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2017 Annual Comprehensive Financial Report (17-003)City of Federal Way, WA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR YEAR ENDED DECEMBER 31, 2017 ,41k CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK 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 308th 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 with 58,000 residents. ,41k CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK CITY of Federal Way COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended December 31, 2017 City of Federal Way 33325 8th Avenue South Federal Way, Washington 98003 (253) 835-2520 www.ciiyoffederalwgy.com Prepared by the Finance Department Finance Director Ade' Ariwoola COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended December 31, 2017 Table of Contents Page INTRODUCTORY SECTION Letterof Transmittal........................................................................................................................... City Officials and Administrative Officers....................................................................................... City Functional Organization Chart .................................................................................................... GFOA Certificate of Achievement..................................................................................................... FINANCIAL SECTION Independent Auditor's Report ............................................................................................................ 11 Management's Discussion and Analysis............................................................................................ 15 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Position................................................................................................ 29 Statementof Activities................................................................................................... 30 Fund Financial Statements: Balance Sheet — Governmental Funds............................................................................. 31 Statement of Revenues, Expenditures, and Changes in Fund Balances — GovernmentalFunds................................................................................................. 33 Reconciliation of the Statement of Revenues, Expenditures, and Change In Fund Balances of Governmental Funds to the Statement of Activities ............... 35 Statement of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual GeneralFund........................................................................................................... 36 StreetFund............................................................................................................... 37 UtilityTax Fund...................................................................................................... 38 Performing Arts & Event Center Operations Fund .................................................. 39 Statement of Net Position — Proprietary Funds................................................................. 40 Statement of Revenues, Expenses and Changes in Fund Net Position — Proprietary Funds 41 Statement of Cash Flows — Proprietary Funds.................................................................. 42 Notes to the Basic Financial Statements........................................................................... 43 Required Supplementary Information: Schedule of Proportionate Share of Net Pension Liability..................................................... 80 Schedule of Employer Contributions...................................................................................... 82 Combining and Individual Fund Statements and Schedules — Nonmajor Governmental Funds: FundDescription....................................................................................................................... 83 CombiningBalance Sheet......................................................................................................... 84 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................... 88 Statement of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual ArterialStreet Fund................................................................................................. 92 Solid Waste & Recycling Fund................................................................................ 93 Special Contracts/Studies Fund............................................................................... 94 Hotel/Motel Lodging Tax Fund............................................................................... 95 Federal Way Community Center Fund.................................................................... 96 TrafficSafety Fund.................................................................................................. 97 Community Development Block Grant Fund.......................................................... 98 Paths& Trails Fund................................................................................................. 99 Individual Fund Statements and Schedules — Debt Service Fund: FundDescription........................................................................................................................ 101 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ...... 102 Combining and Individual Fund Statements and Schedules — Internal Service Funds: FundDescription.................................................................................................................... 103 Combining Statement of Net Position..................................................................................... 104 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ................. 106 Combining Statement of Cash Flows..................................................................................... 108 Supplemental Information: Schedule of State Financial Assistance.................................................................................. 112 Schedule of Expenditures of Federal Awards........................................................................ 113 Capital Assets Used in the Operation of Governmental Funds: Comparative Schedules by Source......................................................................................... 116 Schedule by Function and Activity........................................................................................ 117 STATISTICAL SECTION NetPosition by Component............................................................................................................ 120 Changesin Net Position.................................................................................................................. 121 Government -wide Revenues by Source and Expenditures by Function ......................................... 122 Fund Balances of Governmental Funds.......................................................................................... 123 Changes in Fund Balances, Governmental Funds.......................................................................... 124 Assessed and Estimated Actual Value of Taxable Property........................................................... 125 Property Tax Rates and Levies, Direct and Overlapping Governments ......................................... 126 PrincipalTaxpayers........................................................................................................................ 127 Property Tax Levies and Collections.............................................................................................. 128 Ratio of Outstanding Debt by Type................................................................................................ 129 Ratio of Net General Obligation Bonded Debt to Assessed Value and Net General Obligation Bonded Debt Per Capita ..................................................... 130 Computation of Direct and Overlapping Debt................................................................................ 131 Computation of Limitation of Indebtedness.................................................................................... 132 Ratio of Annual Debt Service Expenditures for General Obligation Bonded Debt to Total General Governmental Expenditures Net of Debt Service Expense ................ 133 DemographicStatistics................................................................................................................... 134 PrincipalEmployers....................................................................................................................... 135 Property Value and Construction................................................................................................... 136 CapitalAssets by Function............................................................................................................. 137 OperatingIndicators by Function................................................................................................... 138 City Government Employees Full -Time Equivalent - History ....................................................... 139 Salaries and Surety Bonds of Principal Officials............................................................................ 140 Miscellaneous Statistical Information............................................................................................ 141 Principal Taxpayers — Sales Taxes................................................................................................. 142 ,41k CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK Page 1 CITY OF Federal Way June 25, 2018 People of the City of Federal Way Honorable Mayor and City Council I am pleased to submit to you the 2017 Comprehensive Annual Financial Report (CAFR) of the City of Federal Way, Washington. This report is published annually as the official annual financial report and complies with state law (RCW 43.09.230) requiring annual report for Washington municipal governments to be certified and filed with the Washington State Auditor's Office in a timely manner. The accuracy of the data, completeness and fairness of the presentation, including all disclosures rests with the City management. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. The City operates under a system of accounting and internal controls that are concerned with safeguarding of assets and the reliability of financial records. The definition of accounting control assumes reasonable, but not absolute assurance that the objectives expressed in it will be accomplished by the system. The concept of reasonable assurance recognizes that the cost of internal control should not exceed the benefits expected to be derived. This transmittal letter is designed to complement the Management Discussion & Analysis (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 City Councilmember and King County Senior Deputy Prosecuting Attorney Jim Ferrell as Mayor on November 5, 2013 and was re- elected November 7, 2017. 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 has twelve major departments consisting of (1) Mayor's Office; (2) City Council; (3) Law; (4) Finance; (5) Human Resources; (6) Information Technology; (7) Municipal Court, (8) Parks and Recreation; (9) Public Works; (10) Police; (11) Community Development; and (12) Performing Arts and Event Center. Fire protection and emergency medical services are provided by South King Fire & Rescue. Lakehaven Utility District delivers water and sewer services. King County 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 current economic condition has made considerable strides since the post Great Recession era as employment and inflation levels are consistent with the Federal Reserve's mandate for maximum sustainable employment and price stability. Consumer confidence levels are at its best since pre -Great Recession levels. Page 2 Nationally, according to Bureau of Labor Statistics, the CPI rose 2.1 percent in 2017, the same increase as in 2016, but larger than the 2014 and 2015 increases. It was also larger than the 1.6-percent average annual increase over the past 10 years. The food index, which declined 0.2 percent in 2016, increased 1.6 percent in 2017. The index for food at home rose 0.9 percent in 2017 after falling in 2015 and 2016. The six major grocery store food group indexes were mixed in 2017, with three increases, two declines, and one unchanged. The index for meats, poultry, fish, and eggs increased 2.8 percent after declining in 2015 and 2016. The beef index rose 3.5 percent in 2017, and the index for eggs increased 11.6 percent. The index for fruits and vegetables rose 1.5 percent in 2017 after falling 2.4 percent in 2016. The index for other food at home also increased in 2017, rising 0.5 percent. The index for cereals and bakery products fell 0.6 percent in 2017, similar to its 0.7-percent decline the prior year. The index for dairy and related products fell 0.5 percent in 2017, its third consecutive yearly decrease. The index for nonalcoholic beverages was unchanged in 2017 after falling in 2016. The index for food away from home rose 2.5 percent in 2017 after a 2.3-percent increase the prior year. Over the last 10 years, the food index rose at an annual rate of 2.0 percent. The food at home index rose at a 1.5-percent rate, and the index for food away from home increased at a 2.6-percent rate since December 2007. The energy index rose 6.9 percent in 2017 after a 5.4-percent increase in 2016. The gasoline index increased 10.7 percent in 2017 following a 9.1-percent increase in 2016. The index for natural gas also increased for the second straight year, rising 4.7 percent in 2017 after increasing 7.8 percent in 2016. The electricity index increased 2.6 percent in 2017 after rising 0.7 percent in 2016. Despite the recent increases, the energy index declined at a 0.5-percent annual rate over the past 10 years. The index for all items less food and energy rose 1.8 percent in 2017, a smaller increase than its 2.2-percent rise in 2016. The shelter index rose 3.2 percent in 2017 following a 3.6-percent increase in 2016. The rent index rose 3.7 percent in 2017, while the index for owners' equivalent rent increased 3.2 percent. The medical care index increased 1.8 percent in 2017, a substantial deceleration from its 4.1-percent increase in 2016. The index for prescription drugs rose 2.8 percent in 2017. The index for hospital services rose 5.1 percent, while the physicians' services index declined 1.8 percent. The index for motor vehicle insurance rose 7.9 percent in 2017 following a 7.0-percent increase in 2016. The education index increased 2.0 percent in 2017, the smallest annual increase in the history of the index, which dates to 1993. The recreation index rose 1.5 percent, and the index for personal care increased 0.9 percent. The index for tobacco increased 6.5 percent, and the alcoholic beverages index rose 1.4 percent. Several indexes declined in 2017. The index for communication declined 4.9 percent in 2017, its eighth consecutive yearly decline. The index for airline fares decreased 4.0 percent in 2017, its fifth consecutive yearly decline. The apparel index fell 1.6 percent, its fourth straight annual decrease. The index for household furnishings and operations also continued to fall, declining 0.8 percent in 2017 after falling 1.1 percent the prior year. The index for new vehicles fell 0.5 percent in 2017 after rising modestly in previous years; the index for used cars and trucks declined 1.0 percent after a 3.5-percent decline the prior year. The Seattle -Tacoma -Bremerton, WA's CPI for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.0 percent in December 2017 compared to increase of 2.5% in 2016. The national CPI-W increased 2.2% for 2017. The Seattle -Tacoma - Bellevue, WA annual unemployment rate for 2017 was 4.1% up from 4.0% in 2016. The last time Seattle -Tacoma -Bellevue annual unemployment rate was below 4.0% was 2007 which was at 3.7% just before the "mortgage market" crash in 2008. ECONOMIC TRENDS Federal Way is the tenth most populated city in the state of Washington according to U.S. Census.gov with 96,690 people after City of Spokane Valley with 97,847 and closely followed by Yakima at 93,667 then Bellingham at 89,045. In 2015, King County median household income was $75,302; Federal Way $55,673, Renton $64,802, Spokane Valley $47,430, and Yakima $40,726. 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 2017, there were 36,938 housing units in Federal Way, an increase of 1.4% over 2016 of 36,424 housing units. Of these units, 55% or 20,177 were single family homes, 41% or 15,472 were multi -family units, and 4% or 1,289 were 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 2017 is estimated at 31,638. Major employers are; Federal Way Public Schools, St. Francis Community Hospital, World Vision, Wild Waves, U.S. Postal Services, and Davita. Page 3 Sales tax collected in 2017 total $14.2 million which was $23,036 less than $14.2 million of 2016. The retail sector of the local economy is anchored by the following areas; the first is South 348th and State 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, Kohls, Dicks Sporting Goods 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 49%; services 23%; construction 14%; information 5%; wholesale trade 4%, manufacturing 1%, and other 4%. In 2017, the total assessed value of property in Federal Way was $10.3 billion, which was approximately 8.4% higher than the 2016 assessed valuation of $9.5 billion. Real Estate sales decreased 22.8% to approximately $819.3 million in 2017 as compared to $1.06 billion in 2016. A total of 649 building permits in 2017 compared to 544 in 2016 and 3,425 other building related permits compared to 3,429 that were issued in 2016. Estimated market value for permit in 2017 was $62.0 million and in 2016 was $57.0 million. Significant building permits include: St, Francis lab and observation unit, Telecare Residential Treatment facility, South King Fire Station 63, and Cottages West Cluster III apartments. 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 determine the magnitude of future financing gaps, if any. 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 During 2017, the City of Federal Way completed construction of several hot -mix asphalt overlays totaling over $1.7M; a sidewalk gap completion project on 21't Ave S between S 320"' and S 310h totaling over $600,000 which was 80% grant funded; the Steel Lake Park Sidewalk Extension Project for $710,000 which extended sidewalks from 25th Ave S to Steel Lake Park; and the S356th Street Widening Project which widened S 356th Street between SR 99 and SR 16, adding one travel lane, sidewalks, and bicycle lanes in both directions totaling over $3.5M which was 69% grant funded. Construction continued on Pacific Hwy HOV Phase 5 (S 359th to S 340th Street) Project which will extend the 7-lane Pacific Highway urban cross section. This project reached approximately 65% completion in 2017 and construction will continue through 2018. In addition, 2017 continued the city's success in securing grant funding including a $400,000 Transportation Improvement Board (TIB) grant for a sidewalk project on Dash Point Road in front of Sacajawea Middle School; a $952,000 Federal Grant for a preservation grant on Campus Drive SW between 196 Ave SW and lst Ave S; and a $692,000 Federal Grant for a preservation grant on 16th Avenue S between S 3486 Street and Pacific Hwy S. Located at 31510 20th Avenue South, the City had the grand opening of its Performing Arts and Event Center (PAEC) in the summer of 2017. The City started construction of this project in 2015. The City is working with a private developer to build a hotel next to the PAEC. 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. Page 4 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. 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 2017 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 in 2017; which is the 28th 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, 2016. The City of Federal Way has received a Certificate of Achievement for the last twenty-seven years (fiscal years ended 1990 — 2016). 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, 2017 and 2018. 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 department. In addition, staff in all City departments should be recognized for responding so positively to the requests for detailed information which accompany each audit. A special note of thanks is given to Chase Donnelly, Accounting Supervisor who served as the coordinator for the CAFR preparation. 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, Ademola A. Ariwoola, MBA, CGFM Finance Director Page 5 2017 CITY OFFICIALS EXECUTIVE & LEGISLATIVE BODY JEANNE BURBIDGE Deputy Mayor SUSAN HONDA Councilmember #3 JIM FERRELL Mayor LYDIA ASSEFA-DA W SON Councilmember # 1 MARK KOPPANG Councilmember #5 BOB CELSKI* Councilmember #2 MARTIN A. MOORE Councilmember #6 DINI DUCLOS Councilmember #7 Elected/ Position Elected/Appointed* Term Appointed Email Phone Mayor Jim Ferrell 1/1/14-12/31/17 11/26/13 Jim.Ferrell@cityoffederalway.com (253) 835-2402 Position #1 Lydia Assefa-Dawson 1/l/16-12/31/19 11/24/15 Lydia.Assefa-Dawson@cityoffederalway.com (253) 835-2401 Position #2 Bob Celski* 1/5/17-11/28/17 01/05/17 Bob.Celski@cityoffederalway.com (253) 835-2401 Position #3 Susan Honda 1/l/16-12/31/19 11/24/15 Susan.Honda@cityoffederalway.com (253) 835-2401 Position #4 Jeanne Burbidge 1/1/14-12/31/17 11/26/13 Jeanne.Burbidge@ctiyoffederalway.com (253) 835-2401 Position #5 Mark Koppang 1/l/16-12/31/19 11/24/15 Mark.Koppang@cityoffederalway.com (253) 835-2401 Position #6 Martin A. Moore 1/l/14-12/31/17 11/26/13 Martin.Moore@cityoffederalway.com (253) 835-2401 Position #7 Dim Duclos 1/l/16-12/31/19 11/24/15 Dini.Duclos@cityoffederalway.com (253) 835-2401 * Councilmember Bob Celski was appointed on 1105117 to fill the unexpired term of Councilmember Kelly Maloney. Page 6 2018 CITY OFFICIALS EXECUTIVE & LEGISLATIVE BODY SUSAN HONDA Deputy Mayor HOANG V. TRAN Councilmember #4 JIM FERRELL Mayor LYDIA ASSEFA-DAWSON Councilmember #1 MARK KOPPANG Councilmember #5 JESSE E. JOHNSON Councilmember #2 MARTIN A. MOORE Councilmember #6 DINI DUCLOS Councilmember #7 Elected/ Position Elected/Appointed* Term Appointed Email Phone Mayor Jim Ferrell 1/l/18-12/31/21 11/28/17 Jim.Ferrell@61yoffederalway.co (253) 835-2402 Position #1 Lydia Assefa-Dawson 1/l/16-12/31/19 11/24/15 Lydia.Assefa-Dawson@cityoffederalwao (253) 835-2401 Position #2 Jesse E. Johnson 11/28/17-12/31/21 11/28/17 Jesse.Johnson(a)cityoffederalway.com (253) 835-2401 Position #3 Susan Honda 1/l/16-12/31/19 11/24/15 Susan.Honda(a cityoffederalway.com (253) 835-2401 Position #4 Hoang V. Tran 1/1/18-12/31/21 11/28/17 Hoang.Tran@61yoffederalway.co (253) 835-2401 Position #5 Mark Koppang 1/l/16-12/31/19 11/24/15 Mark.Koppang@ciiyoffederalwqy.com (253) 835-2401 Position #6 Martin A. Moore 1/l/18-12/31/21 11/28/17 Martin.Moore(a)cityoffederalwU.co (253) 835-2401 Position #7 Dim Duclos 1/l/16-12/31/19 11/24/15 Dini.Duclos(c cityoffederalwU.co (253) 835-2401 *Councilmember Jesse Johnson was elected to fill appointed position #2 that was filled by Councilmember Bob Celski. Due to the position being filled by an appointed person, the elected councilmember term begins immediately after election certification. Page 7 JUDICIAL BRANCH Elected/ Office Position Employee Appointed Term � Contact Information amn" Presiding David Larson Elected N/A 3/3/2008 David.Larson@cityoffederalway.com Judge (253)835-3012 Judge Rebecca Elected N/A 1/l/2010 Rebecca. Robertson@cityoffederalway.com Robertson (253) 835-3025 Court Susanne White Appointed N/A 2/22/2010 Susanne.White@cityoffederalway.com Administrator (253) 835-3000 CITY ADMINISTRATION (In alphabetical order) Emp t Contact information City Attorney Ryan Call 3/9/2017 Ryan.Call@cityoffederalway.com (253) 835-2572 City Clerk Stephanie 10/7/2014 Stephanie.Courtney@cityoffederalway.com Courtney (253) 835-2540 Community Development Brian Davis 11/1/2016 Brian.Davis@cityoffederalway.com Director (253) 835-2612 Economic Development Tim Johnson 9/15/2014 Tim.Johnson@cityoffederalway.com Director (253) 835-2412 Finance Director Ade Ariwoola 4/1/2014 Ade.Ariwoola@cityoffederalway.com (253) 835-2520 Human Resources Manager Jean Stanley 1/1/2011 Jean.Stanley@cityoffederalway.com (253) 835-2532 IT Manager Thomas 7/1/2011 Thomas.Fichtner@cityoffederalway.com Fichtner (253) 835-2547 Parks Director John Hutton 7/23/2014 John.Hutton@cityoffederalway.com (253) 835-6910 Performing Arts & Event Theresa Yvonne 03/10/2015 Theresa.Yvonne@cityoffederalway.com Center Executive Director (253) 835-2414 Police Chief Andy Hwang 3/18/2014 Andy.Hwang@cityoffederalway.com (253) 835-6716 Public Works Director Marwan 7/1/2014 Marwan.Salloum@cityoffederalway.com Salloum (253) 835-2710 G G m c0 tzi °o ■ ro ce z * C) * x * C� * w * C" d � ro �. c' a .o cGo coo K " fD 43 qz tr rn a a m "�. O G wG o< a - x 0 o 4 C o C7 0 � �= � �• ee ao o w a as O o m 0 ro 0 a L- 7y b0 ro a a ° w a ° y d o� w : y c°i w m w �yp�D m " y D • O� O Gu iz° ro 7d °ID r� �b x oa y w p as o° a w o o ID a o m 7y a ID rn o a In ° m w x o• R In, G ri ° n afD C7 �• � C7 T' n o' ° A. cwi qQ as ° tiro b �° A9 y y � ?: A co G� n ° o 5 y Q h � � (D � 0 N ro m oo m o 5 aa. Ci � � Q Oil b7 Uq0 m ro On a a w y ° a Page 9 Government Finance Officers Association 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, 2016 a Executive Director/CEO Page 10 CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK Page 11 Office of the Washington State Auditor Pat McCarthy June 19, 2018 Mayor and City Council City of Federal Way Federal Way, Washington REPORT ON THE FINANCIAL STATEMENTS 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, 2017, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the Page 12 assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion 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, as of December 31, 2017, 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 accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and required supplementary information listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining financial statements and schedules are Page 13 presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. This information has been subjected to auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements as a whole. The Introductory and Statistical Sections are 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 do not express an opinion or provide any assurance on it. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we will also issue our report dated June 19, 2018, 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. 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Sincerely, Pat McCarthy State Auditor Olympia, WA Page 14 CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK Page 15 MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Federal Way, we offer readers of our annual financial report a narrative overview, and an analysis of the financial activities of the City of Federal Way for the fiscal year ended December 31, 2017. We encourage readers to consider the information in conjunction with the preceding letter of transmittal, the financial statements and notes to the financial statements that follow. FINANCIAL HIGHLIGHTS • The total assets plus deferred outflows of the City of Federal Way exceeded its liabilities plus deferred inflows at December 31, 2017 by $585.8 million (Net Position). Capital Assets (net of depreciation and related debt) account for 89.3% of this amount with a value of $523.2 million. Of the remaining net position of $62.6 million, $42.2 million may be used to meet the government's ongoing obligations to citizens and creditors, without legal restriction while the $20.4 million are restricted for specific use. (See page 29). • The City's total net position increased by $16.8 million, or 3.0% above 2016 as referenced on page 17. Governmental activities increased by $13.5 million or 2.7% while business -type activities increased by $3.3 million or 5.1%. The increase in governmental and business -type activities is primarily due to the increase in capital assets (See note 8 on page 59). More detail is described in the analysis below. • Net investment in capital assets increased by $23.3 million (See note 8 on page 59) and unrestricted net position decreased by $5.5 million respectively under 2016 as referenced on page 17. • Restricted Net Position of $20.4 million decreased by $0.9 million or 4.4% primarily due spending down real estate excise tax and LIFT funding on capital projects. Restricted Net Position is for funding of capital projects and debt service. (page 17) • Long term liabilities decreased by $6.2 million or 12.0% primarily due to the reduction of $2.9 million in net pension liability (see note 11 on page 70) for GASB 68 pension reporting, pay down of $2.2 million on target property from sale of the land, long term debt decrease of $1.0 million for General obligation debt, and public works trust fund loans that decreased by $0.1 million during the current fiscal year. (See Note 11 on page 70). • Governmental fund balances at year-end were $38.4 million, a $10.9 million or 28% decrease from the prior year. Of the $38.4 million, $5.3 million, or 13.8% of the governmental fund balance is unassigned and available to fund ongoing activities. The remaining $33.1 million is earmarked for debt service, paths & trails reserve, hotel/motel lodging tax, police special funds, petty cash/change funds, court trust fund, advance travel, strategic opportunities reserve, streets maintenance and capital projects. (See page 32 and page 52). • Unrestricted or Unassigned fund balance in the General Fund was $13.4 million, which decreased by $0.4 million or 3.0% from the prior year. 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 Position, and Cash Flows for all proprietary and internal service funds. The other set of supplementary information is the Statistical Section. This section provides a one 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. Page 16 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. A) The statement of net position presents information on all of the City of Federal Way's assets plus deferred outflows and liabilities plus deferred inflows, with the difference between the two reported as net position. This statement serves a purpose similar to that of a balance sheet in private business. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. B) The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position 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 fund, 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 to 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 twenty individual governmental funds. The City's seven major governmental funds, the general fund, street fund, utility tax fund, debt service fund, performing arts and event center operations fund, transportation fund, and performing arts & events center 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 non -major governmental funds. Individual fund data for each of the non -major governmental funds can be found in combining statements later on in this report. Page 17 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. 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 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, information systems, mail and duplication services, fleet of vehicles and motorized equipment, facilities management, health insurance, and unemployment services. 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 proprietary fund financial statements can be found following the governmental fund statements in 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 fund financial statements. Other Information In addition to the basic financial statements and accompanying notes, this report also presents the combining statements for non -major governmental funds, internal service funds, and capital assets of governmental funds. GOVERNMENT -WIDE FINANCIAL ANALYSIS This section provides analysis of the government -wide financial statements including long-term and short-term information about the City's overall financial condition. The following tables address the financial results of the City as a whole. CONDENSED STATEMENT OF NET POSMON As of December 31, 2017 and 2016 Governmental Activities Business -Type Activities Total 2017 2016 2017 2016 2017 2016 Current and other assets $ 91,707,136 $97,131,758 $ 8,067,357 $7,172,824 $ 99,774,493 $ 104,304,582 Capital assets and Cr', net ofaccum depreciation 481,042,371 463,159,714 61,865,439 59,348,005 542,907,810 522,507,719 Total assets 572,749,507 560,291,472 69,932,796 66,520,829 642,682,303 626,812,301 Deferred ouflows ofresources 2,215,367 3,934,973 226,900 307,122 2,442,267 4,242,095 Total deferred outflows ofresource 2,215,367 3,934,973 226,900 307,122 2,442,267 4,242,095 Long-tennliabilities 44,030,949 49,981,388 1,674,958 1,962,748 45,705,907 51,944,136 Other liabilities 9,318,671 9,162,665 759,603 615,837 10,078,274 9,778,502 Total liabilities 53,349,620 59,144,053 2,434,561 2,578,585 55,784,181 61,722,639 Deferred inflows ofresources 3,318,127 319,074 227,081 28,541 3,545,208 347,615 Total deferred inflows ofresources 3,318,127 319,074 227,081 28,541 3,545,208 347,615 Net position: Net investment in: capital assets Restricted Unrestricted Total net position 461,491,598 440,815,201 61,673,201 59,059,646 523,164,799 499,874,847 20,412,211 21,372,596 33,440 18,438 20,445,651 21,391,034 36,393,318 42,575,521 5,791,413 5,142,741 42,184,731 47,718,262 $ 518,297,127 $ 504,763,318 $ 67,498,054 $ 64,220,825 $ 585,795,181 $ 568,984,143 Page 18 Analvsis of Net Position Total net position of the primary government of $585.8 million at December 31, 2017 increased by $16.8 million or 3.0% compared to December 31, 2016. The increase is due to governmental type activities increase of $13.5 million, and business - type activities increase of $3.3 million. More detail on the changes in net position are described below under Governmental and Business -Type activities. The largest component of the City's net position, 89% or $523.2 million, is net investment in capital 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. Approximately 2.3% or $13.6 million (page 29) of the total net position of the city are restricted for use on capital projects or are earmarked for current approved capital projects. Some of the major capital projects the funds are being used for include the trail and pedestrian access improvements, SR99 HOV Lanes Phase V project, SW 336th Way/SW 3401h Street: 261h Place SW - Hoyt Road, Traffic safety improvement projects, and Grand staircase project. The City attempts to fund capital construction projects on a pay-as-you-go basis, aggressively pursuing grant funding and cost sharing with developers to construct large projects in the City that impact the economy and transportation systems. The remaining balance of restricted net position of $6.8 million are for: $0.32 million for police special funds, and court trust, $0.03 million for steel lake and north lake management districts, $0.03 million for prepaid insurance/debt and flex plan, $0.61 million for peg and franchise fees for educational and governmental access services, $0.97 million for lodging tax, $0.76 million for paths and trails, $0.03 million for Community Development Block Grant, and $4.11 million for debt service. The unrestricted business -type activities portion of $5.8 million; $4.5 million can only be spent on surface water management and the remaining $1.3 million 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 S 3561h Street RDF Retrofit are examples of utility activities. Other functions of the City may access the remaining $36.4 million in governmental activities unrestricted net position to meet ongoing obligation to citizens and creditors. Examples of other City obligations which net position may be used for are public safety, economic development, parks maintenance, ongoing street maintenance, and committed funds for capital projects. At the end of the fiscal year, the City of Federal Way reported positive balances in all three categories of net position, for the government as a whole, as well as for the separate governmental and business -type activities. Governmental Activities: Current and other assets decreased by $5.4 million or 5.6% primarily due to a decrease of $9.3 million in cash and cash equivalents and investments due to $2.9 million used for ongoing construction of PAEC, $0.9 million real estate excise tax used for street capital projects, $4.5 million from the fleet & equipment fund loaned to the PAEC, and $1.0 million used for ongoing services provided in the General Fund, decrease of $0.8 million in accounts receivable for utility work performed by the City for local utilities on Transportation capital projects, offset by a net pension asset increase of $3.6 million, restricted assets increase of $0.7 million in retainage for construction of PAEC and street capital projects, and $0.4 million increase in investment in joint venture for SCORE and Valleycomm. Capitals assets and CIP, net of accumulated depreciation increased by $17.9 million or 3.9% primarily due to the net addition of assets in the current year of $20.2 million, offset by a prior period adjustment of $2.3 million (See Note 8 on page 59). This is primarily due to a net addition of $20.5 million in construction in progress for PAEC, transportation infrastructure projects that include roads, sidewalks, streetlights, and traffic signals for projects such as SR99 HOV Lanes Phase V and South 356th Street SR99 to SR161. In addition $0.8 million in land was dedicated to the City for right-of-way purposes, offset by the $2.0 sale of Target property land. Buildings and Improvements Other than Buildings decrease of $3.0 million is due to current year depreciation. Machinery & Equipment net decrease of $0.5 million is due to current year depreciation offset by the addition of Information Technology equipment, and vehicles for the City. Infrastructure net increase of $2.2 million is primarily due to the addition of roads, streetlights, sidewalks, and traffic signals for S 320th St. at 20th Ave S, S 352nd Street extension from SR99 to SR161, and other traffic related projects, offset by current year depreciation for infrastructure. Deferred outflows of resources decreased by $1.7 million for governmental activities due to higher than expected earnings on pension plan investments for GASB 68 state sponsored pension plans. (See Note 9 on page 61). Page 19 Long-term liabilities decreased by $6.0 million or 11.9% due to the reduction of $2.7 million net pension liability for GASB 68 state sponsored pension plan, $2.2 million on target property from sale of the land, and long term debt decrease of $1.0 million for General obligation debt. (See Note 11 on page 70). Other liabilities increased by $0.2 million or 34.4% primarily due to decreased liabilities at the end of the year of $0.5 million in accrued vouchers payable and customer deposits for Performing Arts & Event Center construction and environmental review for development projects, offset by $0.7 million increase in retainage payable for construction of PAEC and street capital proj ects. Deferred inflows of resources increased by $3.0 million for governmental activities due to higher than expected earnings on pension plan investments for GASB 68 state sponsored pension plans. (See Note 9 on page 61). Net investments in capital assets increased by $20.7 million or 4.7% primarily due to an increase capital assets and CIP, net of accumulated depreciation explained in the above capital assets description (See note 8 and note 15 on pages 59 and 76), and a decrease in long-term liabilities related to debt for the target property due to sale of land. Restricted net position represents amounts that must be used in accordance with external restrictions, and decreased by $1.0 million or 4.5% from the prior year primarily due to additional REET and LIFT restricted funding used for capital projects. Other restricted funding is comprised of debt service, peg fees for government access channel under contracts and studies fund (page 52), paths & trails funding, and lodging tax. The remaining Unrestricted net position decreased by $6.2 million or 14.5% primarily due to the use of cash and cash equivalents for the ongoing construction of Performing Arts & Event Center, and decreased deferred outflows related to higher than expected earnings on pension plan investments for GASB 68 state sponsored pension plans described above. Business -Type Activities: Current and other assets increased by $0.9 million or 12.5% primarily due to an increase in cash and cash equivalents of $0.4 million from surface water management operations, $0.8 million increase in Dumas Bay Centre operation rentals, and a decrease of $0.3 million in grants from surface water management capital projects. Capitals assets and CIP, net of accumulated depreciation increased by $2.5 million or 4.2% primarily due a net increase of $0.8 million in construction in progress for S 320th St. at 20th Ave S Intersection, Sacajawea Safe Routes to Schools, S 352°d Extension, Marine Hills Conveyance System, and other surface water management projects. In the current year, there was a land addition of $0.1 million, infrastructure addition of $2.4 million, machinery and equipment addition of $0.02 million, offset by the addition of accumulated depreciation of $0.8 million. (See Note 8 on page 59). Deferred outflows of resources decreased by $0.08 million for business -type activities due to higher than expected earnings on pension plan investments for GASB 68 state sponsored pension plans. (See Note 9 on page 61). Long-term liabilities decreased by $0.3 million due to current year GASB 68 adjustment to pension liability of $0.2 million and paying down of Public works trust fund loans. (See Note 9 and 11 on pages 61 and 70). Other liabilities increased by $0.1 million or 23.3% primarily due to having additional voucher liabilities at the end of the year for Surface Water Management. This is due to more invoices for Surface Water Management operations at the end of the year. Deferred inflows of resources increased by $0.2 million for business -type activities due to higher than expected earnings on pension plan investments for GASB 68 state sponsored pension plans. (See Note 9 on page 61). Net investments in capital assets increased $2.6 million or 4.4% primarily due to a $2.6 million increase in surface water management construction in progress and infrastructure described above, and a low outstanding balance in Public Works trust fund loan. Unrestricted net position increased by $0.6 million or 12.6% primarily due to the increases in current and other assets described above. Page 20 CHANGES IN NET POSITION For the Years Ended December 31, 2017 and 2016 Governmental Acti-Aties Business -Type Acti,.lties Total 2017 2016 2017 2016 2017 2016 Revenues: Programs revenues: Charges for services $ 17,113,413 $ 14,210,158 $ 4,997,202 $ 4,900,531 $ 22,110,615 $ 19,110,689 Operating grants & contrib. 6,238,698 5,638,756 53,282 68,970 6,291,980 5,707,725 Capital grants & contrib. 14,864,266 15,863,183 1,078,904 790,033 15,943,170 16,653,215 General revenues: Property taxes 10,718,060 10,539,623 - - 10,718,060 10,539,623 Sales tax 14,199,460 14,222,497 14,199,460 14,222,497 Local criminal justice sales tax 2,616,306 2,499,527 2,616,306 2,499,527 Utility tax 12,425,975 11,902,866 12,425,975 11,902,866 Real estate excise tax 4,226,344 5,265,138 - 4,226,344 5,265,138 Othertaxes 1,063,079 477,055 - 1,063,079 477,055 Other 3,836,850 1,526,995 60,544 45,405 3,897,394 1,572,399 Total Revenue 87,302,451 82,145,796 6,189,932 5,804,937 93,492,384 87,950,733 Expenses General government 4,179,619 4,544,037 - 4,179,619 4,544,037 Security of persons & property 36,632,272 36,018,643 - 36,632,272 36,018,643 Transportation 13,681,482 12,920,893 - - 13,681,482 12,920,893 Physical environment 415,771 469,237 - - 415,771 469,237 Economic environment 4,074,379 3,206,414 - - 4,074,379 3,206,414 Health and human services 1,714,311 1,501,057 - - 1,714,311 1,501,057 Culture and recreation 9,329,314 9,373,278 - - 9,329,314 9,373,278 hiterest on long-term debt 502,721 433,729 - - 502,721 433,729 Surface Water Management - - 4,385,355 4,408,225 4,385,355 4,408,225 Dumas Bay Centre - - 1,179,967 1,104,971 1,179,967 1,104,971 Total Expenses 70,529,870 68,467,288 5,565,321 5,513,197 76,095,191 73,980,485 Change in net position before 16,772,582 13,678,508 624,611 291,740 17,397,193 13,970,248 trans fers Transfers (942,000) 633,124 942,000 (633,124) - (0) Change in net position 15,830,582 14,311,632 1,566,611 (341,384) 17,397,193 13,970,248 Net position -beginning 504,763,318 490,451,686 64,220,825 64,828,447 568,984,143 555,280,133 Prior period adjustment Note 15 (2,296,773) - 1,710,618 (266,237) (586,155) (266,237) Net Effect - Change in Accounting for Pensions - - Adjusted net position - beginning 502,466,545 490,451,686 65,931,443 64,562,209 568,397,988 555,013,895 Net position - ending $ 518,297,127 $ 504,763,318 $ 67,498,054 $ 64,220,825 $ 585,795,181 $ 568,984,143 Page 21 Analysis of the chanize in net position: Total government -wide revenues of the primary government increased by $5.5 million or 6.3% and total expenses increased by $2.1 million or 2.9% over the prior year. These changes are discussed in more detail below. Governmental Activities: Governmental activities contributed $15.8 million or 91.0% of the total change in net position of $17.4 million. The prior year change in net position was $14.0 million. The primary increase over 2016 is due to the following revenues, and expenses described below. There was also a reduction of $2.3 million due to prior period adjustment for capital assets described in note 15 on page 76. Total revenues for governmental activities increased by $5.2 million or 6.3% due to charges for services increase of $2.9 million, which is made up of $1.2 million in revenue from transportation impact fees and utility work performed by the City for local utilities on Transportation capital projects, inspection and plan checking fees of $0.2 million, business license fees of $0.2 million, Lakehaven franchise fees of $0.5 million, building permits of $0.2 million, red light traffic infraction revenue of $0.3 million, PAEC operational revenue of $0.2 million, and mitigation impact fees for Parks capital projects of $0.1 million; taxes and general revenue increase by $2.7 million which includes sales tax and criminal justice sales tax of $0.1 million, property tax of $0.2 million, utility tax of $0.5 million, other taxes of $0.6 million (admissions tax), and other revenue of $2.3 million primarily due to new market tax credits received for PAEC and increased investment earnings, decrease in real estate excise tax of $1.0 million; decrease of $0.4 million in operating and capital grants and contributions (PAEC capital grants decrease $5.9 million, street capital grants increase of $5.0 million, and Community Development Block Grant increase of $0.4 million). Total expenses for governmental activities increased by $2.1 million or 3.0%. The net increase is due to increases in the following expense categories: A $0.6 million increase in "Security of persons & property" is due to: $0.6 million in salaries and wages from increased contracted and regular overtime, cost of living adjustments, health insurance and pension cost increases, and vacation payouts. A $0.9 million increase in "Economic Environment" is due to: $0.9 million in salaries and wages and professional services related to the operation of the new Performing Arts and Event Center. A $0.2 million increase in "Health and human services" is due to: $0.2 million increase in Community Development Block Grant expenditures for low income housing acquisition. A $0.8 million increase in "Transportation" is due to $0.3 million increase in asphalt overlay of streets, $0.2 million increase in electricity for streetlights, and $0.3 million increase in street and traffic maintenance. A $0.4 million decrease in "General government" is due to a reduction in pension expense of $0.2 million for GASB 68 pension reporting, and a reduction in outside legal services of $0.2 million. Governmental Activities - Revenues Governmental Activities - Expenses Transportation, 19.4% Physieal environment, 0.6% 1 Economic y environment, "'FFF 5.9% Health and human services, 2.4% Security of Culture and persons & recreation, 13.2% property, 51.9% Intereston long- term debt, 0.7% General government, 5.9% Page 22 Business -Type Activities: Business -type activities of the City's Surface Water Management system and Dumas Bay Centre increased the City's net position by $1.6 million. There was also an addition of $1.7 million for prior period adjustment for capital assets described in note 15. The primary change compared to 2016 is due to the following revenues and expenses described below. Total revenues increased by $0.4 million or 6.6% over 2016, due to an increase in grant revenue for Surface Water Management capital projects. Transfers net change of $1.6 million is primarily due to no transfers out from surface water management in 2017 to transportation capital projects of $1.0 million, and an increase in transfers in to Dumas Bay Centre of $0.6 million. Total expenses decreased by $0.05 million or 0.9% due to a decrease in Surface Water Management maintenance services of $0.1 million and a $0.05 million increase in temporary help and supplies for Dumas Bay Centre (DBC) operations. Business-Typ Dumas Centre, 2 FINANCIAL ANALYSIS OF THE CITY'S FUNDS e Activities - Expenses face Water nagement, 78.8% 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, unrestricted 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 2017, the City's governmental funds had a combined ending fund balance of $38.4 million which is a decrease of $10.9 million from the prior year. Approximately 35% or $13.4 million of the fund balance amount is unrestricted General Fund balance, which is available for spending at the City Council's discretion. Non -spendable fund balance of $0.3M is comprised of court trust and prepaid insurance/flex plan of $0.3M. Restricted fund balance of $20.2M is comprised of $6.5M in transportation capital project funding sources including real estate excise tax (REET), mitigation impact fees, surface water management fees, and gas tax; $4.1M for future debt service payments; $1.8M in parks capital project funding sources including REET, mitigation impact fees, and paths and trails funding; $0.9M LIFT sales tax for downtown redevelopment infrastructure and parks projects; $1.0M in hotel/motel lodging tax for promotion of tourism; $0.8M in paths & trails parks levy dedicated for paths & trails projects; $0.6M for special contracts/studies, $0.03M in REET for city facilities capital projects, $4.3M in REET for future capital projects and debt service payments, $O.1M in Police seizure funds, and $0.03M for Community Development Block Grant funds. Committed fund balance of $12.7M includes amounts that can be used only for the specific purposes determined by a formal action of the government's highest level of decision -making authority. The committed fund balance is detailed by fund under the fund balance classification in Notel. The General Fund is the chief operating fund of the City. Revenues and other sources totaling $49.3M and expenditures and other uses totaling $49.6M, resulted in a total fund balance decrease by $0.3 million or 2.7%. Total ending fund balance of $13.7M, is $0.02M below the budgeted ending fund balance in the fund of $13.8M. Fund balance policy resolution 18-732 set the General Fund and strategic reserve policy at $12M. The City decreased its transfer in from other sources to General Fund as Page 23 reflected in the transfer in included in the Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds to $9.63M in 2017, compared to $10.47M in 2016, and transfer out of $2.80 in 2017, compared to $3.69 in 2016. The Street Fund has a total fund balance of $0.6 million which increased by $0.06 million from 2016 primarily due to increased Public Works permits and fees. The Utility Tax Fund was established to account for the 6% utility tax receipts collected by State statute 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 of 2016 decreased by $0.8 million or 26% from $3.7 million due to additional need for support of General Fund operations, Performing Arts & Event Center (PAEC) operations, payment of PAEC interfund loan, and reserve for future maintenance of City buildings. In addition, there has been an increase in pay for Police positions paid out of the fund. The Debt Service Fund has a total fund balance of $4.1 million, a $1.6 million increase over the $2.5 million 2016 fund balance. The City has adequate funds to service its annual debt payments. The Performing Arts and Event Center Operations Fund was established to account for receipts and disbursements of the operation of the new Performing Arts & Event Center facility. The ending fund balance was $477 and operations were subsidized by utility tax and general fund in the amount of $0.7 million in 2017. The Transportation Fund is used to account for the City's expenditures incurred to improve existing traffic signals, install new signalization, improve major roadways and arterials involving the design and construction of new sections of streets, the widening of roadways to provide additional vehicle lanes, and 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 by $0.04 million from $10.0 million in 2016 due to transferring in from REET and LIFT funds for large projects such as the Grand Staircase project, and SW 336th Way/SW 340th St: 26th Pl. SW. to Hoyt Road. The Performing Arts & Event Center Fund was used to accumulate the cost for the construction of the arts & event center. Ending fund balance decreased by 9.5 million due to paying for the final phases of construction. 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 $4.5 million, and those for Dumas Bay Centre amounted to $1.3 million. The total changes in net position for both funds were $0.9 million increase and $0.7 million increase, 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 2017, the City made budget adjustments. The following discussion is reflective only of the current year of the biennium. The General Fund operating expenditure and other financing use budgets increased by $0.5 million and $0.9 million respectively between the original adopted budget and the adjusted budget for the 2017 fiscal year. The following is the major changes for the 2017 budget: • Added $0.36 million for restoring fleet & equipment replacement reserves to original levels. • Added $0.11 million for contracted vacation payout for Police. • Added $0.05 million for Department of Commerce Day Shelter grant expenditures. • Added $0.02 million for Port of Seattle grant expenditures. • Added $0.08 million in outside legal services. • Added $0.02 million in professional urban planning services for Parks. • Added $0.93 million transfer out to subsidize the Street Fund operations. • Reduced $0.11 million in IT support and equipment for new Police Officers. Page 24 Budget adjustments to revenues and other sources include: Adjustments to beginning balance of $1.08 million; increase in criminal justice sales tax of $0.05 million; increase in state shared revenue of $0.22 million; increase in Police overtime contracted revenue of $0.10 million; increase in state and local grants of $0.16 million; increase in Parks recreation rental revenue of $0.08 million; increase in State seizure revenue of $0.07 million; increase in utility tax transfer in of $1.0 million; decrease in business license revenue of $0.20 million; decrease in sales tax of $0.12 million; and decrease in court revenue of $0.15 million. The General Fund ending fund balance of $13.75 million is $0.02 million below the projected $13.77 million for 2017 year- end. The $0.02 million decrease in ending fund balance is made up of $0.60 million decrease in revenues/other sources and a decrease of $0.58 million in expenditures/other uses. The $0.60 million decrease in revenues/other sources is primarily attributed to a decrease of $1.07 million in transfer in from the Utility Tax Fund, offset by an increase in taxes of $0.45 million comprised of $0.25 million in sales and criminal justice sales tax, $0.15 million in admissions tax, and $0.05 million in gambling tax. The $0.58 million unspent expenditures/other uses are primarily attributable to:, $1.39 million in various savings and timing of payments in General Fund departments such as City Council, Mayor's Office, Economic Development, Law, Municipal Court, and the hiring delay of Police Officers, offset by an increase of $0.81 in transfers out of the General Fund for future debt service payments. 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, 2017 amounts to $543.0 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, and prior period adjustment Note 15, pages 59 and 76. CAPITAL ASSETS AT YEAR-END, NET OF DEPRECIATION Governmental Business -Type Activities Activities Total 2017 2016 Land $ 280,152,612 $ 11,340,293 $ 291,492,905 $ 292,654,983 Building and improvements 27,677,385 4,520,279 32,197,664 35,433,061 Machinery and equipment 6,599,163 83,301 6,682,464 7,131,481 Infrastructure 110,543,046 45,090,749 155,633,795 151,665,984 Construction in progress 56,070,165 830,817 56,900,982 35,622,212 Total Capital Assets $ 481,042,371 $ 61,865,439 $ 542,907,810 $ 522,507,720 Major capital asset events during the current fiscal year included the following amounts: Construction in progress added for expanding and improving the city streets, traffic corridors, and surface water management totaled $8.6 million and Performing Arts and Event Center and various park improvements for $12.7 million. Additionally there was land purchased and donated of $0.9 million offset by the sale of a portion land property of $2.0 million, and buildings, improvements, and machinery and equipment decrease of $3.7 million primarily due to current year depreciation on assets. There was also a net prior period adjustment of ($0.6) million described in Note 15 of the financial statements. Remaining commitments for capital assets is described in Note 8. Long-term debt At the end of 2017, the City of Federal Way had total debt principal balance outstanding of $32.7 million. The future principal and interest payments which are backed by the full faith and credit of the government will be $43.8 million, and average annual debt service of $1.3 million (See Note 11 pages 69 thru 72). The remainder of the City's debt represents Public Works Trust Fund Loans. Page 25 LONGTERM DEBT (FUTURE PRINCIPAL AND INTEREST PAYMENTS) Governmental Business -Type Activities Activities Total General obligation bonds $ 43,645,754 $ - $ 43,645,754 Public works trust fund loan - 195,123 195,123 Total $ 43,645,754 $ 195,123 $ 43,840,877 The City's total debt decreased by $3.3 million due to net of annual debt service payments and pay down of 2014 KeyBank Bond Anticipation Note. In February 2017, Moody's Investors Service upgraded from Aa3 to Aa2 rating for the City's 2013 Limited Tax General Obligation Refunding Bonds. 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 the combination of voted and non -voted general purpose indebtedness cannot exceed 2.5% of assessed valuation. The City's taxable assessed valuation for 2017 was $10.227 billion and the total amount of debt the City may issue is $737.9 million. Remaining legal debt capacities as of December 31, 2017 are: General government (no vote required) General government (3/5 majority vote required) Parks and open space (3/5 majority vote required) Utilities (3/5 majority vote required) Total Capacity $124,321,295 (1.5% X 10.227) +$3.5M - $32.6M $102,268,064 (1.0% X 10.227) $255,670,161 (2.5% X 10.227) $255,670,161 (2.5%X10.227) $737,929,681 (See page 132) Additional information on the City of Federal Way's long-term debt can be found in Note 11 on pages 69 thru 72 and in the Statistical Section of this report. 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 8th Avenue South, Federal Way, Washington 98003, telephone 253-835-2527, or visit the City's website at www.cityoffederalway.com. Page 26 CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK Page 27 BASIC FINANCIAL STATEMENTS Page 28 Government -Wide Financial Statements Statement of Position This statement provides information on all city assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference between the two reported as net position. Statement of Activities This statement is focused on both the gross and net costs of various functions, including both governmental and business -type activities, which are supported by the City's general tax and other revenues. Page 29 STATEMENT OF NET POSITION December 31, 2017 ASSETS Cash & cash equivalents Investments Receivables (net) Due from other governments Prepaid items Restricted assets: Seizure funds/covert funds/municipal trust/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 Net Pension Asset Total Assets DEFERRED OUTFLOWS OF RESOURCES RELATED TO PENSIONS LIABILITIES Accounts payable and accruals Unearned revenue Retainage payable Customer deposits Noncurrent Liabilities: Due within one year Due in more than one year Net Pension Liability Total Liabilities DEFERRED INFLOW OF RESOURCES RELATED TO PENSIONS NET POSITION Net investment in capital assets Restricted for: Debt service Capital projects Steel Lake & North Lake Mgmt District Other Unrestricted Total Net Position Governmental Business -type Activities Activities Total $ 47,574,732 $ 6,686,787 $ 54,261,519 8,410,077 1,164,378 9,574,455 2,578,442 163,108 2,741,550 5,341,752 53,084 5,394,836 35,940 - 35,940 1,849,895 - 1,849,895 19,883,918 - 19,883,918 280,152,612 11,340,293 291,492,905 56,070,165 830,817 56,900,982 19,204,689 884,043 20,088,732 8,472,696 3,636,236 12,108,932 6,599,163 83,301 6,682,464 110,543,046 45,090,749 155,633,795 6,032,380 - 6,032,380 572,749,507 69,932,796 642,682,303 2,215,367 226,900 2,442,267 6,032,024 344,810 6,376,834 326,111 363,856 689,967 1,628,347 41,317 1,669,664 1,332,189 9,620 1,341,809 1,211,329 103,279 1,314,608 33,657,740 189,798 33,847,538 9,161,880 1,381,881 10,543,761 53,349,620 2,434,561 55,784,181 3,318,127 227,081 3,545,208 461,491,598 61,673,201 523,164,799 4,106,222 - 4,106,222 13,591,708 - 13,591,708 - 33,440 33,440 2,714,281 - 2,714,281 36,393,318 5,791,413 42,184,731 $ 518,297,127 $ 67,498,054 $ 585,795,181 Page 30 STATEMENT OF ACTIVITIES For the Year ended December 31, 2017 Program Revenues Net (Expense) Revenue & Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business -type Expenses Services Contributions Contributions Activities Activities Total Functions/Programs Governmental Activities: General government $ 4,179,619 $ 3,155,863 $ 1,693,416 $ - $ 669,660 $ $ 669,660 Security of persons & property 36,632,272 6,014,477 1,491,339 - (29,126,456) (29,126,456) Transportation 13,681,482 2,886,690 1,922,228 13,894,326 5,021,763 5,021,763 Physical environment 415,771 314,842 129,316 - 28,387 28,387 Economic environment 4,074,379 2,171,579 - 969,940 (932,860) (932,860) Health 1,714,311 - 982,232 - (732,079) (732,079) Culture & recreation 9,329,314 2,569,962 20,167 (6,739,185) (6,739,185) Interest on long-term debt 502,721 - - (502,721) (502,721) Total governmental activities 70,529,870 17,113,413 6,238,698 14,864,266 (32,313,492) (32,313,492) Business -type Activities: Surface Water Management 4,385,355 4,048,600 53,282 1,078,904 795,431 795,431 Dumas Bay Centre 1,179,967 948,602 - - (231,364) (231,364) Total business -type activities 5,565,321 4,997,202 53,282 1,078,904 564,067 564,067 Total $76,095,191 $ 22,110,615 $ 6,291,980 $15,943,170 (32,313,492) 564,067 (31,749,425) General revenues: Property tax 10,718,060 10,718,060 Sales tax 14,199,460 14,199,460 Local criminal justice sales tax 2,616,306 2,616,306 Utility tax 12,425,975 12,425,975 Real estate excise tax 4,226,344 4,226,344 Gambling tax 210,029 210,029 Hotel/motel tax 301,603 301,603 Admissions Tax 547,229 547,229 Leasehold excise tax 4,218 4,218 Other revenue 3,149,057 3,149,057 Investment earnings 544,858 60,544 605,402 Gain on sale of capital assets 142,935 - 142,935 Transfers (942,000) 942,000 - Total general revenues and transfers 48,144,074 1,002,544 49,146,618 Change in net position 15,830,582 1,566,611 17,397,193 Net position at beginning of year 504,763,318 64,220,825 568,984,143 Prior period adjustment (See Note 15) (2,296,773) 1,710,618 (586,155) Net Effect - Change in Accounting for Pensions - - - Adjusted beginning net position 502,466,545 65,931,443 568,397,988 Net position at end of year $ 518,297,127 $67,498,054 $ 585,795,181 Page 31 BALANCESHEET GOVERNMENTAL FUNDS December 31, 2017 ASSETS Cash and Cash Equivalents Investments Prepaid insurance/debt service Receivables (net): Taxes Accounts and contracts Restricted cash Due from other governments Interfund loans receivable TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Vouchers payable Accounts/payroll payable Retainage payable Due to other governments Deposits payable Interfund loans payable Unearned revenue TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES FOR UNAVAILABLE PROPERTY TAXES Fund Balance: Nonspendable Restricted Committed Unassigned TOTAL FUND BALANCES General Street Debt Utility Tax Service $ 10,222,065 $ 1,114,802 $ 1,576,783 $ 3,492,598 1,837,470 195,687 277,029 613,624 30,940 - - - 374,404 - 1,252,762 161,530 21,658 - 282,952 - - 1,869,643 102,212 1,101 2,237,068 - - 17,016,072 1,434,359 3,107,675 4,106,222 941,291 301,119 3,650 - 1,125,128 80,210 119,557 - 1,888 - - - 896,967 394,648 - 67,732 70,113 - - 3,033,006 846,090 123,207 - 236,675 - - 252,550 - - 94,452 - - 4,106,222 19,350 588,269 2,984,468 - 13,380,039 - - - 13,746,391 588,269 2,984,468 4,106,222 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 17,016,072 $ 1,434,359 $ 3,107,675 $ 4,106,222 Page 32 ASSETS Cash and Cash Equivalents Investments Prepaid insurance/debt service Receivables (net): Taxes Accounts and contracts Restricted Cash Due from other governments Interfund loans receivable TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Vouchers payable Accounts/payroll payable Retainage payable Due to other governments Deposits payable Interfund loans payable Unearned revenue BALANCESHEET GOVERNMENTAL FUNDS December 31, 2017 Performing Arts & Event Center Performing Arts Nonmajor Operations Transportation & Event Ctr Governmental Total $ 78,491 $ 7,446,353 $ 45,831 $ 12,770,818 $ 36,747,741 13,764 1,308,270 8,052 2,243,553 6,497,449 - - - - 30,940 - - 215,306 1,842,472 208,546 79,884 - 14,237 485,855 - 356,759 1,135,136 75,048 1,849,895 2,830,645 - 538,150 5,341,751 - - - - 2,237,068 300,801 12,021,911 1,189,019 15,857,112 55,033,170 204,666 1,618,286 30,240 21,748 - 356,759 11,165 54,253 752,597 343,530 4,165,139 - 167,956 1,544,839 1,168,035 101,665 1,628,347 - 29,409 1,332,189 7,393,338 14,749 7,408,087 134,013 326,111 TOTAL LIABILITIES 300,324 1,996,793 9,313,970 791,322 16,404,712 DEFERRED INFLOWS OF RESOURCES FOR UNAVAILABLE PROPERTY TAXES - 236,675 Fund Balance: Nonspendable - - 252,550 Restricted - 6,549,073 9,409,914 20,159,661 Committed 477 3,476,045 5,655,876 12,724,485 Unassigned - - (8,124,951) - 5,255,088 TOTAL FUND BALANCES TOTAL LIABILITIES, DEFERRED INFLOWS 477 10,025,118 (8,124,951) 15,065,790 38,391,784 OF RESOURCES AND FUND BALANCES $ 300,801 $ 12,021,911 $ 1,189,019 $ 15,857,112 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. See Note 8, difference is the Internal Service fund amount of $12.04M on page 40 469,003,001 Investment in joint venture is not a financial resource and, therefore, not reported in the funds. See Note 14 $19.88M. Other long-term and non -current assets are not available to pay for current -period expenditures and, therefore, are not reported in the funds: includes deferred inflows, and net pension asset. See Note 6 $237K & Note 9 $6.03M (page 61) Internal service funds are used to charge the costs of insurance, unemployment, information systems, mail and duplication, fleet, and building to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. Page 40 Internal Svc Net Position $29.31M - Adj $59.2K + $59.OK LT Comp Abs + $573AK Net Pension Liability (NPL) + $94.2K Def Infl Rel to Pensions - $93.3K Def Outfl Rel to Pensions Long-term liabilities, including bonds payable, pension liability, and inflows/outflows related to pensions are not due and payable in the current period and, therefore, are not reported in the funds. See Note 11-$32.6M -$2.OM - $0.28M, In Govt Wide - $9.16M NPL - $3.32M Def Infl Rel to Pensions + $2.22M Def Outfl Rel to Pensions 19,883,918 6,269,056 29,883,078 (45,133,710) Net position of governmental activities $ 518,297,127 Page 33 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For Year Ended December 31, 2017 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 Debt General Street Utility Tax Service $ 28,084,812 $ - $ 12,425,975 $ - 3,928,648 196,971 - - 2,313,935 1,386,654 - - 3,616,999 516,303 - - 945,711 - - - 211,196 5,516 21,552 24,251 529,739 46,761 - - 39,631,040 2,152,205 12,447,527 24,251 4,385,913 - - - 33,014,398 201,649 2,761,229 - 1,092,221 3,583,238 - - 2,823,358 - 82,945 - 962,317 - - - 4,478,499 - 110,656 - - - - 8,694,960 - - - 506,321 73,214 20,102 - - 46,829,920 3,804,989 2,954,830 9,201,281 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (7,198,880) (1,652,784) 9,492,697 (9,177,030) OTHER FINANCING SOURCES (USES) Bond proceeds - - - 6,000,000 Sale of capital assets - - - 1,837,715 Transfers in 9,631,425 1,714,542 - 2,937,023 Transfers out (2,798,139) - (10,256,148) - TOTAL OTHER FINANCING SOURCES (USES) 6,833,286 1,714,542 (10,256,148) 10,774,738 NET CHANGE IN FUND BALANCES (365,594) 61,758 (763,451) 1,597,708 FUND BALANCES - BEGINNING 14,111,985 526,511 3,747,919 2,508,514 FUND BALANCES - ENDING $ 13,746,391 $ 588,269 $ 2,984,468 $ 4,106,222 Page 34 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 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For Year Ended December 31, 2017 Performing Arts & Event Center Operations Transportation Performing Arts Nonmajor & Event Ctr Governmental T,. 1 $ - $ - $ - $ 4,706,642 $ 45,217,429 - - - - 4,125,619 - 11,929,693 - 2,554,633 18,184,915 152,102 1,799,637 - 2,438,023 8,523,064 - - - 3,519,019 4,464,730 23,264 50,432 4,477 101,778 442,466 148,461 - 2,118,386 305,710 3,149,057 323,827 13,779,762 2,122,863 13,625,805 84,107,280 - - - 4,551 4,390,464 - - - 1,725,711 37,702,987 - 1,454,032 - 2,350,994 8,480,485 - - - 425,900 425,900 1,195,466 - 17,067 76,257 4,195,093 - - - 758,007 1,720,324 - - - 2,584,544 7,173,699 - - - 159,000 8,853,960 - - - 41,180 547,501 - 16,283,225 12,558,651 226,086 29,161,278 1,195,466 17,737,257 12,575,718 8,352,230 102,651,691 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (871,639) (3,957,495) (10,452,855) 5,273,575 (18,544,411) OTHER FINANCING SOURCES (USES) Bond proceeds - - 105,000 - 6,105,000 Sale of capital assets - - 350,041 - 2,187,756 Transfers in 694,703 3,993,000 500,000 2,135,966 21,606,659 Transfers out - - - (9,207,847) (22,262,134) TOTAL OTHER FINANCING SOURCES (USES) 694,703 3,993,000 955,041 (7,071,881) 7,637,281 NET CHANGE IN FUND BALANCES (176,936) 35,505 (9,497,814) (1,798,306) (10,907,130) FUND BALANCES - BEGINNING 177,413 9,989,613 1,372,863 16,864,096 49,298,914 FUND BALANCES - ENDING $ 477 $ 10,025,118 $ (8,124,951) $ 15,065,790 $ 38,391,784 Page 35 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, 2017 Amounts reported for governmental activities in the statement of activities (page 30) are different because: Net change in fund balances --total governmental funds (page 34) 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 capital outlays exceeded depreciation in the current period. (page 53) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (page 53) 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 position. 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 position. (page 53) Internal service funds are used by management to charge costs of risk management, information systems, mail & duplication, fleet, and building systems to the funds. (page 41) -$43K - $8.6K 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. Includes adjustment for GASB 68 pension reporting. (page 53) $1.68M + $19K 2017 $ (10,907,130) 21,863,395 31,795 3,196,940 (51,987) 1,697,568 Change in net position of governmental activities (page 30) $ 15,830,582 Page 36 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 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 Economic environment Health Culture and recreation Capital outlay TOTAL EXPENDITURES Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) $ 27,700,450 $ 27,635,460 $ 28,084,812 $ 449,352 4,068,801 3,868,791 3,928,648 59,857 1,861,055 2,233,642 2,313,935 80,293 3,669,457 3,789,457 3,616,999 (172,458) 1,163,500 1,013,500 945,711 (67,789) 143,800 143,800 211,196 67,396 357,900 477,900 529,739 51,839 38,964,963 39,162,550 39,631,040 468,490 4,855,143 4,933,103 4,385,913 547,190 33,416,425 33,708,192 33,014,398 693,794 1,152,931 1,152,931 1,092,221 60,710 2,913,836 2,930,859 2,823,358 107,501 911,595 961,595 962,317 (722) 4,440,390 4,460,390 4,478,499 (18,109) - 73,214 73,214 - 47,690,320 48,220,284 46,829,920 1,390,364 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (8,725,357) (9,057,734) (7,198,880) 1,858,854 OTHER FINANCING SOURCES (USES) Transfers in 9,703,314 10,703,314 9,631,425 (1,071,889) Transfers out (1,060,864) (1,990,864) (2,798,139) (807,275) TOTAL OTHER FINANCING SOURCES (USES) 8,642,450 8,712,450 6,833,286 (1,879,164) NET CHANGE IN FUND BALANCES (82,907) (345,284) (365,594) (20,310) FUND BALANCES - BEGINNING 13,034,954 14,111,985 14,111,985 - FUND BALANCES - ENDING $ 12,952,047 $ 13,766,701 $ 13,746,391 $ (20,310) Page 37 STREET FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Licenses and permits $ 115,000 $ 115,000 $ 196,971 $ 81,971 Intergovernmental 1,259,505 1,377,676 1,386,654 8,978 Service charges and fees 257,728 257,728 516,303 258,575 Interest 2,000 2,000 5,516 3,516 Other 34,000 34,000 46,761 12,761 TOTAL REVENUES 2,598,233 1,786,404 2,152,205 365,801 EXPENDITURES Current: Security of persons and property 208,404 208,404 201,649 6,755 Transportation 3,884,067 4,014,642 3,583,238 431,404 Capital outlay - 20,102 20,102 - TOTAL EXPENDITURES 4,092,471 4,243,148 3,804,989 438,159 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,494,238) (2,456,744) (1,652,784) 803,960 OTHER FINANCING SOURCES (USES) Transfers in Transfers out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING 2,479,967 2,520,058 1,714,542 (805,516) (930,000) - - - 1,549,967 2,520,058 1,714,542 (805,516) 55,729 63,314 61,758 (1,556) 500,000 526,510 526,511 1 FUND BALANCES - ENDING $ 555,729 $ 589,824 $ 588,269 $ (1,555) Page 38 UTILITY TAX FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Taxes $ 11,571,540 $ 12,181,908 $ 12,425,975 $ 244,067 Interest 6,000 6,000 21,552 15,552 TOTAL REVENUES 11,577,540 12,187,908 12,447,527 259,619 EXPENDITURES Current: Security of persons and property 2,802,298 2,802,298 2,761,229 41,069 Economic environment 96,308 96,308 82,945 13,363 Culture and recreation 100,337 100,337 110,656 (10,319) TOTAL EXPENDITURES 2,998,943 2,998,943 2,954,830 44,113 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 8,578,597 9,188,965 9,492,697 303,732 OTHER FINANCING SOURCES (USES) Transfers in - - - - Transfers out (8,998,777) (10,124,114) (10,256,148) (132,034) TOTAL OTHER FINANCING SOURCES (USES) (8,998,777) (10,124,114) (10,256,148) (132,034) NET CHANGE IN FUND BALANCES (420,180) (935,149) (763,451) 171,698 FUND BALANCES - BEGINNING 2,920,180 3,747,920 3,747,919 (1) FUND BALANCES - ENDING S 2,500,000 S 2,812,771 S 2,984,468 S 171,697 Page 39 PERFORMING ARTS & EVENT CENTER OPERATIONS FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 REVENUES Service charges and fees Interest Other TOTAL REVENUES EXPENDITURES Current: Economic environment TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) $ 203,871 $ 175,071 $ 152,102 $ (22,969) - 22,929 23,264 335 161,382 240,046 148,461 (91,585) 365,253 438,046 323,827 (114,219) 937,546 1,196,162 1,195,466 696 937,546 1,196,162 1,195,466 696 OVER (UNDER) EXPENDITURES (572,293) (758,116) (871,639) (113,523) OTHER FINANCING SOURCES (USES) Transfers in 572,293 580,703 694,703 114,000 TOTAL OTHER FINANCING SOURCES (USES) 572,293 580,703 694,703 114,000 NET CHANGE IN FUND BALANCES - (177,413) (176,936) 477 FUND BALANCES - BEGINNING - 177,413 177,413 - FUND BALANCES - ENDING $ - $ - $ 477 $ 477 Page 40 ASSETS Current Assets Cash and Cash Equivalents Investements Prepaid items Receivables (net): Accounts and contracts Due from other governments Interfund loans receivable TOTAL CURRENT ASSETS Property, plant and equipment Land Building/structures Improvements other than buildings Machinery/furniture/equipment Infrastructure Construction in progress Less accumulated depreciation TOTAL NONCURRENT ASSETS TOTAL ASSETS STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2017 Governmental Business -type Activities - Enterprise Funds Activities Surface Water Dumas Bay Internal Management Centre TOTAL Service $ 5,082,060 $ 1,545,505 $ 6,627,565 $ 10,886,213 892,881 271,497 1,164,378 $ 1,912,628 - - - 5,000 149,894 13,214 163,108 250,115 53,084 - 53,084 - - - - 5,171,019 6,177,919 1,830,216 8,008,135 18,224,975 9,230,653 2,109,640 11,340,293 - 832,086 3,673,262 4,505,348 16,545,121 3,602,033 314,901 3,916,934 - 52,946 145,848 198,794 18,695,900 60,788,019 - 60,788,019 - 830,817 830,817 (16,030,097) (3,684,668) (19,714,765) (23,201,650) 59,306,456 2,558,983 61,865,439 12,039,371 65,484,375 4,389,199 69,873,574 30,264,346 DEFERRED OUTFLOWS RELATED TO PENSIONS 191,896 35,004 226,900 93,263 LIABILITIES AND FUND EQUITY Current Liabilities: Vouchers/payroll payable Unearned revenue Retainage payable Deposits payable Public Works trust fund loan payable Compensated absences payable TOTAL CURRENT LIABILITIES Long-term liabilities: Public Works trust fund loan payable Compensated absences payable Net Pension Liability TOTAL LONG-TERM LIABILITIES TOTAL LIABILITIES DEFERRED INFLOWS RELATED TO PENSIONS 281,459 63,351 344,810 322,046 137,174 226,682 363,856 - 36,705 4,612 41,317 - 9,620 9,620 96,120 - 96,120 5,973 1,186 7,159 - 557,431 305,451 862,882 322,046 96,119 - 96,119 - 78,156 15,523 93,679 59,027 1,166,677 215,204 1,381,881 573,386 1,340,952 230,727 1,571,679 632,413 1,898,383 536,178 2,434,561 954,459 191,716 35,365 227,081 94,223 Net investment in capital assets 59,114,217 2,558,983 61,673,200 12,039,371 Restricted for: Steel Lake & North Lake Mgmt District 33,440 - 33,440 - Unrestricted 4,438,515 1,293,677 5,732,192 17,269,556 TOTAL NET POSITION $ 63,586,172 $ 3,852,660 67,438,832 $ 29,308,927 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 59,222 NET POSITION OF BUSINESS -TYPE ACTIVITIES $ 67,498,054 Page 41 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For Year Ended December 31, 2017 Governmental Business -type Activities - Enterprise Funds Activities Surface Water Dumas Bay Internal Management Centre TOTAL Service OPERATING REVENUES: Service charges and fees $ 4,046,100 $ 948,602 $ 4,994,702 $ 11,015,870 Intergovernmental 53,283 - 53,283 - Miscellaneous 2,500 - 2,500 77,090 TOTAL OPERATING REVENUES 4,101,883 948,602 5,050,485 11,092,960 OPERATING EXPENSES: Personnel services 2,058,656 471,549 2,530,205 1,085,698 Materials and supplies 127,966 204,138 332,104 705,700 Services and charges 472,372 307,996 780,368 6,774,155 Intergovernmental 252,931 895 253,826 128,600 Depreciation 664,192 154,899 819,091 2,404,618 Interfund charges 805,908 40,463 846,371 - TOTAL OPERATING EXPENSES 4,382,025 1,179,940 5,561,965 11,098,771 OPERATING INCOME (LOSS) (280,143) (231,338) (511,481) (5,811) NON -OPERATING REVENUES (EXPENSES): Gain (Loss) from disposal of capital assets - - - 32,735 Interest income 45,887 5,562 51,449 111,490 Interest expense (2,884) - (2,884) - TOTAL NON -OPERATING REVENUES (EXPENSES) 43,003 5,562 48,565 144,225 INCOME (LOSS) BEFORE TRANSFERS (237,140) (225,776) (462,916) 138,414 Capital contributions Transfers in Transfers out CHANGE IN NET POSITION 1,078,904 - - 942,000 1,078,904 104,747 942,000 713,475 - (1,000,000) 841,764 716,224 1,557,988 (43,364) NET POSITION - BEGINNING 61,033,790 3,136,436 Prior period adjustment 1,710,618 - Net Effect - Change in Accounting for Pensions - - ADJUSTED NET POSITION - BEGINNING 62,744,408 3,136,436 NET POSITION - ENDING $ 63,586,172 $ 3,852,660 Adjustment to reflect the consolidation of internal service fund activities related to enterprise CHANGES IN NET POSITION OF BUSINESS -TYPE ACTIVITIES 8,623 $ 1,566,611 29,352,291 29,352,291 $ 29,308,927 Page 42 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For Year Ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users Cash payments to claimants Cash payments to suppliers for goods/services Cash payments to employees Cash payments to other funds for goods and services Cash payments to other governments for goods and services Other operating receipts NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in Transfers out NET CASH PROVIDED BY NONCAPITAL FINANCINC 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 Cash received from grants 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 ACTIVITIES 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: Increases/(decrease)in depreciation expense (Increases)/decrease in accounts receivable (Increases)/decrease in due from other governments (Increases)/decrease in deferred outflows related to pension: Increases/(decrease)in vouchers/accounts payable Increases/(decrease) in retainage payable Increases/(decrease)in deposits payable Increases/(decrease)in deferred revenue Increases/(decrease)in accrued payroll/compensated absences payabb Increases/(decrease) in net pension liabilit) Increases/(decrease)in deferred inflows related to pension: TOTAL ADJUSTMENTS NET CASH PROVIDED/USED BY OPERATING ACTIVITIES Non -cash investing, capital, and financing activities: Other contributions of capital assets Governmental Business -type Activities - Enterprise Funds Activities Surface Water Dumas Bay Internal Management Centre TOTAL Service $ 4,039,114 $ 895,835 $ 4,934,949 $ 10,765,756 - - - (558,371) (442,784) (487,536) (930,320) (6,758,355) (1,984,358) (458,757) (2,443,115) (1,037,091) (805,906) (40,463) (846,369) (252,931) (895) (253,826) (629,766) 394,687 - 394,687 77,089 947,822 (91,817) 856,006 1,859,262 - 942,000 942,000 713,475 - - (1,000,000) 942,000 942,000 (286,525) (96,120) - (96,120) (2,884) (2,884) (983,541) (23,648) (1,007,189) (6,183,411) 460,191 460,191 - - - 32,735 (622,354) (23,648) (646,002) (6,150,676) 45,882 5,564 51,446 111,489 45,882 5,564 51,446 111,489 371,350 832,099 1,203,450 (4,466,451) 5,603,591 984,903 6,588,494 17,265,292 5,974,941 1,817,002 7,791,944 12,798,841 (280,142) (231,337) (511,479) (5,813) 664,192 154,899 819,091 2,404,618 (27,435) 6,068 (21,367) (250,114) 338,905 - 338,905 - 67,969 12,253 80,222 29,360 126,466 21,365 147,831 (338,036) 31,089 - 31,089 - 3,233 3,233 20,449 (58,836) (38,387) 11,014 (304) 10,710 (2,670) (172,279) (30,101) (202,380) (60,882) 167,594 30,945 198,539 82,799 1,227,964 139,521 1,367,485 1,865,074 $ 947,822 $ (91,817) $ 856,006 $ 1,859,262 $ 104,747 Page 43 NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2017 Ilei 11 WN Note Page 1 Summary of Significant Accounting Policies............................................................................... 44 ReportingEntity ................................................................................................................... 44 Basis of Presentation - Government -wide and Fund Financial Statements .......................... 44 Measurement Focus, Basis of Accounting........................................................................... 46 BudgetaryInformation......................................................................................................... 47 Assets, Liabilities, Fund Balance and Net Position.............................................................. 49 Cashand Investments.................................................................................................. 49 Receivables.................................................................................................................. 49 Amounts Due to and from Other Funds; Interfund Loans ........................................... 49 Inventories and prepaids.............................................................................................. 49 CapitalAssets.............................................................................................................. 49 Deferred Inflow of Resources...................................................................................... 50 Compensated Absences Payable.................................................................................. 50 Pensions....................................................................................................................... 51 Unearned Revenues..................................................................................................... 51 Long -Term Liabilities.................................................................................................. 51 Fund Balance Classification........................................................................................ 51 Interfund Transactions................................................................................................. 52 2 Reconciliation of Government -wide & Fund Financial Statements ............................................. 53 3 Stewardship, Compliance and Accountability .............................................................................. 53 4 Supplemental Appropriations....................................................................................................... 54 5 Deposits and Investments............................................................................................................. 54 6 Property Taxes.............................................................................................................................. 57 7 Unearned Revenues and Receivables........................................................................................... 58 8 Capital Assets............................................................................................................................... 59 9 Pension Plans................................................................................................................................ 61 10 Risk Management......................................................................................................................... 68 11 Long -Term Liabilities................................................................................................................... 69 12 Interfund Transactions.................................................................................................................. 72 13 Contractual Obligations, Contingencies, and Litigation............................................................... 73 14 Joint Ventures............................................................................................................................... 73 15 Prior Period Adjustments................................................................................................... 76 16 Leases................................................................................................................ 77 17 Self-Insurance............................................................................................................................... 77 18 Accounting and Reporting Changes............................................................................................. 78 19 Subsequent Event.......................................................................................................................... 78 Page 44 NOTES TO THE BASIC FINANCIAL STATEMENTS For the Year Ended December 31, 2017 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 ENTITY The City of Federal Way was incorporated on February 28, 1990. Federal Way is a non -charter code city, operating under Section 35A.03 of the Revised Code of Washington. It has a Mayor/Council form of government. The Council is composed of seven councilmembers elected to four-year terms on a non -partisan ballot and are elected at -large. Members of the City Council are responsible for establishing the general direction and policies for the City and for providing the resources necessary to carry out those policies. As the City's chief administrator, the City Mayor is responsible for carrying out the policy and direction set by the City Council. This includes the enforcement of laws and ordinances, the execution of contracts and agreements, and maintenance of peace and order in the City. The City of Federal Way provides a full range of municipal services, including policing, planning and zoning, street maintenance and construction, parks and recreation, and general administrative services. The City operates enterprise funds for Storm Water Management and Dumas Bay Centre. 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 dependent 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 its 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 Ventures, which more fully describe these organizations. I131:�.yk1Ye]a97a6 WNull[I7eQKe]•/D190011oleo 1►.11RM+/10W.11 13alle17y1er:\ecolElI&Ir%00401WoV The government -wide financial statements (i.e. the statement of net position 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 functions or segments. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements, or a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. As a general rule the effect of the interfund activity has been eliminated for the government -wide financial statements. 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. Page 45 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 the receipt and disbursement of State -levied motor vehicle fuel taxes which must be accounted for in a separate fund and expended for street -oriented engineering, maintenance and operations. Utility Tax Fund — This fund was established to account for all utility tax receipts. These receipts will subsequently be distributed to various funds to provide for debt service, capital projects, maintenance and operations expenditures, etc. 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. Performing Arts & Event Center Operations Fund — This fund was established to account for receipts and disbursements related to the operation of the new Performing Arts & Event Center facility. Transportation CIP Fund — This fund accounts for receipts and disbursements related to acquisition, design, construction and any other related street project expenditures. Performing Arts & Event Center Fund — This fund was established to account for receipts and disbursements related to the construction of the Performing Arts and Event Center (PAEC). 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 committed or 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 fund. The major sources of revenues for these funds are general obligation bond proceeds, grants from other agencies, local taxes, contributions from other funds, utility tax, and real estate excise tax. The City reports the following major enterprise funds: 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 revenues and expenses related to the acquisition, capital improvements maintenance and operations of the City -owned Dumas Bay Centre and Knutzen Family Theatre. The Dumas Bay Centre is primarily used for meetings, events, lodging, and catering services. Additionally, the City reports following internal service funds: 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, and worker's compensation claims. Both risk control (to minimize the losses that strike an organization) and risk financing (to obtain finances to provide for or restore the economic damages of those losses) are involved. The City is also currently recovering costs and building reserves for general liability including property, casualty, errors and omissions and fidelity coverage. 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 owns and depreciates all non- proprietary fund assets related to these functions, and charges equipment/software users for both maintenance and operating costs and equipment replacement charges based on depreciation schedules. Mail & Duplication Fund — This fund accounts for duplication, graphics and other general support services provided to departments and funds throughout the City. Page 46 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 Furnishings Fund — This fund accounts for all costs associated with the operation and maintenance of specified City buildings. City building facilities and furnishings are owned by this Fund. Both maintenance/operating costs and depreciation recovery are charged to City departments and funds. Health Insurance Fund — The City is currently self -insuring for medical insurance. The premiums paid by the City and employees are deposited into this fund. Medical service for medical coverage and pharmaceutical reimbursement are paid out of this fund. Also, the fund has established reserves for the payment of estimated future claims. Unemployment Insurance Fund - The City is currently self -insuring 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. Internal Service Funds account for goods and services provided to other departments or agencies of City of Federal Way, or to other governments, on a cost -reimbursement basis. MEASUREMENT FOCUS, BASIS OF ACCOUNTING Government -Wide and Governmental Funds The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, similar to the proprietary fund financial 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. 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. The City considers property tax as available if they are collected within 60 days after year end. 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 have been recognized as revenues of the current fiscal period. Only the portion of property tax 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. Major revenues recorded on the modified accrual basis are: Property Taxes - King County acts as the City's collection agent for these taxes. Upon receipt, 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 ''/4% and optional '/4% 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. Page 47 Shared Revenues - Revenues that have been collected by the State, but not remitted by an intermediary collection agency to the City, are considered measurable and available. Other Revenue Sources - Other items recognized as revenue in the current year on the modified accrual basis include investment interest earned but not received at year end; inter -fund, 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. Proprietary Funds The proprietary fund statements are reported using the economic resources measurement focus and full -accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when liability is incurred regardless of the timing of the cash flows. 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 City are primarily user charges, and the cost of providing goods or services to the general public on a continuing basis. Operating expenses for enterprise 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. Other Disclosure The City was neither the lessor nor lessee in capital leases; did not capitalize interest on qualifying assets for business -type activities; has not been the recipient of an endowment; did not engage in short-term debt activity during the year; has not issued special assessment debt; does not benefit from on -behalf payment; has not pledged future revenues; has not incurred an obligation for pollution remediation; had no hedging derivatives; is not the transferor or operator in a service concession arrangement; and does not provide other post -employment benefits (OPEB), and was not the transferor or continuing government in a merger, transfer of operation, etc. 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 debts service and capital project funds are adopted at the level of the individual debt issue or project and for fiscal periods that correspond to the lives of debt issues or projects. 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 re -appropriation 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 biennial operating budget (funds budgeted on an annual basis) are: General Fund Special Revenue Funds Debt Service Fund Capital Project Funds - Street Fund - Debt Fund - Arterial Street - Utility Tax (including Prop 1) - Solid Waste & Recycling - Special Contracts /Studies - Hotel/Motel Lodging Tax - Federal Way Community Center - Traffic Safety - Community Development Block Grant -Paths & Trails -Performing Arts & Event Center -Downtown Redevelopment -City Facilities -Parks -Transportation -Capital Project Reserve -Performing Arts & Event Center -Surface Water Management -Real Estate Excise Tax Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year end do not constitute expenditure or liabilities because the commitments will be re -appropriated and honored during the subsequent year. 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. By 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. Copies of the preliminary budget are provided to the City Council and made available to staff and the public. City Council conducts workshops and public hearings on the proposed budget between mid -September and mid -October. • 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. No later than 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 October and November. 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 or that affect the number of authorized employee positions, salary ranges, hours, or other conditions of employment 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 one or more than the majority after holding public hearing(s). 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. Page 49 ASSETS, LIABILITIES, FUND BALANCE, NET POSITION Cash and Cash Equivalents 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, 2017, the State Treasurer was holding $41,310,558 in the Local Government Investment Pool. The amount is classified on the balance sheet as cash and cash equivalents in various funds. The interest on these investments is prorated to the various funds based on the average monthly balance for each fund. The amounts reported as cash and cash equivalents also include compensating balances maintained with certain banks in lieu of payments for services rendered. The average compensating balances maintained during the 2017 were approximately $13 million. 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, 2017, the total cash and cash equivalents were $54,544,471. In accordance with GASB Statement 79, LGIP investments are measured at amortized cost. See (Note 5 - Deposits and Investments). Investments The City as of December 31, 2017, had $9,574,455 in authorized investments, and was in compliance with the investment policy of the City. See (Note 5 - Deposits and Investments). Receivables Taxes receivable consists of property taxes and related interest and penalties (see Note 6 - Property Tax). Accrued interest receivable consists of amounts earned on investments, notes, and contracts at the end of the year. Customer accounts receivable consist of amounts owed from private individuals or organizations for goods and services including amounts owed for which billing have not been prepared. Notes and contracts receivable consist of amounts owed on open accounts from private individuals or organizations for goods and services rendered. Amounts Due to and from Other Funds; Interfund Loans Activities 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 toffrom other funds. Any other outstanding balances between the governmental activities and business -type activities are reported in the government -wide financial statements as internal balances. A separate schedule of inter -fund loans receivable and payable is furnished in Note 12, Interfund Transactions. Inventories and Prepaids Inventories in the governmental funds are recorded as expendable supplies held for consumption. The cost is recorded as expenditure at the time individual inventory items are purchased. 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. The City currently uses the consumption method of accounting for prepaids. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City of Federal Way as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one or more years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. See Note 8, Capital Assets. Page 50 Cost for additions or improvements to capital assets are capitalized when they increase the effectiveness or efficiency of the asset. Cost of normal maintenance and repairs are not capitalized. Depreciation on all capital assets is recorded as an allocated expense in the government -wide Statement of Activities and in the proprietary fund statements. Property, plant, and equipment of the primary government are depreciated using the straight line method over the following estimated useful lives: Asset Class Life in Years Computers.................................................................5-6 Printers & Faxes.............................................................7 Teleconumnications Equipment ........................................7 Police Radio Equipment.................................................11 Other Office Equipment .................................. ............ 4-10 Office Furniture and Fixtures...........................................10 Recreation Equipment...................................................10 Parks Equipment ........................................... ............. 6-10 Police Equipment.......................................................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 Heavy Trucks ............................................... ............ 8-10 Land Improvements......................................................20 Buildings.....................................................................20 Infrastructure ............................................... .......... 15-100 Deferred Inflows of Resources A deferred inflow of resources is an acquisition of net assets by the government that is applicable to a future reporting period. See (Note 6 — Property Tax) and (Note 9 — Pension Plans) Compensated Absences Payable 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 27 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 will be paid out up to two years of their monthly vacation accrual rate. 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. Compensated Absences Payable outstanding at year-end is outlined in Note 11. Page 51 Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all state sponsored pension plans and additions to/deductions from those plans' fiduciary net position have been determined on the same basis as they are reported by the Washington State Department of Retirement Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. See (Note 9 — Pension Plans). 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 position. See (Note 11 - Long -Term Debt). Unearned Revenues Unearned revenue is a liability account that reports amounts received in advance of providing goods or services. For detailed information, See (Note 7 — Unearned Revenues and Receivables). Fund Balance Classification Fund balance is a measurement of available financial resources and is the difference between total assets and total liabilities in each fund. Beginning with the most restrictive constraints, fund balance amounts will be reported in the following categories: Nonspendable — amounts that are not in a spendable form or are legally or contractually required to be maintained intact. Restricted — amounts that can be spent only for the specific purposes stipulated by external parties either constitutionally or through enabling legislation. Committed — amounts that can be used only for the specific purposes determined by formal action of the City Council through an ordinance or resolution. Commitments may be changed or lifted by the action of the City Council using the same formal action of ordinance or resolution that was used to create the commitment. Assigned — amounts intended to be used by the government for specific purposes. Intent can be expressed by the City Council or the Mayor. In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other government funds, at a minimum, are intended to be used for the purpose of that fund. Unassigned — includes all amounts not contained in other classifications and is the residual classification of the general fund only. Unassigned amounts are available for any legal purpose. The council can use a resolution to modify or rescind a fund balance commitment. When an expenditure is incurred for which both restricted and unrestricted resources are available, it is the City's policy to use restricted resources first. When unrestricted (committed, unassigned) resources are available, it is the City's policy to spend committed resources first, and then unassigned, in that order. The minimum fund balance established by the Reserve Policy, and passed by resolution from the City Council, states "The City shall have an operating cash flow reserve of seventeen percent of the City's General Fund operating expenditures or $9 million. In addition, the City shall have a contingency for unanticipated cost of $1 million to cover revenue shortfalls resulting from unexpected economic change or recessionary periods, or to provide funds in the event of major unplanned expenditures the City could face as a result of natural disasters. The policy shall also include a strategic opportunities reserve of $2 million to provide liquidity to respond to economic opportunity that is not budgeted for that may provide a long term economic benefit to the City. In the event that any of the Contingency or Strategic Opportunities Reserve is used, such appropriation shall be repaid to the fund annually over the next three years. The purpose of the ending fund balance is to provide financial stability, cash flow for operations and the assurance that the City will be able to respond to revenue shortfalls with fiscal strength." General fund expenditures at 12/31/2017 were $46.8 million and Unassigned General fund balance at year -ended 2017 was $13.4 million or (29%). Other funds that have a significant minimum fund balance policy are: Street Fund - $0.5 million; Arterial Street Fund - $0.1 million; Utility Tax Fund - $2.5 million, REET Fund — one year revenue reserve; Park Equipment and Infrastructure Reserve Fund - $1.125 million; Hotel/Motel Lodging Tax Fund - $0.2 million; Community Center Fund - $1.5 million; Traffic Safety Page 52 Fund - $1.2 million; Debt Service Fund - adequate reserve in accordance with bond ordinance or minimum of one year debt service amount; Dumas Bay Centre Fund - $1.5 million; and Surface Water Management Fund - $0.5 million. The Government -wide statement of net position reports $585.8 million of net position, of which $20.4 million is restricted by the enabling legislation, and $523.2 is for net investment in capital assets (there are no unspent proceeds of debt). 2017 FOND BALANCE CLASSIFICATION Fund Balance General Fund Performing Street Utility Debt Arts & Event Transport- Tax Service Ctr O r. ation Performing Arts & Event Nonmajor Ctr Gov't Total Nonspendable: Court trust $ 221,610 $ $ $ $ $ $ $ $ 221,610 Prepaid insurance/debt service 30,940 30,940 Restricted for: Police covert/seizure 94,452 94,452 Future debt payments - 4,106,222 4,106,222 Special Contracts/Studies - 608,002 608,002 Hotel/Motel Lodging Tax 967,746 967,746 Path & Trails Reserves 761,546 761,546 Downtown Redevelopment 901,814 901,814 City Facilities CIP 29,730 29,730 Parks CIP 1,820,881 1,820,881 Transportation CIP 6,549,073 - 6,549,073 Real Estate Excise Tax - 4,290,210 4,290,210 Community Development Block G 29,985 29,985 Committed to: Capital, debt, and operations - 1,703,359 120,289 1,823,648 Petty cash/advance travel 19,350 - - 19,350 Comm. Development Block Grant - - 9,889 9,889 Proposition 1 1,281,109 - - 1,281,109 Transportation CIP - 3,476,045 3,476,045 Downtown Redevelopment - - City Facilities CIP 250,000 250,000 Arterial Street 372,721 372,721 Solid Waste/Recycling 195,581 195,581 Federal Way Community Center 1,497,086 1,497,086 Traffic Safety - 2,578,153 2,578,153 Snow/ice removal 588,269 - 588,269 Parks CIP - 276,547 276,547 Performing Arts & Event Ctr 477 - 477 Capital Project Res erve - 355,610 355,610 Unassigned: General Fund 13,380,039 - 13,380,039 Performing Arts & Event Ctr - - - - (8,124,951) - (8,124,951) Total Fund Balance: $13,746,391 $ 588,269 $ 2,984,468 $ 4,106,222 $ 477 $10,025,118 $ 8,124,951 $15,065,790 $ 38,391,784 Zmj Interfund Transactions There are four types of transactions between funds - inter -fund loans, inter -fund services provided and used, inter -fund reimbursements, and inter -fund 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, and 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. The transfers are accounted for as 'other financing sources and uses" and are therefore included in the operating statements (see Note 12). Page 53 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 Position The governmental funds' balance sheet includes reconciliation between fund balance — total governmental funds and net position — governmental activities as reported in the government -wide statement of net position. One element of the 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 $45,133,710 difference are as follows: Bonds Payable & Premium at beginning of year $36,055,111 Plus: Inclusion of compensated absences 2,010,898 Plus: Current year addition/reduction of principal portion of debt & premium (3,196,940) Plus: Net Pension Liability 9,161,880 Plus: Deferred Inflows of Resources Related to Pensions 3,318,127 Less: Deferred Outflows of Resources Related to Pensions (2,215,366) Net Adjustment to reduce fund balances -total governmental funds to arrive at net position -governmental activities $45,133,710 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 position 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 $21,863,395 difference are as follows: Capital outlay $ 29,161,278 Plus: Contributed Capital 1,964,633 Less: Loss on Capital (40,786) Less: Sale of Land (2,044,821) Less: Governmental depreciation expense (7,573,395) Plus: Increase in investment in joint venture 396,486 Net adjustment to increase net changes in fund balances - Total governmental funds to arrive at changes in net position ofgovernmental activities $21,863,395 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 inflow of resources in the fund statements $ 31,795 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 $ 19,240 Accrual adjustment for GASB 68 pension reporting $ 1,678,328 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. Page 54 NOTE 4 — SUPPLEMENTAL APPROPRIATIONS Operating Budget Funds Appropriations established during 2017 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. This table does not include transfers out or Proprietary Funds. FUND ORIGINAL BUDGET 2017 SUPPLEMENTAL APPROPRIATIONS FINAL BUDGET General Fund $ 47,690,320 $ 529,964 $ 48,220,284 Special Revenue Funds: Street Fund 4,092,471 150,677 4,243,148 Arterial Street Fund 1,515,409 438,682 1,954,091 Utility Tax Fund 2,998,943 - 2,998,943 Solid Waste/Recycling Fund 503,121 (22,000) 481,121 Special Contracts / Studies - - Hotel/Motel Lodging Tax 224,700 - 224,700 Federal Way Community Center 2,216,850 78,105 2,294,955 Traffic Safety 2,269,463 127,885 2,397,348 Performing Arts & Event Center Oper. 937,546 258,616 1,196,162 Community Development Block Crant 1,277,546 - 1,277,546 Paths & Trails - - - Subtotal Special Revenue Funds: 16,036,049 1,031,965 17,068,014 Debt Service Fund 10,082,279 2,000 10,084,279 Capital Project Funds: Real Estate Excise Tax - - - Downtown Redevelopment - 5,000 5,000 City Facilities - - - Parks 2,367,163 63,043 2,430,206 Transportation 20,036,000 10,524,504 30,560,504 Capital Project Reserve - - - Perfomvng Arts & Event Center 11,278,902 1,617,925 12,896,827 Subtotal Capital Project Funds: 33,682,065 12,210,472 45,892,537 Total: $ 107,490,713 $ 13,774,401 $ 121,265,114 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 Local Government Investment Pool (LGIP), bankers' acceptances, or deposits with Washington State banks and savings and loan institutions. In 2017 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, 2017, the equity in pooled cash and investments was $65,685,869. At year-end, the City had $64,118,926 in cash and cash equivalents which consisted of investments with the LGIP of $41,310,558; U.S. Treasury Agency of $9,574,455; the City's checking account bank balance prior to outstanding checks was $12,963,292; deposit account of $250, petty cash and change funds, advance travel fund and investigative fund totaling $48,760, and Court Trustee Fund of $221,611. Cash held with an escrow agent is $1,566,943. 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) covers amounts over $250,000. Under State statute, members of WPDPC, a Page 55 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 presented on balance sheet in the basic financial statements at fair value. In accordance with GASB Statement 79, LGIP is reported on amortized cost basis. Furthermore, the City can invest and withdraw their investments on a daily basis with a limit of one transaction per business day and minimum transaction amount of five thousand dollars. There is no maximum transaction amount, but an investment or withdrawal of ten million dollars or more, a one -day notification prior to the transfer date is requested, but not required. The State Treasurer's Office administers the Washington State LGIP authorized under Chapter 43.250 RCW. The LGIP operates in a manner consistent with the SEC Rule 2a-7. In its management of LGIP, the State Treasurer adheres to the principles appropriate for the prudent investment of public funds. In priority order, they are the safety of principal, the assurance of sufficient liquidity to meet cash flow demands. As of December 31, 2017 the City had the following investments and maturities: SCBMULEOFINVFSTMENTS BYMATURITIHS AS OF DECEMBER 31, 2017 lnwstment maturities Less than 1 to 2 Greater than Investment Type Fair Value 1 year years 3 years State Investment Pool $ 41,310,558 $ 41,310,558 $ - $ US Treasury Stripped Principal 4,833,005 4,833,005 US Treasury Stripped Principal 4,741,450 - 4,741,450 S 50,885,013 $ 41,310,558 $ 4,833,005 $ 4,741,450 Reconciliation of Government -Wide Statement of Net Position: Key Bank checking account per books $ 12,963,292 Key Bank deposit account $ 250 Petty cash/change fund/advance travel/investigative fund 48,760 Local Government Investment Pool 41,310,558 US Treasury Stripped Principal 9,574,455 Municipal Court Trust on books 221,611 Subtotal cash, cash equivalents, and investments 64,118,926 Cash with escrow agent 1,566,943 Total cash and investments, Government -Wide Statement of Net Position $ 65,685,869 Investments Investments Measured at Amortized Cost As of December 31, 2017, the City had the following investments at amortized cost: SCIIEDULEOFEQVFSTMENTS AT AMORTIZED COST AS OF DECEMBER 31, 2017 Weighed Average Investment Type Maturities (Days) Investments Total State Treasues Investment Pool 37 Days $ 41,310,558 $ 41,310,558 $ 41,310,558 $ 41,310,558 Investments Measured at Fair Value The City measures and reports investments at fair value using the valuation input hierarchy established by generally accepted accounting principles, as follows: • Level 1: Quoted prices in active markets for identical assets or liabilities; • Level 2: These are quoted market prices for similar assets or liabilities, which are not active, or not readily observable. • Level 3: Unobservable inputs for asset or liability. At December 31, 2017, the City had the following investments measured at fair value: Page 56 S CHEDULE OF PWES THE NTS AT FAIR VALUE OF DECEMBER 31, 2017 Quoted Prices in Active Marekts for Significant Other Significant Identical Assets Observable Inputs Unobservable Investment Type 12/31/2017 (Level 1) (Level 2) Inputs (Level 3) U.S. Treasury Agency $ 4,833,005 $ $ 4,833,005 $ - U.S. Treasury Agency 4,741,450 4,741,450 Total By Fair Value Level $ 9,574,455 $ - $ 9,574,455 S - Custodial Credit Risk Custodial credit risk is the risk that in the event of a failure of the counterparty to an investment transaction the City would not be able to recover the value of the investment of collateral securities. As of December 31, 2017, the City is not exposed to custodial credit risk as there are not investments held with a brokerage firm or counterparty. Interest Rate Risk As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment 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 counter -party has to an investment in not fulfilling 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: Local Government Investment Pool (LGIP); 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. The LGIP is unrated. LGIP is comparable to Securities Exchange Commission 2a-7 to minimize credit risk. U.S. Treasury Agency is rated Aaa by Moody's rating service. 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 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 in accordance with state law. No more than 30% of the portfolio may be invested in bankers' acceptances and certificates of deposit." As of December 31, 2017 City investments were 8 1 % in LGIP and 19% in U.S. Treasury Agency. Other Information Below is a schedule of investments by fund type: SCHEDULE OF INVESTMENTS BY FUND CATEGORY AND INVESTMENT TYPE AS OF DECEMBER 31, 2017 Fund Type SIP Investments Total General Fund $ 7,987,443 $ 1,851,232 $ 9,838,675 Other Major Funds 10,863,193 2,517,738 13,380,931 Special Revenue Funds 4,703,160 1,090,041 5,793,201 Capital Projects Funds 4,480,513 1,038,438 5,518,951 Enterprise Funds 5,023,900 1,164,378 6,188,278 Internal Services Funds 8,252,349 1,912,628 10,164,977 Total: $ 41,310,558 $ 9 574 455 $ 50,885,013 Page 57 NOTE 6 — 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. 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. 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, 2017, the balance of property taxes receivable recorded by the City was $260,222. Of this, $236,675 is recorded as deferred inflow of resources, since it was not collected within the first 30 days of the end of 2017. Property taxes are recorded as a receivable when levied, offset by deferred inflow of resources. 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 $1.60. The remaining $2.00 is for the fire district ($1.50) and library district ($0.50). 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. For levy year received in 2017, the City's regular tax levy was $1.13118 per $1,000 on a 2016 assessed valuation of $9,489,437,470 for a total regular levy of $10,657,115. Deferred Inflow of Resources The table below provides details of the deferred inflow of resources as reported on the fund financial statements. DEFERRED INFLOW OF RESOURCES AS OF DECEMBER 31, 2017 Total General Deferred Inflow General Gout Property tax $ 236,675 $ 236,675 Total by Fund: $ 236,675 $ 236,675 Page 58 NOTE 7 - UNEARNED REVENUES AND RECEIVABLES Unearned Revenues The table below provides details of the unearned revenues as reported on the statement of net position. UNEARNED REVENUES AS OF DECEMBER 31, 2017 Unearned Revenues General PAEC Street Oper. Nonmajor Gov't Total General GoA Surface Water Mgmt Dumas Bay Centre Total Proprietary SWM fees - - - 137,174 - 137,174 Commute Trip Reduction Grant - 70,113 - - 70,113 - - PAEC Fees - - 54,253 - 54,253 - - Recreation programs / facility rentals/ other 67,731 - - 134,013 201,744 - 226,682 226,682 Total by Fund: $ 67,731 $ 70,113 $ 54,253 $134,013 $ 326,111 $ 137,174 $ 226,682 $ 363,856 Receivables & Due from Other Governments The receivables for the fiscal year ended December 31, 2017 on the government -wide statement of net position are detailed in the following schedule. RECEIVABLES & DUE FROM OTHER GOVERNMENTS AS OF DECEMBER 31, 2017 Receivable General Street Utility Tax Performing Arts & Event Ctr. Oper. Transport- ation Nonmajor Gov t Proprietary Total Property tax $ 260,222 $ $ $ $ $ $ $ 260,222 Admissions tax 84,858 84,858 Real Estate Excise tax - 215,306 215,306 Utility tax - 1,252,762 - 1,252,762 Gambling tax 29,324 - - 29,324 Recreation programs/ facilities 30,126 208,546 - 12,169 13,214 264,056 Grants/contributions/utility construction contract receivable 184,269 35,604 - 2,884,175 283,764 53,084 3,440,896 Off Duty security & Other receivable 178,551 - - - 250,114 - 428,665 State Shared revenue 1,638,227 88,266 1,102 26,355 256,454 - 2,010,404 Surface Water Management fees - - - - - 149,894 149,894 TotalbvFund: $2,405,578 $ 123,870 $ 1,253,863 $ 208,546 $2,910,530 $1,017,807 $ 216,192 $8,136,386 Page 59 NOTE 8 — CAPITAL ASSETS Capital assets activity for the year ended December 31, 2017 is as follows: CAPITAL ASSETS AS OF DECEMBER 31, 2017 Adjusted Beginning Ending Balance Gowrnmental Activity Balance 1/1/2017 Additions Deletions 12/3/31/2017 Capital Assets, not being depreciated: Land $281,422,489 $774,946 $ (2,044,823) $280,152,612 Construction in progress 33,303,717 29,049,389 (6,282,941) 56,070,165 Total capital assets, not being depreciated: $314,726,206 $29,824,335 $ (8,327,764) $336,222,777 Capital assets, being depreciated: Buildings 39,992,538 - - 39,992,538 Improvements other than buildings 26,450,524 59,954 - 26,510,478 Infrastructure 172,544,173 7,479,003 (55,599) 179,967,577 Machinery & equipment 18,640,450 1,162,700 (315,057) 19,488,093 Total capital assets, being depreciated: 257,627,685 8,701,657 (370,656) 265,958,686 Less accumulated depreciation for: Buildings (18,770,799) (2,017,050) - (20,787,849) Improvements other than buildings (16,984,068) (1,053,714) - (18,037,782) Infrastructure (64,160,477) (5,278,868) 14,813 (69,424,532) Machinery & equipment (11,575,607) (1,628,380) 315,057 (12,888,930) Total accumulated depreciation: (111,490,951) (9,978,012) 329,870 (121,139,093) Total assets being depreciated, net 146,136,734 (1,276,355) (40,786) 144,819,593 Governmental activities capital assets, net $460,862,941 $28,547,980 ($8,368,550) $481,042,371 Adjusted Beginning E Balance Business -Type Activities Balance Additions Deletions 2/3 1 2/31/2017 1/1/2017 Capital Assets, not being depreciated: Land $11,232,493 $107,800 $ - $11,340,293 Construction in progress 1,732,340 875,741 (1,777,264) 830,817 Total capital assets, not being depreciated: $12,964,833 983,541 (1,777,264) 12,171,110 Capital assets, being depreciated: Buildings 4,505,348 - - 4,505,348 Improvements other than buildings 3,913,373 3,561 - 3,916,934 Infrastructure 58,395,603 2,392,416 - 60,788,019 Machinery & equipment 175,146 23,648 - 198,794 Total capital assets, being depreciated: 66,989,469 2,419,625 - 69,409,094 Less accumulated depreciation for: Buildings (3,432,292) (189,013) - (3,621,305) Improvements other than buildings (241,564) (39,134) - (280,698) Infrastructure (15,113,313) (583,956) - (15,697,269) Machinery & equipment (108,505) (6,988) - (115,493) Total accumulated depreciation: (18,895,674) (819,091) - (19,714,765) Total assets being depreciated, net 48,093,795 1,600,534 49,694,329 Business -Type activities capital assets, net $61,058,628 $2,584,075 ($1,777,264) $61,865,439 Page 60 At the end of 2017, 18 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, 2017, are as follows: AS OF DECEMBER 31, 2017 Construction Remaining Governmental Activities Projects in progress Commitment Performing Arts & Event Center $ 32,642,575 $ 321,108 Trail and pedestrian access improvements 351,283 1,085,955 Celebration Park Maintenance Building 35,201 11,938 loth Avenue SW / SW 344th St: SW Campus Drive - 21st Ave SW 318,532 - South 356th St: SR99 - SR161 4,050,446 692,270 SR99 HOV Lanes Phase 5 14,748,647 8,580,787 SW 336th Way / SW 340th St: 26th PI SW - Hoyt Rd 194,148 1,809,742 S 314th St: 20th Ave S - 23rd Ave S - Install New Sidewalks 163,480 11,520 Citywide Pedestrian Crossing Improvements 668,548 297,495 S 344th Way @ Weyerhaeuser Way S 281,685 - School Zone Enhancements 351,523 99,982 21st Ave S Sidewalks 880,781 130,837 Steel Lake Park to Downtown Trail Project 864,822 325,048 21st Ave S Pedestrian Connection Project 228,416 2,579,317 Adaptive Traffic Control System Project Ph I 30,532 1,839,920 City Center Access Ph IProject 168,709 2,331,291 Street Light LED Conversion Project 2,167 3,247,833 Military Rd & S 298th St Compacted Roundabout Project 88,670 75,964 Total Governmental Activities $ 56,070,165 $ 23,441,007 Depreciation expense was charged to functions/programs of the primary government as follows: CAPITAL ASSETS DEPRECIATION BY TYPE AS OF DECEMBER 31, 2017 Governmental and Internal Service Activities General Government $164,730 Security of Persons & Property 1,414,616 Transportation 5,597,056 Physical Environment 15,980 Economic Environment 157,400 Health 64,547 Culture & Recreation 2,563,684 Total Depreciation - Governmental Activities $9,978,012 Business -Type Activities Utilities - Surface Water Management Culture & Recreation - Dumas Bay Centre $664,192 154,899 Total Depreciation - Business -Type Activities $ 819,091 Page 61 NOTE 9 — PENSION PLANS The following table represents the aggregate pension amounts for all plans subject to the requirements of the GASB Statement 68, Accounting and Financial Reporting for Pensions for the year 2017: Aggregate Pension Amounts — All Plans Pension liabilities ($10,543,761) Pension assets $6,032,380 Deferred outflows of resources $2,442,267 Deferred inflows of resources ($3,545,208) Pension expense/expenditures $1,363,313 State Sponsored Pension Plans Substantially all City of Federal Way 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 state Legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. 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 98540-8380 Or downloaded from the DRS website at www.drs.wa.gov. Public Employees' Retirement System (PERS) PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher education employees not participating in higher education retirement programs. PERS is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component. PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member's average final compensation (AFC) times the member's years of service. The AFC is the average of the member's 24 highest consecutive service months. Members are eligible for retirement from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. Members retiring from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non -duty disability payments, an optional cost -of - living adjustment (COLA), and a one-time duty -related death benefit, if found eligible by the Department of Labor and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. Contributions The PERS Plan 1 member contribution rate is established by State statute at 6 percent. The employer contribution rate is developed by the Office of the State Actuary and includes an administrative expense component that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage of covered payroll) for 2017 were as follows: Page 62 PERS Plan 1 Actual Contribution Rates Employer Employee* January - June 2017: PERS Plan 1 6.23% 6.00% PERS Plan 1 UAAL 4.77% Administrative Fee 0.18% Total 11.18% 6.00% July - December 2017: PERS Plan 1 7.49% 6.00% PERS Plan 1 UAAL 5.03% Administrative Fee 0.18% Total 12.70% 6.00% * For employees participating in Judicial Benefit Multiplier (JBM), the contribution rate was 12.26%. The City of Federal Way's actual PERS plan contributions were $745,500 to PERS Plan 1 for the year ended December 31, 2017. PERS Plan 2/3 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member's average final compensation (AFC) times the member's years of service for Plan 2 and 1 percent of AFC for Plan 3. The AFC is the average of the member's 60 highest -paid consecutive service months. There is no cap on years of service credit. Members are eligible for retirement with a full benefit at 65 with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan 2/3 members who have at least 20 years of service credit and are 55 years of age or older, are eligible for early retirement with a benefit that is reduced by a factor that varies according to age for each year before age 65. PERS Plan 2/3 members who have 30 or more years of service credit and are at least 55 years old can retire under one of two provisions: • With a benefit that is reduced by three percent for each year before age 65; or • With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return -to -work rules. PERS Plan 2/3 members hired on or after May 1, 2013 have the option to retire early by accepting a reduction of five percent for each year of retirement before age 65. This option is available only to those who are age 55 or older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non -duty disability payments, a cost -of -living allowance (based on the CPI), capped at three percent annually and a one-time duty related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44. PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined contribution rates are set at a minimum of 5 percent and escalate to 15 percent with a choice of six options. Employers do not contribute to the defined contribution benefits. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan. Contributions The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. The Plan 2/3 employer rates include a component to address the PERS Plan 1 UAAL and an administrative expense that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates and Plan 3 contribution rates. The PERS Plan 2/3 required contribution rates (expressed as a percentage of covered payroll) for 2017 were as follows: Page 63 PERS Plan 2/3 Actual Contribution Rates Employer 2/3 Employee 2* January — June 2017: PERS Plan 2/3 6.23% 6.12% PERS Plan 1 UAAL 4.77% Administrative Fee 0.18% Employee PERS Plan 3 varies Total 11.18% 6.12% July — December 2017: PERS Plan 2/3 7.49% 7.38% PERS Plan 1 UAAL 5.03% Administrative Fee 0,18% Employee PERS Plan 3 Varies Total 12.70% 7.38% * For employees participating in JBM, the contribution rate was 15.30% for January — June 2017 and 18.45% for July — December 2017. The City of Federal Way's actual PERS plan contributions were $1,034,441 to PERS Plan 2/3 for the year ended December 31, 2017. Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) LEOFF membership includes all full-time, fully compensated, local law enforcement commissioned officers, firefighters, and as of July 24, 2005, emergency medical technicians. LEOFF is comprised of two separate defined benefit plans. LEOFF Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined per year of service calculated as a percent of final average salary (FAS) as follows: • 20+ years of service — 2.0% of FAS • 10-19 years of service — 1.5% of FAS • 5-9 years of service — 1 % of FAS The FAS 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 ten years of service. Members are eligible for retirement with five years of service at the age of 50. Other benefits include duty and non -duty disability payments, a cost -of living adjustment (COLA), and a one-time duty -related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. Contributions Starting on July 1, 2000, LEOFF Plan 1 employers and employees contribute zero percent, as long as the plan remains fully funded. The LEOFF Plan 1 had no required employer or employee contributions for fiscal year 2017. Employers paid only the administrative expense of 0.18 percent of covered payroll. LEOFF Plan 2 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the final average salary (FAS) per year of service (the FAS is based on the highest consecutive 60 months). Members are eligible for retirement with a full benefit at 53 with at least five years of service credit. Members who retire prior to the age of 53 receive reduced benefits. If the member has at least 20 years of service and is age 50, the reduction is three percent for each year prior to age 53. Otherwise, the benefits are actuarially reduced for each year prior to age 53. LEOFF 2 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non -duty disability payments, a cost -of -living allowance (based on the CPI), capped at three percent annually and a one-time duty - related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 2 members are vested after the completion of five years of eligible service. Contributions The LEOFF Plan 2 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2. The employer rate included an administrative expense component set at 0.18 percent. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. The LEOFF Plan 2 required contribution rates (expressed as a percentage of covered payroll) for 2017 were as follows: Page 64 LEOFF Plan 2 Actual Contribution Rates Employer Employee January — June 2017: State and local governments 5.05% 8.41% Administrative Fee 0.18% Total 5.23 % 8.41 % Ports and Universities 8.41 % 8.41 % Administrative Fee 0.18% Total 8.59% 8.41 % July — December 2017: State and local governments 5.25% 8.75% Administrative Fee 0.18% Total 5.43% 8.75% Ports and Universities 8.75% 8.75% Administrative Fee 0.18% Total 8.93% 8.75% The City of Federal Way's actual contributions to the plan were $688,577 for the year ended December 31, 2017. The Legislature, by means of a special funding arrangement, appropriates money from the state General Fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. For the state fiscal year ending June 30, 2017, the state contributed $62,155,262 to LEOFF Plan 2. The amount recognized by the City of Federal Way as its proportionate share of this amount is $445,467. Actuarial Assumptions The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial valuation completed in 2017 with a valuation date of June 30, 2016. The actuarial assumptions used in the valuation were based on the results of the Office of the State Actuary's (OSA) 2007-2012 Experience Study and the 2015 Economic Experience Study. Additional assumptions for subsequent events and law changes are current as of the 2016 actuarial valuation report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, 2017. Plan liabilities were rolled forward from June 30, 2016, to June 30, 2017, reflecting each plan's normal cost (using the entry -age cost method), assumed interest and actual benefit payments. Inflation: 3% total economic inflation; 3.75% salary inflation Salary increases: In addition to the base 3.75% salary inflation assumption, salaries are also expected to grow by promotions and longevity. Investment rate of return: 7.5% Mortality rates were based on the RP-2000 report's Combined Healthy Table and Combined Disabled Table, published by the Society of Actuaries. The OSA applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis; meaning, each member is assumed to receive additional mortality improvements in each future year throughout his or her lifetime. There were minor changes in methods and assumptions since the last valuation. • For all systems, except LEOFF Plan 1, how terminated and vested member benefits are valued was corrected. • How the basic minimum COLA in PERS Plan 1 is valued for legal order payees was improved. • For all plans, the average expected remaining service lives calculation was revised. Discount Rate The discount rate used to measure the total pension liability for all DRS plans was 7.5 percent. To determine that rate, an asset sufficiency test included an assumed 7.7 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. (All plans use 7.7 percent except LEOFF 2, which has assumed 7.5 percent). Consistent with the long-term expected rate of return, a 7.5 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue being made at contractually required rates (including PERS 2/3, PSERS 2, SERS 2/3, and TRS 2/3 employers, whose rates include a component for the PERS 1, and TRS 1 plan liabilities). Based on these assumptions, the pension plans' fiduciary net position Page 65 was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.5 percent was used to determine the total liability. Long -Term Expected Rate of Return The long-term expected rate of return on the DRS pension plan investments of 7.5 percent was determined using a building- block -method. In selecting this assumption, the Office of the State Actuary (OSA) reviewed the historical experience data, considered the historical conditions that produced past annual investment returns, and considered capital market assumptions and simulated expected investment returns provided by the Washington State Investment Board (WSIB). The WSIB uses the capital market assumptions and their target asset allocation to simulate future investment returns over various time horizons. Estimated Rates of Return by Asset Class Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of June 30, 2017, are summarized in the table below. The inflation component used to create the table is 2.2 percent and represents the WSIB's most recent long-term estimate of broad economic inflation. Asset Class Target Allocation % Long -Term Expected Real Rate of Return Arithmetic Fixed Income 20% 1.70% Tan ible Assets 5% 4.90% Real Estate 15% 5.80% Global Equity 37% 6.30% Private Equity 23% 9.30% 100% Sensitivity of the Net Pension Liability/(Asset) The table below presents the City of Federal Way proportionate share* of the net pension liability calculated using the discount rate of 7.5 percent, as well as what the City of Federal Way proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.5 percent) or 1-percentage point higher (8.5 percent) than the current rate. 1% Decrease (6.5%) Current Discount Rate (7.5%) 1% Increase (8.5%) PERS 1 $6,621,289 $5,435,344 $4,408,063 PERS 2/3 $13,762,607 $5,108,417 ($1,982,410) LEOFF 2 $1,305,398 ($6,032,380) ($12,010,895) Pension Plan Fiduciary Net Position Detailed information about the State's pension plans' fiduciary net position is available in the separately issued DRS financial report. Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the City of Federal Way's reported a total pension liability of $10,543,761 total pension net asset of $6,032,380 for its proportionate share of the net pension liabilities and net pension asset as follows: Liability or Asset PERS 1 $5,435,344 PERS 2/3 $5,108,417 LEOFF 2 $6,032,380 The amount of the asset reported above for LEOFF Plan 2 reflects a reduction for State pension support provided to the City of Federal Way. The amount recognized by the City of Federal Way as its proportionate share of the net pension asset, the related State support, and the total portion of the net pension asset that was associated with the City of Federal Way were as follows: Page 66 Liability (or Asset) LEOFF 2 — employer's proportionate share $6,032,380) LEOFF 2 — State's proportionate share of the net pension liability/(asset) associated with the employer ($3,913,092) TOTAL $9,945,473) At June 30, the City of Federal Way proportionate share of the collective net pension liabilities was as follows: Proportionate Share 6/30/16 Proportionate Share 6/30/17 Change in Proportion PERS 1 0.114008% 0.114547% 0.000539% PERS 2/3 0.146079% 0.147025% 0.000946% LEOFF 2 0.415772% 0.434711% 0.018939% Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30 are used as the basis for determining each employer's proportionate share of the collective pension amounts reported by the DRS in the Schedules of Employer and Nonemployer Allocations for all plans except LEOFF 1. LEOFF Plan 1 allocation percentages are based on the total historical employer contributions to LEOFF 1 from 1971 through 2000 and the retirement benefit payments in fiscal year 2017. Historical data was obtained from a 2011 study by the Office of the State Actuary (OSA). In fiscal year 2017, the state of Washington contributed 87.12 percent of LEOFF 1 employer contributions and all other employers contributed the remaining 12.88 percent of employer contributions. LEOFF 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. The allocation method the plan chose reflects the projected long-term contribution effort based on historical data. In fiscal year 2017, the state of Washington contributed 39.35 percent of LEOFF 2 employer contributions pursuant to RCW 41.26.725 and all other employers contributed the remaining 60.65 percent of employer contributions. The collective net pension liability (asset) was measured as of June 30, 2017, and the actuarial valuation date on which the total pension liability (asset) is based was as of June 30, 2016, with update procedures used to roll forward the total pension liability to the measurement date. Pension Expense For the year ended December 31, 2017, the City of Federal Way recognized pension expense as follows: Pension Expense PERS 1 $361,396 PERS 2/3 $822,621 LEOFF 2 $179,295 TOTAL $1,363,313 Deferred Outflows of Resources and Deferred Inflows of Resources At December 31, 2017, the City of Federal Way reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PERS 1 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $0 $0 Net difference between projected and actual investment earnings on pension plan investments $0 $202,832 Changes of assumptions $0 $0 Changes in proportion and differences between contributions and proportionate share of contributions $0 $0 Contributions subsequent to the measurement date $386,759 $0 TOTAL $386,759 $202,832 Page 67 PERS 2/3 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $517,603 $168,007 Net difference between projected and actual investment earnings on pension plan investments $0 $1,361,781 Changes of assumptions $54,261 $0 Changes in proportion and differences between contributions and proportionate share of contributions $226,116 $0 Contributions subsequent to the measurement date $568,294 $0 TOTAL $1,366,274 $1,529,788 LEOFF 2 Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $265,135 $228,758 Net difference between projected and actual investment earnings on pension plan investments $0 $1,354,312 Changes of assumptions $7,264 $0 Changes in proportion and differences between contributions and proportionate share of contributions $65,133 $229,518 Contributions subsequent to the measurement date $351,702 $0 TOTAL $689,234 $1,812,588 Deferred outflows of resources related to pensions resulting from the City of Federal Way's contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31: PERS 1 2018 $137,101 2019 $43,285 2020 $10,050 2021 $98,965 2022 $0 Thereafter $0 TOTAL $202,832 Year ended December 31: PERS 2/3 2018 $417,092 2019 $215,935 2020 $107,031 2021 $542,185 2022 $51,550 Thereafter $67,015 TOTAL $731,808 Year ended December 31: LEOFF 2 2018 $650,125 2019 $112,950 2020 $120,907 2021 ($596,221 2022 ($39,420) Thereafter ($181,332 TOTAL ($1,475,055 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 2017 on average, there were a total of 325 individuals covered by this system. As of the end of the year, there were 321 active employees of the City and five were drawing retirement benefits. During the year 37 employees left the City's employment and either had been reimbursed their contributions, 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 2017 was $28,499,903 and excluding PERS, LEOFF, FWRS, deferred comp, flex plan, and section 125 covered payroll was $25,383,187. Total City payroll was $30,370,526. Actual City contributions for the year were $1,440,976. Actual employee contributions were $1,718,088. 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 County 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. MEBT can be contacted for additional information at (877)-690-5410. In July 1995, the City implemented the hardship withdrawal and loan provision program that allow participants to have limited access to their contributions while still employed by the City. Hardship withdrawals are available in the event of financial necessity resulting from uninsured medical expenses, tuition expenses, purchasing one's primary residence, or to prevent foreclosure on one's primary residence. Loans receivable as of December 31, 2017 were $1,440,432. After 5 years an employee becomes 100% vested in their employer contributions. Also an employee becomes 100% vested when they reach their normal retirement date (the earlier of age 65 or the earliest service retirement date under any other retirement benefit program to which the City contributes on the employees behalf). 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. The City faces most of the risks faced by similar sized cities including general liability for bodily injury, law enforcement, and property liability. Through its Risk Management Fund, the City records insurance premium costs for general liability coverage and builds reserves for future claims, self -insured retention, and a future general liability self-insurance program. There were no settlements in excess of insurance for commercially insured activities for 1996 through 2017. The fund balance for the Risk Fund as of 12/31/2017 is $1.57 million. The following is a summary of coverage in force in 2017. Page 69 S CHEDULE OF INSURANCE IN FORCE AS OF DECE MER 31, 2017 Company Policy Period Details of Coverage Liability Limits Argonaut 12/31/16-12/31/17 General liability (auto, general, police, e & $250,000 self -insured retention (SIR) with o, employment practices, & stop gap) aggregate limits of $10,000,000. National $10,000,000 in excess of $10,000,000 with Casualty 12/31/16-12/31/17 Excess liability aggregate limits of $10,000,000. Crime/fidelity (employee theft, forgery or alternation, on premises, in transit, money Deductible ranges from $5,000 to $25,000 Travelers 1/1/17-1/l/18 orders and counterfeit money, computer with single loss limits ranging from$50,000 crime, fund transfer fraud and claims to $1,000,000. expense) $25,000 deductible with single loss limits of Philadelphia 1/l/17-1/l/18 Property coverage $41,923,909 for buildings and $4,401,565 in contents. The City's industrial insurance is provided by the Association of Washington Cities and is administered by the Workers' Comp Retro Program. Coverage is purchased by means of standard rates per working hour and is computed by the total number of hours worked by employees multiplied by the basic premium rate assigned to the business risk classification. The following are benefits provided by industrial insurance: medical services, damaged clothing, travel expenses, time -loss payments, vocational rehabilitation, partial disability awards, pension awards and survivor benefits. NOTE 11— LONG-TERM LIABILITIES The various categories of long-term debt reflected on the City's financial statements are briefly described in the following paragraphs. Ratings are issued on the bond at the time of issuance. The ratings issued on City bonds are shown on page 66. 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 because 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 2017 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. A) On November 17, 2017, the City issued $6,000,000 of limited tax general obligation bond with an interest rate of 2.17 percent, maturity due date of 11/27/2037 which contains mandatory tender option date of 1 l/17/2022. Proceeds were used to pay off the 2014 KeyBank Bond Anticipation Note which was scheduled for maturity on 12/01/2017. B) On November 26, 2014 the City issued $8,209,906 of general obligation Bond anticipation note with KeyBank to acquire the Target property with an interest only rate of 1.51 percent and principal due 12/01/2017. The funds were used to purchase the old Target property for downtown development. The bond was partially paid down on 10/13/2017 for $2,209,906 with partial sale of the land on August 7, 2017. The bond was paid in full on 11/17/2017. C) On March 4, 2013 the City issued $12,415,000 of general obligation refunding bonds with an average interest rate of 2.67 percent to provide resources to purchase U.S. Government and State and Local Government Series security that were placed in an irrevocable trust for the purpose of generating resources to advance refund on $12,310,000 of outstanding 2003 GO Federal Way Community Center debt on December 1, 2013. As a result the 2003 GO FWCC bonds are considered to be defeased and the liability has been removed from the governmental activities column of the statement of net position. This advance refunding was undertaken to reduce total debt service payments over the next twenty one years by $2,322,943 and resulted in an economic gain of $1,740,458. (Economic gain is the net present value of future savings between old and the new debt). D) On June 28, 2016 the City entered into a Contract Loan Guarantee with Housing Urban Development for development of the Federal Way Performing Arts and Events Center. This loan, referred to as Section 108 Loan is authorized up to $3,030,000 with advances of $3,030,000 as of 12/31/2017 with a variable rate of 3M LIBOR plus 20 basis points. The Section 108 Loan contains a 20 year term with provisions to convert to a fixed rate loan at a future date. E) The City in conjunction with several other South King County cities (Auburn, Burien, Renton, SeaTac, Tukwila,) agreed to build a facility to hold its inmates. The total bond in 2009 was $86.325 million and the City of Federal Page 70 Way's portion at that time was $15.522 million. In 2017 the facility was able to use its excess revenue from excess space rented to non-member cities to pay the bond in 2017. SCORE and Valley Communications joint venture information can be found on pages 73 thru 76. The following schedules detail the long-term debt activity and balances of the City for GO Bonds, SCORE and Section 108 HUD Loan, Public Works Trust Fund Loans, Compensated Absences, and Net Pension Liability. Typically we have used the governmental funds on pages 29 and 30 to liquidate the net pension liability, with the General Fund being the primary fund. OUTSTANDING GENFRAL OBLIGATION DEBT AND LONGTERM LIABR ITIFS - BY TYPE DECFIVIBER 31, 2017 Amount Beginning Ending Bond Rating Description Issue Maturity Interest Originally Outstanding Amount Amount Outstanding atlssuance Date Date Rate Issued Debt Issued Redeemed Debt Governmental Activities: General Obligation Bonds: A) 2017 Ltd Tax GO Bond' - Nov 17, 17 Nov 27, 37 2.17 $ - $ - $ 6,000,000 $ 6,000,000 B) 2014 KeyBank Bond Anticipation Note Nov 26, 14 Dec 01, 17 1.51 8,209,960 8,209,960 - 8,209,960 - C) 2013 Refund Ltd/Community Center 2 Aa3 Dec 01, 13 Dec 01, 33 2.67 12,415,000 10,880,000 - 485,000 10,395,000 Subtotal GO Bonds: - - - 20,624,960 19,089,960 6,000,000 8,694,960 16,395,000 Other Miscellaneous Debt -Intergovernmental: D) 2016 Section 108 HUD Loan3 Aug 01, 16 Aug 01, 35 1.14 2,925,000 2,925,000 105,000 159,000 2,871,000 E) 2009 SCORE/Special Obligation Bond Al/AA Nov 04, 09 Jan 01, 39 3.00-6.62 15,522,300 13,710,600 - 403,200 13,307,400 Subtotal miscellaneous: - - 18,447,300 16,635,600 105,000 562,200 16,178,400 Subtotal GO Bonds plus Misc. 39,072,260 35,725,560 6,105,000 9,257,160 32,573,400 Compensated absences - 2,032,808 2,080,522 2,102,432 2,010,898 Net Pension Liability (NPL) for Pers 1,2, & 3 - 11,893,469 2,731,589 9,161,880 Subtotal GO bonds, misc., comp. absences, & NPL - - 39,072,260 49,651,837 8,185,522 14,091,181 43,746,178 Business -Type Activities: Public Works Trust Fund Loan (PWTFL): PWTL - SeaTac Mall Drain Imp May 31, 00 Jul 01, 19 1.00 412,500 48,060 - 16,020 32,040 PWTL- SeaTac Mall Drain Imp Aug 14, 00 Jul 01, 19 1.00 2,062,500 240,301 80,100 160,201 Subtotal PWTFL - - 2,475,000 288,361 96,120 192,241 Compensated absences - 90,128 110,168 99,458 100,838 Net Pension Liability (NPL) for Pers 1,2, & 3 - 1,584,261 202,380 1,381,881 SubtotalPWTFL, comp. absences, &NPL 2,475,000 1,962,750 110,168 397,958 1,674,960 Grand Total All Long -Term Debt: $ 41,547,260 $ 51,614,587 $ 8,295,690 $ 14,489,139 $45,421,138 I On November 17, 2017 the City issued $6, 000, 000 of Ltd Tax GO Bond with an interest rate of 2.17 percent, maturity date of 11/27/2037, mandatory tender option date of ll/17/2022. Bond proceeds were used to payoff the 2014 KeyBank Bond Anticipation Note. 2 The ending 2017 refunding Community bond premium is $284, 771 with current year amortization of $44, 780. 3 Contract Loan Guarantee Assistance via Housing Urban Development with variable rate; 3 month libor plus 20 basis points. ° Currently the City has an inter -local agreement with Des Moines where they contribute 1 % to the City of Federal Way SCORE Debt. SCHEDULE OF CHANGES IN LONG-TERM LIABILITIES PERIOD ENDED DECEMBER 31, 2017 Beginning Ending Outstanding Additions Reductions Outstanding Debt Debt Governmental Activities: General Obligation Bonds $ 19,089,960 $ 6,000,000 $ (8,694,960) $ 16,395,000 Other -intergovernmental debt 16,635,600 105,000 (562,200) 16,178,400 Compensated absences 2,032,808 2,080,522 (2,102,432) 2,010,898 Net Pension Liability L for Pers 1,2, & 3 11,893,469 2,731,589 9,161,880 Total Governmental Activities 49,651,837 8,185,522 14,091,181 43,746,178 Business -Type Activities: Enterprise Funds Public Works Trust Fund Loan 288,361 - (96,120) 192,241 Compensated absences 90,128 110,168 (99,458) 100,838 Net Pension Liability NPL for Pers 1,2, & 3 1,584,261 202,380 1,381,881 Total Business -Type Activities 1,962,750 110,168 397,958 1,674,960 Total All Funds $ 51,614,587 $ 8,295,690 $ 14 489 139 $ 45,421,138 Page 71 OUTSTANDING GENERAL OBLIGATION DEBT AND LONG-TERM LIABILITIES - BY FUND DECEMBER 31, 2017 Amount Beginning Amount Amount Ending Due within Description Originally Outstanding Issued Redeemed Outstanding one year Issued Debt Debt Governmental Long -Term Debt: General Obligation Bonds: A) 2017 Ltd Tax GO Bond 1 $ - $ - $ 6,000,000 $ - $ 6,000,000 $ B) 2014 KeyBank Bond Anticipation Note 1 8,209,960 8,209,960 8,209,960 - - C 2013 Refund Ltd/Community Center 2 12,415,000 10,880,000 485,000 10,395,000 500,000 Subtotal GO Bonds: 20,624,960 19,089,960 6,000,000 8,694,960 16,395,000 500,000 Other Miscellaneous Debt -Intergovernmental: D) 2016 Section 108 HUD Loan3 2,925,000 2,925,000 105,000 159,000 2,871,000 159,000 E 2009 SCORE/Special Obligation Bond4 15,522,300 13,710,600 - 403,200 13,307,400 415,800 Subtotal miscellaneous: 18,447,300 16,635,600 105,000 562,200 16,178,400 574,800 Subtotal GO Bonds plus Misc. 39,072,260 35,725,560 6,105,000 9,257,160 32,573,400 1,074,800 Compensated absences - 2,032,808 2,080,522 2,102,432 2,010,898 136,529 Net Pension Liability L for Pers 1,2, & 3 - 11,893,469 - 2,731,589 9,161,880 na Subtotal GO bonds, misc., comp. absences, & NPL: 39,072,260 49,651,837 8,185,522 14,091,181 43,746,178 1,211,329 Business -Type Activities: Enterprise Funds: Public Works Trust Fund Loan 2,475,000 288,361 - 96,120 192,241 96,120 Subtotal Bus -Type Long -Term Debt 2,475,000 288,361 - 96,120 192,241 96,120 Compensated absences - 90,128 110,168 99,458 100,838 7,159 Net Pension Liability NPL for Pers 1,2, & 3 - 1,584,261 - 202,380 1,381,881 na Subtotal PWTFL, comp. absences, & NPL: 2,475,000 1,962,750 110,168 397,958 11674,960 1 103,279 Grant Total All Long -Term Debt: $ 41,547,260 $ 51,614,587 $ 8 295 690 $14 489139 $ 45 421 138 1 $1 14 608 SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY AS OF DECEMBER 31, 2017 Government Activities Business -Type Activities General Governmental Debt Public Work Trust Fund Grand Total Year Principal Interest Principal Interest Principal Interest P&I 2018 $ 1,074,800 $ 1,079,024 $ 96,120 $ 1,922 $ 1,170,920 $ 1,080,946 $ 2,251,866 2019 1,295,747 1,019,871 96,120 961 1,391,867 1,020,832 2,412,699 2020 1,523,881 981,262 - - 1,523,881 981,262 2,505,143 2021 1,574,916 931,453 1,574,916 931,453 2,506,369 2022 6,233,956 876,620 6,233,956 876,620 7,110,576 2023 1,259,400 730,077 1,259,400 730,077 1,989,477 2024-2028 6,893,500 3,055,710 6,893,500 3,055,710 9,949,210 2029-2033 9,063,400 2,012,999 9,063,400 2,012,999 11,076,399 2034-2038 3,653,800 385,338 3,653,800 385,338 1 4,039,138 Total $ 32,573,400 S 11,072,354 $ 192,240 $ 2,883 $32,765,640 1 $11,075,237 1 $43,840,877 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. See page 132 for a detailed calculation of the valuation. The City's legally remaining del )t capacities as of 1Jecember S 1, zu 1 / are: Computation of Limitation of Indebtedness 2017 General government (no vote required) $ 124,321,295 General government (3/5 majority vote required) 102,268,064 Parks and open space (3/5 majority vote required) 255,670,161 Utilities (3/5 majority vote required) 255,670,161 Total Capacity $ 737,929,681 Page 72 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. Typically the General Fund has been used to liquidate compensated absences for the General Government. Governmental Activities: Current portion $ 136,529 Noncurrent portion 1,874,369 Business -Type Activities: Current portion 7,159 Noncurrent portion 93,679 Total Compensated absences $ 2,111,736 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, 2017 is $-0- for its tax-exempt general obligation bond issues subject to the Tax Reform Act issued through that date. No arbitrage applies to any of City of Federal Way bonds. NOTE 12 — INTERFUND TRANSACTIONS Interfund transfers for the year ended December 31, 2017 were as follows: Interfund Transfers In Out Governmental Funds: General Fund Street Fund Utility Tax Fund Debt Service Performing Arts & Event Center Operations Transportation Performing Arts & Event Center Nonmajor Governmental Funds Proprietary Funds: Dumas Bay Centre Internal Service Funds $ 9,631,425 $ 2,798,139 1,714,542 - - 10,256,148 2,937,023 - 694,703 3,993,000 500,000 - 2,135,966 9,207,847 942,000 - 713,475 1,000,000 Total: $23,262,134 $23,262,134 The following describes the amounts transferred out during 2017: General Fund: • $1,628,766 to Street Fund to subsidize street maintenance and operations. • $114,000 to Performing Art & Event Center to subsidize operations. • $120,289 to Parks Reserve for reserve fund balance. • $11,084 to Federal Way Community Center to subsidize maintenance and operations. • $924,000 to Debt Service for future debt service payments. Utility Tax Fund: • $7,480,745 to General Fund for operation support. • $441,593 to Federal Way Community Center for maintenance and operations. • $85,776 to Street Fund for maintenance and operations of City streets. • $475,331 to Building & Furnishings Fund for future capital needs of city buildings. • $250,000 to Municipal Facilities Fund for capital projects reserve. • $442,000 to Dumas Bay Center to subsidize maintenance and operations and establish a reserve for future capital needs of the building. • $580,703 to Performing Art & Event Center for maintenance and operations of operating the facility. Page 73 • $500,000 to Performing Art & Event Center for construction of the facility. Nonmajor Funds: • $1,021,298 from Traffic Safety Fund to General Fund for Police related services. • $205,000 from Traffic Safety Fund to Street Construction Project School Zone Enhancements. • $2,013,023 from Real Estate Excise Tax (REET) Fund to Debt Service Fund for debt payments. • $1,013,000 from REET Fund to Arterial Street for street overlay. • $100,000 from REET Fund to Parks CIP Fund for major maintenance of parks facilities. • $100,000 from REET Fund to Parks CIP Fund for playground equipment. • $50,000 from REET Fund to Parks CIP Fund for trail and pedestrian access improvements. • $50,000 from REET Fund to Parks CIP Fund for Lakota Soccer Field upgrade project. • $632,542 from REET Fund to Street Construction Project S 356th St SR99 to SR161. • $867,458 from REET Fund to Street Construction Project SW 336th Way/SW 340`h St from 26th PI SW to Hoyt Rd. • $113,000 from REET Fund to Street Construction Project Steel Lake Park to Downtown Trail. • $500,000 from REET Fund to Dumas Bay Center Fund for reserve. • $109,338 from REET Fund to Information Technology Fund for PAEC IT related expenditures. • $128,806 from Parks Reserve Fund to Fleet Fund for Parks Sand & Equipment. • $2,000,000 from Downtown Redevelopment Fund -LIFT to Street Construction Project 21st Ave S Pedestrian Connection (Staircase) • $175,000 from Downtown Redevelopment Fund -LIFT to Street Construction Project 21" Ave S Sidewalks. • $129,382 from Capital Project Reserve Fund to General Fund for operations. Internal Service: • $1,000,000 from Unemployment Insurance Fund to General Fund for operations. Interfund loans for the year ended December 31, 2017 were as follows: Interfund Loans Receivable Payable General Fund $ 2,237,068 $ - Special Revenue Funds: Community Development Block Grant - 14,749 Capital Project Funds: Perforining Arts & Event Center - 7,393,338 Internal Service Funds: Fleet & Equipment Fund 5,171,019 - Total Interfund Loans $ 7,408,087 $ 7,408,087 NOTE 13 — CONTRACTUAL OBLIGATIONS, CONTINGENCIES AND LITIGATION As of December 31, 2017 there were several minor claims for damages and three lawsuits pending against the City. With one exception noted below, in the opinion of the City Attorney, none of these lawsuits or claims exposes the City to potential liability, either singly or in the aggregate, that materially affect the financial condition of the City. The one exception to this statement is a claim for $10,777,440.22 filed by a contractor, Graham Construction, Inc., in relation to Phase 5 of the Pacific Highway improvement project. While the City disputes this claimed amount and is vigorously defending the City's position, it is possible that the liability for the City may exceed the original contract budget by a significant amount. NOTE 14 — JOINT VENTURES 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. Federal Way was formally admitted as an addition in 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 was automatically extended for a consecutive five year -period. 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 Page 74 Department; SeaTac Fire Department; North Highline Fire Department; King County EMS Units; and Vashon Island Fire Department. Separate agreements between Valley Com 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 2017 cost distributions for the five member cities are as follows: Dispatchable Percent City Calls of Total Kent 115,303 26.55% Renton 87,220 20.09% Auburn 100,554 23.16% Tukwila 36,635 8.44% Federal Way 94,522 21.77% Total 434,234 100.00% 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 fmds 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 2017 Kent Renton Auburn Tukwila Federal Way Total Equity @ January 1, 2017 $ 6,314,604 $ 4,531,544 $ 4,504,828 $ 2,391,872 $ 3,484,567 $ 21,227,415 Priorperiod adjustment $ - $ - $ - $ - $ - $ - Current year increase 900,497 681,177 785,310 286,111 738,204 3,391,299 Equity @ December 31, 2017 $ 7,215,101 $ 5,212,721 $ 5,290,138 $ 2,677,983 $ 4,222,771 $ 24,618,714 Percent of equity 29.31% 21.17% 21.49% 10.88% 17.15% 100.00% Prior year's percent of equity 29.75% 21.35% 21.22% 11.27% 16.42% 100.00% A complete set of financial statements is available from: Valley Communications Center, 27519 108'b Avenue SE, Kent, WA 98030. Page 75 South Correction Entity The South Correctional Entity (SCORE) consolidated correctional facility was established February 25, 2009, 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, 2009 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, 2009, 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 Host City Agreement. Pursuant to SCORE financial policies, all unexpected funds or reserve funds shall be distributed based on the percentage of the Member City's average daily population at the SCORE Facility for the last three (3) years regardless of its Owner City or Host City status. SCORE, a 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 was 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. The SCORE PDA issued $86 million in special obligation bonds in 2009 (the "Bonds") to construct, develop, acquire and equip the SCORE Facility. Pursuant to the Formation Interlocal Agreement and the ordinances of each city, each Owner City (which includes the Cities of Auburn, Burien Federal Way, Renton, SeaTac, and Tukwila) is obligated to budget for and pay its share, and only its share, of the principal of and interest on the Bonds as the same become due and payable. Each Owner City's obligation to pay its portion is an irrevocable, unconditional full faith and credit obligation of such Owner City, payable from property taxes levied within the constitutional and statutory authority provided without a vote of the electors of the Owner City on all of the taxable property within the Owner City and other sources of revenues available therefor. The following is a summary of the debt service requirements for the Bonds: 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% 2018 $ 2,240,000 $ 4,715,979 $ (1,512,496) $ 5,443,483 $ 1,687,480 $ 217,739 $ 979,827 $ 1,959,654 $ 163,304 $ 435,479 2019 2,310,000 4,602,229 (1,478,317) 5,433,912 1,684,513 217,356 978,104 1,956,208 163,017 434,713 2020 2,385,000 4,484,854 (1,440,560) 5,429,294 1,683,081 217,172 977,273 1,954,546 162,879 434,344 2021 2,465,000 4,363,604 (1,401,577) 5,427,027 1,682,378 217,081 976,865 1,953,730 162,811 434,162 2022 2,590,000 4,233,250 (1,500,618) 5,322,632 1,650,016 212,905 958,074 1,916,148 159,679 425,811 2023-2027 14,485,000 18,727,798 (6,710,481) 26,502,317 8,215,718 1,060,093 4,770,417 9,540,834 795,070 2,120,185 2028-2032 17,725,000 13,590,870 (4,959,695) 26,356,175 8,170,414 1,054,247 4,744,112 9,488,223 790,685 2,108,494 2033-2037 21,855,000 7,082,263 (2,731,829) 26,205,434 8,123,685 1,048,217 4,716,978 9,433,956 786,163 2,096,435 2038-2039 10,115,000 676,321 (353,824) 10,437,497 3,235,624 417,500 1,878,749 3,757,499 313,125 835,000 Total $ 76,1709000 $62,477,168 $(22,0893397) $ 116,5573771 1 $ 369132,909 $ 4,6623311 $ 20,9803400 $41,9603798 $3,496,733 $ 9,324,622 *Of the $20,980,400 allocation to Federal Way, $13,710,600 is for the principal portion and the remainder is for interest. The City of Federal Way reports its share of equity interest in the Governmental Activities column within the Government - wide financial statements under non -current assets. The following is condensed (unaudited) financial information as of December 31, 2017 related to SCORE: Page 76 South Correction Entity (SCORE) 2017 Owner Cities Equity Allocation Member Percent of 2016 2017 city i i Balance Apportionment Equity Balance Auburn 31.00% $ 3,115,334 $ 32,413 $ 3,147,747 Burien 3.10% 324,602 22,263 346,865 Des Moines 1.800/0 166,583 (3,248) 163,335 Federal Way 23.30% 2,292,265 61,482 2,353,747 Renton 29.20% 2,941,503 74,665 3,016,168 SeaTac 4.50% 434,029 22,947 456,976 Tukwila 7.10% 703,323 16,099 719,422 Total 100.00% $ 9,977,639 $ 226,621 $ 10,204,260 Completed financial statements for SCORE and SCORE PDA can be obtained at SCORE, Attn: Finance Manager, 20817 17th Avenue South, Des Moines, WA 98198. Joint Venture Reconciliation to Government Wide Financial Statements Balance 1/1/2017 Additions Balance Reductions 12/31/2017 Valley Communications Public Development Authority $ - $ - $ - $ - SCORE Public Development Authority 13,710,600 - (403,200) $ 13,307,400 Total Due to Other Governmental Units 13,710,600 - (403,200) 13,307,400 Valley Communications Center 3,484,567 738,204 - 4,222,771 South Correctional Entity (SCORE) 2,292,265 61,482 - 2,353,747 Total Joint Venture Capital Assets 5,776,832 799,686 - 6,576,518 Total Investment in Joint Ventures $ 19,487,432 $ 799,686 $ (403,200) $ 19,883,918 NOTE 15 — PRIOR PERIOD ADJUSTMENTS Governmental -type capital asset activity prior period adjustment of $2.3M is for Construction in progress that was incorrectly classified and should have been classified as business -type in the amount of $1.7M and repairs and maintenance expenditure in the amount of $0.6M. Beg. Bal Prior Period Adj. Beg. Ending Bal. Governmental Activity 1/1/2017 Adjustment Balance Additions Deletions 12/31/2017 Capital assets, not being depreciated: Land $ 281,422,489 $ - $ 281,422,489 $ 774,946 $ (2,044,823) $ 280,152,612 Construction in progress 35,600,490 (2,296,773) 33,303,717 29,049,389 (6,282,941) 56,070,165 Total capital assets, not being depreciated: 317,022,979 (2,296,773) 314,726,206 29,824,335 (8,327,764) 336,222,777 Capital assets, being depreciated Buildings 39,992,538 39,992,538 - - 39,992,538 hnprovements other than buildings 26,450,524 26,450,524 59,954 - 26,510,478 Infrastructure 172,544,173 172,544,173 7,479,003 (55,599) 179,967,577 Machinery and equipment 18,640,450 18,640,450 1,162,700 (315,056) 19,488,093 Total capital assets, being depreciated: 257,627,685 - 257,627,685 8,701,657 (370,655) 265,958,686 Less accumulated depreciation for: Buildings (18,770,799) (18,770,799) (2,017,050) - (20,787,849) hnprovements other than buildings (16,984,068) (16,984,068) (1,053,714) - (18,037,782) Infrastructure (64,160,477) (64,160,477) (5,278,868) 14,813 (69,424,532) Machinery and equipment (11,575,607) (11,575,607) (1,628,380) 315,057 (12,888,930) Total accumulated depreciation: (111,490,951) (111,490,951) (9,978,012) 329,870 (121,139,093) Total assets being depreciated, net 146,136,734 - 146,136,734 (1,276,355) (40,785) 144,819,593 Governmental activities capital assets, net $ 463,159,714 S (2,296,773) $ 460,862,941 $ 28,547,980 $ (8,368,549) $ 481,042,371 Page 77 Business -type capital asset activity prior period adjustment of $1.7M is for Construction in progress that was incorrectly classified as governmental -type activity. lBusiness-TypeActivities Beg. Bal Prior Period Adj. Beg. Ending Bal. 1/1/2017 Adjustment Balance Additions Deletions 12/31/2017 Capital assets, not being depreciated: Land $11,232,493 $ - $11,232,493 $107,800 $ - $11,340,293 Construction in progress 21,722 1,710,618 1,732,340 875,741 (1,777,264) 830,817 Total capital assets, not being depreciated: 11,254,215 1,710,618 12,964,833 983,541 (1,777,264) 12,171,110 Capital assets, being depreciated Buildings Improvements other than buildings Infrastructure Machinery and equipment Total capital assets, being depreciated: Less accumulated depreciation for: Buildings Improvements other than buildings Infrastructure Machinery and equipment Total accumulated depreciation Total assets being depreciated, net Business Type activities capital assets, net NOTE 16 — LEASES 4,505,348 4,505,348 - 4,505,348 3,913,373 3,913,373 3,561 3,916,934 58,395,603 58,395,603 2,392,416 60,788,019 175,146 175,146 23,648 198,794 66,989,469 - 66,989,469 2,419,625 - 69,409,094 (3,432,292) (3,432,292) (189,013) (3,621,305) (241,564) (241,564) (39,134) (280,698) (15,113,313) (15,113,313) (583,956) (15,697,269) (108,505) (108,505) (6,988) (115,493) (18,895,674) (18,895,674) (819,091) (19,714,765) 48,093,795 - 48,093,795 1,600,534 - 49,694,329 $ 59,348,010 $ 1,710,618 $ 61,058,628 $ 2,584,075 $ (1,777,264) $ 61,865,439 Operating Leases Starting February 1, 2014, the City of Federal Way started leasing the office buildings for the downtown Police substation. Total cost for the leases was $42,000 for the year ended December 31, 2017. The future minimum lease payment for the downtown Police substation lease is as follows: Year furling December 31, 2017 Amount 2018 42,000 Total: $ 42,000 NOTE 17 — SELF-INSURANCE The City's unemployment insurance, where it has elected to become fully self -insured. Related premiums received by the Unemployment Insurance Fund is 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 is self -insured for unemployment compensation. The weekly payments to an employee range from $169 - $713 depending upon the wages earned. At December 31st, 2017 the City had $359,328 in reserve. IUnemplovment compensation benefits 2016 2017 1 Unemployment reserve, Jan. 1st $ 2,131,298 $ 1,377,809 Unemployment compensation benefits 271,127 35,413 Unemployment compensation interest 5,448 3,924 Claim payments during the year (30,064) (57,818) Operating Transfer to General Fund (1,000,000) (1,000,000) Unemployment reserve, Dec. 31st $1,377,809 $ 359,328 The City's also elected to self -insure for medical. Related premiums are received by the Health Insurance Fund and are used to reimburse weekly claims to the Group Health Corporation for medical benefits paid the eligible individuals, and establish reserves for the payment of estimated future medical benefits claims liability. At December 3l't, 2017 the City had $2,550,138 ffli��Y��Y� Page 78 Health Insurance benefits 2016 2017 Health Insurance reserve, Jan. 1st $ 1,741,487 $ 2,020,466 Health Insurance benefits 4,069,020 4,238,581 Health Insurance Fanployee Contributions 217,341 216,562 Health Insurance COBRA Contributions 5,757 10,026 Health Insurance interest 7,698 13,247 Health Insurance Recovery -Stop Loss 1,072,162 306,963 Prescription Claim payments during the year (549,408) (461,723) Medical Claim payments during the year (3,775,159) (2,944,877) Insurance -Stop Loss (384,370) (464,184) Other services and charges (384,061) (384,922) Health Insurance reserve, Dec. 3 1 s t $ 2,020,466 $ 2,550,138 NOTE 18 ACCOUNTING CHANGES AND REPORTING CHANGES The City has adopted reporting requirements of GASB Statement 72, Fair Value Measurement and Application for the year 2017. See note 5 for implementation of GASB Statement 79. NOTE 19 SUBSEQUENT EVENT No major event. Page 79 REQUIRED SUPPLEMENTARY INFORMATION City of Federal Way Schedule of Proportionate Share of the Net Pension Liability PERS 1 As of June 30, 2017 Last 10 Fiscal Years* 2015 2016 2017 Employer's proportion of the net pension liability (asset) % 0.110831% 0.114008% 0.114547% Employer's proportionate share of the net pension liability $ 5,797,492 6,122,767 5,435,344 TOTAL $ 5,797,492 6,122,767 5,435,344 Employer's covered employee payroll $ 12,744,440 13,650,352 14,496,336 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll % 45.49% 44.85% 37.49% Plan fiduciary net position as a percentage of the total pension liability % 59.10% 57.03% 61.24% Notes to Schedule: * Employer's covered employee payroll increased by $846K, but net pension liability decreased by $687K Additional years information will be displayed as it becomes available. City of Federal Way Schedule of Proportionate Share of the Net Pension Liability PERS 2 - 3 As of June 30, 2017 Last 10 Fiscal Years* 2015 2016 2017 Employer's proportion of the net pension liability (asset) % 0.143122% 0.146079% 0.147025% Employer's proportionate share of the net pension liability $ 5,113,831 7,354,962 5,108,416 TOTAL $ 5,113,831 7,354,962 5,108,416 Employer's covered employee payroll $ 12,744,440 13,650,352 14,496,336 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll % 40.13% 53.88% 35.24% Plan fiduciary net position as a percentage of the total pension liability % 89.20% 85.82% 90.97% Notes to Schedule: * Employer's covered employee payroll increased by $846K, but net pension liability decreased by $2.25 million. Additional years information will be displayed as it becomes available. Page 81 City of Federal Way Schedule of Proportionate Share of the Net Pension Liability (Asset) LEOFF 2 As of June 30, 2017 Last 10 Fiscal Years* 2015 2016 2017 Employer's proportion of the net pension liability (asset) % 0.427847% 0.415772% 0.434711% Employer's proportionate share of the net pension liability (asset) $ (4,397,411) (2,418,255) (6,032,380) LEOFF 2 - State's proportionate share of the net pension liability (asset) associated with the employer $ (2,907,569) (1,576,526) (3,913,092) TOTAL $ (7,304,980) (3,994,781) (9,945,472) Employer's covered employee payroll $ 12,477,707 12,625,740 13,610,662 Employer's proportionate share of the net pension liability as a percentage of covered employee payroll %-35.24% -19.15% -44.32% Plan fiduciary net position as a percentage of the total pension liability % 111.67% 106.04% 113.36% Notes to Schedule: * Employer's covered employee payroll increased by $985K and net pension asset increased by $3.6M. Additional years information will be displayed as it becomes available. City of Federal Way Schedule of Employer Contributions PERS 1 As of December 31, 2017 Last 10 Fiscal Years* 2015 2016 2017 Statutorily or contractually required contributions $ 584,359 663,133 745,500 Contributions in relation to the statutorily or contractually required contributions $ (584,359) (663,133) (745,500) Contribution deficiency (excess) $ - - - Covered Employer Payroll $ 13,309,318 13,887,684 15,134,713 Contributions as a percentage of covered employee payroll % 4.39% 4.77% 4.93% Notes to Schedule: * Employer's covered employee payroll increased by $1.25 million. Additional years information will be displayed as it becomes available. City of Federal Way Schedule of Employer Contributions PERS 2-3 As of December 31, 2017 Last 10 Fiscal Years* 2015 2016 2017 Statutorily or contractually required contributions $ 750,485 866,073 1,034,441 Contributions in relation to the statutorily or contractually required contributions $ (750,485) (866,073) (1,034,441) Contribution deficiency (excess) $ - - - Covered Employer Payroll $ 13,309,318 13,887,684 15,134,713 Contributions as a percentage of covered employee payroll % 5.64% 6.24% 6.83% Notes to Schedule: * Employer's covered employee payroll increased by $1.25 million. Additional years information will be displayed as it becomes available. City of Federal Way Schedule of Employer Contributions LEOFF 2 As of December 31, 2017 Last 10 Fiscal Years* 2015 2016 2017 Statutorily or contractually required contributions $ 625,331 669,609 688,577 Contributions in relation to the statutorily or contractually required contributions $ (625,331) (669,609) (688,577) Contribution deficiency (excess) $ - - - Covered Employer Payroll $ 12,382,722 13,274,725 13,365,190 Contributions as a percentage of covered employee payroll % 5.05% 5.04% 5.15% Notes to Schedule: * Employer's covered employee payroll increased by $90K Additional years information will be displayed as it becomes available. Page 83 Combining Statement — Nonmajor Governmental Funds' Description For the Year Ended December 31, 2017 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 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 '/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 2013, King County voters approved a new $0.1877, six -year, inflation adjusted property tax lid lift to expand park and recreation opportunities. Seven percent of the County 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 Proiects 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 Real Estate Excise Tax Fund was established to account for the City's real estate excise tax and the transfers to pay for debt and capital projects. The Downtown Redevelopment CIP Fund accounts for receipts of Local Infrastructure Financing Tool (LIFT), and downtown redevelopment projects. 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. 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 Capital Project Reserve Fund accounts for receipts and disbursements related to acquisition, design, construction and any other related municipal facility and community/senior capital project expenditures. COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2017 ASSETS Cash and Cash Equivalents Investments Prepaid insurance/debt service Receivables (net): Taxes Accounts and contracts Restricted Cash Due from other governments TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND Liabilities: Vouchers payable Accounts/payroll payable Retainage payable Deposits payable Interfund loans payable Unearned revenue TOTAL LIABILITIES Fund Balance: Restricted Committed TOTAL FUND BALANCES Special Capital Revenue Projects Total $ 6,205,297 $ 6,565,521 $ 12,770,818 1,090,040 1,153,513 2,243,553 - 215,306 215,306 14,237 - 14,237 75,048 - 75,048 342,894 195,256 538,150 7,727,516 8,129,596 15,857,112 285,632 57,898 343,530 167,956 - 167,956 75,048 26,617 101,665 29,409 - 29,409 14,749 - 14,749 134,013 - 134,013 706,807 84,515 791,322 2,367,279 7,042,635 9,409,914 4,653,430 1,002,446 5,655,876 7,020,709 8,045,081 15,065,790 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 7,727,516 $ 8,129,596 $ 15,857,112 Page 85 COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2017 ASSETS Cash and Cash Equivalents Investments Receivables (net): Accounts and contracts Restricted Cash Due from other governments TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Vouchers payable Accounts/payroll payable Retainage payable Deposits payable Interfund loans payable Unearned revenue TOTAL LIABILITIES Arterial Solid Waste Street Recycling Hotel/Motel Lodging Tax $ 278,780 $ 110,208 $ 517,144 $ 816,167 48,980 19,363 90,858 143,394 2,068 - - - 75,048 - - - 44,518 77,476 - 19,147 449,394 207,047 608,002 978,708 Special Contracts/ Studies - 1,444 - 10,326 1,625 10,022 - 636 75,048 - - - 76,673 11,466 - 10,962 Fund Balance: Restricted - - 608,002 967,746 Committed 372,721 195,581 - - TOTAL FUND BALANCES 372,721 195,581 608,002 967,746 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 449,394 $ 207,047 $ 608,002 $ 978,708 COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2017 Federal way Community Paths and Community Traffic Development Trails Center Safety Block Grant Reserve Total ASSETS Cash and Cash Equivalents $ 1,532,636 $ 2,299,847 $ 3,439 $ 647,076 $ 6,205,297 Investments 269,088 404,066 604 113,687 1,090,040 Receivables (net): Accounts and contracts 12,169 - - - 14,237 Restricted Cash - - - - 75,048 Due from other governments - - 200,970 783 342,894 TOTAL ASSETS 1,813,893 2,703,913 205,013 761,546 7,727,516 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Vouchers payable 73,300 58,852 141,710 - 285,632 Accounts/payroll payable 80,085 66,908 8,680 - 167,956 Retainage payable - - - - 75,048 Deposits payable 29,409 - - - 29,409 Interfund loans payable - - 14,749 - 14,749 Unearned revenue 134,013 - - - 134,013 TOTAL LIABILITIES 316,807 125,760 165,139 - 706,807 Fund Balance: Restricted - - 29,985 761,546 2,367,279 Committed 1,497,086 2,578,153 9,889 - 4,653,430 TOTAL FUND BALANCES 1,497,086 2,578,153 39,874 761,546 7,020,709 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 1,813,893 $ 2,703,913 $ 205,013 $ 761,546 $ 7,727,516 Page 87 ASSETS Cash and Cash Equivalents Investments Prepaid insurance/debt service Receivables (net): Taxes Accounts and contracts Restricted Cash Due from other governments Interfund loans receivable TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Vouchers payable Retainage payable TOTAL LIABILITIES COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS December 31, 2017 Real Estate Excise Tax Downtown City Capital Project Fund Redevelopment Facilities Parks Reserve Total $ 3,514,263 $ 654,982 $ 237,928 $ 1,855,879 $ 302,469 $ 6,565,521 617,430 115,076 41,802 326,064 53,141 1,153,513 215,306 215,306 63,500 131,756 195,256 4,410,499 901,814 279,730 2,181,943 355,610 8,129,596 57,898 57,898 26,617 26,617 84,515 84,515 Fund Balance: Restricted 4,290,210 901,814 29,730 1,820,881 - 7,042,635 Committed 120,289 - 250,000 276,547 355,610 1,002,446 TOTAL FUND BALANCES 4,410,499 901,814 279,730 2,097,428 355,610 8,045,081 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 4,410,499 $ 901,814 $ 279,730 $ 2,181,943 $ 355,610 $ 8,129,596 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For Year Ended December 31, 2017 REVENUES Taxes 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 Special Capital Revenue Projects Total $ 480,307 $ 4,226,335 $ 4,706,642 1,607,290 947,343 2,554,633 2,335,607 102,416 2,438,023 3,519,019 - 3,519,019 39,276 62,502 101,778 303,447 2,263 305,710 8,284,946 5,340,859 13,625,805 - 4,551 4,551 1,725,711 - 1,725,711 2,350,994 - 2,350,994 425,900 - 425,900 76,257 - 76,257 758,007 - 758,007 2,353,979 230,565 2,584,544 159,000 - 159,000 41,180 - 41,180 - 226,086 226,086 7,891,028 461,202 8,352,230 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 393,918 4,879,657 5,273,575 OTHER FINANCING SOURCES (USES) Transfers in 1,465,677 670,289 2,135,966 Transfers out (1,226,298) (7,981,549) (9,207,847) TOTAL OTHER FINANCING SOURCES (USES) 239,379 (7,311,260) (7,071,881) NET CHANGE IN FUND BALANCES 633,297 (2,431,603) (1,798,306) FUND BALANCES - BEGINNING 6,387,412 10,476,684 16,864,096 FUND BALANCES - ENDING $ 7,020,709 $ 8,045,081 $ 15,065,790 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For Year Ended December 31, 2017 Special Arterial Solid Waste Contracts/ Hotel/Motel Street Recycling Studies Lodging Tax REVENUES Taxes $ - $ - $ - $ 301,603 Intergovernmental 535,575 129,316 - - Service charges and fees 373,779 314,842 79,108 - Fines and forfeitures - - - - Interest 763 1,014 3,466 5,025 Other - - - - TOTAL REVENUES 910,117 445,172 82,574 306,628 EXPENDITURES Current: General government - - - - Security of persons and property - - - - Transportation 1,796,366 - - - Physical environment - 425,900 - - Economic environment - - - 76,257 Health - - - - Culture and recreation - - - - Debt service: Principal - - - - Interest/fiscal charges/admin fees - - - - Capital outlay - - - - TOTAL EXPENDITURES 1,796,366 425,900 - 76,257 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (886,249) 19,272 82,574 230,371 OTHER FINANCING SOURCES (USES) Transfers in 1,013,000 - - - Transfers out - - - TOTAL OTHER FINANCING SOURCES (USES) 1,013,000 - - - NET CHANGE IN FUND BALANCES 126,751 19,272 82,574 230,371 FUND BALANCES - BEGINNING 245,970 176,309 525,428 737,375 FUND BALANCES - ENDING $ 372,721 $ 195,581 $ 608,002 $ 967,746 Page 90 NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING FUND BALANCES - ENDING COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For Year Ended December 31, 2017 REVENUES Taxes 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 Federal way Community Paths and Community Traffic Development Trails Center Safety Block Grant Reserve Total $ - $ - $ - $ 178,704 $ 480,307 932,232 10,167 1,607,290 1,567,878 - - - 2,335,607 - 3,519,019 - - 3,519,019 10,563 14,492 - 3,953 39,276 303,447 - - - 303,447 1,881,888 3,533,511 932,232 192,824 8,284,946 - 1,725,711 - - 1,725,711 554,628 - - 2,350,994 - - - - 425,900 - - 76,257 - - 758,007 - 758,007 2,353,979 - - - 2,353,979 - - 159,000 - 159,000 41,180 - 41,180 2,353,979 2,280,339 958,187 - 7,891,028 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (472,091) 1,253,172 (25,955) 192,824 393,918 OTHER FINANCING SOURCES (USES) Transfers in Transfers out TOTAL OTHER FINANCING SOURCES (USES) 452,677 (1,226,298) - - 239,379 (19,414) 26,874 (25,955) 192,824 633,297 1,516,500 2,551,279 65,829 568,722 6,387,412 $ 1,497,086 $ 2,578,153 $ 39,874 $ 761,546 $ 7,020,709 452,677 - - - 1,465,677 - (1,226,298) - - (1,226,298) Page 91 REVENUES Taxes Intergovernmental Service charges and fees Interest Other TOTAL REVENUES COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS For Year Ended December 31, 2017 Real Estate Excise Tax Downtown Fund Redevelopment $ 4,226,335 $ - $ - 947,343 31,357 14,922 4,257,692 962,265 City Facilities Parks Capital Project Reserve Total $ - $ $ 4,226,335 - 947,343 102,416 102,416 137 13,811 2,275 62,502 2,263 - 2,263 137 118,490 2,275 5,340,859 EXPENDITURES Current: General government 4,551 - 4,551 Economic environment - - - Culture and recreation - - 230,565 - 230,565 Capital outlay - - 226,086 - 226,086 TOTAL EXPENDITURES - 4,551 - 456,651 - 461,202 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 4,257,692 957,714 137 (338,161) 2,275 4,879,657 OTHER FINANCING SOURCES (USES) Transfers in 120,289 - 250,000 300,000 - 670,289 Transfers out (5,677,167) (2,175,000) - - (129,382) (7,981,549) TOTAL OTHER FINANCING SOURCES (USES) (5,556,878) (2,175,000) 250,000 300,000 (129,382) (7,311,260) NET CHANGE IN FUND BALANCES (1,299,186) (1,217,286) 250,137 (38,161) (127,107) (2,431,603) FUND BALANCES - BEGINNING 5,709,685 2,119,100 29,593 2,135,589 482,717 10,476,684 FUND BALANCES - ENDING $ 4,410,499 $ 901,814 $ 279,730 $ 2,097,428 $ 355,610 $ 8,045,081 Page 92 ARTERIAL STREET SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Intergovernmental $ 502,409 $ 502,409 $ 535,575 $ 33,166 Service charges and fees - 328,682 373,779 45,097 Interest - - 763 763 TOTAL REVENUES 502,409 831,091 910,117 79,026 EXPENDITURES Current: Transportation 1,515,409 1,954,091 1,796,366 157,725 TOTAL EXPENDITURES 1,515,409 1,954,091 1,796,366 157,725 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,013,000) (1,123,000) (886,249) 236,751 OTHER FINANCING SOURCES (USES) Transfers in 1,013,000 1,013,000 1,013,000 - TOTAL OTHER FINANCING SOURCES (USES) 1,013,000 1,013,000 1,013,000 - NET CHANGE IN FUND BALANCES - (110,000) 126,751 236,751 FUND BALANCES - BEGINNING 100,000 245,970 245,970 - FUND BALANCES - ENDING $ 100,000 $ 135,970 S 372,721 S 236,751 Page 93 SOLID WASTE & RECYCLING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Intergovernmental $ 126,600 $ 126,600 $ 129,316 $ 2,716 Service charges and fees 304,517 304,517 314,842 10,325 Interest - - 1,014 1,014 TOTAL REVENUES 431.117 431.117 445.172 14.055 EXPENDITURES Current: Physical environment 503,121 481,121 425,900 55,221 TOTAL EXPENDITURES 503,121 481,121 425,900 55,221 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (72,004) (50,004) 19,272 69,276 NET CHANGE IN FUND BALANCES (72,004) (50,004) 19,272 69,276 FUND BALANCES - BEGINNING 175,352 176,309 176,309 - FUND BALANCES - ENDING $ 103,348 $ 126,305 $ 195,581 $ 69,276 Page 94 SPECIAL CONTRACTS/STUDIES SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Service charges and fees $ - $ - $ 79,108 $ 79,108 Interest - - 3,466 3,466 TOTAL REVENUES - - 82,574 82,574 EXPENDITURES Current: TOTAL EXPENDITURES - - - - EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES - - 82,574 82,574 NET CHANGE IN FUND BALANCES - - 82,574 82,574 FUND BALANCES - BEGINNING 408,356 525,428 525,428 - FUND BALANCES - ENDING $ 408,356 $ 525,428 $ 608,002 $ 82,574 Page 95 HOTEL/MOTEL LODGING TAX SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Taxes $ 225,000 $ 225,000 $ 301,603 $ 76,603 Interest 700 700 5,025 4,325 TOTAL REVENUES 225,700 225,700 306,628 80,928 EXPENDITURES Current: Economic environment 224,700 224,700 76,257 148,443 TOTAL EXPENDITURES 224,700 224,700 76,257 148,443 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,000 1,000 230,371 229,371 NET CHANGE IN FUND BALANCES 1,000 1,000 230,371 229,371 FUND BALANCES - BEGINNING 501,765 737,375 737,375 - FUND BALANCES - ENDING $ 502,765 $ 738,375 $ 967,746 $ 229,371 Page 96 FEDERAL WAY COMMUNITY CENTER SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Service charges and fees $ 1,516,500 $ 1,471,819 $ 1,567,878 $ 96,059 Interest - - 10,563 10,563 Other 290,000 335,950 303,447 (32,503) TOTAL REVENUES 1,806,500 1,807,769 1,881,888 74,119 EXPENDITURES Current: Culture and recreation 2,216,850 2,294,955 2,353,979 (59,024) TOTAL EXPENDITURES 2,216,850 2,294,955 2,353,979 (59,024) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (410,350) (487,186) (472,091) 15,095 OTHER FINANCING SOURCES (USES) Transfers in 393,850 470,686 452,677 (18,009) TOTAL OTHER FINANCING SOURCES (USES) 393,850 470,686 452,677 (18,009) NET CHANGE IN FUND BALANCES (16,500) (16,500) (19,414) (2,914) FUND BALANCES - BEGINNING 1,516,500 1,516,500 1,516,500 - FUND BALANCES - ENDING $ 1,500,000 $ 1,500,000 $ 1,497,086 $ (2,914) Page 97 TRAFFIC SAFETY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Fines and forfeitures $ 3,136,874 $ 3,336,874 $ 3,519,019 $ 182,145 Interest 3,500 3,500 14,492 10,992 TOTAL REVENUES 3,140,374 3,340,374 3,533,511 193,137 EXPENDITURES Current: Security of persons and property 1,782,639 1,782,639 1,725,711 56,928 Transportation 486,824 614,709 554,628 60,081 TOTAL EXPENDITURES 2,269,463 2,397,348 2,280,339 117,009 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 870,911 943,026 1,253,172 310,146 OTHER FINANCING SOURCES (USES) Transfers out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING (1,226,298) (1,226,298) (1,226,298) - (1,226,298) (1,226,298) (1,226,298) - (355,387) (283,272) 26,874 310,146 2,558,371 2,551,279 2,551,279 - FUND BALANCES - ENDING $ 2,202,984 $ 2,268,007 $ 2,578,153 $ 310,146 COMMUNITY DEVELOPMENT BLOCK GRANT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 REVENUES Intergovernmental TOTAL REVENUES EXPENDITURES Current: Health Debt service: Principal Interest/fiscal charges/admin fees TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) $ 1,237,105 $ 1,237,105 $ 932,232 $ (304,873) 1,237,105 1,237,105 932,232 (304,873) 1,068,546 1,068,546 758,007 310,539 159,000 159,000 159,000 - 50,000 50,000 41,180 8,820 1,277,546 1,277,546 958,187 319,359 OVER (UNDER) EXPENDITURES (40,441) (40,441) (25,955) 14,486 NET CHANGE IN FUND BALANCES (40,441) (40,441) (25,955) 14,486 FUND BALANCES - BEGINNING 40,444 65,831 65,829 (2) FUND BALANCES - ENDING $ 3 $ 25,390 $ 39,874 $ 14,484 Page 99 PATH & TRAILS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 REVENUES Taxes Intergovernmental Interest TOTAL REVENUES EXPENDITURES Current: TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING FUND BALANCES - ENDING Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) $ 160,000 $ 160,000 $ 178,704 $ 18,704 9,000 9,000 10,167 1,167 - - 3,953 3,953 169,000 169,000 192,824 23,824 169,000 169,000 192,824 23,824 169,000 169,000 192,824 23,824 553,356 568,722 568,722 - $ 722,356 $ 737,722 $ 761,546 $ 23,824 Page100 CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK Page 101 Budget and Actual — Debt Service Fund Description For the Year Ended December 31, 2017 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 transfers from Real Estate Excise Tax Fund, transfers from the Utility Tax Fund, and/or other revenues designated by the City Council. Page102 DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL For Year Ended December 31, 2017 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) REVENUES Interest $ - $ - $ 24,251 $ 24,251 Other 935,325 935,326 - (935,326) TOTAL REVENUES 935,325 935,326 24,251 (911,075) EXPENDITURES Current: Debt service: - - Principal 9,060,760 9,060,760 8,694,960 365,800 Interest/fiscal charges/admin fees 1,021,519 1,023,519 506,321 517,198 TOTAL EXPENDITURES 10,082,279 10,084,279 9,201,281 882,998 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (9,146,954) (9,148,953) (9,177,030) (28,077) OTHER FINANCING SOURCES (USES) Bond proceeds - 6,000,000 6,000,000 - Sale of capital assets 8,597,577 1,837,715 1,837,715 - Transfers in 813,023 2,013,023 2,937,023 924,000 Transfers out - - - - TOTAL OTHER FINANCING SOURCES (USES) 9,410,600 9,850,738 10,774,738 924,000 NET CHANGE IN FUND BALANCES 263,646 701,785 1,597,708 895,923 FUND BALANCES - BEGINNING 2,500,000 2,508,514 2,508,514 - FUND BALANCES - ENDING $ 2,763,646 $ 3,210,299 $ 4,106,221 $ 895,922 Page103 Combining Statement — Internal Service Fund's Description For the Year Ended December 31, 2017 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, and worker's compensation claims. Both risk control (to minimize the losses that strike an organization) and risk financing (to obtain finances to provide for or restore the economic damages of those losses) are involved. 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. The Health Insurance Fund accounts for all self -insuring for medical insurance. The premiums paid by the City's medical benefit contributions and employee medical deductions reimburse the medical and pharmaceutical reimbursements. Also, establish reserves for the payment of estimated future claims. The Unemployment Insurance Fund is currently self -insuring 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. Page104 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET POSITION December 31, 2017 Risk Information Support Fleet and Management Systems Services Equipment ASSETS Current Assets Cash and Cash Equivalents $ 1,351,891 $ 3,211,871 $ 154,175 $ 1,674,845 Investments 237,518 564,302 27,087 294,258 Prepaid items - - 5,000 - Receivables (net): Accounts and contracts 355 - - Interfund loans receivable - - - 5,171,019 TOTAL CURRENT ASSETS 1,589,764 3,776,173 186,262 7,140,122 Noncurrent assets Capital assets: Building/structures - - - - Machinery/furniture/equipment 7,258,670 307,817 11,129,413 Less accumulated depreciation (5,778,453) (127,460) (6,933,238) TOTAL NONCURRENT ASSETS 1,480,217 180,357 4,196,175 TOTAL ASSETS 1,589,764 5,256,390 366,619 11,336,297 DEFERRED OUTFLOWS RELATED TO PENSIONS - 80,363 - 4,068 LIABILITIES Current Liabilities: Vouchers/payroll payable 16,175 96,797 9,559 68,656 TOTAL CURRENT LIABILITIES 16,175 96,797 9,559 68,656 Long-term liabilities Compensated absences payable 59,027 - Net Pension Liability 490,757 24,964 TOTAL LONG-TERM LIABILITIES - 549,784 - 24,964 TOTAL LIABILITIES 16,175 646,581 9,559 93,620 DEFERRED INFLOWS RELATED TO PENSIONS - 80,645 - 4,102 NET POSITION Net Investment in capital - 1,480,217 180,357 4,196,175 Unrestricted 1,573,589 3,129,310 176,703 7,046,468 TOTAL NET POSITION $ 1,573,589 $ 4,609,527 $ 357,060 $ 11,242,643 Page105 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET POSITION December 31, 2017 Buildings and Self Health Unemployment Furnishings Insurance Insurance TOTAL ASSETS Current Assets Cash and Cash Equivalents $ 2,143,104 $ 2,006,181 $ 344,146 $ 10,886,213 Investments 376,528 352,471 60,464 1,912,628 Prepaid items - - - 5,000 Receivables (net): Accounts and contracts 249,760 - 250,115 Interfund loans receivable - - - 5,171,019 TOTAL CURRENT ASSETS 2,519,632 2,608,412 404,610 18,224,975 Noncurrent assets Capital assets: Building/structures 16,545,121 - - 16,545,121 Machinery/furniture/equipment - - - 18,695,900 Less accumulated depreciation (10,362,499) - - (23,201,650) TOTAL NONCURRENT ASSETS 6,182,622 - - 12,039,371 TOTAL ASSETS 8,702,254 2,608,412 404,610 30,264,346 DEFERRED OUTFLOWS RELATED TO PENSIONS 8,832 - - 93,263 LIABILITIES Current Liabilities: Vouchers/payroll payable 27,302 58,274 45,283 322,046 TOTAL CURRENT LIABILITIES 27,302 58,274 45,283 322,046 Long-term liabilities Compensated absences payable - 59,027 Net Pension Liability 57,665 573,386 TOTAL LONG-TERM LIABILITIES 57,665 632,413 TOTAL LIABILITIES 84,967 58,274 45,283 954,459 DEFERRED INFLOWS RELATED TO PENSIONS 9,476 94,223 NET POSITION Net Investment in capital 6,182,622 - - 12,039,371 Unrestricted 2,434,021 2,550,138 359,327 17,269,556 TOTAL NET POSITION $ 8,616,643 $ 2,550,138 $ 359,327 $ 29,308,927 Page106 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION For Year Ended December 31, 2017 Risk Information Support Fleet and Management Systems Services Equipment OPERATING REVENUES: Service charges and fees $ 1,522,843 $ 2,081,733 $ 127,730 $ 1,992,733 Miscellaneous 70,705 5,901 TOTAL OPERATING REVENUES 1,593,548 2,087,634 127,730 1,992,733 OPERATING EXPENSES: Personnel services 882,674 - 43,669 Materials and supplies - 254,453 15,936 394,536 Services and charges 60,797 634,902 73,878 288,312 Intergovernmental - 123,278 - 456 Insurance 501,622 - - Claims 558,371 - - - Depreciation - 402,026 37,959 1,138,620 TOTAL OPERATING EXPENSES 1,120,790 2,297,333 127,773 1,865,593 OPERATING INCOME (LOSS) 472,758 (209,699) (43) 127,140 NON -OPERATING REVENUES (EXPENSES): Gain (Loss) from disposal of capital assets - - - 32,735 Interest income 6,999 21,755 1,297 52,046 Interest expense TOTAL NON -OPERATING REVENUES (EXPENSES) 6,999 21,755 1,297 84,781 INCOME (LOSS) BEFORE TRANSFERS 479,757 (187,944) 1,254 211,921 Capital contributions - 30,006 - 74,741 Transfers in 109,338 128,806 Transfers out - - CHANGE IN NET POSITION NET POSITION - BEGINNING Net Effect - Change in Accounting for Pensions ADJUSTED NET POSITION - BEGINNING NET POSITION - ENDING 479,757 (48,600) 1,093,832 4,658,127 1,254 415,468 355,806 10,827,175 1,093,832 4,658,127 355,806 10,827,175 $ 1,573,589 $ 4,609,527 $ 357,060 $ 11,242,643 Page107 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION For Year Ended December 31, 2017 Buildings and Self Health Unemployment Furnishings Insurance Insurance TOTAL OPERATING REVENUES: Service charges and fees $ 483,286 $ 4,772,132 $ 35,413 $ 11,015,870 Miscellaneous 484 77,090 TOTAL OPERATING REVENUES 483,770 4,772,132 35,413 11,092,960 OPERATING EXPENSES: Personnel services 159,355 1,085,698 Materials and supplies 40,775 705,700 Services and charges 347,613 4,250,841 57,819 5,714,162 Intergovernmental - 4,866 - 128,600 Insurance - 501,622 Claims - 558,371 Depreciation 826,013 2,404,618 TOTAL OPERATING EXPENSES 1,373,756 4,255,707 57,819 11,098,771 OPERATING INCOME (LOSS) (889,986) 516,425 (22,406) (5,811) NON -OPERATING REVENUES (EXPENSES): Gain (Loss) from disposal of capital assets - - - 32,735 Interest income 12,222 13,247 3,924 111,490 Interest expense TOTAL NON -OPERATING REVENUES (EXPENSES) 12,222 13,247 3,924 144,225 INCOME (LOSS) BEFORE TRANSFERS (877,764) 529,672 (18,482) 138,414 Capital contributions - - 104,747 Transfers in 475,331 713,475 Transfers out - (1,000,000) (1,000,000) CHANGE IN NET POSITION (402,433) 529,672 (1,018,482) (43,364) NET POSITION - BEGINNING 9,019,076 2,020,466 1,377,809 29,352,291 Net Effect - Change in Accounting for Pensions ADJUSTED NET POSITION - BEGINNING 9,019,076 2,020,466 1,377,809 29,352,291 NET POSITION - ENDING $ 8,616,643 $ 2,550,138 $ 359,327 $ 29,308,927 Page1O8 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS For Year Ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users Cash payments to claimants Cash payments to suppliers for goods/services Cash payments to employees Cash payments to other governments for goods and services Other operating receipts NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in Transfers out NET CASH PROVIDED BY NONCAPITAL FINANCING CASH FLOWS FROM CAPITAL AND CAPITAL - RELATED FINANCING ACTIVITIES: Acquisition of capital asset/construction work in progress/interfund loan 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 ACTIVITIES 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: Increases/(decrease)in depreciation expense (Increases)/decrease in due from other governments (Increases)/decrease in deferred outflows related to pensions Increases/(decrease) in vouchers/accounts payable Increases/(decrease) in accrued payroll/compensated absences payable Increases/(decrease) in net pension liability Increases/(decrease) in deferred inflows related to pensions TOTAL ADJUSTMENTS NET CASH PROVIDED/USED BY OPERATING ACTIVITIES Non -cash investing, capital, and financing activities: Other contributions of capital assets Risk Information Support Fleet and Management Systems Services Equipment $ 1,522,488 $ 2,081,733 $ 127,730 $ 1,992,733 (558,371) - - - (111,393) (1,148,532) (88,465) (736,225) - (881,599) - (43,748) (501,622) (123,278) - - 70,705 5,901 - - 421,806 (65,775) 39,265 1,212,761 109,338 - 128,806 - 109,338 - 128,806 (196,914) (73,506) (5,912,991) - - - 32,735 - (196,914) (73,506) (5,880,256) 7,000 21,755 1,297 52,044 7,000 21,755 1,297 52,044 428,806 (131,596) (32,944) (4,486,645) 1,160,603 3,907,769 214,206 6,455,748 1,589,409 3,776,173 181,262 1,969,103 472,757 (209,699) (43) 127,140 - 402,026 37,959 1,138,620 - 33,173 - 1,741 (50,596) (259,177) 1,349 (52,920) - (2,670) - - - (99,440) - (5,377) - 70,012 - 3,557 (50,951) 143,924 39,308 1,085,621 $ 421,806 $ (65,775) $ 39,265 $ 1,212,761 $ - $ 30,006 $ - $ 74,741 Page109 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS For Year Ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from users Cash payments to claimants Cash payments to suppliers for goods/services Cash payments to employees Cash payments to other governments for goods and services Other operating receipts NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in Transfers out NET CASH PROVIDED BY NONCAPITAL FINANCING CASH FLOWS FROM CAPITAL AND CAPITAL - RELATED FINANCING ACTIVITIES: 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 ACTIVITIES 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: Increases/(decrease) in depreciation expense (Increases)/decrease in due from other governments (Increases)/decrease in deferred outflows related to pensions Increases/(decrease)in vouchers/accounts payable Increases/(decrease) in accrued payroll/compensated absences payable Increases/(decrease) in net pension liability Increases/(decrease) in deferred inflows related to pensions TOTAL ADJUSTMENTS NET CASH PROVIDED/USED BY OPERATING ACTIVITIES Non -cash investing, capital, and financing activities: Other contributions of capital asset: Buildings and Health Unemployment Furnishings Insurance Insurance TOTAL $ 483,286 $ 4,522,373 $ 35,413 $ 10,765,756 - - - (558,371) (389,590) (4,266,318) (17,832) (6,758,355) (111,745) - - (1,037,091) - (4,866) - (629,766) 484 - - 77,089 (17,565) 251,188 17,581 1,859,262 475,331 - - 713,475 - - (1,000,000) (1,000,000) 475,331 - (1,000,000) (286,525) (6,183,411) - 32,735 (6,150,676) 12,222 13,247 3,924 111,489 12,222 13,247 3,924 111,489 469,988 264,435 (978,495) (4,466,451) 2,049,644 2,094,217 1,383,105 17,265,292 2,519,632 2,358,652 404,610 12,798,841 (889,987) 516,425 (22,405) (5,813) 826,013 - - 2,404,618 (5,554) - - 29,360 (1,202) (15,477) 39,987 (338,036) - - - (2,670) 43,935 - - (60,882) 9,230 - - 82,799 872,422 (265,236) 39,987 1,865,074 $ (17,565) $ 251,188 $ 17,581 $ 1,859,262 $ 104,747 Page 110 CITY OF Federal Way It's all within reach THIS PAGE IS LEFT D4T=ONALLY BLANK Page111 SUPPLEMENTAL INFORMATION Page112 MCAG NO. 0711 SCHEDULE 15 CITY OF FEDERAL WAY, WASHINGTON SCHEDULE OF STATE FINANCIAL ASSISTANCE For Year Ended December 31, 2017 State Agency Pass- Thru Agency (if applicable) Other I.D./ Current Year Program Title BARS Account Grant # Expenditures Department of Commerce Housing Assistance Unit Consolidated Homeless Grant 001-0000-083-334-04-020 16-46118-01 50,000 SUBTOTAL DEPARTMENT OF COMMERCE 50,000 Washington Office of Sheriffs and Police Chiefs WA Auto Theft Prevention Authority Grant 001-0000-090-334-06-090 17-19 WATPA GG-PSATT 165,134 SUBTOTAL WASHINGTON OFFICE OF SHERIFFS AND POLICE CHIEFS 165,134 State Department of Ecology Coordinated Prevention Grant 106-0000-000-334-03-010 W2RCPG-1517-FEDWAY-00083 23,431 Water Quality Algae Grant 401-0000-000-334-03-010 WQALG-2016-FEDWAY-00003 13,090 Stormwater Capacity Grant 2015-2017 401-0000-000-334-03-010 WQSWCAP-1517-FEDWAY-00005 9,278 SUBTOTAL STATE DEPARTMENT OF ECOLOGY 45,799 State Department of Transportation Commute Trip Reduction 101-0000-000-334-03-060 GCB2157 12,512 S 352nd Street Extension from SR99 to SR161 306-4400-151-334-03-080 8-1-113(010)-1 8,681 S 356th Street Improvements (SR99 to SR161) 306-4400-157-334-03-080 8-1-113(012)-1 2,528,606 SR 99 HOV Lanes Phase V 306-4400-165-334-03-080 8-1-113 011 -1 2,894,136 SUBTOTAL STATE DEPARTMENT OF TRANSPORTATION 5,443,935 State Department of Natural Resources WA DNR RSRC Cleanup 001-0000-090-334-02-030 KI17-015 81,606 SUBTOTAL STATE DEPARTMENT OF NATURAL RESOURCES 81,606 TOTAL STATE ASSISTANCE: 5 786 474 Page113 MCAG NO. 0711 SCHEDULE 16 CITY OF FEDERAL WAY, WASHINGTON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For Year Ended December 31, 2017 Federal Agency From From Passed Pass- Thru Agency (if applicable) CFDA Other Pass -Through Direct Total through to Federal Program Name BARS Account # I.D. # Awards Awards Expenditures Subrecipients US Department of Housing and Urban Development Office of Community Planning and Development Community Development Block Grants/Entitlement Grants 119-7300-801-331-14-218 14.218 801 B-17-MC-53-0015 - 5,400 5,400 5,400 Community Development Block Grants/Entitlement Grants 119-7300-802-331-14-218 14.218 802 B-17-MC-53-0015 - 65,588 65,588 65,588 Community Development Block Grants/Entitlement Grants 119-7300-803-331-14-218 14.218 803 B-17-MC-53-0015 - 12,838 12,838 12,838 Community Development Block Grants/Entitlement Grants 119-7300-951-331-14-218 14.218 951 B-17-MC-53-0015 - 76,000 76,000 - Community Development Block Grants/Entitlement Grants 119-7300-955-331-14-218 14.218 955 B-17-MC-53-0015 - 14,580 14,580 14,580 Community Development Block Grants/Entitlement Grants 119-7300-956-331-14-218 14.218 956 B-17-MC-53-0015 - 6,500 6,500 6,500 Community Development Block Grants/Entitlement Grants 119-7300-961-331-14-218 14.218 961 B-17-MC-53-0015 - 100,441 100,441 - Community Development Block Grants/Entitlement Grants 119-7300-966-331-14-218 14.218 966 B-17-MC-53-0015 - 32,940 32,940 - Community Development Block Grants/Entitlement Grants 119-7300-967-331-14-218 14.218 967 B-17-MC-53-0015 - 21,173 21,173 21,173 Community Development Block Grants/Entitlement Grants 119-7300-987-331-14-218 14.218 987 B-17-MC-53-0015 - 9,720 9,720 9,720 Community Development Block Grants/Entitlement Grants 119-7300-900-331-14-218 14.218 900 B-17-MC-53-0015 - 198,691 198,691 - Community Development Block Grants/Entitlement Grants 119-7300-994-331-14-218 14.218 994 B-17-MC-53-0015 - 86,931 86,931 86,931 Community Development Block Grants/Entitlement Grants 119-7300-996-331-14-218 14.218 996 B-17-MC-53-0015 - 53,404 53,404 - Community Development Block Grants/Entitlement Grants 119-7300-997-331-14-218 14.218 997 B-17-MC-53-0015 - 9,720 9,720 9,720 Community Development Block Grants/Entitlement Grants 119-7300-998-331-14-218 14.218 998 B-17-MC-53-0015 240,000 240,000 240,000 SUBTOTAL CFDA 14.218 Entitlement Grants Cluster REFER TO NOTES 1-3 933,926 933,926 472,450 US Department of Housing and Urban Development Office of Community Planning and Development Community Development Block Grants Section 108 Loan Guarantees 308-5800-110-331-14-248 14.248 B-13-MC-53-0015 - 3,030,000 3,030,000 - SUBTOTAL CFDA 14.248 REFER TO NOTES 1-4 3,030 000 3,030,000 US Department of Justice Bureau of Justice Assistance Bulletproof Vest Partnership Program 001-0000-090-331-16-607 16.607 BPV 32,765 32,765 SUBTOTAL CFDA 16.607 REFER TO NOTES 1-3 32,765 32,765 US Department of Justice Bureau of Justice Assistance Pass-thru City of Seattle Edward Byrne Memorial Justice Assistance Grant Program 001-0000-090-333-16-738 16.738 2015-DJ-BX-0552 1,837 1,837 SUBTOTAL CFDA 16.738 REFER TO NOTES 13 1,837 1,837 US Department of Justice Office of Community Oriented Policing Services Public Safety Partnership and Community Policing Grants 001-0000-090-331-16-710 16.710 #2017UMWX0104 75,166 75,166 SUBTOTAL CFDA 16.710 REFER TO NOTES 13 75,166 75,166 US Department of Transportation National Highway Traffic Safety Administration Pass-thru Washington Tragic Safety Commission State and Community Highway Safety 00 1 -0000-090-333-20-600 20.600 DHGN 23,148 23,148 SUBTOTAL CFDA 20.600 Highway Safety Cluster REFER TO NOTES 13 23,148 23,148 US Department of Transportation Federal Highway Administration Pass-thru Washington State DOT Highway Planning and Construction 306-4400-165-333-20-050 20.205 STPUL-0099(126) 4,792,825 - 4,792,825 - Highway Planning and Construction 306-4400-193-333-20-050 20.205 CM-1001(004) 642,828 - 642,828 - Highway Planning and Construction 306-4400-194-333-20-050 20.205 SRTS-0509(031) 18,666 - 18,666 - Highway Planning and Construction 306-4400-199-333-20-050 20.205 HSIP-0005(409) 58,214 - 58,214 - Highway Planning and Construction 306-4400-200-333-20-050 20.205 HLP-0443(008) 221,164 - 221,164 - Highway Planning and Construction 306-4400-202-333-20-050 20.205 HSIP-0005(464) 33,550 - 33,550 - Highway Planning and Construction 306-4400-209-333-20-050 20.205 NHPP-1008(004) 14,055 - 14,055 - Highway Planning and Construction 306-4400-210-333-20-050 20.205 NHPP-1013(005) 16,689 - 16,689 - Hiahwav Plannina and Construction 306-4400-211-333-20-050 20.205 HSIP-1031 005 84,288 84,288 SUBTOTAL CFDA 20.205 Highway Planning and Construction Cluster REFER TO NOTES 1-3 5,882,279 5,882,279 US Department of Homeland Security Pass-thru Military Department FEMA Grant 101-0000-000-333-97-036 97.036 ER-1701(029) 92,636 92,636 Emergency Management Performance Grants 101-0000-000-333-97-042 97.042 n/a 37,500 37,500 SUBTOTAL CFDA 97.042 REFER TO NOTES 1-3 130,136 130,136 TOTAL FEDERAL ASSISTANCE: 6,037,400 4,071,857 10,109,257 472,450 Page114 ie Schedule of Financial Assistance is prepared on the same basis of accounting as the City of Federal Way's financial statements. The City uses the modified accrual basis of accounting, which is the basis iapted to governmental fund -type measurement focus. All grants reported on this schedule have been accounted for in governmental fund types. Grant revenues are determined to be earned and available at e 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. ote 2: Program Costs is amounts shown as current year expenditures represent only the federal grant portion of the program costs. Entire program costs, including the City of Federal Way's portion, are more than shown. Such cpenditures are recognized following, as applicable, either the cost principles in the OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, or the cost principles contained in Title U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or e limited as to reimbursement. ote 3: Indirect Cost Rate is City of Federal Way did not use the new 10 % de minimis indirect cost rate as covered in 200.414 Indirect (F&A) costs,and is currently only charging direct costs to grants received. ote 4: Federal Loans is City of Federal Way was approved by the US Department of Housing and Urban Development Office of Community Planning and Development to receive a loan totaling $3,030,000 to finance the Performing Arts Event Center economic development project. Page115 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS Page116 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS COMPARATIVE SCHEDULE BY SOURCE December 31, 2017 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 2017 2016 $ 280,152,613 $281,422,490 23,447,416 23,447,417 26,510,478 26,450,524 792,192 746,629 179,967,577 172,544,173 56,070,165 35,600,490 566,940,441 540, 211, 723 125,244, 871 125,244, 871 252,375,395 252,375,395 128,427,658 112,466, 222 60,892,517 50,125,235 $ 566,940,441 $ 540,211,723 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. Page117 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY FUNCTION AND ACTIVITY December 31, 2017 Improvements Machinery Construction Other than and in Total Total Function and Activity Land Buildings Buildings Equipment Infrastructure Progress 2017 2016 GENERAL GOVERNMENT Miscellaneous general government $ 24,762,774 $ $ 19,973 $ $ 6,139,001 $ 32,316,295 $ 63,238,043 $52,724,215 Total General Government: 24,762,774 19,973 6,139,001 32,316,295 63,238,043 52,724,215 CULTURE AND RECREATION Culture and Recreation 113,723,537 23,447,416 26,490,505 792,192 94,474,128 577,665 259,505,443 259,279,358 Total Culture and Recreation: 113,723,537 23,447,416 26,490,505 792,192 94,474,128 577,665 259,505,443 259,279,358 TRANSPORTATION Streets and Traffic 141,666,302 - - - 79,354,448 23,176,205 244,196,955 228,208,150 Total Transportation: 141,666,302 79,354,448 23,176,205 244,196,955 228,208,150 Total General Fixed Asset by Function: $ 280,152,613 $ 23,447,416 $ 26,510,478 $ 792,192 $ 179,967,577 $ 56,070,165 $ 566,940,441 $ 540,211,723 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. Page118 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY For the Year Ended December 31, 2017 GENERAL GOVERNMENT Miscellaneous general government TOTAL GENERAL GOVERNMENT CULTURE AND RECREATION TOTAL CULTURE AND RECREATION TRANSPORTATION Streets and traffic TOTAL TRANSPORTATION TOTAL GENERAL FIXED ASSETS Governmental Funds Capital Assets 1/1/2017 Additions Deductions Governmental Funds Capital Assets 12/31/2017 $52,724,215 $ 10,513,828 $ - $63,238,043 52,724,215 10,513,828 - 63,238,043 259,279,358 6,417,482 6,191,397 259,505,443 259,279,358 6,417,482 6,191,397 259,505,443 228,208,150 45,385,002 29,396,197 244,196,955 228,208,150 45,385,002 29,396,197 244,196,955 $ 540,211,723 $ 62,316,312 $ 35,587,594 $ 566,940,441 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. Page119 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. Page120 NET POSITION BY COMPONENT Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Governmental activities Net investmentin capital assets $ 456,600,030 $ 442,704,401 465,671,345 470,074,915 471,597,776 468,628,412 466,078,036 424,245:625 440,815,201 461,491,598 Restricted 28,434,066 27,476,530 17,442,323 23,941,601 22,847,077 22,594,884 17,391,272 20,193214 21,372,596 20,412,211 Unrestricted 24,773 913 44,282 822 44,613,406 38,602 445 45 027,323 48,829 641 57 837,173 46,012 847 42 575,521 36,393 318 Total governmental activities netpositio 509,808,009 514,463,753 527,727,074 532,618,951 538,472,176 540,052,936 541,306,481 490,451,686 504,763,318 518,297,127 Bu ness-type activities Net investment in capital assets 50,494,590 50,578,649 50,563,097 50,052,887 50,280,880 50,620,091 50,299,229 58,998,176 59,059,646 61,673,201 Restricted 42,558 16,366 9,411 18,831 26,496 20,559 20,311 15,906 18,438 33,440 Unrestricted 5,071 617 5,115,275 5 015,367 5,398 786 5 968,302 6,577 269 7 219 403 1,814 364 5 142 741 5 791 413 Total business -type activities net positio 55,608,765 55,710,290 55,587,875 55,470,504 56,275,678 57,217,919 57,538,943 64,828,446 64,220,825 67,498,054 Primary government Net investment in capital assets 507,094,620 493,283,050 516,234,442 520,127,792 520,878,656 519,248,503 516,377,265 483,243,801 499,874,847 523,164,799 Restricted 28,476,624 27,492,896 17,451,734 23,960,432 22,873,573 22,615,443 17,411,583 20,209,120 21,391,034 20,445,651 Unrestricted 29,845,530 49,398 097 49 628,773 44,001,231 50 995,625 55,406 910 65 056,576 51,827 211 47s718,262 42,184 731 Total primary governmentnet assets 565,416,774 570,174,043 583,314,949 588,089,455 594,747,853 597,270,856 598,845,424 555,280,132 568,984,143 585,795,181 Source: City of Federal Way Finance Note: All amounts are reported on the accrual basis. Page 121 CHANGES IN NET POSITION Last Ten Fiscal Years Expenses Governmental activities: General government $5,606,797 $4,566,457 $ 4,865,827 $ 4,448,449 $ 4,300,691 $ 4,575,614 $ 4,633,942 $4,743,932 $4,544,037 $ 4,179,619 Security ofpersons and property 24,745,284 26,341,614 26,842,240 27,222,584 27,604,936 27,894,695 29,703,386 32,017,617 36,018,643 36,632,272 Transportation 7,891,298 9,448,397 9,781,800 13,539,598 9,946,776 9,675,727 11,434,659 13,070,260 12,920,893 13,681,482 Physical environment 370,718 450,914 451,470 424,466 415,935 490,916 443,127 476,570 469,237 415,771 Economic environment 3,382,572 3,560,620 3,175,005 2,782,435 2,645,478 2,191,487 2,785,807 2,973,437 3,206,414 4,074,379 Health and human sees 705,976 776,854 767,108 690,643 754,727 1,683,449 1,056,802 1,618,759 1,501,057 1,714,311 Culture and recreation 6,955,442 8,089,242 8,073,804 8,105,578 8,081,401 8,418,920 8,376,205 8,959,555 9,373,278 9,329,314 Interest on long-term debt 901,161 811,124 685,214 614,571 602,572 1,779,833 1,010,406 461,763 433,729 502,721 Total governmental activities expenses 50,559,248 54,045,222 54,642,468 57,828,324 54,352,517 56,710,640 59,444,335 64,321,893 68,467,288 70,529,870 Business -type activities: Surface Water Mgmt 4,060,440 3,345,027 3,384,352 3,527,590 3,272,514 3,234,742 3,653,999 4,093,534 4,408,225 4,385,355 Dumas Bay Center 1,045,250 984,103 849,176 890,738 873,144 844,623 945,705 1,250,161 1,104,971 1,179,967 Total business -type activities expenses 5105 690 4,329,130 4,233,528 4,418,328 4,145,658 4,079,365 4,599,703 5,343,695 5,513,196 5,565,321 Total primary government expenses 55,664,938 58,374,352 58,875,996 62,246,652 58 498175 60,790,005 64,044,038 69,665,588 73,980,484 76 095191 Program Revenues Governmental activities: Charges for services General Government $2,313,939 $873,258 975,515 816,140 924,966 1,983,033 2,118,896 1,994,674 2,449,406 3,155,863 Security of Persons & Property 2,309,406 5,037,388 5,381,407 4,985,320 5,937,100 5,022,896 4,637,071 5,295,641 5,701,083 6,014,477 Transportation 513,340 1,806,846 1,961,083 2,484,058 2,139,292 577,489 1,804,199 1,362,118 1,565,140 2,886,690 Physical Environment 262,847 86,230 90,512 77,875 89,457 299,337 305,742 302,083 304,294 314,842 Economic Environment 1,962,624 680,908 636,534 510,483 568,973 2,201,375 3,059,772 2,698,841 1,766,106 2,171,579 Health - 148,579 153,792 126,710 162,322 - - - - - Culture & Recreation 2,561,685 1,546,931 1,618,659 1,487,099 1,738,098 2,431,603 2,476,383 2,475,852 2,424,129 2,569,962 Operating grants and contributions 1,538,476 2,172,168 9,718,920 4,597,981 5,367,163 6,007,682 5,410,098 6,544,176 5,638,756 6,238,698 Capital grants and contributions 8,933,154 8,452,149 9,044,477 9,716,551 5,225,265 3,892,651 5,632,549 4,508,428 15,863,183 14,864,266 Total governmental activities program revenue 20,395,471 20,804,457 29,580,898 24,802,216 22,152,636 22,416,065 25,444,710 25,181,813 35,712,097 38,216,377 Business -type activities: Charges for services 4,473,453 4,183,012 4,246,235 4,020,144 4,222,726 4,096,751 4,174,613 4,662,995 4,900,530 4,997,202 Operating grants and contributions - - - 265,660 576,182 774,436 177,518 17,108 68,970 53,282 Capital grants and contributions 430,090 328,130 790,033 1,078,904 Total business -type activities program revenue: 4,473,453 4,183,012 4,246,235 4,285,804 4,798,908 4,871,187 4,782,221 5,008,233 5,759,533 6,129,388 24,868,924 24,987,469 33,827,133 29,088,020 26,951,544 27,287,252 30,226,931 30,190,046 41,471,630 44,345,765 Net(Expense)/Revenue Governmental activities (30,163,777) (33,240,765) (25,061,570) (33,026,108) (32,199,881) (34,294,574) (33,999,625) (39,140,080) (32,755,191) (32,313,492) Business -type activities (632,237) (146,118) 12,707 (132,524) 653,250 791,822 182,517 (335,462) 246,337 564,067 General Revenues and Other Changes in Net Position Governmental activities: Taxes Sales tax 12,144,276 10,583,298 10,708,951 10,858,381 10,534,147 11,346,338 12,173,281 13,297,086 14,222,497 14,199,460 Local Criminal Justice Sales Tax 2,051,524 1,743,893 1,701,120 1,795,971 1,864,991 1,992,667 2,138,406 2,319,124 2,499,527 2,616,306 Utility tax 13,469,136 13,549,472 12,890,310 13,068,510 13,083,179 12,584,293 12,028,878 11,796,550 11,902,866 12,425,975 Property tax 9,397,456 9,653,537 9,609,740 9,867,614 10,052,109 10,152,114 10,349,905 10,460,136 10,539,623 10,718,060 Real estate excise tax 2,590,310 1,428,985 1,403,361 1,560,395 1,507,313 2,034,033 2,062,722 3,031,159 5,265,138 4,226,344 Gambling Tax 1,259,783 1,127,203 493,486 511,005 114,443 178,696 176,068 177,807 190,051 210,029 Hotel/MotelTax 188,833 154,148 149,058 185,289 193,344 208,839 231,828 266,053 283,220 301,603 Admissions Tax - - - - - - - - - 547,229 Leasehold tax 5,712 4,999 5,757 6,259 5,820 5,989 6,693 6,104 3,784 4,218 Other 6,502,869 2,020,751 1,210,341 1,061,026 838,259 868,261 1,145,798 2,052,748 1,526,995 3,693,915 Gain on sale of capital assets - - - - - - - - - 142,935 Transfers 123,518 (200,907) 152,768 (113,000) (140,500) (137,419) (116,000) (17,959) 633,124 (942,000) Total governmental activities 47,733,417 40,065,379 38,324,892 38,801,450 38,053,106 39,233,811 40,197,580 43,388,808 47,066,825 48,144,074 Business -type activities: Other 3,447,458 46,736 17,646 12,405 11,424 13,000 22,507 24,917 45,405 60,544 Transfers (123,518) 200,907 (152,768) 113,000 140,500 137,419 116,000 17,959 (633,124) 942,000 Total business -type activities 3,323,940 247,643 135,122 125,405 151,924 150,419 138,507 42,876 587,719 1,002,544 Total primary government $ 51,057,357 $40,313,022 $ 38,189,770 $ 38,926,855 $ 38,205,030 $ 39,384,230 $ 40,336,087 $ 43,431,684 $ 46,479,106 $ 49,146,618 Change in Net Position Governmental activities $ 17,569,640 $ 6,824,613 $ 13,263,321 $ 5,775,342 $ 5,853,224 $ 4,939,237 $ 6,197,955 $ 4,248,728 $14,311,632 $ 15,830,582 Business -type activities 2,691,703 101,525 (122,415) (7,119) 805,174 942,241 321,025 (292,586) (341,384) 1,566,611 Prior Period Adjustment (1,722,939) (2,168,769) - (3,358,477) (4,944,409) (37,035,737) (266,237) (586,155) Net Effect - Change in Accounting for Pensions 10,485,698 Total primary government $ 18,538,404 $ 4,757,370 $ 13,140,907 $ 5,768,223 $ 6,658,398 $ 2,523,001 $ 1,574,570 $(43,565,293) $ 13,704,011 $ 16,811,038 Source: City of Federal Way Finance Note: All amounts are reported on the accrual basis. Page 122 GOVERNMENT -WIDE REVENUES BY SOURCE AND EXPENSES BY FUNCTION Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Program Revenues Charges for Services $ 14,397,294 $ 14,363,151 15,063,736 14,507,828 15,782,934 16,612,484 18,576,675 18,792,204 19,110,688 22,110,615 Operating Grants and Contributions 1,538,476 2,172,168 9,718,920 4,863,641 5,943,345 6,782,118 5,587,616 6,561,284 5,707,725 6,291,980 Capital Grants and Contributions 8,933,154 8,452,149 9,044,477 9,716,551 5,225,265 3,892,651 6,062,639 4,836,558 16,653,215 15,943,170 General revenues Sales tax 12,144,276 10,583,298 10,708,951 10,858,381 10,534,147 11,346,338 12,173,281 13,297,086 14,222,497 14,199,460 Local Criminal Justice Sales Tax 2,051,524 1,743,893 1,701,120 1,795,971 1,864,991 1,992,667 2,138,406 2,319,124 2,499,527 2,616,306 Utility tax 13,469,136 13,549,472 12,890,310 13,068,510 13,083,179 12,584,293 12,028,878 11,796,550 11,902,866 12,425,975 Property tax 9,397,456 9,653,537 9,609,740 9,867,614 10,052,109 10,152,114 10,349,905 10,460,136 10,539,623 10,718,060 Real estate excise tax 2,590,310 1,428,985 1,403,361 1,560,395 1,507,313 2,034,033 2,062,722 3,031,159 5,265,138 4,226,344 Gambling Tax 1,259,783 1,127,203 493,486 511,005 114,443 178,696 176,068 177,807 190,051 210,029 Hotel/MotelTax 188,833 154,148 149,058 185,289 193,344 208,839 231,828 266,053 283,220 301,603 Admissions Tax 547,229 Leasehold tax 5,712 4,999 5,757 6,259 5,820 5,989 6,693 6,104 3,784 4,218 Other revenue 875,389 1,421,791 1,063,825 960,012 702,833 624,464 883,549 1,820,868 1,159,347 3,149,057 Unrestricted Grants & Contribution 7,448,783 284,350 Investment Earnings 1,678,292 385,976 179,373 113,419 146,850 256,797 284,757 256,797 413,052 605,402 Gain on sale of capital assets (52,137)1 (24,630)1 (15,211)1 142,935 Total Revenues 75,926,281 65,300,490 72,016,903 68,014,875 65 156,573 66,671,482 70,563,017 73,621,730 87 950,733 93,492,384 Expenses General Government 5,606,797 4,566,457 4,865,827 4,448,449 4,300,691 4,575,614 41633,942 4,743,932 4,544,037 41179,619 Security of Persons & Property 24,745,284 26,341,614 26,842,240 27,222,584 27,604,936 27,894,695 29,703,386 32,017,617 36,018,643 36,632,272 Transportation 7,891,298 9,448,397 9,781,800 13,539,598 9,946,776 9,675,727 11,434,659 13,070,260 12,920,893 13,681,482 Physical Environment 370,718 450,914 451,470 424,466 415,935 490,916 443,127 476,570 469,237 415,771 Economic Environment 3,382,572 3,560,620 3,175,005 2,782,435 2,645,478 2,191,487 2,785,807 2,973,437 3,206,414 4,074,379 Health 705,976 776,854 767,108 690,643 754,727 1,683,449 1,056,802 1,618,759 1,501,057 1,714,311 Culture & Recreation 6,955,442 8,089,242 8,073,804 8,105,578 8,081,401 8,418,920 8,376,205 8,959,555 9,373,278 9,329,314 Interest on long-term debt 901,161 811,124 685,214 614,571 602,572 1,779,833 1,010,406 461,763 433,729 502,721 Surface Water Management 4,060,440 3,345,027 3,384,352 3,527,590 3,272,514 3,234,742 3,653,999 4,093,534 4,408,225 4,385,355 Dumas Bay Centre 1,045,250 984,103 849,176 890,738 873,144 844,623 945,705 1,250,161 1,104,971 1,179,967 Total Expenses $55,664,938 $58,374,352 $ 58,875,996 $ 62,246,652 $ 58,498,175 $ 60,790,005 $ 64,044,038 $ 69,665,588 $ 73,980,484 $ 76,095,191 Source: City of Federal Way Finance Page123 FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General fund Reserved 418,207 106,728 Unreserved 5,511,440 8,138,468 Nonspendable 81,146 104,012 69,398 76,538 105,417 136,806 187,294 252,550 Restricted 168,398 145,524 60,585 39,081 54,526 71,106 108,147 94,452 Committed 21,893 21,893 21,893 3,403,937 34,513 199,013 19,350 Assigned Unassigned Total general fund 8,188,575 1 12,372,719 1 14,783,219 1 16,003,076 1 12,480,539 1 14,362,533 1 13,794,955 1 13,380,039 5,929,647 8,245,196 8,438,119 12,644,148 14,935,095 16140 587 16,044,419 14,604,958 14,289,399 13,746,391 All Other Governmental Funds Reserved 1,763,667 4,770,399 Unreserved, reported in. Special revenue fund: 7,505,799 4,311,238 Capital projects fund: 26,252,192 22,934,356 Debt service funds Nonspendable Restricted 17,776,967 19,325,489 18,079,168 17,478,394 17,231,330 19,985,302 21,077,165 20,065,209 Committed 18,611,612 11,642,248 15,813,105 16,371,292 19,530,016 17,114,881 13,932,351 12,705,135 Assigned 100,000 Unassigned 8,124,951 Total a0 other governmental funds $ 35,521,658 $ 32,015,993 $ 36,488,580 $ 30,967,736 $ 33,892,273 $ 33,849,686 $ 36,761,346 $ 37,100,183 $ 35,009,516 $ 24,645,392 Source: City of Federal Way Finance Note: Fund Balance reclassification implementation of GASB 54 for year's 2010 and forwar Page 124 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenues Taxes $ 41,071,781 $ 38,192,852 $ 37,122,069 $ 37,831,045 $ 37,450,059 $ 38,505,413 $ 39,241,915 $41,387,894 $44,898,868 $ 45,217,429 Licenses, fees and permits 2,195,068 2,163,984 2,547,655 2,209,873 2,501,368 2,638,017 3,311,671 3,574,648 3,140,133 4,125,619 Intergovernmental 10,520,570 11,127,718 18,648,749 11,713,248 7,631,014 9,682,511 9,929,833 8,910,603 19,783,107 18,184,915 Charges for services 6,246,207 51573,647 51486,632 6,131,287 5,686,962 5,965,726 7,591,795 6,467,528 6,934,789 8,523,064 Development Fees Fines and Forfeitures 1,433,628 21200,092 2,783,214 2,146,524 3,371,878 3,911,990 3,498,596 4,087,033 4,135,236 4,464,730 Investment earnings 1,274,955 271,600 139:698 89,338 122:483 172,049 210,439 210,289 308,643 442,466 Other revenues 875 389 1 599:207 899,092 96Q,012 702,830 178,850 883 549 1,82Q,867 1 159 348 3,149,057 Total revenues 63,617,598 61,129,100 67,627,109 61,081,327 57,466,594 61,554,556 64,707,798 66,458,862 80 60124 84107 280 Expenditures General government 5,197,032 4,518,821 41857,177 4,234,327 41402,129 41495,029 4,444,772 4,707,145 4,541,228 4,390,464 Security of persons and property 25,470,722 27,051,814 26,892,207 28,332,237 26,562,270 29,028,242 31,235,230 32,471,782 35,655,951 37,702,987 Transportation 6,634,548 6,165,540 5,700,274 7,427,408 6,039,183 5,672,769 6,209,000 7,109,395 7,162,201 8,480,485 Physical Environment 370,718 448,873 450,971 427,315 409,042 468,220 461,718 478,807 452,720 425,900 Economic Environment 3,344,987 3,504,767 3,161,820 2,782,537 2,645,215 2,190,502 2,786,542 2,960,841 3,180,808 4,195,093 Health 700,876 772,151 765,963 690,824 754,311 1,681,986 1,057,841 1,617,818 1,497,793 1,720,324 Culture and Recreation 5,871,288 5,845,676 5,857,621 5,821,160 5,877,370 6,183,381 6,246,952 6,787,491 7,032,133 7,173,699 Debt Service Princi al 440,900 4,558,750 494,250 457,520 480,760 1,019,698 963,500 640,482 470,000 8,853,960 InteresUfisea] charges/admin fees 901,161 811,124 685,214 614,571 602,572 1,781,778 1,021,945 491,379 471,738 547,501 Capital Outlay 1 18,037,109 1 8,443,523 1 14,249,501 1 11,560,205 1 4,337,758 1 8,987,949 1 17,508,958 1 10,237,386 1 26,745,849 1 29,161,278 Total expenditures 66,969,341 62,121,039 63,114,998 62,348,104 52,110,610 61,509,554 71,936,458 67,502,526 87,210,421 102,651,691 Excess of revenues over (under) expenditures (3,351,743) (991,939) 4,512,111 (1,266,777) 5,355,984 45,002 (7,228,660) (1,043,664) (6,850,297) (18,544,411) Other Financing Sources (Uses) GO bond proceeds 12,415,000 2,925,000 6,105,000 Bond principal payoff 11,955,000 Sale ofca iW assets 9,162 5,500 2,187,756 Anticipation Note 8,209,960 Bond prentimn 410,660 Transfers in 16,232,916 25,619,678 22,473,128 21,453,223 16,228,281 18,972,853 40,440,790 14,422,187 21,043,890 21,606,659 Transfers out 16,109 398 25,817 857 22 319,725 21,510 423 16 368 781 18 731 107 38,606 598 14 479 146 19,524 820 22 262 134 Total other financing sources (uses) 123,518 (198,179) 153,403 (48,038) (140,500) 1,117,906 10,044,152 (56,959) 4,444,070 7,637,281 Net change in fund balances $ 3 228 225 $ (1,190,118) $ 4,665,514 $ 1 314 815 $ 5,215,484 $ 1,162,908 $ 2,815,492 $ 1 100 623 $ 2 406 227 $ (10,907,130 Debt service as a percentage of noncapital expenditures 2.7% 10.0% 2.4% 2.1% 2.3% 5.3% 3.6% 2.0% 1.6% 12.8% Source: City of Federal Way Finance Page125 ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY* Last Ten Fiscal Years Fiscal Year Real Property Personal Property State Public Service Property Total Total City Direct Tax Rate(Decrease) Percent Increase 2008 9,527,060,585 257,152,954 97,434,092 9,881,647,631 1.04 9.7% 2009 8,294,282,076 236,445,351 92,287,195 8,623,014,622 0.97 -12.7% 2010 7,948,924,766 228,247,721 91,163,299 8,268,335,786 1.13 -4.1% 2011 7,410,324,237 219,890,581 92,768,984 7,722,983,802 1.20 -6.6% 2012 6,832,615,312 213,389,519 96,827,145 7,142,831,976 1.30 -7.5% 2013 7,076,203,165 212,126,219 97,686,143 7,386,015,527 1.42 3.4% 2014 8,043,211,679 223,362,313 109,128,234 8,375,702,226 1.40 13.4% 2015 8,550,055,199 233,032,732 122,206,127 8,905,294,058 1.25 6.3% 2016 9,148,479,809 228,742,814 112,214,847 9,489,437,470 1.19 6.6% 2017 9,969,974,857 214,620,795 114,210,407 10,298,806,059 1.13 8.5% * Real, personal, and state public service property has been assessed at 100% of the estimated value. Source: King County Assessor's Office. Note: These figures include all final tax adjustments, non-taxable, senior citizen exempted property and omits. The total assessed value was reduced by non-taxable of $71,999,621 yielding a taxable assessed value of of $10,226,806,438. The taxable assessed valuations are the the basis for the following year's tax levy. Page 126 PROPERTY TAX RATES AND LEVIES, DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years City Direct Rates* Overlapping Rates City of Federal Way Fiscal 11 Federal School Year Way District 4210 King Washington County State King County Port of County Flood Zone Seattle Ferry District Fire District #39 Library Emergency Medical Sound Services Transit Total TAX RATES PER $1,000 OF ASSESSED VALUATION 2008 1.04 11 4.15 1.21 2.13 0.10 0.22 0.055 1.50 0.45 0.30 11.16 2009 0.97 4.20 1.10 1.96 0.09 0.20 0.052 1.50 0.42 0.27 10.76 2010 1.13 5.11 1.28 2.22 0.11 0.22 0.003 1.50 0.49 0.30 12.36 2011 1.20 5.36 1.34 2.28 0.11 0.22 0.004 1.39 0.57 0.30 12.77 2012 1.30 5.77 1.42 2.42 0.12 0.23 0.004 1.50 0.57 0.30 13.63 2013 1.42 7.55 1.54 2.57 0.13 0.23 0.004 1.82 0.57 0.30 16.14 2014 1.40 7.28 1.52 2.47 0.15 0.22 0.003 1.81 0.56 0.34 15.75 2015 1.25 1 6.42 1.35 2.29 0.14 0.19 1.77 0.50 0.30 14.20 2016 1.19 6.75 1.48 2.17 0.13 0.17 1.91 0.48 0.28 14.55 2017 1.13 6.32 1.38 2.03 0.12 0.15 1.83 0.451 0.26 1 0.25 13.93 DETAIL OF TAX RATES FOR 2017 Basic Rate 1.13 1.35 2.03 0.12 0.15 1.50 0.40 6.68 Voted Rate 6.32 0.04 0.33 0.05 0.26 0.25 7.25 TAX LEVIES 2008 9,300,030 52,730,549 409,763,053 723,908,902 33,945,830 75,908,664 18,670,739 22,288,360 91,371,026 101,861,635 101,861,635 1,641,610,423 2009 9,551,027 58,588,636 422,757,529 756,272,108 35,151,944 75,911,308 19,335,328 23,715,724 95,398,383 105,611,047 105,611,047 1,707,904,081 2010 9,690,241 61,404,973 437,163,660 756,411,197 35,783,324 73,504,599 1,185,576 20,409,747 97,015,693 102,103,088 102,103,088 1,696,775,186 2011 9,827,398 61,622,347 439,635,095 749,341,420 36,076,405 73,512,887 1,184,924 18,234,001 115,495,462 98,604,471 98,604,471 1,702,138,881 2012 9,967,650 61,493,504 449,642,988 769,672,818 36,904,878 73,014,552 1,182,466 18,291,481 112,332,714 95,287,781 95,287,781 1,723,078,613 2013 10,081,231 74,591,150 482,114,428 803,686,293 41,355,065 73,020,604 1,183,773 20,431,912 109,665,815 93,899,062 93,899,062 1,803,928,395 2014 10,240,148 74,592,913 482,114,428 837,694,800 52,112,348 73,018,695 1,183,251 20,866,842 116,790,442 113,565,682 113,565,682 1,895,745,231 2015 10,379,941 75,700,006 519,943,107 883,333,788 53,576,135 73,003,848 23,587,509 120,007,126 116,779,587 116,779,587 1,993,090,634 2016 10,487,319 85,094,113 626,660,985 921,288,805 55,134,677 072,015,418 26,636,830 123,025,026 119,904,362 119,904,362 2,160,151,897 2017 10,657,115 85,155,041 649,375,369 954,266,653 55,133,687 1 72,010,667 27,439,155 126,375,001 123,505,903 106,640,644 2,210,559,235 Source: King County Assessor's Office and King County Department of Finan ''Ihe Ci ofFedeml Wa 's Direct Rate has onl o en[ which is [he a ense Im Page127 PRINCIPAL TAXPAYERS Current Year and Nine Years Ago Taxpayer Type of Business 2017 2008 Assessed Valuation Rank % of Total (A) Assessed Valuation Assessed Valuation Rank % of Total (A) Assessed Valuation Weyerhaeuser Real Estate Investment Trust $ 127,788,837 1 1.24% $ 191,132,662 1 1.95% KW Club Palisades LLC Real Estate Management 86,096,000 2 0.84% 0.00% Puget Sound Energy-Elec/Gas Electric\Gas 80,299,856 3 0.78% 55,868,813 4 0.57% Prime Woodley Campus Drive Real Estate Management 75,132,000 4 0.73% 0.00% Prime Catalina Campus Dr Real Estate Management 74,906,000 5 0.73% 0.00% Avanath Federal Way LLC Real Estate Management 65,668,000 6 0.64% 0.00% MGP XI Commons FW LLC (formerly Commons Mall LLC) Retailer 62,691,900 7 0.61% 76,592,009 2 0.78% Harsch Investment Properties Retailer 60,719,900 8 0.59% 55,637,300 5 0.57% PRCP-Arcadia LLC (formerly Real Estate Management 60,307,800 9 0.59% 0.00% CA Reservice Owner LLC Real Estate Management 56,075,000 10 0.54% 0.00% Federal Way Crossings Owner ( Shopping Center 48,136,300 H 0.47% 0.00% Greystone Meadows Apts. Real Estate Management 46,444,000 12 0.45% 0.00% FPA5 Landings LLC Real Estate Management 42,388,000 13 0.41% 0.00% KNL Vision WA LLC Real Estate Management 40,440,000 14 0.39% 28,112,000 6 0.29% Fairfield Maple Hill LLC Real Estate Management 39,495,000 15 0.38% 0.00% Cove Apartments LLC Real Estate Management 38,054,000 16 0.37% 27,812,000 7 0.28% Wal-Mart Retailer 34,786,500 17 0.34% 0.00% FSC Riverside Associates Real Estate Management 34,052,000 18 0.33% 0.00% Waterbury Park Apts. Real Estate Management 33,703,000 19 0.33% 0.00% Shores at Federal Way LLC Real Estate Management 32,500,000 20 0.32% 0.00% IHP - Courtyard by Marriott Hospitality 22,812,200 21 0.22% 17,551,200 9 0.18% Virginia Mason Clinic Medical Services 20,851,500 22 0.20% 15,110,535 11 0.15% Fred Meyer Retail/Wholesaler 18,302,100 23 0.18% 21,989,306 8 0.22% Costco Retail / Wholesaler 12,281,700 24 0.12% 16,001,428 10 0.16% ANS LLC Real Estate Management 11,336,100 25 0.11% 13,059,200 12 0.13% Campus Business Parks LLC Real Estate Management 7,974,600 26 0.08% 12,863,000 13 0.13% Qwest Corporation Telecommunications 0.00% 12,142,034 14 0.12% LBA Realty Real Estate Management 0.00% 66,919,700 3 0.68% $1 233 242 293 11.97% $ 610,791,187 6.22% Source: King County Assessor's Office. A 2017 and 2008 assessed valuation for the City of Federal Way was $10,298,806,509 and $9,825,319,904, respectively. Page128 PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Fiscal Year Taxes Levied for the Fiscal Year Collected within the Fiscal Year of the Levy Collections in Subsequent Years Total Collections to Date Total Outstanding Delinquent Taxes Ratio of Delinquent Taxes to Total Tax Levy Current Tax Amount Percentage of Levy Total Tax Amount Percentage of Levy 2008 9,265,234 9,037,601 97.5% 185,130 9,222,731 99.5% 42,502 0.5% 2009 9,511,404 9,277,004 97.5% 172,687 9,449,691 99.4% 61,713 0.6% 2010 9,680,047 9,433,214 97.5% 139,340 9,572,554 98.9% 107,493 1.1% 2011 9,755,022 9,506,527 97.5% 186,036 9,692,563 99.4% 62,459 0.6% 2012 9,919,406 9,739,696 98.2% (0) 9,739,696 98.2% 179,710 1.8% 2013 10,081,231 9,848,925 97.7% 37,272 10,029,029 99.5% 195,033 1.9% 2014 10,240,148 10,035,433 98.0% 56,371 10,091,805 98.6% 148,343 1.4% 2015 10,379,941 10,188,421 98.2% 39,138 10,227,559 98.5% 152,382 1.5% 2016 10,487,319 10,254,720 97.8% 72,477 10,327,198 98.5% 160,121 1.5% 2017 10,657,115 10,433,533 97.9% 22,380 10,455,913 98.1% 201,202 1.9% Source: Data has been derived from the "Annual Tax Receivable Summary" prepared by the King County Finance. Note: These figures include tax adjustments such as omits, refunds, and senior citizen exempted property. Page129 RATIO OF OUTSTANDING DEBT BY TYPE For the Last Ten Fiscal Years Fiscal Year Governmental Activities Business Type Activities Total Primary Government % of Personal Income (b) Per Capita (b) General Obligation Bonds Certificates of Participation Public Works Trust Fund Loan 2008 19,138,000 - 1,574,753 20,712,753 0.134% 235 2009 29,212,950 - 1,392,394 30,605,344 0.090% 346 2010 28,683,950 - 1,210,035 29,893,985 0.091% 337 2011 28,157,950 - 1,027,676 29,185,626 0.091% 327 2012 27,616,950 - 845,317 28,462,267 0.093% 318 2013 27,016,400 - 662,958 27,679,358 0.097% 309 2014 34,703,360 - 480,600 35,183,960 0.058% 390 2015 33,656,660 - 384,481 34,041,141 0.080% 375 2016 35,725,560 - 288,361 36,013,921 0.076% 384 2017 32,573,400 - 192,241 32,765,641 0.088% 340 Source: City of Federal Way Finance Division Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Demographic Statistics schedule for personal income and population data. These ratios are calculated using personal income for the prior calendar year. (b) Per capita income information for Federal Way based on US Census Bureau - Quickfacts. Page130 RATIO OF NET GENERAL OBLIGATION BONDED DEBT TO ASSESSED VALUE AND NET GENERAL OBLIGATION BONDED DEBT PER CAPITA For the Last Ten Fiscal Years Ratio of Net (B) (C) Bonded Debt Net Bonded Fiscal (A) Assessed Gross Less Restricted Net To Assessed Debt Per Year Population Value Bonded Debt for Debt Bonded Debt Value Capita 2008 88,040 9,825,319,904 20,712,753 1,882,041 18,830,712 0.0019 213.89 2009 88,578 8,563,964,852 30,605,344 4,225,463 26,379,881 0.0031 297.82 2010 88,760 8,206,354,959 29,893,985 3,379,427 26,514,558 0.0032 298.72 2011 89,370 7,659,569,844 29,185,626 3,866,184 25,319,442 0.0033 283.31 2012 89,460 7,142,831,976 28,462,267 4,182,345 24,279,922 0.0034 271.41 2013 89,718 7,386,015,527 27,679,358 5,248,336 22,431,022 0.0030 250.02 2014 90,147 8,375,702,226 35,183,960 2,136,390 33,047,570 0.0039 366.60 2015 90,764 8,905,294,058 34,041,141 2,283,702 31,757,439 0.0036 349.89 2016 93,670 9,489,437,470 36,013,921 2,508,514 33,505,407 0.0035 357.70 2017 96,350 10,298,806,059 32,765,641 3,492,598 29,273,043 0.0028 303.82 (A) Sources: State of Washington Office of Financial Management Population Estimates. (B) The final certified Regular Levy assessed valuation of all taxable property by the King County Assessor's Office for use in calculating levy rates for the following year's tax roll. The total assessed valuation of $10,298,806,059 has been reduced by non-taxable of $71,999,621 to arrive at taxable assessed valuation of $10,226,806,438. (C) Includes Public Works Trust Fund Loans issued in 2000 and Section 108 Loan issued in 2016; general obligation bonds issued in 2009, 2013, 2014, and 2017. Page 131 COMPUTATION OF DIRECT AND OVERLAPPING DEBT December 31, 2017 (A) (B) Gross General Percentage Amount Obligation Debt Applicable to Applicable to Jurisdiction Outstanding Federal Way Federal Way King County $ 740,158,000 1.93% $ 14,260,559 Port of Seattle 388,360,000 1.93% 7,482,498 Federal Way School District #210 162,229,548 68.64% 111,359,460 Fire District # 39 32,945,000 61.10% 20,130,654 Library 89,230,000 3.40% 3,032,665 Total Overlapping Debt 1,412,922,548 156,265,835 CITY OF FEDERAL WAY 32,573,400 (C) 100.00% 32,573,400 Total Direct and Overlapping Debt $ 1,445,495,948 $ 188 839 235 (A) Total general obligation bonds outstanding at the year end, exclusive of available cash in debt service funds, proprietary -type debt, credit enhancement and hotel/motel debt. Source: King County Financial Management. (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. Source: King County Assessor's Office (C) Includes general obligation debt issued in 2009, 2013, 2014, 2016, and 2017. Source: City of Federal Way Finance Page132 COMPUTATION OF LIMITATION OF INDEBTEDNESS December 31, 2017 DESCRIPTION General Debt Capacity Excess Levy Open Space and Park Excess Levy Utility Purposes Total Debt Capacity (Limited) Councilmanic (Unlimited) Excess Levy Statutory debt limit: 2017 TAV=$10,226,806,438 A 1.50%AV @ 100% $ 153,402,097 $ (153,402,097) $ - $ - $ - 2.50%AV @ 100% - 255,670,161 255,670,161 255,670,161 767,010,483 Add: Cash reserved for debt redemption (B) 3,492,598 - - - 3,492,598 Less: Bonds and COPS outstanding 32,573,400 - - - 32,573,400 Remaining Debt Capacity $ 124,321,295 $ 102,268,064 $ 255,670,161 $ 255,670,161 $ 737,929,681 Total Remaining "General" Capacity $226,589,359 (A) This figure represents the City's final total taxable assessed valuation (TAV) for 2017 which was used to determine the 2018 property tax levy. (B) Reflects debt service fund balance as of 12/31/2017. Fiscal Year Debt limit Total net debt applicable to limit Legal debt margin Total net debt applicable to the limit as a % of debt limit 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% 2011 579,223,785 (20,964,944) 558,258,841 3.62% 2012 535,712,398 (25,612,462) 510,099,936 4.78% 2013 550,022,093 (25,064,092) 524,958,001 4.56% 2014 623,929,441 (32,566,971) 591,362,470 5.22% 2015 663,674,591 (31,372,958) 632,301,633 4.73% 2016 706,516,822 (33,217,046) 673,299,776 4.70% 2017 767,010,483 (29,080,802) 737,929,681 3.79% 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. Page133 RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL OBLIGATION BONDED DEBT TO TOTAL GENERAL GOVERNMENTAL EXPENDITURES NET OF DEBT SERVICE EXPENSE Total General Ratio of Debt Service Fiscal Total Debt Governmental to General Governmental Year Principal Interest * Service Expenditures Expenditures 2008 467,000 841,542 1,308,542 51,278,215 2.6% 2009 4,585,000 824,693 5,409,693 54,585,436 9.9% 2010 525,000 629,419 1,154,419 50,093,838 2.3% 2011 526,000 622,903 1,148,903 49,482,421 2.3% 2012 480,760 1,114,827 1,595,587 47,879,445 3.3% 2013 1,050,430 1,413,862 2,464,292 57,934,989 4.3% 2014 995,300 985,475 1,980,775 48,877,840 4.1% 2015 771,120 495,359 1,266,479 48,845,021 2.6% 2016 566,120 475,073 1,041,193 52,159,793 2.0% 2017 8,950,080 491,866 9,441,946 62,791,020 15.0% Source: City of Federal Way Finance Note: * Interest excludes bond issuance and debt registration costs. Page 134 DEMOGRAPHIC STATISTICS Fiscal Personal Income Per Capita Median Education Level in Years School Unemployment Year Population Sea-Tac-Bel [D] Income [C] Age [C] of Formal Schooling Enrollment (A) Rate (B) 2008 88,040 169,798,086,000 27,730 37.0 13.0 21,622 5.1% 2009 88,578 171,680,771,000 27,638 36.6 13.0 21,700 8.9% 2010 88,760 176,084,963,000 27,307 35.1 13.0 21,630 9.7% 2011 89,370 178,306,642,000 26,668 35.2 13.0 21,608 8.9% 2012 89,460 189,431,079,000 26,514 34.9 13.0 20,665 8.1% 2013 89,718 199,243,414,000 26,740 34.9 13.0 21,554 7.4% 2014 90,147 213,700,152,000 20,481 35.1 13.0 21,772 6.2% 2015 90,764 227,827,122,000 27,145 35.7 13.0 21,979 5.3% 2016 93,670 245,230,664,000 27,483 35.7 13.0 21,673 4.9% 2017 96,350 N/A 28,947 35.9 13.0 22,522 4.4% (A) Includes public school enrollment. Kindergarten is included though not State mandated. (B) Unemployment rates came from the US Department of Labor, Bureau of Labor Statistics. (C) Per Capital Income for Federal Way came from U.S. Census Bureau - Quickfacts. (D) Personal income information is for Seattle -Tacoma -Bellevue area provided by the Bureau of Economic Analysis, information for 2017 not available. 2017 data for Personal Income to be published fall of 2018. Sources: Data was obtained from U. S. Census Bureau US Department of Labor, Bureau of Labor Statistics US Department of Commerce, Bureau of Economic Analysis School data was provided by the Federal Way School District. Page135 PRINCIPAL EMPLOYERS Current Year and Nine Years Ago Taxpayer Type of Business 2017 2008 Number of Employees Rank % of Total City Em to ment Number of Em to ees Rank % of Total City Employment Federal Way Public Schools Educational Services 2,987 1 9.44% 2,701 2 8.82% St Francis Hospital Medical Services 1,209 2 3.82% 744 4 2.43% World Vision Inc Christian Relief Agency -Nonprofit 854 3 2.70% 809 3 2.64% Wild Waves Amusement Center 635 4 2.01% 639 6 2.09% Us Postal Service - Bulk Mail Postal Service 600 5 1.90% 655 5 2.14% Davita Health Services 503 6 1.59% - - 0.00% Wal-Mart Retail 496 7 1.57% 500 7 1.63% City Of Federal Way Government Services 476 8 1.50% 440 8 1.44% Safeway Retail 276 9 0.87% - - 0.00% Virginia Mason Federal Way Medical Services 253 10 0.80% 235 10 0.77% Costco Wholesale Corporation Wholesale 252 11 0.80% 272 9 0.89% BergerABAM Inc Engineering/Architectural 227 12 0.72% - 0.00% Fred Meyer Retail 220 13 0.70% 190 13 0.62% Homestreet Bank Banking 200 14 0.63% - - 0.00% Hallmark Manor Retirement Home 195 15 0.62% - - 0.00% Home Depost Retail 151 21 0.48% 180 14 0.59% Target Store Retail 142 25 0.45% 178 15 0.58% Sears Roebuck & Company Retail 73 32 0.23% 205 11 0.67% Weyerhaeuser Company Lumber Products 28 31 0.09% 3,316 1 10.83% Prudential NW Realty Assoc. Inc. Real Estate 4 33 0.01% 200 12 0.65% Source: City of Federal Way Business License Note: Principal Employers - includes both full-time and art -time employees. Page136 PROPERTY VALUE AND CONSTRUCTION Commercial Construction (A) Residential Construction (A) Multi -Family Construction (A) Year Permits Value (In Thousands) Permits Value (In Thousands) Permits Value (In Thousands) 2008 256 45,810 258 17,554 91 26,025 2009 132 45,343 275 13,057 76 20,802 2010 149 31,043 321 19,676 75 2,686 2011 134 12,724 301 19,455 47 847 2012 160 27,989 346 29,115 92 974 2013 162 22,891 369 33,260 131 5,442 2014 220 35,923 359 30,923 53 61,511 2015 181 73,654 343 20,341 109 104,115 2016 172 18,547 292 19,804 80 18,667 2017 210 26,817 320 24,455 119 10,992 Sources & Notes: (A) Federal Way Community & Economic Development Department. Commercial construction includes alterations. Other building -related permits (plumbing, mechanical, fire alarm, etc.) numbering 3,425 and valued at $9,706,274 have been excluded. Page137 CAPITAL ASSETS BY FUNCTION Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Transportation Street (Center Line Miles) 234.72 234.72 242.90 248.23 248.23 249.25 249.25 249.25 249.25 253.8 Signals WSDOT-owned and maintained 5 5 5 5 6 6 6 6 6 6 Signals City -owned & County -maintained 76 76 76 76 77 77 77 77 80 80 Street lights City -owned and maintained 1,463 1,467 1,509 1,554 1,618 1,705 1,728 1,728 1,785 1,857 Street lights City -owned and PSE-maintain 644 644 644 644 644 644 644 644 644 644 Street lights PSE-owned and maintained 1,975 1,975 1,975 1,975 1,975 1,975 1,978 1,980 1,983 1,986 Culture & Recreation Developed Parks - Acreage 524.49 524.49 524.49 524.49 579.86 579.86 588.99 588.99 588.99 588.99 Developed Parks - # of Parks 32 32 32 32 29 29 30 30 32 32 Undeveloped Parks - Acreage 551.12 551.12 551.12 551.12 539.43 539.43 539.43 539.43 539.43 539.43 Undeveloped Parks - # of Parks 22 22 22 22 22 22 22 22 22 22 Tennis Courts City -Owned 11 11 11 11 9 9 9 9 9 9 Tennis Courts - Public 22 22 22 22 25 25 25 25 22 22 Swimming Pools City -Owned 1 1 1 1 2 2 2 2 2 2 Swimming Pools County -Owned 1 1 1 1 3 3 3 3 3 3 Trails - Miles 6 6 6 6 9 9 9 9 9 9 Trails -# of Trails 3 3 3 3 6 6 6 6 6 6 Community Centers/Recreation Facilities 1 1 1 1 1 1 2 2 3 3 Source: City of Federal Way Public Works and Parks Department Page138 OPERATING INDICATORS BY FUNCTION Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SECURITY OF PERSONS & PROPERTY Offenses: Forcible Rape (including attempts) 30 51 50 38 48 35 70 47 46 34 Robbery 170 198 152 119 107 107 135 152 191 169 Criminal Homicide 10 5 5 4 3 6 4 4 9 7 Aggravated Assault 115 115 118 99 150 133 148 178 209 226 Vehicle Theft 816 561 741 694 800 778 869 762 1,080 963 Burglary (commercial & residential) 800 741 828 752 931 801 816 635 645 664 Larceny 2,933 3,231 3,141 3,067 3,409 3,571 3,912 3,701 4,225 3,699 Arson 13 13 11 11 9 7 13 14 18 10 Citations: Traffic 19,339 20,678 18,094 17,226 13,023 17,558 13,705 15,466 10,602 10,579 Red Light Photo 3,813 13,002 25,691 15,340 13,455 24,454 24,750 29,812 33,626 38,434 ECONOMIC ENVIRONMENT Building Related Permits & Values Building Permits 605 483 545 482 598 662 632 633 544 649 Estimated Value (In Millions $) $ 89 $ 79 $ 53 $ 33 $ 58 $ 62 $ 128 $ 198 $ 57 $ 62 Other Building Related Permits 2,370 2,209 2,423 2,385 2,960 3,827 3,722 3,868 3,429 3,425 Estimated Value (In Millions $) $ 7 $ 6 $ 6 $ 6 $ 5 $ 6 $ 7 $ 8 $ 8 $ 10 Source: City of Federal Way Police Department and Community Development Department Page139 CITY GOVERNMENT EMPLOYEES FULL-TIME EQUIVALENT - HISTORY Department 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Mayor's Office 9.75 7.63 7.63 5.00 3.00 3.50 6.00 8.00 12.34 14.34 Administration 5.25 3.13 3.13 4.00 3.00 3.00 5.00 6.00 6.34 6.34 Economic Development 1.50 1.50 1.50 - - 0.50 1.00 1.00 1.00 1.00 Performing Arts & Event Cente - - - - - 1.00 5.00 7.00 Government Affairs 3.00 3.00 3.00 - - - - Human Services - - - 1.00 - - - - - - City Council 3.50 3.50 4.50 4.50 3.85 4.15 4.15 4.20 4.20 4.20 Municipal Court 14.00 13.00 13.00 13.00 13.00 13.00 13.00 13.00 16.00 16.00 Human Resources 5.25 5.25 5.25 4.50 4.50 4.50 5.13 5.75 6.00 6.00 City Clerk 1.75 1.75 1.75 1.75 1.75 1.75 1.88 2.50 2.50 2.50 Human Resources 3.50 3.50 3.50 2.75 2.75 2.75 3.25 3.25 3.50 3.50 Finance 8.00 7.60 7.60 7.00 7.00 6.00 7.00 8.00 8.00 8.00 Administration - - - - - - - - - - Finance 8.00 7.60 7.60 7.00 7.00 6.00 7.00 8.00 8.00 8.00 Information System 10.60 10.00 9.60 7.00 7.00 7.00 6.00 7.00 7.00 7.00 Law 13.00 12.00 12.00 11.00 11.00 12.00 12.00 12.50 12.50 12.50 Civil Legal Services 5.80 4.80 4.80 4.80 4.80 4.80 4.80 4.80 4.80 4.80 Criminal Prosecution Services 7.20 7.20 7.20 6.20 6.20 7.20 7.20 7.70 7.70 7.70 Community & Econ Developmei 32.00 30.00 28.90 19.00 21.65 21.85 26.25 26.70 26.70 26.70 Administration 4.50 5.00 5.00 3.50 3.50 3.50 3.90 3.90 3.90 3.90 Planning 8.75 8.00 7.00 6.00 6.00 6.00 7.00 7.00 6.00 6.00 Building 14.25 13.00 13.00 9.00 9.00 10.00 12.00 12.00 13.00 13.00 Human Services 3.50 3.00 3.00 - 2.65 2.35 3.35 3.80 3.80 3.80 Neighborhood Development 1.00 1.00 0.90 - - - - - - - Economic Development - - - 0.50 0.50 - - - - - Police 169.00 164.00 161.00 135.00 132.00 145.00 146.00 160.00 160.00 160.00 Administration 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 2.00 2.00 Support Services 61.00 61.00 58.00 51.00 52.00 55.00 56.00 57.00 55.00 55.00 Field Operations 105.00 100.00 100.00 81.00 77.00 87.00 87.00 100.00 103.00 103.00 Parks, Rec. & Cultural Svcs. 44.25 39.75 39.75 36.45 36.45 35.45 35.90 34.80 37.46 37.46 Administration 2.80 1.35 1.35 1.35 1.35 1.35 1.80 1.80 1.80 1.80 Planning - - - - - - - Kenneth Jones Pool - - - - - - - General Recreation 7.10 4.80 4.80 5.50 5.50 5.50 5.50 5.50 5.83 5.83 Community Center 12.35 13.35 13.35 13.35 13.35 13.35 13.35 11.00 11.33 11.33 Dumas Bay Centre 2.75 2.75 2.75 2.75 2.75 2.75 2.75 3.00 3.00 3.00 Knutzen Family Theatre 1.75 - - - - - - - - - Parks Maintenance 17.00 17.00 17.00 13.00 13.00 12.50 12.50 13.50 15.50 15.50 Building 0.50 0.50 0.50 0.50 0.50 - - - - Public Works 44.00 42.95 41.95 38.95 38.95 39.95 38.95 44.00 43.00 44.00 Administration 1.85 2.35 2.35 2.25 2.20 2.25 2.25 2.75 2.75 2.75 Development Services 6.45 4.45 4.45 4.20 4.20 3.70 3.70 2.20 2.20 2.20 Traffic Services 6.10 6.10 5.10 2.35 2.35 3.85 3.85 4.35 4.35 4.35 Street Services 11.00 10.50 10.50 10.60 10.60 10.60 10.60 11.60 11.60 11.60 Emergency Management 1.00 1.00 1.00 1.00 1.00 1.00 - - - - Solid Waste & Recycling 1.70 1.70 1.70 1.70 1.70 1.70 1.70 2.20 2.20 2.20 Surface Water Management 15.40 16.35 16.35 16.35 16.40 16.35 16.35 20.40 19.40 20.40 Fleet & Equipment 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 Total 353.35 335.68 331.18 281.40 278.40 292.40 300.38 323.95 333.20 336.20 Source: City of Federal Way Finance Division *table does NOT include 1-time positions or frozen positions Page140 SALARIES AND SURETY BONDS OF PRINCIPAL OFFICIALS DECEMBER 31, 2017 LEGISLATIVE BODY POSITION EMPLOYEE ANNUAL SALARY MAYOR JIM FERRELL $119,088 DEPUTY MAYOR JEANNE BURBIDGE $14,214 COUNCIL MEMBERS LYDIA ASSEFA-DAWSON $14,214 MARK KOPPANG $14,214 SUSAN HONDA $14,214 BOB CELSKI $14,214 MARTIN MOORE $14,214 DINI DUCLOS $14,214 ADMINISTRATIVE STAFF POSITION EMPLOYEE ANNUAL SALARY FINANCE DIRECTOR ADE ARIWOOLA $153,900 CITY ATTORNEY RYAN CALL $144,996 CITY CLERK STEPHANIE COURTNEY $100,092 ECONOMIC DEVELOPMENT DIRECTOR TIM JOHNSON $147,132 PARKS DIRECTOR JOHN HUTTON $142,920 COMMUNITY DEVELOPMENT DIRECTOR BRIAN DAVIS $153,012 PUBLIC WORKS DIRECTOR MARWAN SALLOUM $155,532 POLICE CHIEF ANDY HWANG $170,088 Source: City of Federal Way Human Resources NOTE: In accordance with Ordinance 90-016, individual fidelity coverage of not less than $50,000 exists for the Mayor, Finance Director, City Clerk, Police Chief, and Judge. Page 141 MISCELLANEOUS STATISTICAL INFORMATION LOCAL TAXES ON BUSINESSES Franchise Tax - Cable TV ............................ 5.00% Utility Tax - (6%+ 1.75% Prop 1).................. 7.75% Admission Tax ........................................ 5.00% Gambling Taxes: Bingo/Raffles.................................... 5.00% Amusement/Games ............................. 2.00% Punchboard/PullTabs .........................., 3.00% Cardrooms........................................ 10.00% Local Sales Tax (Collected by the State)........... 10.00% FIRE AND EMERGENCY MEDICAL RESPONSE INFORMATION Fire and EmerQencv Medical Response information reflects the Qreater Federal Wav area, which is served by South King Fire & Rescue. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fire and Other Responses 1,083 1,147 1,041 934 1,363 968 999 1,148 1,019 3,213 Emergency Medical 12,058 11,077 11,460 11,914 12,571 12,950 13,847 14,193 16,144 17,109 PUBLIC EDUCATION 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 23 Elementary Schools 9,594 9,594 9,560 9,673 9,229 9,777 10,054 10,253 10,498 10,493 8 Middle Schools Public Academy, TAF 5,234 5,203 5,235 5,205 5,041 5,050 5,034 5,209 5,183 5,238 5 Schools 6,531 6,637 6,547 6,409 6,018 6,341 6,299 6,166 5,582 6,382 _High 2 Alternative\Int. Academy, Open Doors 263 266 288 321 377 386 385 351 412 409 Total 21,622 21,700 21,630 21,608 20,665 21,554 21,772 21,979 21,673 22,522 3,455 Staff members TAXABLE SALES (in millions) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Retail Sales $1,458 $1,257 $1,261 $1,277 $1,239 $1,355 $1,432 $1,564 $1,673 $1,671 Real Estate Sales $536 $208 $238 $315 $303 $399 $418 $599 $1,062 $819 Source: South King County Fire and Rescue Federal Way Public School City of Federal Way Finance Division Page142 PRINCIPAL TAXPAYERS -SALES TAXES Current Year and Nine Years A a 2017 2008 Sales Tax % of Total City Sales Tax Sales Taxes % of Total City Sales Received Sector Location Rank Received Received Sector Location Rank Taxes Received $ 763,058 General Merchandise Stores - S 348th St 1 5.35% $ 755,075 General Merchandise Stores - S 312th & S 316th 1 6.22% Wholesale Grocery & Other Grocery & Other General Merchandise Stores - General Merchandise Stores - 674,282 Grocery & Other S 312th & S 316th 2 4.72% 608,765 Wholesale Grocery & Other S 348th St 2 5.01% 441,399 Building Material & Garden S 348th St 3 3.09% 317,220 Budding Material & Garden S 348th St 3 2.61 Equipment & Supplies Equipment & Supplies General Merchandise Stores - 305,203 Motor Vehicle and Parts Dealers S 348th St 4 2.14% 293,971 Clothing, Household, & Other Commons 4 2.42% 298,728 General Merchandise Stores - Grocery & Other Twin Lakes 5 2.09% 263,130 Electronics and Appliance Stores Pavillion 5 2.17% 267,341 General Merchandise Stores - 1.87% 248,120 General Merchandise Stores - Grocery Twin Lakes 2.04 Clothing, Household, & Other Commons 6 & Other 6 Building Material & Garden Budding Material & Garden 231,875 Equipment & Supplies S 348th St 7 1.62% 213,723 Equipment & Supplies S 348th St 7 1.76% 206,394 Electronics and Appliance Stores Pavillion 8 1.451/. 181,508 Motor Vehicle and Parts Dealers S 348th St 8 1.49% 152,548 Administration of Economic Other 9 1.07% 158,041 General Merchandise Stores - Tools, Commons 9 1.30% Pro s Equipment, Clothin & Other 133,865 Amusement, Gambling, and S 348th St 10 0.94% 156,409 General Merchandise Stores - Commons 10 1.29% Recreation Industries Clothing, Household, &Other 3 474 693 24.34% S 3,195,961 26.32° Source: Washington State Department of Revenue Note: It is illegal to disclose specific taxpayer sales tax information. The above information is being provided without identification The City received $14.2M in sales and use tax in 2017 and $12.1M in 2008.