,359
Compensated Absences
79,302
(15,844)
296
63,162
2,332
Total Bus -Type plus Comp Abs LTD
4,030,440
1,471,696
(15,844)
182,655
1,273,197
184,691
Grand Total All Long -Term Debt
$ 36,241,990
$ 32,191,166 $
163,354
$ 864,736
$ 31,489,784
$ 817,858
* Debt service principal payments in Debt Service Fund include credits of $30,750 from Interlocal agreement with Federal Way Fire District to participate
in capital cost obligations with Valley Communications joint venture with the City of Federal Way.
SCHEDULE OF CHANGES IN LONG-TERM LIABILITIES
Period Ended December 31, 2010
Beginning
Ending
Outstanding Debt
Additions
Reductions
Outstanding Debt
Governmental Activities:
General Obligation Bonds
$ 13,300,000
$ - $
(320,000)
$ 12,980,000
Other -Intergovernmental Debt
15,912,950
-
(209,000)
15,703,950
Compensated Absences
1,506,520
179,198
(153,081)
1,532,637
Total Governmental Activities
30,719,470
179,198
(682,081)
30,216,587
Business -Type Activities:
Enterprise Funds
Public Works Trust Fund Loan
1,392,394
-
(182,359)
1,210,035
Com ensated Absences
79,302
(15,844)
(296)
63,162
Total Business -Type Activities
1,471,696
(15,844)
(182,655)
1,273,197
Total All Funds
$ 32,191,166
$ 163,354 $
(864,736)
$ 31,489,784
SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY
As of December 31, 2010
Governmental Activities
Business -Type Activities
General Gov't Debt
PW Trust Fund
Grand Total
Year
Principal
Interest
Principal
Interest
Principal
Interest
P&I
2011
$ 526,000
$ 622,903
$ 182,359
$ 12,100
$ 708,359
$ 635,003
$ 1,343,362
2012
541,000
901,657
182,359
10,277
723,359
911,934
1,635,293
2013
895,550
1,176,067
182,359
8,453
1,077,909
1,184,520
2,262,429
2014
913,500
1,147,476
182,359
6,630
1,095,859
1,154,106
2,249,965
2015
943,300
1,114,298
96,120
4,806
1,039,420
1,119,104
2,158,524
2016-2020
4,099,650
5,067,175
384,479
9,612
4,484,129
5,076,787
9,560,916
2021-2025
5,068,850
4,134,950
-
-
5,068,850
4,134,950
9,203,800
2026-2030
6,355,250
2,896,987
-
6,355,250
2,896,987
9,252,237
2021-2035
6,041,150
1,342,778
-
6,041,150
1,342,778
7,383,928
2036-2040
1 3,299,700
1 291,295
1 -
3,299,700
1 291,295
1 31590,995
Total
1 $ 28,683,950
1 $ 18,695,586
1 $ 1,210,035
$ 51,878
$ 29,893,985
1 $ 18,747,464
1 $ 48,641,449
Citv ofFederal Wav / 55
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'/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 1.5% of the valuation within the
City without a vote of the people. No combination of limited or unlimited tax debt may exceed 7'/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 as of December 31, 2010 are:
General Government (no vote required) $ 100,803,450
General Government (3/5 majority vote required) 82,063,550
Parks and Open space (3/5 majority vote required) 205,158,874
Utilities (3/5 majority vote required) 205,158,874
Total Capacity 593,184,748
Compensated Absences
The City's liability for accrued vacation and compensatory time balances is recorded in the schedule below. Accrued
compensated absences for proprietary fund employees are recorded as liabilities in those funds expected to incur the related
future expense.
Governmental Activities:
Current portion $ 107,167
Noncurrent portion 1,425,470
Business -Type Activities:
Current portion 2,332
Noncurrent portion 60,830
Total Compensated Absences $ 1,595,799
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, 2010 is $-0- for its tax-exempt general obligation bond issues subject to the
Tax Reform Act issued through that date.
Leases
The City of Federal Way leases office buildings and land which are accounted for as operating leases. Operating leases do not
give rise to property rights or lease obligations, and therefore the results of the lease agreements are not reflected in the City's
capital assets. Total Cost for the leases was $3,510 for the year ended December 31, 2010. The current year lease payments
included the site lease for the City's WiFi Project. Federal Way WiFi project is to provide free broadband Internet service to
Federal Way citizens, businesses and visitors in the downtown business corridor, City parks, Community Center, Dumas Bay
Centre and City Hall. The site lease was extended in July of 2010 for an additional 5 years terminating in July 2015. The
future minimum lease payments for the WiFi Project are as follows:
2010 $ 3,000
2011
3,000
2012
3,000
2013
3,000
2014
3,000
2015
1,500
$ 16,500
Citv ofFederal Wav / 56
NOTE 12 — INTERFUND TRANSACTIONS
Interfund transfers for the year ended December 31, 2010 were as follows:
Interfund Transfers
Governmental Funds:
General Fund
Street Fund
Utility Tax Fund
Debt Service
Downtown Redevelopment
Transportation
Nonmajor Governmental Funds
Proprietary Funds:
Surface Water Management
In Out
$ 9,535,090 $ 1,891,377
2,666,941
-
1,061,684
13,213,723
1,976,716
2,991,684
1,255,000
925,250
3,043,709
1,106,737
2,933,988
2,190,954
600,000 885,000
Dumas Bay Centre 132,232 -
Internal Service Funds 177,192 177,827
$ 23,382,552 $ 23,382,552
The following describes the amounts transferred out during 2010:
General Fund:
• $1,854,476 to Street Fund to subsidize street maintenance and operations
• $11,901 to CDBG for support of Administration
• $25,000 to Federal Way Community Center for use of facilities by General Parks and Recreation
Utility Tax Fund:
• $3,154,878 to General Fund for Proposition 1 for Public Safety and Community Programs Funding
• $915,032 to Federal Way Community Center Debt Service
• $761,684 to Arterial Street Fund overlay program
• $1,002,862 to General Fund for Public Safety Positions
• $1,255,000 to Downtown Redevelopment CIP Fund
• $293,265 to General Fund for Celebration Park maintenance & operations
• $354,556 to Street Fund for maintenance and operations on bond projects
• $132,232 to Dumas Bay Centre Fund for Knutzen Family Theatre subsidy
• $127,906 to Street Fund for street lights maintenance and operations.
• $90,956 to General Fund for Arts Commission
• $28,114 to General Fund for Red, Whites & Blues Festival
• $68,355 to General Fund for new Parks maintenance and operations
• $902,231 to Federal Way Community Center for maintenance/operations and capital reserves
• $4,125,652 to General Fund for ongoing support of operations
Debt Service Fund:
• $2,661,684 of Real Estate Excise Tax to Transportation CIP for various projects
• $330,000 of Real Estate Excise Tax to parks CIP for various projects.
Downtown Redevelopment:
• $13,720 to General Fund for support of Economic Development Consultant
• $755,000 return of unspent Real Estate Tax to Debt Service Fund
• $156,530 to City Facilities for PACC
Transportation CIP Fund:
• $45,053 to General Fund for Federal Lobbyist
• $1,061,684 Utility Tax Fund for closeout of project/unspent utility tax
Proprietary Funds:
• $600,000 from Surface Water Management CIP to Surface Water Management Operations
0 $285,000 from Surface Water Management CIP to Transportation CIP to fund SR99 HOV Lanes Phase IV
Citv ofFederal Wav / 57
Internal Service:
• $27,827 from Risk management to Fleet/Equipment for insurance proceeds
• $150,000 from Fleet/Equipment to General Fund for Animal Services start-up cost
Nonmajor Fund:
• $50,000 from Traffic Safety Fund to General Fund for support of Municipal Court
• $450,000 from Traffic Safety Fund to General Fund for support of Police Department
• $330,000 from Traffic Safety Fund to Street Fund for support of Traffic Services
• $161,000 from Path & Trails Fund to Parks CIP for Levy Transfer
• $61,235 from City Facilities CIP to General Fund for project closeouts
• $755,000 from City Facilities CIP to Debt Service for unspent Real Estate Excise Tax
• $85,645 from City Facilities CIP to Federal Way Community Center for close out of Federal Way Community
Center Reserve balance
• $500,000 from Parks CIP to Overlay for redirecting Camp Kilworth balance
• $97,025 from Community Development Block Grant to Transportation CIP to install street lights on 20"' Way
South
• $306,684 from Arterial Street to Debt Service for unspent Real Estate Excise Tax.
Interfund loans for the year ended December 31, 2010 were as follows:
Interfund Loans Receivable Payable
General Fund $ 366,000 $ -
Special Revenue Funds:
Community Development Block Grant - 366,000
Total Interfund Loans $ 366,000 $ 366,000
NOTE 13 — CONTINGENCIES AND LITIGATION
As of December 31, 2010 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.
NOTE 14 — JOINT VENTURE
Vallev Communication Center
The "Valley Communications Center" was established August 20, 1976, when an Interlocal Agreement was entered into by
the four original participating municipal corporations, including the cities of Renton, Kent, Auburn, and Tukwila, and Federal
Way which was formally admitted during 2000. The agreement is sanctioned by the provisions and terms of the Interlocal
Cooperation Act pursuant to RCW 39.34. The initial duration of the agreement was five years, and thereafter is automatically
extended for consecutive five year -periods.
The purpose of the joint operation, hereafter referred to as Valley Com, is to provide improved consolidated emergency
communications (dispatch) services for police, fire, and medical aid, to the five participating cities and to several subscribing
agencies, which include King County Fire Districts 2, 20, 26, 40, 43, 44, and 47; City of Pacific Police and Fire Departments,
City of Algona Police Department, City of Des Moines Police Department, City of Black Diamond Police and Fire
Department; SeaTac Fire Department; North Highline Fire Department; King County EMS Units; and Vashon Island Fire
Department. Separate agreements between Valley Corn and the subscribing agencies have been executed, which set forth
conditions of services and rates charged.
The allocation of prorated financial participation among the five member cities is the percentage of dispatched calls attributed
to each jurisdiction compared to the total estimated dispatched calls, for the current twelve month period ending December 31.
The percentages are applied to the current approved budget, less revenue from all other sources. Distribution of the current
year net income is based on the same percentages. The 2010 cost distributions for the five member cities are as follows:
Citv ofFederal Wav / 58
Dispatchable
Percent
City
Calls
of Total
Kent
94,799
25.89%
Renton
79,729
21.77%
Auburn
73,969
20.20%
Tukwila
34,691
9.47%
Federal Way
83,022
22.67%
Total
366,210
100.00%
Valley Com is governed by an Administration Board, composed of the Mayors or designated representatives from the five
participating cities of Renton, Kent, Auburn, Tukwila, and Federal Way. The Administration Board is authorized to establish
bylaws that govern procedures of the Board and Valley Com's general operations for the following functions: 1) Budget
review and recommendations to the legislative bodies of the member cities, and budget adoption after each legislative body
has approved the required financial participation for the ensuing year; 2) Approve appointment and/or discharge of the
Director; 3) Approve personnel policy and make final decisions on all major policy changes; and 4) Review and approves all
contracts.
In addition, an Operating Board was established and consists of two members of each participating City's Public Safety
Departments, including the heads of such departments or their designees. The Operating Board performs the following
functions: 1) Oversees the general operation of Valley Com, and advises and makes recommendations to the Administration
Board; 2) Make recommendations on Director selection; 3) Presents proposed policies and budgets to the Administration
Board; and 4) Reviews disbursements of funds by the Director.
The Director presents a proposed budget to the Operating Board on or before August 15 of each year. Said budget is then
presented to the Administrative Board by September 1 of each year. The Administration Board can make changes to the
proposed Valley Com budget as it finds necessary, but final approval falls to the legislative body of each member city, in
accordance with the provisions of the interlocal agreement.
In May 1993 Valley Com entered into an agreement with King County to provide joint project management for the acquisition
and installation of 800-MHz emergency radio communications system approved by the voters of King County in conjunction
with a $57 million levy. In August 1993 Valley Com also entered into an Interlocal Cooperation Agreement with the sub-
regions of King County, Seattle, and Eastside Public Safety Communications, which governs the development and installation
of the new 800-MHz emergency radio system. Valley Com now provides emergency communication dispatch services to a
population of approximately 570,000.
Valley Com operates as an enterprise fund and is totally self supporting through the implementation of user fees and the
primary source of revenue is provided by charges for calls for service. The 800-MHz emergency radio communications
system operated by the agreement with King County is operated as a separate enterprise fund, and the Member Cities have no
equity interest in the contributed capital from this system.
The share of equity belonging to the five participating cities is shown below. Liabilities are the responsibility of the five
participating cities in direct proportion to their equity position.
BALANCES IN 2010
Kent Renton Auburn Tukwila Federal Way Total
Equity @ January 1, 2010 $ 6,628,171 $ 4,653,923 $ 4,408,776 $ 2,661,250 $ 2,903,476 $ 21,255,596
Current Year Decrease
213,723
179,748
166,762
78,210
187,172
825,615
Equity @ December 31, 2010
$ 6,841,894 $
4,833,671 $
4,575,538 $
2,739,460 $
3,090,648 $
22,081,211
Percent of Equity
30.99%
21.89%
20.72%
12.41%
14.00%
100.00%
Percent of 2009 Distribution
31.18%
21.90%
20.74%
12.52%
13.66%
100.00%
During 2000, the Valley Communications Center Development Authority was created to issued $12,758,000 in General
Obligation Bonds to finance construction, equipment, and land for a new facility completed in 2002. Each of the five
participating cities is responsible for one -fifth of the debt obligation, which is $2,551,600. In 2010, , the current economy
created a favorable interest rate culminate whereby refunding the outstanding bonds would result in potential debt service
savings to the Authority and Member Cities. The outstanding debt at the time of issuance of the refunding bonds was
$5,345,000 and the projected savings from refunding the outstanding bonds is $389,613 for the Authority and Member Cities.
Citv ofFederal Wav / 59
The basic agreement shall not be terminated until all bonds issued by Valley Communications Center Development Authority
have been paid and retired. The City of Federal Way includes its one -fifth share of the bond issue with its general long-term
debt. The balance of the City of Federal Way's obligation was $1,044,000 at 12/31/2010.
A complete set of financial statements is available from: Valley Communications Center, 27519 108"' Avenue SE, Kent, WA
98030.
South Correction Entity (SCORE)
The South Correctional Entity (SCORE) consolidated correctional facility was established February 25, 2010, when an
Interlocal Agreement (the "Original Interlocal Agreement") was entered into by seven participating municipal governments,
the "Member Cities" of Auburn, Burien, Des Moines, Federal Way, Renton, SeaTac and Tukwila, under the authority of the
"Interlocal Cooperation Act" (RCW 39.34). This "Original Interlocal Agreement" was amended and restated October 1, 2010
and named the City of Des Moines as the "Host City" and the remaining Member Cities as "Owner Cities". This interlocal
agreement is known as the "Formation Interlocal Agreement". Pursuant to a separate "Host City Agreement" dated October
1, 2010, the Host City will not enjoy the same equity position as the Owner Cities until all debts issued are paid and the Host
City fulfills all of its obligations as outlined in the Agreement.
SCORE, an governmental administrative agency pursuant to RCW 39.34.030 (3), has the power to acquire, construct, own,
operate, maintain, equip, and improve a correctional facility known as the "SCORE Facility" and to provide correctional
services and functions incidental thereto, for the purpose of detaining arrestees and sentenced offenders in the furtherance of
public safety and emergencies within the jurisdiction of the Member Cities. The SCORE Facility may serve the Member
Cities and Subscribing Agencies which are in need of correctional facilities. Any agreement with a Subscribing Agency shall
be in writing and approved by SCORE as provided within the SCORE Formation Interlocal Agreement.
Financing for the acquisition, construction, equipping, and improvement of the SCORE Facility will be provided by bonds
issued by the South Correctional Entity Facility Public Development Authority (the "SCORE PDA"), a public development
authority chartered by the City of Renton pursuant to RCW 35.21.730 through 35.21.755 and secured by the full faith and
credit of the Cities of Auburn, Burien Federal Way, Renton, SeaTac, and Tukwila (the "Owner Cities"). The SCORE PDA
issued $86 million in special obligation bonds in 2010 to carry out the facility development project. The following is a
summary of the debt service requirements for the bond issue:
Summary of Debt Service Requirements
Debt Service Schedule
Debt Service Allocation to Owner Cities
35%BABs
Auburn
Burien
Federal Way
Renton
SeaTac
Tukwila
Year
Principal
Interest
Subsidy
Total
31%
4%
18%
36%
3%
8%
2011
5,155,732
(1,675,089)
3,480,643
1,078,999
139,226
626,516
1,253,031
104,419
278,451
2012
-
5,155,732
(1,675,089)
3,480,643
1,078,999
139,226
626,516
1,253,031
104,419
278,451
2013
1,915,000
5,126,998
(1,675,089)
5,366,909
1,663,742
214,676
966,044
1,932,087
161,007
429,353
2014
1,950,000
5,066,566
(1,654,975)
5,361,591
1,662,093
214,464
965,086
1,930,173
160,848
428,927
2015-2019
10,750,000
24,045,404
(8,092,315)
26,703,089
8,277,958
1,068,124
4,806,556
9,613,112
801,093
2,136,247
2020-2024
12,905,000
21,102,168
(7,405,227)
26,601,941
8,246,602
1,064,078
4,788,349
9,576,699
798,058
2,128,155
2025-2029
15,675,000
16,833,706
(6,067,796)
26,440,910
8,196,682
1,057,636
4,759,364
9,518,728
793,227
2,115,273
2030-2034
19,265,000
11,158,380
(4,128,483)
26,294,897
8,151,418
1,051,796
4,733,081
9,466,163
788,847
2,103,592
2035-2039
23,775,000
4,064,705
(1,697,914)
26,141,791
1 8,103,955
1,045,672
4,705,522
9,411,045
784,254
2,091,343
Totals
$ 86,235,000 $
97,709,391 $
(34,071,977) $
149,872,414
1 S 46,460,448 $
5,994,898
$ 26,977,034 $
53,954,069 $
4,496,172 $
11,989,792
Note: Interest is to be paid from bond proceeds during the construction period (2010-2011).
*Of the $26,977,034 allocation to Federal Way, $14,659,950 is for the principal portion and the remainder is for interest.
Citv ofFederal Wav / 60
The City of Federal Way reports its share of equity interest in the Governmental Activities column within the Government -
wide financial statements under Investment in Joint Venture. The following is condensed (unaudited) financial information as
of December 31, 2010 related to SCORE:
South Correctional Entity (SCORE)
2010 Owner Cities Equity Allocation
Member City
Percent of Equity
2009 Disbribution 2010 Distribution
2010 Equity Balance
Auburn
31.00%
$ 1,692,471 $
(90,883) $
1,601,588
Burien
4.00%
218,383
(11,727)
206,656
Federal Way
18.00%
982,725
(52,771)
929,954
Renton
36.00%
1,965,450
(105,540)
1,859,910
SeaTac
3.00%
163,787
(8,795)
154,992
Tukwila
8.00%
436,767
(23,454)
413,313
Total
100.00%
$ 5,459,583 $
(293,170) $
5,166,413
Completed financial statements for SCORE and SCORE PDA can be obtained from the SCORE office, City of Renton, 1055
South Grady Way, Renton, WA 98057.
ON ofFederal Wav / 61
Combining Statement — Nonmajor Governmental Funds' Description
For the Year Ended December 31, 2010
Special Revenue Funds
Special Revenue funds are used to account for the proceeds of revenue sources (other than special assessments, expendable
trusts or major capital projects) that are legally restricted to expenditures for specified purposes.
The Arterial Street Fund accounts for the receipt and expenditure of the State -levied motor vehicle fuel tax distributed to the
City in accordance with State R.C.W. 82.36.020. These revenues are to be used for the construction, improvement, chip
sealing, seal -coating, and repair of arterial highways and city streets, or for the payment of related municipal indebtedness.
The Solid Waste/Recycling Fund was established to account for special refuse collection fees used to manage the Solid Waste
and Recycling program.
The Special Contracts/Studies Fund accounts for receipts and disbursements related to special contracts and special projects
where completion will extend beyond the calendar year.
The Hotel/Motel Lodging Tax Fund was established to account for all lodging tax receipts and disbursements related to
tourism promotion and acquisition and/or operation of tourism -related facilities.
The 2% Percent for Arts Fund was established for the purpose of providing funding for arts projects. The funds are to be
used to create a variety of cultural opportunities for citizens and to enhance the cultural environment in the community by
encouraging and promoting the creation and placement of art in public places and the incorporation of art into project design.
The Federal Way Community Center Fund was established to account for the operation of the community center. The fund
is supported by user fees and designated utility tax transfers.
The Traffic Safety Fund was established to account for the penalties and fines collected in criminal traffic violations and
those related to the operation of the Red Light Photo Enforcement Program. Funds collected for traffic safety shall be used
for, but not limited to prevention, education, and enforcement effectors related to traffic safety and compliance with traffic
control devices within the city, including maintenance and operation costs.
The Community Development Block Grant Fund accounts for the receipt and disbursement of federal grant revenue received
through the Department of Housing and Urban Development's Community Development Block Grant Program. Separate
subsidiary records are maintained to administer the individual projects accounted for in this fund.
The Path and Trails Reserve Fund was established in accordance with State law to accumulate unexpended proceeds of the
City's 1/2% motor vehicle fuel tax receipts which are restricted in use to the construction and maintenance of paths and trails
within City right-of-way. In August 2007, King County voters approved a new $0.05, six -year, inflation adjusted property tax
lid lift to expand park and recreation opportunities. One cent of the five -cent acquisition levy proceeds will be distributed to
cities for acquisition and development of open space and natural lands and city trail projects that support connections to the
regional trail system.
Capital Projects Funds
The Capital Project Funds account for the acquisition or construction of major capital facilities with the exception of those
facilities financed by proprietary and trust funds. The major sources of revenue for this fund are general obligation bond
proceeds, grants from other agencies, local taxes and contributions from other funds.
The Parks CIP Fund was established to account for receipts and disbursements related to acquisition, design, construction
and any other related parks capital project expenditures.
The City Facilities CIP Fund accounts for receipts and disbursements related to acquisition, design, construction and any
other related municipal facility and community/senior capital project expenditures.
ON ofFederal Wav / 62
A�k
CITY OF
Federal Way
It's all within reach
THIS PAGE IS LEFT INTENTIONALLY BLANK
Citv ofFederal Wav / 63
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2010
ASSETS
Equity in pooled cash and investments
Due from other governments
Restricted Cash
TOTAL ASSETS
LIABILITIES AND FUND BALANCES
Liabilities:
Vouchers payable
Retainage payable
Deposits payable
Interfund loans payable
Unearned revenue
TOTAL LIABILITIES
Fund balance:
Restricted
Committed
TOTAL FUND BALANCES
Special Capital
Revenue Projects TOTAL
$ 3,419,106 $ 2,544,789 $ 5,963,895
490,969 437,671 928,640
- 2,000 2,000
3,910,075 2,984,460 6,892,535
146,268
11,073 157,341
-
2,000 2,000
15,331
- 15,331
366,000
- 366,000
161,944
- 161,944
689,543 13,073 702,615
909,492 2,222,699 3,132,191
2,311,040 748,688 3,059,728
3,220,532 2,971,387 6,191,920
TOTAL LIABILITIES AND FUND BALANCE $ 3,910,075 $ 2,984,460 $ 6,894,535
Citv ofFederal Wav / 64
COMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31, 2010
Special
Arterial Solid Waste Contracts/ Hotel/Motel 2% for the
Street Recycling Studies Lodging Tax Arts
ASSETS
Equity in pooled cash & investments $ 522,099 $ 115,572 $557,474 $ 207,232 $
Due from other governments 39,275 48,443 - 10,925
293
TOTAL ASSETS 561,374 164,015 557,474 218,157 293
LIABILITIES AND FUND BALANCES
Liabilities:
Vouchers payable - 6,196 - 2,500 -
Deposits payable - - - - -
Interfund loans payable - - - - -
Unearned revenue - 22,720 - - -
TOTAL LIABILITIES - 28,916 - 2,500 -
Fund balance:
Restricted - - 557,474 215,657 -
Committed 561,374 135,099 - - 293
TOTAL FUND BALANCES 561,374 135,099 557,474 215,657 293
TOTAL LIABILITIES & FUND
BALANCE $ 561,374 $ 164,015 $557,474 $ 218,157 $ 293
Citv ofFederal Wav / 65
COMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31, 2010
(continued)
Federal Way
Community
Paths and
Community Traffic
Development
Trails
Center Safety
Block Grant
Reserve
TOTAL
ASSETS
Equity in pooled cash & investments $ 996,127 $ 884,096
$ 471
$135,742
$ 3,419,106
Due from other governments - -
391,707
619
490,969
TOTAL ASSETS 996,127 884,096
392,178
136,361
3,910,075
LIABILITIES AND FUND BALANCES
Liabilities:
Vouchers payable
60,818
50,576
26,178
- 146,268
Deposits payable
15,331
-
-
- 15,331
Interfund loans payable
-
-
366,000
- 366,000
Unearned revenue
139,224
-
-
- 161,944
TOTAL LIABILITIES
215,373
50,576
392,178
- 689,543
Fund balance:
Restricted
-
-
-
136,361 909,492
Committed
780,754
833,520
-
- 2,311,040
TOTAL FUND BALANCES
780,754
833,520
-
136,361 3,220,532
TOTAL LIABILITIES & FUND
BALANCE
$ 996,127 $
884,096
$ 392,178
$136,361 $ 3,910,075
Citv ofFederal Wav / 66
COMBINING BALANCE SHEET
NONMAJOR CAPITAL PROJECTS FUNDS
DECEMBER 31, 2010
City
Parks Facilities
ASSETS
Equity in pooled cash and investments
Due from other governments
Restricted Cash
TOTAL ASSETS
LIABILITIES AND FUND BALANCES
Liabilities:
Vouchers payable
Retainage payable
TOTAL LIABILITIES
Fund balance:
Restricted
Committed
TOTAL FUND BALANCES
TOTAL LIABILITIES AND FUND BALANCE
TOTAL
$ 2,297,877 $ 246,912 $ 2,544,789
- 437,671 437,671
- 2,000 2,000
2,297,877 686,583 2,984,460
4,073
7,000
11,073
-
2,000
2,000
4,073
9,000
13,073
1,981,822
240,877
2,222,699
311,982
436,706
748,688
2,293,804
677,583
2,971,387
$ 2,297,877 $
686,583
$ 2,984,460
Ci
Federal Wav / 67
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
For the Year Ended December 31, 2010
REVENUES
Taxes
Licenses and permits
Intergovernmental
Service charges and fees
Fines
Interest
Other
TOTAL REVENUES
EXPENDITURES
Current:
General government
Security of persons and property
Physical environment
Transportation
Economic environment
Culture and recreation
Capital outlay
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Special Capital
Revenue Projects TOTAL
$ 304,886
$
304,886
300,000
300,000
1,269,857
5,372,671
6,642,528
1,693,007
12,708
1,705,715
1,510,292
-
1,510,292
5,009
1,539
6,548
239,013
90
239,104
5,322,064 5,387,008 10,709,073
517,417
517,417
2,938
2,938
450,971
450,971
1,593,827
1,593,827
140,064
140,064
2,051,623
- 2,051,623
22,974
5,765,116 5,788,090
4,779,814 5,765,116 10,544,930
542,250 (378,108) 164,143
2,286,458 647,530 2,933,988
(1,394,709) (796,245) (2,190,954)
TOTAL OTHER FINANCING SOURCES (USES)
891,749
(148,715)
743,034
NET CHANGE IN FUND BALANCES
1,433,999
(526,823)
907,177
FUND BALANCES - BEGINNING
1,786,533
3,498,210
5,284,743
FUND BALANCES - ENDING $ 3,220,532 $ 2,971,387 $ 6,191,920
Citv ofFederal Wav / 68
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS
For the Year Ended December 31, 2010
Solid
Special
Hotel/Motel
Arterial
Waste/
Contracts/
Lodging
2% for the
Street
Recycling
Studies
Tax
Arts
REVENUES
Taxes $
-
$ -
$ -
$ 149,058
$ -
Licenses and permits
-
-
300,000
-
-
Intergovernmental
505,333
154,012
-
-
-
Service charges and fees
59,750
276,214
-
-
-
Fines
-
-
-
-
-
Miscellaneous:
Interest
1,739
222
922
316
Other
-
3,983
-
5,000
-
TOTAL REVENUES
566,822
434,431
300,922
154,374
-
EXPENDITURES
Current:
General government
-
-
-
-
-
Security of persons and property
-
-
-
-
-
Physical environment
-
450,971
-
-
-
Transportation
1,593,827
-
-
-
-
Economic environment
-
-
-
140,064
-
Culture and recreation
-
-
-
-
-
Capital outlay
-
-
14,510
-
-
TOTAL EXPENDITURES
1,593,827
450,971
14,510
140,064
-
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
(1,027,005)
(16,540)
286,412
14,310
-
OTHER FINANCING SOURCES (USES)
Transfers in
1,261,684
-
-
-
-
Transfers out
(306,684)
-
-
-
TOTAL OTHER FINANCING SOURCES
(USES)
955,000
-
-
-
NET CHANGE IN FUND BALANCES
(72,005)
(16,540)
286,412
14,310
-
FUND BALANCES - BEGINNING
633,379
151,639
271,062
201,347
293
FUND BALANCES - ENDING $
561,374
$ 135,099
$ 557,474
$ 215,657
$ 293
Citv ofFederal Wav / 69
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS
For the Year Ended December 31, 2010
(continued)
Federal Way
Community
Paths and
Community
Traffic
Development
Trails
Center
Safety
Block Grant
Reserve
TOTAL
REVENUES
Taxes
$ -
$ -
$ -
$ 155,828
$ 304,886
Licenses and permits
-
-
-
-
300,000
Intergovernmental
-
-
602,541
7,971
1,269,857
Service charges and fees
1,357,043
-
-
-
1,693,007
Fines
1,510,292
-
-
1,510,292
Miscellaneous:
Interest
880
879
-
51
5,009
Other
230,030
-
-
-
239,013
TOTAL REVENUES
1,587,953
1,511,171
602,541
163,850
5,322,064
EXPENDITURES
Current:
General government
-
-
517,417
-
517,417
Security of persons and property
-
2,938
-
-
2,938
Physical environment
-
-
-
-
450,971
Transportation
-
-
-
-
1,593,827
Economic environment
-
-
-
-
140,064
Culture and recreation
2,051,623
-
-
-
2,051,623
Capital outlay
8,464
-
-
-
22,974
TOTAL EXPENDITURES
2,060,087
2,938
517,417
-
4,779,814
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
(472,134)
1,508,233
85,124
163,850
542,250
OTHER FINANCING SOURCES (USES)
Transfers in
1,012,873
-
11,901
-
2,286,458
Transfers out
-
(830,000)
(97,025)
(161,000)
(1,394,709)
TOTAL OTHER FINANCING SOURCES
(USES)
1,012,873
(830,000)
(85,124)
(161,000)
891,749
NET CHANGE IN FUND BALANCES
540,739
678,233
-
2,850
1,433,999
FUND BALANCES - BEGINNING
240,014
155,288
-
133,511
1,786,533
FUND BALANCES - ENDING
$ 780,754
$ 833,520
$ -
$ 136,361
$ 3,220,532
Citv ofFederal Wav / 70
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR CAPITAL PROJECTS FUNDS
For the Year Ended December 31, 2010
City
Parks Facilities TOTAL
REVENUES
Intergovernmental
$ -
$ 5,372,671
$ 5,372,671
Service charges and fees
12,708
-
12,708
Miscellaneous:
Interest
133
1,406
1,539
Other
-
90
90
TOTAL REVENUES
12,841
5,374,167
5,387,008
EXPENDITURES
Capital Outlay
292,288
5,472,828
5,765,116
TOTAL EXPENDITURES
292,288
5,472,828
5,765,116
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
(279,447)
(98,661)
(378,108)
OTHER FINANCING SOURCES (USES)
Transfers in
491,000
156,530
647,530
Transfers out
(500,000)
(296,245)
(796,245)
TOTAL OTHER FINANCING SOURCES (USES)
(9,000)
(139,715)
(148,715)
NET CHANGE IN FUND BALANCES
(288,447)
(238,376)
(526,823)
FUND BALANCES - BEGINNING
2,582,251
915,959
3,498,210
FUND BALANCES - ENDING
$ 2,293,804
$ 677,583
$ 2,971,387
Citv ofFederal Wav / 71
ARTERIAL STREET
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Intergovernmental
Service charges and fees
Interest
TOTAL REVENUES
EXPENDITURES
Current:
Transportation
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ 552,000 $ 529,000 $ 505,333 $ (23,667)
11,000 11,000 59,750 48,750
5,000 5,000 1,739 (3,261)
568,000 545,000 566,822 21,822
1,968,000 2,133,379 1,593,827 539,552
1,968,000 2,133,379 1,593,827 539,552
(1,400,000) (1,588,379) (1,027,005) 561,374
1,400,000 1,261,684 1,261,684 -
- (306,684) (306,684) -
TOTAL OTHER FINANCING SOURCES (USES) 1,400,000 955,000 955,000 -
NET CHANGE IN FUND BALANCES - (633,379) (72,005) 561,374
FUND BALANCES - BEGINNING 15,106 633,377 633,379 2
FUND BALANCES - ENDING $ 15,106 $ (2) $ 561,374 $ 561,376
Citv ofFederal Wav / 72
SOLID WASTE & RECYCLING
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Intergovernmental
Service charges and fees
Interest
Other
TOTAL REVENUES
EXPENDITURES
Current:
Physical Environment
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
NET CHANGE IN FUND BALANCES
FUND BALANCES - BEGINNING
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ 138,000 $ 154,451 $ 154,012 $ (439)
278,854 278,854 276,214 (2,640)
- - 222 222
3,983 3,983
416,854 433,305 434,431 1,126
502,404 481,140 450,971 30,169
502,404 481,140 450,971 30,169
(85,550) (47,835) (16,540) 31,295
(85,550) (47,835) (16,540) 31,295
107,053 151,640 151,639 (1)
FUND BALANCES - ENDING $ 21,503 $ 103,805 $ 135,099 $ 31,294
ON ofFederal Wav / 73
HOTEL/MOTEL LODGING TAX
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Taxes
Interest
Other
TOTAL REVENUES
EXPENDITURES
Current:
Economic environment
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
NET CHANGE IN FUND BALANCES
FUND BALANCES - BEGINNING
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ 215,755 $ 165,000 $ 149,058 $ (15,942)
6,000 1,000 316 (684)
- 3,360 5,000 1,640
221,755 169,360 154,374 (14,986)
221,755 370,707 140,064 230,643
221,755 370,707 140,064 230,643
(201,347) 14,310 215,657
(201,347) 14,310 215,657
201,346 201,347 1
FUND BALANCES - ENDING $ - $ (1) $ 215,657 $ 215,658
ON ofFederal Wav / 74
FEDERAL WAY COMMUNITY CENTER
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Service charges and fees
Interest
Other
TOTAL REVENUES
EXPENDITURES
Current:
Culture and recreation
Capital outlay
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ 1,400,407 $ 1,289,093 $ 1,357,043 $ 67,950
- - 880 880
263,000 238,000 230,030 (7,970)
1,663,407 1,527,093 1,587,953 60,860
2,107,343 2,110,626 2,051,623 59,003
13,000 8,652 8,464 188
2,120,343 2,119,278 2,060,087 59,191
(456,936) (592,185) (472.134) 120,051
1,090,690 1,012,876 1,012,873 (3)
TOTAL OTHER FINANCING SOURCES (USES) 1,090,690 1,012,876 1,012,873 (3)
NET CHANGE IN FUND BALANCES 633,754 420,691 540,739 120,048
FUND BALANCES - BEGINNING 673,191 24,014 240,014 216,000
FUND BALANCES - ENDING $ 1,306,945 $ 444,705 $ 780,753 $ 336,048
Citv ofFederal Wav / 75
TRAFFIC SAFETY
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Fines and forfeitures
Interest
TOTAL REVENUES
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ - $ 830,000 $ 1,510,292 $ 680,292
- 879 879
830,000 1,511,171 681,171
EXPENDITURES
Current:
Security of persons and property
- 50,000
2,938
47,062
TOTAL EXPENDITURES
- 50,000
2,938
47,062
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
- 780,000
1,508,233
728,233
OTHER FINANCING SOURCES (USES)
Transfers out
- (830,000)
(830,000)
-
TOTAL OTHER FINANCING SOURCES (USES)
- (830,000)
(830,000)
-
NET CHANGE IN FUND BALANCES
- (50,000)
678,233
728,233
FUND BALANCES - BEGINNING
- 155,287
155,288
1
FUND BALANCES - ENDING $
- $ 105,287 $
833,521 $
728,234
Citv ofFederal Wav / 76
PATH & TRAILS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Taxes
Intergovernmental
Interest
TOTAL REVENUES
EXPENDITURES
Current:
General government
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers out
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ 151,443 $ 151,443 $ 155,828 $ 4,385
8,715 8,315 7,971 (344)
500 500 51 (449)
160,658 160,258 163,850 3,592
160,658 160,258 163,850 3,592
(161,000) (161,000) (161,000) -
TOTAL OTHER FINANCING SOURCES (USES)
(161,000)
(161,000)
(161,000) -
NET CHANGE IN FUND BALANCES
(342)
(742)
2,850 3,592
FUND BALANCES - BEGINNING
126,005
133,511
133,511 -
FUND BALANCES - ENDING $ 125,663 $ 132,769 $ 136,361 $ 3,592
Citv ofFederal Wav / 77
Budget and Actual — Debt Service Fund Description
For the Year Ended December 31, 2010
The Debt Service Fund accounts for the accumulation of resources for the payment of general obligation and special
assessment bond principal, interest and related costs. Revenues for this fund consist of the City's real estate excise tax,
transfers from the Utility Tax Fund, and/or other revenues designated by the City Council.
ON ofFederal Wav / 78
A�k
CITY OF
Federal Way
It's all within reach
THIS PAGE IS LEFT INTENTIONALLY BLANK
Citv ofFederal Wav / 79
BALANCESHEET
DEBT SERVICE FUND
DECEMBER 31, 2010
Debt
Service
ASSETS
Equity in pooled cash & investments $ 3,330,998
Receivables (net):
Taxes 210,498
TOTAL ASSETS 3,541,496
LIABILITIES AND FUND BALANCES
Liabilities:
Vouchers payable 4,600
Deferred revenue 157,470
TOTAL LIABILITIES 162,070
Fund balance:
Restricted 3,379,426
TOTAL FUND BALANCES 3,379,426
TOTAL LIABILITIES AND
FUND BALANCE $ 3,541,496
Citv ofFederal Wav / 80
DEBT SERVICE FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For the Year Ended December 31, 2010
REVENUES
Taxes
Interest
TOTAL REVENUES
EXPENDITURES
Debt Service:
Principal
Interest/Fiscal Charges/Admin Fees
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Variance with
Budgeted Amounts Final Budget -
Positive
Original Final Actual Amounts (Negative)
$ 3,300,000 $ 900,000 $ 1,403,361 $ 503,361
60,000 60,000 6,018 (53,982)
3,360,000 960,000 1,409,379 449,379
476,400 476,400 494,250 (17,850)
727,405 727,405 685,214 42,191
1,203,805 1,203,805 1,179,464 24,341
2,156,195 (243,805) 229,915 473,720
915,033 1,976,717 1,976,716 (1)
(3,072,000) (2,991,684) (2,991,684) -
TOTAL OTHER FINANCING SOURCES (USES)
(2,156,967)
(1,014,967)
(1,014,968)
(1)
NET CHANGE IN FUND BALANCES
(772)
(1,258,772)
(785,053)
473,719
FUND BALANCES - BEGINNING
1,139,413
4,164,480
4,164,479
(1)
FUND BALANCES - ENDING $ 1,138,641 $ 2,905,708 $ 3,379,426 $ 473,718
ON ofFederal Wav / 81
Combining Statement — Internal Service Fund's Description
For the Year Ended December 31, 2010
Internal Service Funds
Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to
other departments or agencies of a government, or to other governments, on a cost -reimbursement
basis.
The Risk Management Fund accounts for the City's risk financing activities established to minimize adverse effects of losses
associated with property and casualty, medical and dental, unemployment and worker's compensation claims. Both risk
control (to minimize the losses that strike and organization) and risk financing (to obtain finances to provide for or restore the
economic damages of those losses) are involved. The City is currently self -insuring only State Unemployment Compensation.
Related premiums received by the fund are used to reimburse the unemployment benefits paid to eligible individuals and to
establish reserves for the payment of estimated future unemployment claims liability. The City is also currently recovering
costs and building reserves for general liability including property, casualty, errors and omissions and fidelity coverage.
The Information Systems Fund was established to account for all costs associated with data processing, telecommunications
and the Geographical Information System (GIS). This fund will own and depreciate all non-proprietary fund assets related to
these functions, and will charge equipment/software users for both maintenance/operating costs and equipment replacement
charges based on depreciation schedules.
The Support Services Fund will account for duplication, graphics and other general support services provided to departments
and funds throughout the City.
The Fleet and Equipment Fund accounts for the cost of maintaining City vehicles and other motorized equipment. Rates
charged to user departments are based on the full cost of maintaining equipment items, including the recovery of related
depreciation expense.
The Buildings and Furnishings Fund accounts for all costs associated with the operation and maintenance of specified City
buildings. City building facilities and furnishings will be owned by this Fund, and both maintenance/operating costs and
depreciation recovery will be charged City departments and funds.
ON ofFederal Wav / 82
ASSETS
Current assets:
Equity in pooled cash & investments
Prepaid postage
Receivables (net):
Accounts and contracts
Due from other governments
TOTAL CURRENT ASSETS
Noncurrent assets
Capital assets:
Buildings / Structures
Machinery/furniture/equipment
Less accumulated depreciation
TOTAL NONCURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Current liabilities:
Vouchers/payroll payable
Deferred Revenue
TOTAL CURRENT LIABILITIES
Long-term liabilities:
Compensated absences payable
TOTAL LONG TERM LIABILITIES
TOTAL LIABILITIES
NET ASSETS
Invested in capital assets
Unrestricted
TOTAL NET ASSETS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET ASSETS
December 31, 2010
Risk Information Support Fleet and Buildings and
Management Systems Services Equipment Furnishings TOTAL
$ 5,465,794 $ 3,316,620 $ 337,531 $ 4,905,325 $ 1,548,205 $ 15,573,475
- - 5,000 - - 5,000
10,830 - - 10,830
- 27,506 27,506
5,476,624 3,316,620 342,531 4,905,325 1,575,711 15,616,811
-
-
-
16,193,560
16,193,560
6,405,044
283,730
7,832,406
8,492
14,529,672
(4,829,502)
(225,660)
(4,397,124)
(4,407,917)
(13,860,203)
1,575,542
58,070
3,435,282
11,794,135
16,863,029
5,476,624 4,892,162
400,601
8,340,607
13,369,846
32,479,840
44,842 30,969 30,123 34,870 41,548 182,352
- - - - 67,920 67,920
44,842 30,969 30,123 34,870 109,468 250,272
43,841
3,001
2,273
49,115
- 43,841 -
3,001
2,273
49,115
44,842 74,810 30,123
37,871
111,741
299,387
- 1,575,542 58,070 3,435,282 11,794,135 16,863,029
5,431,782 3,241,810 312,408 4,867,454 1,463,970 15,317,424
$ 5,431,782 $ 4,817,352 $ 370,478 $ 8,302,736 $ 13,258,105 $ 32,180,453
Citv ofFederal Wav / 83
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES
IN FUND NET ASSETS
For the Year Ended December 31, 2010
Risk
Information
Support
Fleet and
Buildings and
Management
Systems
Services
Equipment
Furnishings
TOTAL
OPERATING REVENUES:
Service charges and fees
$ 945,631
$ 1,835,112
$ 164,041
$ 2,047,963
$ 506,919
$ 5,499,666
Intergovernmental
-
-
-
-
20,833
20,833
Miscellaneous
79,042
38,572
2,064
179
18,612
138,469
TOTAL OPERATING REVENUES
1,024,673
1,873,684
166,105
2,048,142
546,364
5,658,968
OPERATING EXPENSES:
Personal services
-
861,522
-
36,571
69,640
967,733
Materials and supplies
-
33,514
23,544
445,510
40,113
542,681
Services and charges
25,148
394,438
105,100
344,657
329,399
1,198,742
Intergovernmental
-
122,601
-
-
-
122,601
Insurance
406,820
-
-
406,820
Claims
476,107
-
-
-
-
476,107
Depreciation
-
396,768
21,886
831,492
861,488
2,111,634
TOTAL OPERATING EXPENSES
908,075
1,808,843
150,530
1,658,230
1,300,640
5,826,318
OPERATING INCOME (LOSS)
116,598
64,841
15,575
389,912
(754,276)
(167,350)
NON -OPERATING REVENUES (EXPENSES)
Interest income
5,438
5,657
569
8,175
2,630
22,469
Gains (losses) from disposal of capital assets
-
500
-
(15,711)
-
(15,211)
TOTAL NON -OPERATING
REVENUES NET OF EXPENSES
5,438
6,157
569
(7,536)
2,630
7,258
INCOME (LOSS) BEFORE
CONTRIBUTIONS & TRANSFERS
122,036
70,998
16,144
382,376
(751,646)
(160,092)
Transfers in
-
-
-
27,827
149,365
177,192
Transfers out
(27,827)
-
(150,000)
-
(177,827)
Capital contributions
-
131,669
-
149,328
280,997
CHANGE IN NET ASSETS
94,209
202,667
16,144
409,531
(602,281)
120,270
TOTAL NET ASSETS, BEGINNING
5,337,573
4,614,685
354,334
7,916,865
13,860,386
32,083,844
TOTAL NET ASSETS, ENDING $ 5,431,782 $ 4,817,352 $ 370,478 $ 8,326,396 $ 13,258,105 $ 32,204,113
Citv ofFederal Wav / 84
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
For the Year Ended December 31, 2010
Risk Information Support
Management Systems Services
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from users
$ 934,801 $
1,835,112 $
164,041
Cash payments to claimants
(476,107)
-
-
Cash payments to suppliers for goods/services
(133,839)
(526,812)
Cash payments to employees
(885,165)
Cash payments to other funds for goods and services
(106,217)
Cash payments for other services/charges
(406,820)
Cash payments to other governments for goods and services
-
(122,601)
-
Other operating receipts
79,042
38,570
2,065
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
(2,923)
339,104
59,889
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in
-
-
Transfers out
(27,827)
NET CASH PROVIDED BY NONCAPITAL FINANCING
(27,827)
CASH FLOWS FROM CAPITAL AND CAPITAL -
RELATED FINANCING ACTIVITIES:
Acquisition of capital asset/construction work in progress (241,492) (19,666)
Proceeds from the sale of capital assets 500
NET CASH USED FOR CAPITAL
AND CAPITAL -RELATED FINANCING ACTIVITIES (240,992) (19,666)
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts of interest
5,437
5,657
568
NET CASH PROVIDED BY INVESTING ACTIVITES
5,437
5,657
568
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(25,313)
103,769
40,791
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
5,491,107
3,212,851
296,740
CASH AND CASH EQUIVALENTS AT END OF YEAR
5,465,794
3,316,620
337,531
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Operating income (loss)
116,598
64,840
15,576
Adjustments to reconcile operating income to
net cash provided (used) by operating activities:
Depreciation expense
-
396,768
21,886
(Increase)/decrease in accounts receivable
(10,830)
-
-
(Increase)/decrease in due from other governments
-
Increase/(decrease) in vouchers/accounts payable
(108,691)
(98,861)
22,427
Increase/(decrease)in deferred revenue
-
Increase/(decrease) in accrued payroll/compensated absences payable
(23,643)
-
TOTAL ADJUSTMENTS
(119,521)
274,264
44,313
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
$ (2,923) $
339,104 $
59,889
Non -cash investing, capital, and financing activities:
Other contributions of capital assets
$ - $
131,669 $
-
Citv ofFederal Wav / 85
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
For the Year Ended December 31, 2010
(continued)
Fleet and Buildings and
Equipment Furnishings TOTAL
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from users
$ 2,047,963 $
575,396
$ 5,557,313
Cash payments to claimants
-
-
(476,107)
Cash payments to suppliers for goods/services
(782,349)
(358,574)
(1,801,574)
Cash payments to employees
(36,538)
(67,833)
(989,536)
Cash payments to other funds for goods and services
(106,217)
Cash payments for other services/charges
-
(406,820)
Cash payments to other governments for goods and services
(254)
-
(122,855)
Other operating receipts
179
18,612
138,468
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
1,229,001
167,601
1,792,672
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in
27,827
149,365
177,192
Transfers out
(150,000)
-
(177,827)
NET CASH PROVIDED BY NONCAPITAL FINANCING
(122,173)
149,365
(635)
CASH FLOWS FROM CAPITAL AND CAPITAL
RELATED FINANCING ACTIVITIES:
Acquisition of capital asset/construction work in progress
(548,180)
(809,338)
Proceeds from the sale of capital assets
17,104
17,604
NET CASH USED FOR CAPITAL
AND CAPITAL -RELATED FINANCING ACTIVITIES
(531,076)
-
(791,734)
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts of interest
8,174
2,630
22,466
NET CASH PROVIDED BY INVESTING ACTIVITES
8,174
2,630
22,466
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
583,926
319,596
1,022,769
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
4,321,399
1,228,609
14,550,706
CASH AND CASH EQUIVALENTS AT END OF YEAR
4,905,325
1,548,205
15,573,473
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Operating income (loss)
378,080
(754,276)
(179,180)
Adjustments to reconcile operating income to
net cash provided (used) by operating activities:
Depreciation expense
843,322
861,488
2,123,464
(Increase)/decrease in accounts receivable
-
-
(10,830)
(Increase)/decrease in due from other governments
-
(27,506)
(27,506)
Increase/(decrease) in vouchers/accounts payable
7,566
18,168
(159,391)
Increase/(decrease) in deferred revenue
-
67,920
67,920
Increase/(decrease) in accrued payroll/compensated absences payable
33
1,807
(21,803)
TOTAL ADJUSTMENTS
850,921
921,877
1,971,854
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
$ 1,229,001 $
167,601
$ 1,792,672
Non -cash investing, capital, and financing activities:
Other contributions of capital assets
$ 149,328 $
-
$ 280,997
ON ofFederal Wav / 86
Ak
CITY OF
Federal Way
It's all within reach
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Citv ofFederal Wav / 87
CAPITAL ASSETS USED IN THE
OPERATION
OF GOVERNMENTAL FUNDS
Citv ofFederal Wav / 88
CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS
COMPARATIVE SCHEDULE BY SOURCE
December 31, 2010
GOVERNMENTAL FUNDS CAPITAL ASSETS
Land
Buildings
Improvements other than buildings
Machinery and equipment
Infrastructure
Construction in progress
TOTAL GOVERNMENTAL FUNDS CAPITAL ASSETS
INVESTMENTS IN GOVERNMENTAL FUNDS CAPITAL ASSETS BY SOURCE:
General Fund
Special Revenue Funds
Capital Project Funds
Donations
TOTAL GOVERNMENTAL FUNDS CAPITAL ASSETS
2010 2009
$ 301,270,212
$ 294,568,474
504,835
504,835
43,264,217
43,166,135
184,000
184,000
143,187,237
120,659,730
16,193,940
32,209,930
504,604,441 491,293,104
125,244,871
125,244,871
252,375,395
252,375,395
112,933,199
99,808,431
14,050,976
13, 864,407
$ 504,604,441 $ 491,293,104
This schedule presents only the historical cost of capital asset balances (no depreciation expenses) related to
governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the
above amounts. Generally, the capital assets of the internal service funds are included as governmental
activities in the statement of net assets.
Citv ofFederal Wav / 89
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City of Federal Way / 90
CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS
SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY
For the Year Ended December 31, 2010
Governmental
Governmental
Funds
Funds
Capital Assets
Capital Assets
1/1/2010 Additions
Deductions 12/31/2010
GENERAL GOVERNMENT
Miscellaneous general government
$ 22,853,458 $
152,000 $
- $ 23,005,458
TOTAL GENERAL GOVERNMENT
22,853,458
152,000
- 23,005,458
CULTURE AND RECREATION
256,538,046
5,639,690
- 262,177,736
TOTAL CULTURE AND RECREATION
256,538,046
5,639,690
- 262,177,736
TRANSPORTATION
Streets and traffic
211,901,599
7,519,647
- 219,421,246
TOTAL TRANSPORTATION
211,901,599
7,519,647
- 219,421,246
TOTAL GENERAL FIXED ASSETS $ 491,293,104 $ 13,311,337 $ - $ 504,604,441
This schedule presents only the historical cost of capital asset balances (no depreciation expenses) related to
governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the
above amounts. Generally, the capital assets of the internal service funds are included as governmental
activities in the statement of net assets.
ON ofFederal Wav / 91
Statistical Section
The statistical section presents detailed information as a context for understanding what the information in the financial
statements and note disclosures say about the City's overall financial health. The following are the five categories of
information presented in this section.
Financial Trends — These schedules contain trend information to help the reader understand how the City's financial
performance and well-being have changed over time.
Revenue Capacity — These schedules contain information to help the reader assess the City's most significant local revenue
sources, property tax and sales tax.
Debt Capacity — These schedules present information to help the reader assess the affordability of the City's current levels of
outstanding debt and the City's ability to issue additional debt in the future.
Demographic and Economic Information — These schedules offer demographic and economic indicators to help the reader
understand the environment within which the City's financial activities take place.
Operating Information — These schedules contain service and infrastructure data to help the reader understand how the
information in the City's financial report relates to the services the city provides and the activities it performs.
ON ofFederal Wav /92
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CITY OF
Federal Way
It's all within reach
THIS PAGE IS LEFT INTENTIONALLY BLANK
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CHANGES IN NET ASSETS
Last Seven Fiscal Years
2004
2005
2006
2007
2008
2009
2010
Expenses
Governmental activities:
General government
$ 6,304,256
$ 5,539,682
$ 4,364,710
$ 4,506,800
$5,606,797
$4,566,457
$ 4,865,827
Security of persons and property
17,374,845
16,825,123
19,906,722
23,107,683
24,745,284
26,341,614
26,842,240
Transportation
4,098,790
5,451,324
5,628,100
9,986,067
7,891,298
9,448,397
9,781,800
Physical environment
295,537
322,151
313,388
336,588
370,718
450,914
451,470
Economic environment
2,953,073
3,095,391
3,162,089
3,319,955
3,382,572
3,560,620
3,175,005
Health and human svcs
683,804
631,133
622,761
684,984
705,976
776,854
767,108
Culture and recreation
4,914,348
4,789,920
5,172,663
6,506,137
6,955,442
8,089,242
8,073,804
Interest on long-term debt
1,764,077
1,541,930
1,420,691
1,122,358
901,161
811,124
685,214
Total governmental activities expenses
38,388,730
38,196,654
40,591,124
49,570,572
50,559,248
54,045,222
54,642,468
Business -type activities:
Surface Water Mgmt
3,282,427
2,995,074
3,142,613
3,454,193
4,060,440
3,345,027
3,384,352
Dumas Bay Center
879,870
819,515
925,825
980,588
1,045,250
984,103
849,176
Total business -type activities expenses
4,162,297
3,814,589
4,068,438
4,434,781
5,105,690
4,329,130
4,233,528
Total primary government expenses
$ 42,551,027
42,011,243
44,659,562
54,005,353
55,664,938
58,374,352
58,875,996
Program Revenues
Governmental activities:
Charges for services
General Government
1,509,973
1,372,270
1,052,641
3,510,339
$2,313,939
$873,258
975,515
Security of Persons & Property
4,203,315
4,780,082
4,800,920
2,110,164
2,309,406
5,037,388
5,381,407
Transportation
1,453,002
1,351,596
1,357,333
3,119,637
513,340
1,806,846
1,961,083
Physical Environment
94,627
88,222
75,580
-
262,847
86,230
90,512
Economic Environment
788,171
847,686
762,603
1,009,707
1,962,624
680,908
636,534
Health
163,686
172,838
150,192
-
-
148,579
153,792
Culture & Recreation
1,201,189
1,322,962
1,247,495
531,041
2,561,685
1,546,931
1,618,659
Operating grants and contributions
32,415
1,228,979
1,512,394
22,858
1,538,476
2,172,168
9,718,920
Capital grants and contributions
7,214,776
4,250,635
5,973,071
11,457,030
8,933,154
8,452,149
9,044,477
Total governmental activities program revenues
16,661,154
15,415,270
16,932,229
21,760,776
20,395,471
20,804,457
29,580,898
Business -type activities:
Charges for services
$ 4,249,020
4,100,623
4,130,179
3,667,168
4,473,453
4,183,012
4,246,235
Operating grants and contributions
535,645
-
1,113,010
632,185
-
-
-
Capital grants and contributions
478,030
-
-
222,474
-
-
-
Total business -type activities program revenues
5,262,695
4,100,623
5,243,189
4,521,827
4,473,453
4,183,012
4,246,235
$ 21,923,849
19,515,893
22,175,418
26,282,603
24,868,924
24,987,469
33,827,133
Net (Expense)/Revenue
Governmental activities
(21,727,576)
(22,781,384)
(23,658,895)
(27,809,796)
(30,163,777)
(33,240,765)
(25,061,570)
Business -type activities
1,100,398
286,034
1,174,751
87,046
(632,237)
(146,118)
12,707
General Revenues and Other Changes in
Net Assets
Governmental activities:
Taxes
Sales tax
12,194,264
13,123,518
14,363,541
15,194,007
14,195,800
12,327,191
12,410,071
Utility tax
7,554,580
8,292,520
9,043,449
12,796,461
13,469,136
13,549,472
12,890,310
Property tax
8,121,088
8,442,172
8,892,558
9,059,734
9,397,456
9,653,537
9,609,740
Real estate excise tax
3,078,898
4,695,984
5,499,911
4,898,537
2,590,310
1,428,985
1,403,361
Gambling Tax
1,443,150
1,501,065
1,363,468
1,489,952
1,259,783
1,127,203
493,486
Hotel/Motel Tax
142,030
158,117
175,219
191,691
188,833
154,148
149,058
Leasehold tax
19,292
2,026
4,592
7,254
5,712
4,999
5,757
Other
1,717,362
6,080,222
3,221,392
6,971,413
6,502,869
2,020,751
1,210,341
Transfers
(203,190)
(126,369)
(107,581)
(185,495)
123,518
(200,907)
152,768
Total governmental activities
34,067,474
42,169,255
42,456,549
50,423,554
47,733,417
40,065,379
38,324,892
Business -type activities:
Other
116,634
319,432
388,729
366,031
3,447,458
46,736
17,646
Transfers
203,190
126,369
107,581
185,495
(123,518)
200,907
(152,768)
Total business -type activities
319,824
445,801
496,310
551,526
3,323,940
247,643
(135,122)
Total primary government
$ 34,387,298
$ 42,615,056
$ 42,952,859
$ 50,975,080
$ 51,057,357
$ 40,313,022
$ 38,189,770
Change in Net Assets
Governmental activities
$ 12,339,898
$ 19,387,871
$ 18,797,654
$ 22,613,758
$ 17,569,640
$ 6,824,613
$ 13,263,321
Business -type activities
1,420,222
731,835
1,671,061
638,572
2,691,703
101,525
(122,415)
Prior Period Adjustment
-
-
-
-
(1,722,939)
(2,168,769)
-
Total primary government
$ 13,760,120
$ 20,119,706
$ 20,468,715
$ 23,252,330
$ 18,538,404
$ 4,757,370
$ 13,140,907
Source: City of Federal Way Finance
Note: All amounts are reported on the accrual basis.
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CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
Last Seven Fiscal Years
Revenues
Taxes
Licenses, fees and permits
Intergovernmental
Charges for services
Development Fees
Fines and Forfeitures
Investment earnings
Other revenues
Total revenues
Expenditures
General government
Security of persons and property
Transportation
Physical Environment
Economic Environment
Health
Culture and Recreation
Debt Service
Principal
Interest/fiscal charges/admin fei
Capital Outlay
Total expenditures
Excess of revenues over
(under) expenditures
Other Financing Sources (Uses)
GO bond proceeds
Sale of capital assets
Transfers in
Transfers out
2004 2005 2006 2007 2008 2009 2010
$ 32,553,302 $ 36,310,754 $ 39,334,751 $ 43,584,824 $ 41,071,781 $ 38,192,852 37,122,069
1,235,039
2,247,651
2,089,844
2,939,328
2,195,068
2,163,984
2,547,655
10,111,537
5,479,614
8,047,243
15,494,887
10,520,570
11,127,718
18,648,749
4,200,528
4,927,163
6,355,262
6,327,552
6,246,207
5,573,647
5,486,632
3,167,605
2,040,378
196,060
-
-
-
-
810,793
720,464
805,598
1,005,293
1,433,628
2,200,092
2,783,214
744,435
1,557,935
2,447,996
2,463,670
1,274,955
271,600
139,698
751,025
1,065,664
717,922
630,966
875,389
1,599,207
899,092
53,574,264
54,349,623
59,994,676
72,446,520
63,617,598
61,129,100
67,627,109
6,107,564
5,462,633
3,944,288
4,364,750
5,197,032
4,518,821
4,857,177
16,982,135
16,988,412
19,909,858
24,183,913
25,470,722
27,051,814
26,892,207
4,788,954
5,080,577
5,373,983
6,631,030
6,634,548
6,165,540
5,700,274
289,921
322,151
313,388
336,588
370,718
448,873
450,971
2,944,584
3,119,831
3,055,426
3,326,986
3,344,987
3,504,767
3,161,820
679,655
634,061
613,800
677,536
700,876
772,151
765,963
3,927,933
3,859,465
4,108,813
5,300,455
5,871,288
5,845,676
5,857,621
3,768,044
2,933,231
2,197,357
9,953,505
440,900
4,558,750
494,250
1,764,077
1,518,384
1,420,691
1,122,358
901,161
811,124
685,214
17,609,080
8,228,486
24,412,303
19,162,067
18,037,109
8,443,523
14,249,501
58,861,947
48,147,231
65,349,907
75,059,188
66,969,341
62,121,039
63,114,998
(5,287,683) 6,202,392 (5,355,231) (2,612,668) (3,351,743) (991,939) 4,512,111
- 4,100,000 - - - -
- 3,618,512 20,000 (23,786) - - -
15,615,639 15,650,064 13,231,785 22,688,136 16,232,916 25,619,678 22,473,128
(15,983,582) (16,266,811) (13,517,681) (23,190,280) (16,109,398) (25,817,857) (22,319,725)
Total other financing sources (uses) (367,943) 3,001,765 3,834,104 (525,930) 123,518 (198,179) 153,403
Net change in fund balances $ (5,655,626) $ 9,204,157 $ (1,521,127) $ (3,138,598) $ (3,228,225) $ (1,190,118) $ 4,665,514
Debt service as a percentage of
noncapital expenditures 15.5% 12.6% 9.7% 24.7% 2.8% 11.1% 2.4%
Source: City of Federal Way Finance
Citv ofFederal Wav / 98
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COMPUTATION OF DIRECT AND OVERLAPPING DEBT
December 31, 2010
Jurisdiction
King County
Port of Seattle
Federal Way School District #210
Library
Total Overlapping Debt
CITY OF FEDERAL WAY
(A)
(B)
Gross General
Percentage
Amount
Obligation Debt
Applicable to
Applicable to
Outstanding
Federal Way
Federal Way
$ 1,178,358,000
2.50%
$ 29,487,341
335,500,000
2.50%
8,395,583
198,990,000
70.57%
140,424,209
132,155,000
3.98%
5,255,824
1,845,003,000
183,562,957
29,893,985
(C, 100.00%
29,893,985
Total Direct and Overlapping Debt $ 1,874,896,985
$ 213,456,942
(A) Total general obligation bonds outstanding at the year end, exclusive of refunded bonds.
Source is King County Department of Finance.
(B) Determined by ratio of assessed valuation of property subject to taxation in overlapping unit to
valuation of property subject to taxation in reporting unit.
(C) Includes Public Works Trust Fund Loans issued in 1994, 1996, 1997, and 2000;
general obligation bonds issued in 2000, 2003, 2006 and 2009.
Source is City of Federal Way Finance
Citv ofFederal Wav / 106
COMPUTATION OF LIMITATION OF INDEBTEDNESS
December 31, 2010
General Debt Capacity
Excess Levy
Excess Levy
(Limited) (Unlimited)
Open Space
Utility Total Debt
DESCRIPTION
Councilmanic Excess Levy
and Park
Purposes Capacity
Statutory debt limit:
(2010 AV=$8,206,354,959) (A)
1.50% AV @ 100%
$ 123,095,324 $ (123,095,324)
$ -
$ - $ -
2.50% AV @ 100%
- 205,158,874
205,158,874
205,158,874 615,476,622
Add: Cash on hand for
debt redemption (B) 6,392,076 - - - 6,392,076
Less: Bonds and COPs outstanding (28,683,950) - - - (28,683,950)
Remaining Debt Capacity $ 100,803,450 $ 82,063,550 $ 205,158,874 $ 205,158,874 $ 593,184,748
Total Remaining
"General" Capacity $182,867,000
(A) This figure represents the City's final total taxable assessed valuation (AV) for 2010 which was used to determine the
2011 property tax levy.
(B) Reflects ending fund balance in the Debt Service Fund and Utility Tax Fund as of December 31, 2010.
(C) Combined total for Councilmanic, Financing Lease, and Excess Levy capacities.
Total net debt
Total net debt
applicable to
applicable
Legal debt
the limit as a
Fiscal Year
Debt limit
to limit
margin
% of debt limit
2001
353,852,494
(28,124,453)
325,728,041
7.95%
2002
443,427,207
(14,289,859)
429,137,348
3.22%
2003
469,715,580
(31,327,803)
438,387,777
6.67%
2004
471,925,773
(26,881,086)
445,044,687
5.70%
2005
487,677,084
(23,478,555)
464,198,529
4.81%
2006
543,899,454
(21,459,145)
522,440,309
4.32%
2007
600,871,170
(12,012,597)
588,858,573
3.91%
2008
736,889,175
(11,615,105)
725,274,070
1.58%
2009
741,123,572
(22,913,431)
718,210,141
3.09%
2010
615,476,622
(22,291,874)
593,184,748
3.62%
Source: City of Federal Way Finance
(A) King County Department of Finance
Note: Under state finance law, the city's outstanding general obligation debt should not exceed 15 percent of total assessor's
property value.
By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general
obligation bonds.
Federal Wav / 107
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CITY GOVERNMENT EMPLOYEES FULL-TIME EQUIVALENT - HISTORY
Department
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Mayor's Office
6.00
5.00
6.00
6.00
6.00
6.00
6.00
10.00
9.75
7.63
7.63
Administration
6.00
5.00
5.00
5.00
5.00
5.00
5.00
5.50
5.25
3.13
3.13
Economic Development
-
-
1.00
1.00
1.00
1.00
1.00
1.50
1.50
1.50
1.50
Government Affairs
-
-
-
-
-
-
-
3.00
3.00
3.00
3.00
City Council
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
4.50
Municipal Court
11.55
13.55
13.55
13.55
12.55
12.55
12.55
14.00
14.00
13.00
13.00
Human Resources
7.50
6.50
7.00
6.50
6.50
5.00
5.00
5.00
5.25
5.25
5.25
City Clerk
2.50
2.50
2.50
2.00
2.00
1.50
1.50
1.50
1.75
1.75
1.75
Human Resources
5.00
4.00
4.50
4.50
4.50
3.50
3.50
3.50
3.50
3.50
3.50
Finance
10.00
8.50
8.50
9.50
9.50
8.50
8.50
9.50
8.00
7.60
7.60
Administration
2.00
1.50
1.50
1.50
1.50
1.50
1.50
1.50
-
-
-
Finance
8.00
7.00
7.00
8.00
8.00
7.00
7.00
8.00
8.00
7.60
7.60
Information System
8.50
9.00
9.00
9.00
9.00
8.50
8.50
10.60
10.60
10.00
9.60
Law
10.00
11.00
11.00
10.38
10.60
10.60
10.60
13.00
13.00
12.00
12.00
Civil Legal Services
4.05
5.05
5.05
5.80
5.80
5.80
5.80
5.80
5.80
4.80
4.80
Criminal Prosecution Services
5.95
5.95
5.95
4.58
4.80
4.80
4.80
7.20
7.20
7.20
7.20
Community Development
30.05
29.05
28.55
29.60
29.60
28.70
28.70
30.49
32.00
30.00
28.90
Administration
4.50
4.50
4.50
4.50
4.50
4.50
4.50
4.50
4.50
5.00
5.00
Planning
8.80
8.80
8.80
8.80
8.80
8.80
8.80
8.75
8.75
8.00
7.00
Building
13.25
12.25
11.25
12.30
12.30
12.30
12.30
13.25
14.25
13.00
13.00
Human Services
2.50
2.50
3.00
3.00
3.00
2.50
2.50
3.00
3.50
3.00
3.00
Neighborhood Development
1.00
1.00
1.00
1.00
1.00
0.70
0.70
1.00
1.00
1.00
0.90
Police
138.50
141.50
151.00
155.00
155.00
152.00
155.00
169.00
169.00
164.00
161.00
Administration
2.00
2.00
2.00
2.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
Support Services
56.50
58.50
59.00
55.00
54.00
53.00
55.00
61.00
61.00
61.00
58.00
Field Operations
80.00
81.00
90.00
98.00
98.00
96.00
97.00
105.00
105.00
100.00
100.00
Parks, Rec. & Cultural Svcs.
26.90
27.00
27.00
30.40
30.40
30.20
31.20
44.25
44.25
39.75
39.75
Administration
2.00
2.00
2.00
1.80
1.80
1.80
1.80
1.80
2.80
1.35
1.35
Planning
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
-
-
-
Kenneth Jones Pool
-
-
-
3.00
3.00
3.00
3.00
-
-
-
-
General Recreation
7.50
6.50
6.50
6.60
6.60
6.60
6.60
7.10
7.10
4.80
4.80
Community Center
-
-
-
-
-
-
-
12.35
12.35
13.35
13.35
Dumas Bay Centre
2.00
2.00
2.00
2.00
2.00
2.00
3.00
3.00
2.75
2.75
2.75
Knutzen Family Theatre
1.00
1.00
1.00
1.50
1.50
1.50
1.50
1.50
1.75
-
-
Parks Maintenance
13.00
14.00
14.00
14.00
14.00
13.80
13.80
17.00
17.00
17.00
17.00
Building
0.40
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
Public Works
37.50
38.50
38.50
41.50
41.60
41.60
42.60
44.00
44.00
42.95
41.95
Administration
2.50
2.10
2.10
2.10
2.10
2.10
1.90
1.85
1.85
2.35
2.35
Development Services
6.45
6.45
6.45
6.45
5.80
5.80
6.50
6.45
6.45
4.45
4.45
Traffic Services
4.00
4.10
4.10
5.10
5.10
5.10
5.10
6.10
6.10
6.10
5.10
Street Services
9.70
10.00
10.00
11.00
11.70
11.70
11.00
11.50
11.00
10.50
10.50
Emergency Management
-
-
-
-
-
-
1.00
1.00
1.00
1.00
1.00
Solid Waste & Recycling
1.60
1.60
1.60
1.60
1.60
1.60
1.70
1.70
1.70
1.70
1.70
Surface Water Management
13.25
14.25
14.25
15.25
15.30
15.30
15.40
15.40
15.40
16.35
16.35
Fleet & Equipment
-
-
-
-
-
-
-
-
0.50
0.50
0.50
Total
290.00
293.10
303.60
314.93
314.25
307.15
312.15
353.34
353.35
335.68
331.18
Source: City of Federal Way Finance Division
Citv ofFederal Wav / 114
SALARIES AND SURETY BONDS OF PRINCIPAL OFFICIALS
DECEMBER 31, 2010
POSITION
MAYOR
DEPUTY MAYOR
COUNCIL MEMBERS
POSITION
CITY ATTORNEY
CITY CLERK
COMMUNITY DEVELOPMENT DIRECTOR
ECONOMIC DEVELOPMENT DIRECTOR
FINANCE DIRECTOR
FINANCIAL SERVICES ADMINISTRATOR
HUMAN RESOURCES DIRECTOR
PARKS AND PUBLIC WORKS DIRECTOR
POLICE CHIEF
Source: City of Federal Way Finance Division
LEGISLATIVE BODY
EMPLOYEE ANNUAL SALARY
SKIP PRIEST
$112,800
DINI DUCLOS
$13,800
JIM FERRELL
$13,800
LINDA KOCHMAR
$13,800
MICHAEL PARK
$13,800
JEANNE BURBIDGE
$13,800
JACK DOVEY
$13,800
ROGER FREEMAN
$13,800
ADMINISTRATIVE STAFF
EMPLOYEE ANNUAL SALARY
PAT RICHARDSON
$134,484
CAROL MCNEILLY
$77,664
VACANT
$121,848
PATRICK DOHERTY
$115,680
THO KRAUS
$121,848
BRYANT ENGE
$141,036
VACANT
$121,848
CARY ROE
$141,036
BRIAN WILSON
$135,384
NOTE: In accordance with State of Washington legal statues, individual fidelity coverage of not less than $100,000
exists for the Mayor, City Attorney, Community & Economic Development Director, Finance Director, Financial Services
Parks and Public Works Director, and Police Chief.
Federal Wav / 115
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CITY OF
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