09-01-2015 Financial Statements andCity Clerk
Washington State Auditor's Office
Independence • Respect • Integrity
Financial Statements and Federal Single Audit
Report
City of Federal Way
King County
For the period January 1, 2014 through December 31, 2014
Published August 31, 2015
Report No. 1014872
Washington State Auditor's Office
August 31, 2015
Mayor and City Council
City of Federal Way
Federal Way, Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report on the City of Federal Way's financial statements and compliance
with federal laws and regulations.
We are issuing this report in order to provide information on the City's financial condition.
Sincerely,
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
Insurance Building, P.O. Box 40021 ❑Olympia, Washington 98504 -0021 0(360) 902 -0370 ❑TDD Relay (800) 833 -6388
TABLE OF CONTENTS
Federal Summary 4
Independent Auditor's Report On Internal Control Over Financial Reporting And On
Compliance And Other Matters Based On An Audit Of Financial Statements Performed In
Accordance With Government Auditing Standards 6
Independent Auditor's Report On Compliance For Each Major Federal Program And On
Internal Control Over Compliance In Accordance With OMB Circular A -133 8
Independent Auditor's Report On Financial Statements 11
Financial Section 14
About The State Auditor's Office 74
Washington State Auditor's Office Page 3
FEDERAL SUMMARY
City of Federal Way
King County
January 1, 2014 through December 31, 2014
The results of our audit of the City of Federal Way are summarized below in accordance with
U.S. Office of Management and Budget Circular A -133.
Financial Statements
An unmodified opinion was issued on the financial statements of the governmental activities, the
business -type activities, each major fund and the aggregate remaining fund information.
Internal Control Over Financial Reporting:
• Significant Deficiencies: We reported no deficiencies in the design or operation of
internal control over financial reporting that we consider to be significant deficiencies.
• Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
We noted no instances of noncompliance that were material to the financial statements of the
City.
Federal Awards
Internal Control Over Major Programs:
• Significant Deficiencies: We reported no deficiencies in the design or operation of
internal control over major federal programs that we consider to be significant
deficiencies.
• Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
We issued an unmodified opinion on the City's compliance with requirements applicable to its
major federal program.
We reported no findings that are required to be disclosed under section 510(a) of OMB Circular
A -133.
Washington State Auditor's Office Page 4
Identification of Major Programs:
The following was a major program during the period under audit:
CFDA No. Program Title
20.205 Highway Planning and Construction Cluster -
Construction
The dollar threshold used to distinguish between Type A and Type B
OMB Circular A -133, was $300,000.
The City qualified as a low -risk auditee under OMB Circular A -133.
Highway Planning and
programs, as prescribed by
Washington State Auditor's Office Page 5
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
City of Federal Way
King County
January 1, 2014 through December 31, 2014
Mayor and City Council
City of Federal Way
Federal Way, Washington
We have audited, 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, the 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, 2014, and the related notes to the financial statements, which
collectively comprise the City's basic financial statements, and have issued our report thereon
dated June 26, 2015.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit of the financial statements, we considered the City's
internal control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City's
internal control. Accordingly, we do not express an opinion on the effectiveness of the City's
internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the City's financial statements will not be prevented,
or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
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combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies. Given these limitations, during our audit we did
not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City's financial statements are free
from material misstatement, we performed tests of the City's compliance with certain provisions
of laws, regulations, contracts and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of
the City's internal control or on compliance. This report is an integral part of an audit performed
in accordance with Government Auditing Standards in considering the City's internal control and
compliance. Accordingly, this communication is not suitable for any other purpose. However,
this report is a matter of public record and its distribution is not limited. It also serves to
disseminate information to the public as a reporting tool to help citizens assess government
operations.
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
June 26, 2015
Washington State Auditor's Office Page 7
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR
EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL
CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB
CIRCULAR A -133
City of Federal Way
King County
January 1, 2014 through December 31, 2014
Mayor and City Council
City of Federal Way
Federal Way, Washington
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM
We have audited the compliance of the City of Federal Way, King County, Washington, with the
types of compliance requirements described in the U.S. Office of Management and Budget
(OMB) Circular A -133 Compliance Supplement that could have a direct and material effect on
each of its major federal programs for the year ended December 31, 2014. The City's major
federal programs are identified in the accompanying Federal Summary.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts
and grants applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of the City's major federal
programs based on our audit of the types of compliance requirements referred to above. We
conducted our audit of compliance in accordance with auditing standards generally accepted in
the United States of America; the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States; and
OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations.
Those standards and OMB Circular A -133 require that we plan and perform the audit to obtain
reasonable assurance about whether noncompliance with the types of compliance requirements
referred to above that could have a direct and material effect on a major federal program
occurred. An audit includes examining, on a test basis, evidence about the City's compliance
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with those requirements and performing such other procedures as we considered necessary in the
circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each
major federal program. Our audit does not provide a legal determination on the City's
compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended December 31, 2014.
REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Management of the City is responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and
performing our audit of compliance, we considered the City's internal control over compliance
with the types of requirements that could have a direct and material effect on each major federal
program in order to determine the auditing procedures that are appropriate in the circumstances
for the purpose of expressing an opinion on compliance for each major federal program and to
test and report on internal control over compliance in accordance with OMB Circular A -133, but
not for the purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly, we do not express an opinion on the effectiveness of the City's
internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on
a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance
requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
control that might be material weaknesses or significant deficiencies. We did not identify any
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deficiencies in internal control over compliance that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
PURPOSE OF THIS REPORT
The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of OMB Circular A -133. Accordingly, this report is not suitable for any other
purpose. However, this report is a matter of public record and its distribution is not limited. It
also serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
July 29, 2015
Washington State Auditor's Office Page 10
INDEPENDENT AUDITOR'S REPORT ON
FINANCIAL STATEMENTS
City of Federal Way
King County
January 1, 2014 through December 31, 2014
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,
2014, and the related notes to the financial statements, which collectively comprise the City's
basic financial statements as listed on page 14.
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 assessment of the risks of material misstatement of the financial
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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, 2014, 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 on pages 15 through 25 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.
Washington State Auditor's Office Page 12
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 accompanying Schedule of
Expenditures of Federal Awards is presented for purposes of additional analysis as required by
U.S. Office of Management and Budget Circular A -133, Audits of States, Local Governments,
and Non - Profit Organizations. This schedule 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 basic financial
statements. The information has been subjected to the auditing procedures applied in the audit of
the basic financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to
prepare the basic financial statements or to the basic financial statements themselves, and other
additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the information is fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING
STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated
June 26, 2015 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.
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
June 26, 2015
Washington State Auditor's Office Page 13
FINANCIAL SECTION
City of Federal Way
King County
January 1, 2014 through December 31, 2014
REQUIRED SUPPLEMENTARY INFORMATION
Management's Discussion and Analysis - 2014
BASIC FINANCIAL STATEMENTS
Statement of Net Position — 2014
Statement of Activities — 2014
Balance Sheet (with Reconciliation to Statement of Net Position) — Governmental Funds
— 2014
Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental
Funds — 2014
Statement of Revenues, Expenditures and Changes in Fund Balance Budget to Actual —
General Fund - 2014
Statement of Revenues, Expenditures and Changes in Fund Balance Budget to Actual —
Street Fund - 2014
Statement of Revenues, Expenditures and Changes in Fund Balance Budget to Actual —
Utility Tax Fund - 2014
Statement of Net Position — Proprietary Funds — 2014
Statement of Revenues, Expenses and Changes in Fund Net Position — Proprietary Funds
2014
Statement of Cash Flows — Proprietary Funds — 2014
Notes to Financial Statements — 2014
SUPPLEMENTARY AND OTHER INFORMATION
Schedule of Expenditures of Federal Awards and Notes — 2014
Washington State Auditor's Office Page 14
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, 2014. 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 of the City of Federal Way exceeded its liabilities at December 31, 2014 by $598.8 million (Net Position.)
Capital Assets (net of depreciation and related debt) account for 86% of this amount with a value of $516.4 million. Of the
remaining net position of $82.5 million or 14 %, $65.1 million may be used to meet the government's ongoing obligations
to citizens and creditors, without legal restriction while the $17.4 million are restricted for specific use.
• The City's total net position increased by $1.6 million, or less than 1% over 2013 as referenced on page number 18.
Governmental activities increased by $1.3 million or less than 1% while business -type activities increased by $0.3 million.
There was also a prior period adjustment of $4.9 million as noted in note 15.
• Net investment in capital assets governmental activities decreased by $2.6 million and government -wide unrestricted net
position increased by $181 thousand respectively over 2013 as referenced on page number 15.
• Restricted Net Position decreased by $5.2 million or 29.9% and is mainly for funding of capital projects and debt service.
• Governmental fund balances at year -end were $52.8 million, $2.8 million or 6% increase over the prior year. Of this
amount, a total of $12.5 million, or 24% of the governmental fund balance is unrestricted and available to fund ongoing
activities. The remaining $40.3 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 and capital
projects.
• Unrestricted fund balance in the general fund was $12.5 million, which decreased by $3.5 million or 28% from the prior
year.
• Debt increased by $7.0 million during the current fiscal year. General obligation debt decreased by $1.0 million while
public works trust fund loan decreased by $0.2 million. The City acquired the Target property at 2141 S 314th Street via 3-
year bank loan of $8.2 million at an annual rate of 1.51%.
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 Non -Major Funds. The other set of supplementary information is the Statistical Section. This section provides a four to
ten -year view of the City's revenues, expenditures, debt obligations and capacity, the City's largest taxpayers, and those
entities with the largest employment within the City of Federal Way. This section provides a long -term perspective on the
City's economy.
Government -wide Financial Statements
The government -wide financial statements are designed to provide readers with a broad overview of the City of Federal
Way's finances, in a manner similar to a private- sector business.
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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 13 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, downtown redevelopment 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.
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.
Washington State Auditor's Office Page 16
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 POSITION
As of December 31, 2014 and 2013
Governmental Activities Business -Type Activities Total
2014 2013 2014 2013 2014 2013
Current and other assets $ 95,147,927 $91,533,341 $ 7,787,827 $7,182,887 $ 102,935,754 $ 98,716,228
Capital assets and CIP,
net ofaccum depreciation 486,490,172 481,287,121 50,779,826 51,283,047 537,269,998 532,570,168
Total assets 581,638,099 572,820,462 58,567,653 58,465,934 640,205,752 631,286,396
Long -term liabilities 36,932,078 29,002,726 565,483 734,681 37,497,561 29,737,407
Other liabilities 3,399,540 3,764,800 463,227 513,334 3,862,767 4,278,134
Total liabilities 40,331,618 32,767,526 1,028,710 1,248,015 41,360,328 34,015,541
Net position:
Net investment in:
capital assets 466,078,036 468,628,412 50,299,229 50,620,091 516,377,265 519,248,503
Restricted 17,391,272 22,594,884 20,311 20,559 17,411,583 22,615,443
Unrestricted 57,837,173 48,829,641 7,219,403 6,577,269 65,056,576 55,406,910
Total net position $ 541,306,481 $ 540,052,936 $ 57,538,943 $ 57,217,919 $ 598,845,424 $ 597,270,855
Analysis of Net Position
Total net position of the primary government of $598.8 million at December 31, 2014 increased $1.6 million or less than 1.0%
compared to December 31, 2013. The increase is mainly due to governmental type activities increase of $1.3 million and
business -type activities increase of $0.3 million.
Washington State Auditor's Office Page 17
The largest component of the City's net position, 86% or $516.4 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 2.6% or $14.0 million 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
downtown park, trail and pedestrian access improvements, SR99 HOV Lanes Phase 5, S 356`h St: SR99 - SR 161, S 304th St at
28th Ave S, and Performing Arts and Conference Center. 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 system.
The remaining balance of restricted net position of $3.4 million is divided among restrictions for: $0.13 million for police
special funds, and court trust, $0.02 million for steel lake and north lake management districts, $0.03 million for prepaid
insurance /debt and flex plan, $0.44 million for peg and franchise fees for educational and governmental access services, $0.40
million for lodging tax, $0.20 million for paths and trails, and $2.14 million for debt service.
The unrestricted business -type activities portion of $7.2 million, $7.0 million can only be spent on surface water management
and the remaining $0.18 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 West Branch Lakota Creek
Restoration are examples of utility activities.
Other functions of the City may access the remaining $57.8 million in 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 increased by $3.6 million or 3.9% primarily due to an increase of $1.9 million in investment in joint
venture related to the SCORE jail facility (see Note 13). In addition, cash & cash equivalents increased by $2.4 million
primarily due to an increase in sales tax revenue, and charges for services revenue from community development.
Capitals assets and CIP, net of accumulated depreciation increased by $5.2 million or 1.1% primarily due to purchase of Target
property land for downtown redevelopment of $8.2 million, construction in progress of Performing Arts & Event Center of
$1.6 million, $1.0 million for developer contributed infrastructure assets and Brooklake Center, and deprecation increase due to
prior period adjustment on infrastructure of $4.9 million and current year depreciation. (see Note 7)
Long -term liabilities increased by $7.9 million or 27.3% primarily due to $8.2 million general obligation bond issued for
Target Property purchase, and paying down the balance on GO Bond, SCORE facility, and Valley Communications. (see Note
10)
Other liabilities decreased by $0.365 million or 9.7% primarily due to having less December purchases in the Transportation
Fund than the prior year, therefore decreasing vouchers payable.
Net investments in capital assets decreased by $2.55 million or less than 1.0% primarily due primarily due to an increase in
capital assets and CIP, net of accumulated depreciation and an increase in long -term liabilities as described above, therefore
decreasing net investments in capital assets.
Restricted net position represents amounts that must be used in accordance with external restrictions, and decreased by $5.2
million or 29.9% from the prior year primarily due to moving committed fund balance that was in restricted net position in
2013 for capital assets to unrestricted net position in the government -wide financial statements. Additions to the restricted net
position balance include the performing arts & event center balance, and the downtown park project balance in the Parks
capital fund. Additionally there are externally restricted balances for special contracts /studies, hotel /motel lodging tax, and
paths and trails reserve.
Washington State Auditor's Office Page 18
Business -Type Activities:
Current and other assets increased by $0.6 million or 8.4% primarily due to an increase in Surface Water Management
operations cash and other equivalents of $0.46 million from revenues exceeding operating expenditures due to unfilled
positions, and an increase in Surface Water Management due from other governments of $0.19 million. The remainder is
primarily due to a reduction in receivables for surface water management fees, and a reduction in Dumas Bay Centre cash due
to additional operating expenses from food and operating costs in the center.
Capitals assets and CIP, net of accumulated depreciation decreased by $0.5 million or 1.0% primarily due to current year
depreciation on Surface Water Management and Dumas Bay Centre assets. (see Note 7)
Long -term liabilities decreased by $0.17 million or 23.0% due to paying down of Public works trust fund loans by $0.18
million, and an increase in compensate absences payable of $0.01 million. (See Note 10)
Net investments in capital assets decreased $0.32 million or less than 1.0% primarily due to current year depreciation on
Surface Water Management and Dumas Bay Centre assets, and low outstanding balance in Public works trust fund loan as
described above.
Unrestricted net position increased by $0.6 million or 9.8% primarily due to the increase in current and other assets and the
decrease in other liabilities as described above.
Washington State Auditor's Office Page 19
CHANGES IN NET POSITION
For the Years Ended December 31, 2014 and 2013
Governmental Activities Business -Type Activities Total
2014 2013 2014 2013 2014
2013
Revenues:
Programs revenues:
Charges for services $ 14,402,062 $ 12,515,733 $ 4,174,613 $ 4,096,751 $ 18,576,675 $ 16,612,484
Operating grants & contrib. 5,410,098 6,007,682 607,608 774,436 6,017,706 6,782,118
Capital grants & contrib. 5,632,549 3,892,651 - 5,632,549 3,892,651
General revenues:
Property taxes 10,349,906 10,152,114 10,349,906 10,152,114
Sales tax 12,173,281 11,346,338 12,173,281 11,346,338
Local criminal justice sales tax 2,138,406 1,992,667 2,138,406 1,992,667
Utility tax 12,028,878 12,584,293 12,028,878 12,584,293
Real estate excise tax 2,062,722 2,034,033 2,062,722 2,034,033
Other taxes 414,589 393,524 414,589 393,524
Other 1,145,798 868,261 22,507 13,000 1,168,306 881,261
Total Revenue 65,758,290 61,787,296 4,804,728 4,884,187 70,563,018 66,671,483
Expenses:
General government 4,633,942 4,575,614 4,633,942 4,575,614
Security of persons & property 29,703,386 27,894,695 29,703,386 27,894,695
Transportation 11,434,659 9,675,727 11,434,659 9,675,727
Physical environment 443,127 490,916 443,127 490,916
Economic environment 2,785,807 2,191,487 2,785,807 2,191,487
Health and human services 1,056,802 1,683,449 1,056,802 1,683,449
Culture and recreation 8,376,205 8,418,920 8,376,205 8,418,920
Interest on long -term debt 1,010,406 1,779,833 1,010,406 1,779,833
Surface Water Management 3,653,999 3,234,742 3,653,999 3,234,742
Dumas Bay Centre 945,705 844,623 945,705 844,623
Total Expenses 59,444,335 56,710,641 4,599,703 4,079,365 64,044,038 60,790,006
Change in net position before 6,313,955 5,076,655 205,025 804,822 6,518,979 5,881,477
transfers
Transfers (116,000) (137,419) 116,000 137,419
Change in net position 6,197,955 4,939,236 321,025 942,241 6,518,980 5,881,477
Net position - beginning 540,052,936 538,472,176 57,217,919 56,275,678 597,270,854 594,747,854
Prior period adjustment Note 15 (4,944,409) (3,358,477) (4,944,409) (3,358,477)
Adjusted net position - beginning 592,326,445 591,389,377
535,108,526 535,113,699 57,217,919 56,275,678
Net position - ending $ 541,306,481 $ 540,052,936 $ 57,538,943 $ 57,217,919 $ 598,845,424 $ 597,270,855
Washington State Auditor's Office Page 20
Analysis of the change in net position:
Total government -wide revenues of the primary government increased by $3.9 million or 5.8% and total expenses increased by
$3.3 million or 5.4% from the prior years. These changes are discussed in more detail below.
Governmental Activities:
Governmental activities contributed $6.2 million or 95% of the total change in net position of $6.5 million. The prior year
change in net position was $4.9 million. The primary change compared to 2013 is due to the following revenues, and expenses
described below.
Total revenues for governmental activities increased $4.0 million or 6.4 %. The increase is primarily due to an increase in sales
tax of $0.83 million, capital grants and contributions related to transportation improvement projects of $1.7 million, charges for
services related to transportation impact fees for development of City roads of $1.1 million, and charges for services related to
building development expedited plan review and plan checking fees of $0.24 million.
Total expenses for governmental activities increased $2.7 million or 4:8 %. The net increase is primarily due to increases in the
following expense categories: A $1.8 million increase in "Security of persons & property" primarily due to $1.5 million
increase in salaries and wages related to adding a Police Officer and Police Records Administrator, unfilled Police officer
vacancies being filled, health insurance cost increases, and an increase in overtime due to major events in 2014, $0.13 million
increase in operating supplies from backorder of ammunition, and $0.20 million increase in SCORE and Valleycomm
operations. A $1.8 million increase in "Transportation" primarily due to $0.63 million in Street operations related to
maintenance of City roads and $1.3 million depreciation expense increase due to adding additional assets, as well as capturing
depreciation expense related to assets in Note 15 prior period adjustment. A $0.59 million increase in "Economic
environment" primarily due to adding 4.0 FTE to the Community Development Department, and additional consulting for
plans review. A $0.77 million decrease in "interest on long -term debt" primarily due to additional interest payments on 2003
debt refunding.
Other ta,
Governmental Activities - Revenues
Other. 1.7 %
Charges for
services, 21.9%
Sales tae 18.5%
Business -Type Activities:
Operating grants
& contributions,
82%
Capital grants and
contribution, 8.6%
Property taxi
15.7%
Governmental Activities - Expenses
Interest on long-
term debt. 1 .7%
Heahh and human recreation.
services. 1.8% 14.1%
Economic
environment. 4.7%
Physical
environment. 0.7%
asponation.
t9.r/
General
government. 78%
Business -type activities of the City's Surface Water Management system and Dumas Bay Centre increased the City's net
position by $0.3 million, compared to prior year net position of $0.9 million. The primary change compared to 2013 is due to
the following revenues and expenses described below.
Total revenues decreased by $0.08 million or 1.6% from 2013. Attributing factors to the decrease in revenues are as follows: A
decrease in grant revenue for Surface Water Management capital projects of $0.17 million, an increase for Dumas Bay Centre
revenues of $0.02 million for overnight rentals, and additional Surface Water Management fees of $0.03 million.
Total expenses increase of $0.52 million or 12.8% from 2013. This is primarily due to an increase of $0.10 million in goods
and services for the operation of Dumas Bay Centre, and personnel costs increase of $0.15 million in Surface Water
Management due to the additional reclass of expenditures to construction in progress in 2013 over 2014. The increase in
services and charges of $0.09 million is due to the additional reclass of expenditures to construction in progress in 2013 over
2014, and additional repairs and maintenance for Surface Water Management operations. The increase of $0.07 million in
intergovernmental services is attributed to additional permit expenditures to Department of Ecology for water quality.
Washington State Auditor's Office
Page 21
Business -Type Activities - Revenues
Other. OS %
Opealmg grants
& contributions.
12 6%
Charges for
scniccs. 86.9%
Business -Type Activities - Expenses
Dumas Bas
Centre. 20.6%
Surface Water
Management,
79.4%
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
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 2014, the City's governmental funds had a combined ending fund balance of $52.8 million which increased by
$2.8 million from the prior year. Approximately 24% or $12.5 million of this amount constitutes unrestricted General Fund
balance, which is available for spending at the City Council's discretion. The remainder of the fund balance is restricted to
indicate that it is not available for new spending because it has already been committed for debt service, paths & trails reserve,
hotel/motel lodging tax, police special funds, petty cash/change funds, court trust fund, advance travel, and capital projects
The General Fund is the chief operating fund of the City. Total fund balance decreased by $0.01 million or 0.6% due to the
increase in expenditures offset by an increase to various revenues described below. The decrease in fund balance is primarily
due to $0.5 million transfer out for Capital Project Reserve Fund, an $1.8 million increase in expenditures, therefore reducing
fund balance for salaries and wages related to adding a Police Officer and Police Records Administrator, unfilled Police officer
vacancies being filled, health insurance cost increases, and an increase in overtime due to major events in 2014; a $0.1 million
increase in operating supplies from backorder of ammunition, and $0.2 million increase in SCORE and Valleycomm
operations. Additionally a $0.6 million increase in expenditures is due to adding 4.0 FTE's to the Community Development
Department, and additional consulting for plans review is also a factor in decreasing the fund balance. To offset the decrease in
fund balance there was a transfer in of $2.0 million from risk management fund for committed strategic opportunities reserve,
an increase in sales tax of $0.8 million and charges for services related to building development expedited plan review and plan
checking fees of $0.2 million.
The Street Fund has a total fund balance of $0.6 million which increased by $0.5 million from 2013 due to transferring in $0.5
million to maintain an emergency reserve fund for snow and ice removal.
The Utility Tax fund was established to account for the utility tax receipts which include 6% 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 decreased $0.1 million or 4% from 2013 due mainly to
$0.6 million less tax revenue received and more being transferred out for Street Fund operations.
The Debt Service Fund has a total fund balance of $0.07 million which decreased by $5.2 million from 2013 due to creation of
separate Real Estate Excise Tax Fund and separate Debt Service Fund.
The Downtown Redevelopment fund was established to accumulate resources and set aside funding for downtown projects.
Overall, ending fund balance decreased by $2.6 million. This is primarily due to a $4.2 million transfer out to the Performing
Arts & Event Center Fund and an increase in LIFT Sales tax revenue from the State of $0.8 million.
Washington State Auditor's Office Page 22
The Transportation Fund is used to improve existing traffic signals, new signalization, major roadways and arterials involving
the design and construction of new sections of streets, the widening of roadways to provide additional vehicle lanes, the
installation of sidewalks and landscaping. The major source of revenue for this fund is grants from other agencies and
contributions from other funds. Total ending fund balance decreased by $5.0 million primarily due to transferring out $4.4
million to the Real Estate Excise Tax Fund due to a project being completed and transferring out $1.3 million to the Utility Tax
Fund due to projects being completed.
The Performing Arts & Event Center Fund is being used for the building of the center. This is an added fund for 2014 and has
a fund balance of $8.4 million primarily due to transfers in of Utility Tax, Real Estate Excise Tax, and LIFT Sales tax revenue.
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 $7.0 million, and
those for Dumas Bay Centre amounted to $0.2 million. The total changes in net position for both funds were $0.5 million
increase and $0.2 million decrease, respectively. Other factors concerning the finances of these two funds have already been
addressed in the discussion of the City of Federal Way's business -type activities.
GENERAL FUND BUDGETARY AND ACTUAL HIGHLIGHTS
The City of Federal Way budgets on a biennial basis with each budget beginning in an odd numbered year. Appropriations for
operating funds are authorized for two years, but must be reviewed and reauthorized by the City Council in the middle of the
biennial period. In 2014, the City made two budget adjustments. The following discussion is reflective only of the current
year of the biennium.
The General Fund operating expenditure budget increased by $4.0 million between the original adopted budget and the
adjusted budget for 2014 fiscal year. The following is the major changes for the 2014 budget:
o Added $0.88 million for new hires and 2.5 percent salary increase.
o Added $0.10 million for termination pay.
o Added $0.18 million for Health Care Premium increase.
o Added $0.07 million for search for City Attorney and Economic Development Director.
o Added $0.05 million for Nick and Derek project overtime.
o Added $0.05 million for two new vehicles for Building Inspector and Plans Examiner.
o Added $0.10 million for election fees.
o Added $0.05 million for security improvement to Municipal Court.
o Added $0.05 million for outside Legal Counsel Services.
o Added $0.78 million for future and pending deductible to Risk Management.
o Added $0.07 million for Permit System Upgrade.
o Added $0.11 million for Building Abatement.
o Added $0.08 million for comprehensive plan update.
o Added $0.08 million for the City Center Redevelopment.
o Added $0.30 million for Parks & Recreation for capital, temp help, wire theft, and cultural plan.
o Added $0.12 million for Microsoft Enterprise Agreement and Additional Licenses.
o Added $0.21 million for Police Grants.
Adjustments to revenues and other sources budget include: Adjustments to beginning balance of $9.9 million; increase in
liquor profits of $0.15 million; increase in grants of $0.55 million; increase in sales tax of $0.82 million; increase of $0.06
million for property taxes; increase of $0.19 million for criminal justice sales tax; increase in franchise fees of $0.06 million;
increase of $0.11 million for liquor excise tax; increase of $0.13 million for state shared criminal justice for high crime;
increased building permits of $0.25 million; increased plan check fees of $0.60 million and plumbing permit fees of $0.04
million.
The General Fund ending fund balance of $16.0 million is $4.6 million over the projected $11.4 million for 2014 year -end. Of
the $4.6 million, $1.2 million is being earmarked for carry forward into 2015. The remaining $3.4 million increase is
considered one -time funds for 2016.
The $4.6 million increase in ending fund balance is made up of $2.7million in additional revenues /other sources and $1.96
million in unspent expenses/other uses.
Washington State Auditor's Office
Page 23
The $2.7 million increase in revenues /other sources is primarily attributed to increases in property taxes of $0.16 million; sales
tax of $0.56 million, criminal justice sales tax of $0.23 million, gambling taxes of $0.03 million, state shared revenue of $0.19
million, Police contracted services fees of $0.29 million, and community and economic development permits and fees of $0.96
million.
The $1.96 million unspent expenses /other uses are primarily attributable to savings found in: Jail services of $0.16 million;
Community & Economic Development of $0.40 million; Parks & Recreation of $0.25 million; Law of $0.15 million; Human
Resources /City Clerk of $0.10 million; Municipal Court of $0.02 million; Finance of $0.04 million, City Council of $0.03
million, and $0.30 transfer out for self - insurance.
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,
2014 amounts to $537 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 7.
CAPITAL ASSETS AT YEAR -END, NET OF DEPRECIATION
Land
Building and improvements
Machinery and equipment
Infrastructure
Construction in progress
Total Capital Assets
Gove rnme ntal
Activitie s
$ 312,907,345
31,913,909
4,814,797
113,978,317
22,875,804
$ 486,490,172
Business -Type
Activitie s
$ 10,933,528 $
7,101,767
22,379
29,331,337
3,390,815
$ 50,779,826 - $
Total
2014
323,840,873
39,015,677
4,837,176
143,309,653
26,266,619
537,269,998 r$
2013
$ 315,111,400
69,682,635
4,905,995
125,252,298
17,617,840
532,570,168
Major capital asset events during the current fiscal year included the following: expanding and improving the city streets
and traffic corridors for a total of $6.7 million and Performing Arts and Event Center and various park improvements for
$2.5 million. Additionally there was a land purchase of $8.2 million for the Target property, and a prior period
adjustment to depreciation in Note 15 of $4.9 million. Additional information on the City of Federal Way's capital assets
can be found in Note 8 of the Notes to the Financial Statements.
Long -term debt
At the end of 2014, the City of Federal Way had total debt outstanding of $37.1 million. The future principal and interest
payments which are backed by the full faith and credit of the government will be $47.8 million (see page 68 and 69). The
remainder of the City's debt represents Public Works Trust Fund Loans.
LONG -TERM DEBT (FUTURE PRINCIPAL AND INTEREST PAYMENTS)
Governmental
Activities
General obligation bonds $ 47,805,540 $
Public works trust fund loan
Total $ 47,805,540 $ 495,016 $ 48,300,556
Business -Type
Activities Total
- $ 47,805,540
495,016 495,016
The City's total debt decreased by $1.2 million due to annual debt service payments.
In February 2013, Moody's Investors Service assigned Aa3 rating to the City's Limited Tax General Obligation Refunding
Bonds, 2013.
Washington State statutes limit the amount of debt a government entity may issue to 7.5% of its total assessed valuation,
subject to 60% majority vote of qualified electors. Of the 7.5% limit, 2.5% is for general purposes, 2.5% for open space /park
facilities, and 2.5% for utilities. Non -voted general purpose indebtedness is limited to 1.5% of assessed valuation and
combination of voted and non -voted general purpose indebtedness cannot exceed 2.5% of assessed valuation.
Washington State Auditor's Office Page 24
The City's assessed valuation for 2014 was $8.319 billion and the total amount of debt the City may issue is $591.3
million. Remaining legal debt capacities as of December 31, 2014 are:
General government (no vote required) $ 92,159,058
General government (3/5 majority vote required) $ 83,190,592
Parks and open space (3/5 majority vote required) $207,976,480
Utilities (3/5 majority vote required) $207,976,480
Total Capacity $591,302,611
Additional information on the City of Federal Way's long -term debt can be found in Note 11 and in the Statistical Section of
this report.
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 -2520, or visit the City's website at www.cityoffederalway.com.
Washington State Auditor's Office Page 25
STATEMENT OF NET POSITION
December 31, 2014
ASSETS
Cash & cash equivalents and investments
Receivables (net)
Due from other governments
Prepaid items
Restricted assets:
Seizure funds /petty cash/advance travel /retainage
Investment in joint venture
Capital assets not being depreciated:
Land
Construction in progress
Capital assets net of accumulated depreciation:
Buildings /structures
Improvements other than buildings
Machinery and equipment
Infrastructure
Total Assets
LIABILITIES
Accounts payable and accruals
Unearned revenue
Retainage payable
Customer deposits
Noncurrent Liabilities:
Due within one year
Due in more than one year
Total Liabilities
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
$ 68,235,688
2,342,820
2,419,409
30,588
134,354
21,985,068
$ 7,241,528
155,402
390,896
312,907,345 10,93 3,528
22,875,804 3,390,815
9,048,779 470,054
22,865,130 6,631,713
4,814,797 22,379
113,978,317 29,331,337
581,638,099 58,567,653
1,589,376
280,206
206,323
1,323,636
1,168,423
35,763,655
40,331,618
466,078,036
2,136,390
14,062,918
1,191,964
57,83 7,173
$ 541,306,481
60,368
359,007
38,288
5,564
187,962
377,521
1,028,710
50,299,229
20,311
7,219,403
Total
$ 75,477,216
2,498,222
2,810,305
30,588
134,354
21,985,068
323,840,873
26,266,619
9,518,833
29,496,843
4,837,176
143,309,653
640,205,752
1,649,744
639,212
244,611
1,329,200
1,3 56,385
36,141,176
41,360,328
516,377,265
2,136,390
14,062,918
20,311
1,191,964
65,056,576
$ 57,538,943 $ 598,845,424
Washington State Auditor's Office Page 26
STATEMENT OF ACTIVITIES
For the Year ended December 31, 2014
Charges for
Expenses Services
Functions/Programs
Governmental Activities:
General government $ 4,633,942
Security of persons & property 29,703,386
Transportation 11,434,659
Physical environment 443,127
Economic environment 2,785,807
Health 1,056,802
Culture & recreation 8,376,205
Interest on long -term debt 1,010,406
Total governmental activities 59,444,335 14,402,062 5,410,098 5,632,549
Program Revenues
capital
Operating Grants and
Grants and Contribution
Contributions s
Net (Expense) Revenue & Changes in Net Position
Governmental Business -type
Activities Activities
Total
$ 2,118,896
4,637,071
1,804,199
305,742
3,059,772
2,476,383
$ 1,771,655
579,991
1,605,815
146,631
1,285,258
20,749
$ -
5,632,549
Business -type Activities:
Surface Water Management
Dumas Bay Centre
Total business -type activities
Total
3,653,999 3,530,939
945 705 643 673
4,599,703
$ 64,044,038 $ 18,576,675 $ 6,017,706 $5,632,549
607,608
$ (743,391) $
(24,486,324)
(2,392,096)
9,246
1,559,222
(1,056,802)
(5,879,073)
(1,010,406)
(33,999,625)
$ (743,391)
(24,486,324)
(2,392,096)
9,246
1,559,222
(1,056,802)
(5,879,073)
(1,010,406)
(33,999,625)
4,174,613 607,608
484,549
(302,031)
182,517
(33,999,625) 182,517
484,549
(302,031)
182,517
(33,817,108)
General revenues:
Property tax
Sales tax
Local criminal justice sales tax
Utility tax
Real estate excise tax
Gambling tax
Hotel/motel tax
Leasehold excise tax
Other revenue
Investment earnings
Transfers
Total general revenues and transfers
Change in net position
Net position at beginning of year
Prior period adjustment (See Note 15)
Adjusted beginning net position
Net position at end of year
10,349,906
12,173,281
2,138,406
12,028,878
2,062,722
176,068
231,828
6,693
883,549
262,249
(116,000)
40 197 580
6 197 955
540,052,936
(4,944,409)
535,108,526
22,507
116,000
10,349,906
12,173,281
2,138,406
12,028,878
2,062,722
176,068
231,828
6,693
883,549
284,757
138,507 40,336,087
321,025 6,518,979
57,217,919 597,270,854
(4,944,409)
57,217,919 592,326,445
$ 541,306,481 $ 57,538,943 $ 598,845,424
Washington State Auditor's Office Page 27
ASSETS
Equity in pooled cash & 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
Liabilities:
Vouchers payable
Accounts /payroll payable
Retainage payable
Deposits payable
Interfund loans payable
Unearned revenue
TOTAL LIABILITIES
DEFERRED INFLOWS OF RESOURCES
Fund Balance:
Nonspendable
Restricted
Committed
Unassigned
TOTAL FUND BALANCES
TOTAL LIABILITIES, DEFERRED
INFLOWS OF RESOURCES AND FUND
BALANCES
BALANCE SHEET
GOVERNMENTAL FUNDS
December 31, 2014
General
$ 15,313,366
25,588
260,394
42,450
134,354
1,562,928
10,000
17,349,080
484,864
4,674
528,899
55,286
1,073,723
230,939
105,417
54,526
3,403,937
12,480,539
16,044,418
Street
Utility Tax
Debt
Service
$ 1,527,218 $ 1-,844,387 $ 108,058
82,333
1,609,551
164,301
772,111
71,116
1,007,528
602,023
602,023
1,698,136
2,674
3,545,197
3,545,197
3,545,197
108,058
54
34,518
34,572
73,486
73,486
$ 17,349,080 $ 1,609,551 $ 3,545,197 $ 108,058
Washington State Auditor's Office Page 28
BALANCE SHEET
GOVERNMENTAL FUNDS
December 31, 2014
Downtown Performing Arts Nonmajor
Redevelopment ort
Transpation & Event Ctr Governmental Total
ASSETS
Equity in pooled cash & investments $ 214,369 $ 8,301,420 $ 8,578,843 $ 15,400,991 $ 51,288,652
Prepaid insurance /debt service - - 25,588
Receivables (net):
Taxes 274,168 2,232,698
Accounts and contracts 67,672 110,122
Restricted Cash - - 134,354
Due from other governments 119,036 411,403 241,035 2,419,409
Interfund loans receivable - - - 10,000
TOTAL ASSETS 333,405 8,712,823 8,578,843 15,983,866 56,220,823
LIABILITIES, DEFERRED INFLOWS
OF RESOURCES AND FUND
Liabilities:
Vouchers payable 367 308,545 195,272 205,898 1,359,301
Accounts /payroll payable - 4,674
Retainage payable - 192,440 13,883 206,323
Deposits payable - 22,631 1,323,641
Interfund loans payable - - 10,000 10,000
Unearned revenue 119,286 280,206
TOTAL LIABILITIES 367 500,985 195,272 371,698 3,184,145
DEFERRED INFLOWS OF RESOURCES (25) 230,914
Fund Balance:
Nonspendable - - 105,417
Restricted 22,804 5,494,696 2,462,606 9,177,738 17,285,856
Committed 310,259 2,717,142 5,920,965 6,434,430 22,933,953
Unassigned - - 12,480,539
TOTAL FUND BALANCES 333,063 8,211,838 8,383,571 15,612,168 52,805,765
TOTAL LIABILITIES, DEFERRED
INFLOWS OF RESOURCES AND FUND
BALANCES $ 333,405 $ 8,712,823 $ 8,578,843 $ 15,983,866
Amounts reported for governmental activities in the statement of net position are different because:
Capital assets are used in governmental activities are not financial resources and, therefore, are not
reported in the funds. See Note 7, difference is the Internal Service fund amount of $13.47M on page 37
473,019,406
Investment in joint venture is not a financial resource and, therefore, not reported in the funds. See Note 13. 21,985,068
Other long -term assets are not available to pay for current - period expenditures and, therefore,
are deferred inflow of resources in the funds. See Note 6. 230,914
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 37 Internal Service Net Position - Adj $55.9K + $45.6K LT Comp Abs.
30,197,406
Long -term liabilities, including bonds payable, are not due and payable in the current period
and, therefore, are not reported in the funds. See Note 10. (36,932,078)
Net position of governmental activities $ 541,306,481
Washington State Auditor's Office Page 29
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
For Year Ended December 31, 2014
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
General
Street Utility Tax
$ 24,727,864 $
3,198,758
1,692,392
3,849,987
1,038,407
143,292
457,127
35,107,827
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
4,031,000
30,607,442
2,726,069
835,814
3,931,907
49,241
42,181,473
(7,073,646)
112,913
1,118,593
255,884
802
44,053
Debt
Service
$ 12,028,877 $
81,466
1,532,245 12,110,343
4,630,788
80,134
2,427
2,427
963,500
1,021,945
4,630,788 80,134 1,985,445
(3,098,543) 12,030,209 (1,983,018)
Anticipation note - - -
Transfers in 10,619,159 3,600,566 1,735,831 25,169
Transfers out (3,641,682) - (13,888,383) (3,217,000)
TOTAL OTHER FINANCING
SOURCES (USES) 6,977,477 3,600,566 (12,152,552) (3,191,831)
NET CHANGE IN FUND BALANCES (96,169) 502,023 (122,343) (5,174,849)
FUND BALANCES - BEGINNING 16,140,587 100,000 3,667,540 5,248,336
FUND BALANCES - ENDING $ 16,044,418 $ 602,023 $ 3,545,197 $ 73,486
Washington State Auditor's Office Page 30
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
For Year Ended December 31, 2014
Downtown Performing Arts Nonmajor
Redevelopment Transportation & Event Ctr Govemmental Total
REVENUES
Taxes $ 8,744 $ $ $ 2,476,430 $ 39,241,915
Licenses and permits 3,311,671
Intergovernmental 1,285,258 4,647,052 1,186,538 9,929,833
Service charges and fees - 1,406,402 2,079,522 7,591,795
Fines and forfeitures - - 2,460,189 3,498,596
Interest 1,402 8,332 3,115 9,603 250,439
Other - 1,528 - 380,841 883,549
TOTAL REVENUES 1,295,404 6,063,314 3,115 8,593,123 64,707,798
EXPENDITURES
Current:
General govemment 3,306 330,332 4,444,772
Security of persons and property - - 627,788 31,235,230
Transportation 163,041 1,415,171 6,209,000
Physical environment - 461,718 461,718
Economic environment 60,473 2,786,542
Health 222,027 1,057,841
Culture and recreation 2,315,045 6,246,952
Debt service:
Principal 963,500
Interest/fiscal charges /admin fees - - - - 1,021,945
Capital outlay 8,221,755 6,755,012 1,564,307 918,643 17,508,958
TOTAL EXPENDITURES 8,225,061 6,918,053 1,564,307 6,351,197 71,936,458
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (6,929,657) (854,739) (1,561,192) 2,241,926 (7,228,660)
OTHER FINANCING SOURCES (USES)
Anticipation note 8,209,960 - - - 8,209,960
Transfers in 300,000 1,598,000 9,944,763 12,617,302 40,440,790
Transfers out (4,209,763) (5,726,278) - (7,923,492) (38,606,598)
TOTAL OTHER FINANCING
SOURCES (USES) 4,300,197 (4,128,278) 9,944,763 4,693,810 10,044,152
NET CHANGE IN FUND BALANCES (2,629,460) (4,983,017) 8,383,571 6,935,736 2,815,492
FUND BALANCES - BEGINNING 2,962,523 13,194,855 8,676,432 49,990,273
FUND BALANCES - ENDING $ 333,063 $ 8,211,838 $ 8,383,571 $ 15,612,168 $ 52,805,765
Washington State Auditor's Office Page 31
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For Year Ended December 31, 2014
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
Economic environment
Health
Culture and recreation
Capital outlay
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
TOTAL OTHER FINANCING
SOURCES (USES)
NET CHANGE IN FUND BALANCES
FUND BALANCES - BEGINNING
FUND BALANCES - ENDING
Budgeted Amounts
Original
Final
$ 22,691,000
2,041,000
807,000
2,757,241
1,115,000
74,000
293,650
$ 23,755,000
2,416,000
1,357,675
3,395,714
1,115,000
74,000
293,650
Variance with
Final Budget -
Positive
Actual Amounts (Negative)
$ 24,727,864
3,198,758
1,692,392
3,849,987
1,038,407
143,292
457,127
$ 972,864
782,758
334,717
454,273
(76,593)
69,292
163,477
29,778, 891 32,407,039
35,107,827 2,700,788
4,121,168 5,731,468 4,031,000 1,700,468
28,864,714 29,937,585 30,607,442 (669,857)
2,236,206 3,120,965 2,726,069 394,896
782,871 805,075 835,814 (30,739)
3,817,122 4,184,996 3,931,907 253,089
- 40,000 49,241 (9,241)
39,822,081 43,820,089 42,181,473 1,638,616
(10,043,190) (11,413,050) (7,073,646) 4,339,404
8,578,187 10,644,187 10,619,159 (25,028)
(2,311,276) (3,954,601) (3,641,682) 312,919
6,266,911 6,689,586 6,977,477 287,891
(3,776,279) (4,723,464) (96,169) 4,627,295
6,276,742 16,140,587 16,140,587
$ 2,500,463 $ 11,417,123
$ 16,044,418 $ 4,627,295
Washington State Auditor's Office Page 32
STREET FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For Year Ended December 31, 2014
REVENUES
Licenses and permits
Intergovernmental
Service charges and fees
Interest
Other
TOTAL REVENUES
EXPENDITURES
Current:
Transportation
TOTAL EXPENDITURES
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
TOTAL OTHER FINANCING
SOURCES (USES)
NET CHANGE IN FUND BALANCES
FUND BALANCES - BEGINNING
FUND BALANCES - ENDING
Budgeted Amounts
Original
Final
$ 115,000
1,040,000
202,000
2,000
34,000
$ 115,000
1,104,302
202,000
2,000
34,000
Actual Amounts
$ 112,913
1,118,593
255,884
802
44,053
Variance with
Final Budget -
Positive
(Negative)
1,393,000 1,457,302
1,532,245
$ (2,087)
14,291
53,884
(1,198)
10,053
74,943
4,405,275
4,405,275
(3,012,275)
5,292,731 4,630,788
5,292,731 4,630,788
(3,835,429) (3,098,543)
661,943
661,943
736,886
3,012,276
3,835,432
3,600,566
(234,866)
3,012,276 3,835,432
3
100,000
$ 100,003
1
100,000
$ 100,001
3,600,566 (234,866)
502,023 502,020
100,000
$ 602,023 $ 502,020
Washington State Auditor's Office Page 33
UTILITY TAX FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
For Year Ended December 31, 2014
REVENUES
Taxes
Interest
TOTAL REVENUES
EXPENDITURES
Current:
General government
TOTAL EXPENDITURES
Budgeted Amounts
Original
Variance with
Final Budget -
Positive
Final Actual Amounts (Negative)
$ 12,361,000
6,000
$ 12,552,000
6,000
$ 12,028,877
81,466
$ (523,123)
75,466
12,367,000 12,558,000
12,110,343 (447,657)
48,000 48,000
48,000 48,000
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 12,319,000 12,510,000
80,134 (32,134)
80,134 (32,134)
12,030,209 (479,791)
161
504,079
504,240
24,449
1
$ 24,450
OTHER FINANCING SOURCES (USES)
Transfers in 1,735,670
Transfers out (12,822,187) (14,392,462)
TOTAL OTHER FINANCING
SOURCES (USES) (12,822,187) (12,656,792)
NET CHANGE IN FUND BALANCES (503,187) (146,792)
FUND BALANCES - BEGINNING 3,211,486 3,667,539
FUND BALANCES - ENDING $ 2,708,299 $ 3,520,747
1,735,831
(13,888,383)
(12,152,552)
(122,343)
3,667,540
$ 3,545,197
Washington State Auditor's Office Page 34
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
December 31, 2014
Governmental
Business -type Activities - Enterprise Funds Activities
Surface Water Dumas Bay Internal
Management Centre TOTAL Service
ASSETS
Current Assets
Equity in pooled cash & investments $ 6,755,299 $ 430,255 $ 7,185,553 $ 17,003;012
Prepaid items - - 5,000
Receivables (net):
Accounts and contracts 113,772 41,630 155,402
Due from other governments 390,896 390,896
TOTAL CURRENT ASSETS 7,259,967 471,885 7,731,851 17,008,012
Property, plant and equipment
Land 8,823,888 2,109,640 10,933,528
Building/structures 19,849 3,581,015 3,600,864 16,556,966
Improvements other than buildings 7,079,899 - 7,079,899
Machinery/furniture /equipment - 122,200 122,200 16,136,986
Infrastructure 42,809,205 - 42,809,205
Construction in progress 3,012,007 378,808 3,390,815
Less accumulated depreciation (13,938,245) (3,218,438) (17,156,683) (19,223,186)
TOTAL NONCURRENT ASSETS 47,806,603 2,973,225 50,779,828 13,470,766
TOTAL ASSETS 55,066,570 3,445,110 58,511,679 30,478,778
LIABILITIES AND FUND EQUITY
Current Liabilities:
Vouchers /payroll payable 47,497 12,871 60,368 225,403
Retainage payable - with escrow agent 38,288 - 38,288
Deposits payable - 5,558 5,558
Unearned revenue 102,969 256,037 359,006
Public Works trust fund loan payable 182,359 - 182,359
Compensated absences payable 4,532 1,071 5,603
TOTAL CURRENT LIABILITIES 375,645 275,537 651,182 225,403
Long -term liabilities:
Public Works trust fund loan payable 298,240 298,240
Compensated absences payable 64,140 15,149 79,289 45,648
TOTAL LONG -TERM LIABILITIES 362,380 15,149 377,529 45,648
TOTAL LIABILITIES 738,025 290,686 1,028,711 271,051
Net investment in capital assets 47,326,004 2,973,225 50,299,229 13,470,766
Restricted for:
Steel Lake & North Lake Mgmt District 20,311 - 20,311 -
Unrestricted 6,982,230 181,199 7,163,429 16,736,961
TOTAL NET POSITION $ 54,328,545 $ 3,154,424 57,482,969 $ 30,207,727
Adjustment to reflect the consolidation of internal service fund activities related to
enterprise funds 55,975
NET POSITION OF BUSINESS -TYPE ACTIVITIES $ 57,538,944
Washington State Auditor's Office Page 35
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET POSITION
PROPRIETARY FUNDS
For Year Ended December 31, 2014
OPERATING REVENUES:
Service charges and fees
Intergovernmental
Miscellaneous
TOTAL OPERATING REVENUES
OPERATING EXPENSES:
Personal services
Materials and supplies
Services and charges
Intergovernmental
Depreciation
Interfund charges
TOTAL OPERATING EXPENSES
OPERATING INCOME (LOSS)
NON - OPERATING REVENUES (EXPENSES):
Gain (Loss) from disposal of capital assets
Interest income
Interest expense
Business -type Activities - Enterprise Funds
Surface Water Dumas Bay
Management Centre TOTAL
$ 3,487,801 $
607,608
43.138
Governmental
Activities
Internal
Service
643,673 $ 4,131,474 $ 9,848,540
607,608 -
43,138 52,033
4,138,547 643,673
1,688,025
140,048
444,104
248,736
501,420
637.865
4,782,220
339,240 2,027,265
146,578 286,626
260,356 704,460
4,941 253,677
155,263 656,683
40.713 678.578
3,660,198 947,091 4,607,289
478,349 (303,418)
21,407
(6,630)
TOTAL NON - OPERATING REVENUES (EXPENSES) 14,777
INCOME (LOSS) BEFORE TRANSFERS 493,126
Capital contributions
Transfers in
Transfers out
CHANGE IN NET POSITION
NET POSITION - BEGINNING
NET POSITION - ENDING
376
376
(303,042)
116,000
493,126 (187,042)
53,835,419 3,341,466
$ 54 328 545 $ 3,154,424
Adjustment to reflect the consolidation of internal service fund activities related to enterprise
CHANGES IN NET POSITION OF BUSINESS -TYPE ACTIVITIES
174,931
21,783
(6,630)
15,153
190,084
9,900,573
814,795
771,503
5,794,827
162,118
2,111,152
9,654,395
246,178
41,437
12,534
53,971
300,149
75,619
116,000 1,764,834
(3,715,026)
306,084 (1,574,424)
31,782,151
$ 30 207,727
14,941
$ 321,025
Washington State Auditor's Office Page 36
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
For Year Ended December 31, 2014
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 govermnents 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:
Principal paid on debt service
Interest paid on debt service
Acquisition of capital asset/construction work in progress
Proceeds from the sale of capital assets
NET CASH USED FOR CAPITAL AND CAPITAL -
RELATED FINANCING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts of interest
NET CASH PROVIDED BY INVESTING 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:
Depreciation expenses
(Increases)/decrease in accounts receivable
(Increases)/decrease in due from other governments
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 payable
TOTAL ADJUSTMENTS
NET CASH PROVIDED/USED BY OPERATING ACTIVITIES
Non -cash investing, capital, and financing activities:
Other contributions of capital assets
Business -type Activities - Enterprise Funds
Surface Water Dumas Bay
Management Centre
$ 3,488,270 $ 633,948
(603,055) (416,815)
(1,676,496) (337,608)
(637,865) (40,713)
(248,736) (4,941)
458,343 -
780,461 (166,129)
(182,359)
(6,630)
(153,463)
116,000
116,000
TOTAL
Governmental
Activities
Internal
Service
$ 4,122,218 $ 9,848,543
(553,567)
(5,496,276)
(814,556)
(1,019,870)
(2,014,104)
(678,578)
(253,677) (718,888)
458,343 52,033
614,332 2,317,289
116,000 1,764,833
(3,715,026)
116,000 (1,950,193)
(182,359)
(6,630)
(153,463)
(1,097,179)
41,437
(342,452) - (342,452) (1,055,742)
21,404
21,404
377 21,781 12,535
377 21,781 12,535
459,413 (49,752) 409,661 (676,111)
6.295.886
480,007 6,775,893 17,679,123
6,755,299 430,255
7,185,554 17,003,012
478,351 (303,419) 174,932 246,182
501,420
44,787
(192,403)
(24,739)
5,836
(44,320)
11,529
302,110
155,264 656,684 2,111,152
(32,721) 12,066 -
(192,403) -
(10,476) (35,215) (40,283)
5,836 -
595 595
22,996 (21,324) -
1,632 13,161 238
137,290 439,400 2,071,107
$ 780,461 $ (166,129) $
614,332 $ 2,317,289
$ 44,613
Washington State Auditor's Office Page 37
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Year Ended December 31, 2014
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 in 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 13, Joint Venture, which more fully describes these organizations.
GOVERNMENTAL -WIDE AND FUND FINANCIAL STATEMENTS
The government -wide financial statements (i.e. the statement of net 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 differences between the governmental fund statements and the entity -wide statements represent reconciling items between
the fund level and government -wide financial statements. The reconciliations are included as part of the financial statements.
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) grant and
contributions that are restricted to meeting the operational or capital requirements, or a particular function or segment. Taxes
and other items not properly included among program revenues are reported instead as general revenues.
Washington State Auditor's Office Page 38
Separate fund financial statements are provided for governmental funds and proprietary funds. Major individual governmental
funds and major individual enterprise funds are reported as separate columns in the fund financial statements.
MEASUREMENT FOCUS, BASIS OF ACCOUNTING, FINANCIAL STATEMENT PRESENTATION
The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis
of accounting, as are the proprietary fund statements. Revenues are recorded when earned and expenses are recorded when a
liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for
which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by
the provider have been met.
Governmental Funds
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified
accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are
considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. For this purpose, the City of Federal Way considers revenues to be available if they are collected within 30
days of the end of the current fiscal period with an exception to utility and gambling taxes, which is extended to 60 days.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when
payment is due.
Property taxes, licenses, and interest associated within the current period are all considered to be susceptible to accrual and
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.
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.
Downtown Redevelopment CIP Fund — This fund was established to accumulate resources to set aside for downtown
projects.
Transportation CIP Fund — This fund accounts for receipts and disbursements related to acquisition, design,
construction and any other related street project expenditures.
Performing Arts & Event Center Fund — This fund was established to accumulate resources to set aside for Performing
Arts and Event Center (PACC).
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.
Washington State Auditor's Office Page 39
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.
Proprietary Funds
Proprietary funds are used to account for activities similar to those found in the private sector where the intent of the governing
body is to finance the full cost of providing services, including depreciation, primarily through user charges. The measurement
focus for these funds is based on the commercial model, which uses a flow of economic resources approach. Under this
approach, the operating statements for the proprietary funds focus on a measurement of net income (revenues and expenses)
and both current and non - current assets and liabilities are reported on the related Statement of Net Position.
As a general rule the effect of the inter -fund activity has been eliminated for the government -wide financial statements.
Amounts reported as program revenue include 1) charges to customers, 2) operating grants and contributions, and 3) capital
grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather
than program revenues. General revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from non - operating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal
ongoing operations. The principal operating revenues of the enterprise and internal service funds are primarily user charges,
the cost of providing goods or services to the general public on a continuing basis. Operating expenses for enterprise funds and
internal service funds includes the cost of sales and services, administrative expenses, and depreciation on capital assets. All
revenues and expenses not meeting this definition are reported as non - operating revenues and expenses.
The City reports the following major proprietary funds:
Enterprise Funds
The City uses enterprise funds to account for government activities that are financed and operated in a manner similar to
private business. Costs of providing services to the general public are primarily financed by user fees.
Surface Water Management Fund — This fund was established to administer and account for all receipts and
expenditures related to the City's surface and storm water management system.
Dumas Bay Centre Fund — This fund was established to account for 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.
Internal Service Funds
The City uses Internal Service Funds to account for the financing of goods or services provided by one department or agency to
other departments or agencies of a government, or to other governments, on a cost - reimbursement basis.
A description of each individual Internal Service Fund is included in the Comprehensive Annual Financial Report provided
below:
Risk Management Fund — This fund accounts for the City's risk financing activities established to minimize adverse
effects of losses associated with property and casualty, 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.
Washington State Auditor's Office Page 40
Mail & Duplication Fund — This fund accounts for duplication, graphics and other general support services provided
to departments and funds throughout the City.
Fleet and Equipment Fund — This fund accounts for the cost of maintaining City vehicles and other motorized
equipment. Rates charged to user departments are based on the full cost of maintaining equipment items, including
the recovery of related depreciation expense.
Buildings and Furnishings Fund — This fund accounts for all costs associated with the operation and maintenance of
specified City buildings. City building facilities and furnishings 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, establish 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.
Basis of Accounting
Basis of accounting refers to when revenues and expenditures or expenses are recognized and reported in the financial
statements.
The accrual basis of accounting is used by proprietary funds. Under this method, revenues are recognized when earned, and
expenses are recognized when incurred.
The modified accrual basis of accounting is used by governmental funds. Revenues and other financial resources are
recognized when they become susceptible to accrual, i.e., when the related funds become both measurable and available to
finance expenditures of the current period. To be considered "available ", revenue must be collected during the current period
or soon enough thereafter to pay current liabilities. The City uses thirty days when evaluating the available criteria to accrue
revenues except for proprietary funds.
Expenditures are recognized when the related fund liability is incurred. Since the recognition of depreciation does not reduce
net financial resources, it is not considered as expenditure. Other exceptions include (1) inventories of materials and prepaid
items are reported as expenditures when purchased, (2) interest on long -term debt is not accrued but is recorded as an
expenditure when due, (3) accumulated unpaid vacation and sick pay are considered expenditures when paid.
Major revenues recorded on the modified accrual basis are:
Property Taxes - King County acts as the City's collection agent for these taxes. 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 '/% and optional 1/4% 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.
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.
Washington State Auditor's Office Page 41
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.
FINANCIAL STATEMENT PRESENTATION
In order to obtain an understanding of changes in the City's position and the results of the City's operations, the financial
statements for year end of 2014 should be read in conjunction with the government's financial statements for the year ended
December 31, 2013.
BUDGETARY INFORMATION
Scope of Budget
Annual appropriated budgets are adopted for the general, some special revenue, and debt service funds on the modified accrual
basis of accounting. For governmental funds, there are no differences between the budgetary basis and generally accepted
accounting principles. Budgets for project and grant related special revenue funds and capital project funds are adopted at the
level of the individual project and for fiscal periods that correspond to the lives of projects. Since these funds are not budgeted
on an annual basis, budgetary comparisons are not presented. NCGA Statement 1 does not require, and the financial
statements do not present, budgetary comparisons for proprietary fund types.
Legal budgetary control is established at the fund level, i.e., expenditures for a fund may not exceed the total appropriation
amount. Any unexpended appropriation balances for annually budgeted funds lapse at the end of the year. Appropriations for
other special purpose funds that are non - operating in nature are adopted on a "project- length" basis and, therefore, are carried
forward from year to year without 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
- Street Fund
- Arterial Street
- Utility Tax
- Solid Waste & Recycling
- Special Contracts / Studies
- Hotel /Motel Lodging Tax
- Federal Way Community Center
- Traffic Safety
- Real Estate Excise Tax
- Community Development Block Grant
-Paths & Trails
Debt Service Fund
- Debt Fund
Procedures for Adopting the Biennial Budget
Capital Project Funds
- Downtown Redevelopment
-City Facilities
-Parks
- Transportation
- Capital Project Reserve
- Performing Arts & Event Center
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.
Washington State Auditor's Office Page 42
By the first Tuesday in October, 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 -
December.
No later than the third Monday in November, the City Council must adopt an ordinance to establish the amount of property
taxes to be levied in the coming year.
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 November and December. Final hearings on the budget
must begin on or before the first Monday of December, and may continue until the 25th day prior to beginning of the next
fiscal year.
By December 31, the City Council makes its adjustments to the proposed budget and adopts a final budget by ordinance.
The final operating budget, as adopted, is published and distributed within the first three months of the following year.
Copies of the adopted budget are made available to the public.
Amending the Budget
The Mayor is authorized to transfer budgeted amounts between departments within any fund; however, any revisions that alter
the total expenditures of a fund or that affect the number of authorized positions must be approved by the City Council.
When the City Council determines that it is in the best interest of the City to increase or decrease the appropriation for a
particular fund, it may do so by ordinance approved by a simple majority.
The budget amounts shown in the financial statements are the final authorized amounts as revised during the year.
The financial statements contain the original and final budget information. The original budget is the first complete
appropriated budget. The final budget is the original budget adjusted by all reserves, transfers, allocations, supplemental
appropriations, and other legally authorized changes applicable for the fiscal year.
Encumbrances
An encumbrance system is used for budgetary control purposes to record commitments resulting from approved purchase
orders. During the year, encumbrances are recorded in the accounting system at the time purchase orders are issued for goods
and services. Upon payment, the encumbrance is reversed and the actual cost of the related item is recorded as fund
expenditure. Outstanding encumbrances lapse at year end, are canceled and rolled over to the next fiscal year. Therefore,
these amounts have not been recorded as current year expenditures unless considered to be susceptible to accrual at the end of
the year. Below is a schedule of encumbrances by major funds and aggregated non -major funds.
Washington State Auditor's Office Page 43
SCHEDULE OF ENCUMBRANCES BY FUNDS AND FUND CATEGORY
AS OF DECEMBER 31, 2014
FUND
TYPE
ENCUMBRANCES
General Fund
Major
$
2,563,075
Street Fund
Major
297,220
Capital Proj Fund - Streets
Major
2,514,906
Surface Water Management
Major
355,984
PA CC Capital Project
Major
308,422
Dumas Bay Centre
Major
188,085
Non -Major Funds
Non -Major
1,884,994
Total
$
8,112,684
ASSETS, LIABILITIES, FUND BALANCE, NET POSITION
Cash and Investments
The City follows the practice of pooling cash and investments of all funds for investment purposes, except for cash held in
escrow, which is disclosed separately on the balance sheet. Each fund's portion of total cash and investments is summarized
by fund type in the combined balance sheet as equity in pooled cash and investments.
It is the City's policy to invest all cash not immediately required for disbursement. At December 31, 2014, the State Treasurer
was holding $63,798,002 in the Local Government Investment Pool. The Local Government Investment Pool is considered a
cash equivalent. The interest earnings on these investments are allocated to all funds based on the average monthly balance for
each fund.
For purposes of the Statement of Cash Flows, the City considers all highly liquid investments with a maturity of three months
or less when purchased, to be cash equivalents. At December 31, 2014, the total cash and cash equivalents were $75,611,617.
The City's deposits are entirely covered by federal depository insurance (FDIC) or by collateral held in a multiple financial
institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC).
The City is authorized by State law to purchase certificates of deposit issued by Washington State depositories that participate
in a state insurance pool managed by the Washington Public Deposit Protection Commission; securities purchased by the
Washington State Investment Pool; U.S. Treasury and Agency securities, banker's acceptances trading in the secondary market;
and repurchase agreements with dealers that use authorized securities as collateral.
In accordance with GASB 31, investments in money market investments and participating interest - earning investment
contracts with a remaining maturity of one year or less at the time of purchase are stated at amortized cost. All other
investments are stated at fair value. There was no material deviation from fair value quoted at year -end.
Receivables
Taxes receivable consists of property taxes and related interest and penalties (see Property Tax Note 6). Accrued interest
receivable consists of amounts earned on investments, notes, and contracts at the end of the year.
Due From Other Governments reflects measurable and available intergovernmental grants, entitlements, or State shared
revenues (taxes /charges levied and collected by an intermediary collecting government and distributed on same basis); loans;
and charges for services rendered by the City for another government unit. A separate schedule of Due From Other
Governments is disclosed in Note 6.
Amounts Due to and from Other Funds; Interfund Loans
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 to /from other funds." Any residual balances outstanding between the governmental
activities and business -type activities are reported in the government -wide financial statements as "internal balances."
Washington State Auditor's Office Page 44
Loans between funds must be authorized by the Mayor and Council. In the governmental funds, loans to other funds are offset
by a corresponding restricted of fund balance to indicate that the outstanding loan amounts do not constitute "available
spendable resources" and are, therefore, not available for appropriation. A separate schedule of inter -fund loans receivable and
payable is furnished in Note 11.
Inventories
Inventories in the governmental funds are recorded as expenditures at the time of purchase. Amounts remaining at year -end
are immaterial and, therefore, are not reflected on the balance sheets of those funds. There were no material inventories at
year -end in the Internal Service or Enterprise Funds.
Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure, are reported in the applicable governmental or
business -type activities columns in the government -wide financial statements.
Major expenditures for capital assets, including capital leases and major repairs that increase useful lives are capitalized.
Maintenance, repairs, and minor renewals are accounted for as expenditures or expenses when incurred. The City has adopted
a general capital asset capitalization policy where an item's cost must equal or exceed $5,000 and estimated economic useful
Life of one year or more. All capital assets are valued at historical cost or estimated cost; where historical cost is not known or
at an estimated market value for donated assets.
Depreciation on all capital assets is recorded as an allocated expense in the government -wide Statement of Activities and in the
proprietary fund statements. Capital assets are reported net of depreciation. The City uses a combination of group depreciation
and straight -line depreciation over the life of the assets.
The following summarizes the average service lives used to calculate depreciation for specific categories of assets in the City's
Assets:
Asset Class Life in Years
Computers. .5 -6
Printers& Faxes ............................... ..............................7
Telecommunications Equipment. .7
Police Radio Equipment .................... .............................11
Other Office Equipment............ ............. ........ ............. .4-10
Office Furniture and Fixtures ............... 10
Recreation Equipment 10
Parks Equipment... .............. ........... ..... ....... .............6-10
Police Equipment ............................ ...........................9 -11
Shop /Miscellaneous Equipment 10-12
Heavy Work Equipment.................. ........................ ...10-16
Non - Police Vehicles .......................... ..............................7
Po lice Patro I Vehicles ........................ ..............................5
Police Non- Patrol Vehicles 7 -10
Heavy Trucks ..................... 8 -10
Land Improvements... 20
Buildings ...............20
Storm Drainage Systems .................... .............................20
Infrastructure.......... ....... .......... ...... ........ .............15-100
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.
Washington State Auditor's Office Page 45
Employee vacation leave is accumulated monthly at rates ranging from 12 to 22.5 days per year depending on term of
employment. Employees may accumulate up to a maximum of 240 hours of vacation leave, except the Police Guild, who can
accrue up to a maximum of 360 hours. Outstanding vacation leave is payable upon termination of employment at the
following rate: City Employees up to 240 hours and Police Guild members 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 10.
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. Long -term debt outstanding at year -end is outlined in Note 10.
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.
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.
When multiple categories of fund balance are available for expenditure, the City will start with the most restricted category and
spend those funds first before moving down to the next category with available funds. The minimum fund balance established
by the Reserve Policy states "The City shall establish fund balance target of seventeen percent of the City's General Fund
operating expenditures. 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
12/31/2014 were $42.2 million and Unassigned General fund balance at year -ended 2014 was $12.5 million (29 %).
The Government -wide statement of net position reports $598.8 million of net position, of which $17.4 million is restricted by
the enabling legislation.
Washington State Auditor's Office Page 46
2014 FUND BALANCECLASSQdCATION
Fund Balance
General
Fund
Street
Performing
Utility Debt Downtown Transport Arts &Event Nonmajor Total
Tax Service Redevelop anon Ctr Gov't
Nonspendable:
Court trust
$ 79,828 $ - $ - $ - $ - $ - $ - $ - $ 79,828
Prepaid insurance /debt service
25,588 25,588
Restricted for:
Police covert/seizure
54,526 54,526
Future debt payments
73,486 73,486
Special Contracts /Studies
435,061 435,061
HoteFMotel Lodging Tax
400,296 400,296
Path & Trails Reserves
196,665 196,665
Downtown Redevelopment
22,804 22,804
City Facilities CIP
199,943 199,943
Parks CIP
4,394,909 4,394,909
Transportation CIP
5,494,696 5,494,696
Performing Arts & Event Ctr
2,462,606 2,462,606
Real Estate Excise Tax
3,550,864 3,550,864
Committed to:
Capital, debt, and operations
2,710,594 2,710,594
Petty cash /advance travel
21,600 21,600
Comm Development Block Grant
48,924 48,924
Proposition 1 834,603 834,603
Transportation CIP
2,717,142 2,717,142
Downtown Redevelopment 310,259 310,259
Arterial Street
308,706 308,706
Solid Waste /Recycling
204,135 204,135
2% for the Arts 293
293
Federal Way Community Center
1,573,469 1,573,469
Traffic Safety
3,500,514 3,500,514
Snow /ice removal
602,023 602,023
Parks CIP
Performing Arts & Event Ctr
318,515
5,920,965
318,515
5,920,965
Capital Project Reserve
480,167 480,167
Strategic Opportunities Reserve 3,382,044 3,382,044
Unassigned:
General Fund 12,480,539
12,480,539
Total Fund Balance: $16,044,418 $602,023 $ 3,545,197 $ 73,486 $ 333,063 $ 8,211,838 $ 8,383,571 $15,612,168 $ 52,805,765
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 11).
Washington State Auditor's Office
Page 47
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 $36,932,078 difference are as follows:
Bonds Payable & Premium at beginning of year
Plus: Inclusion of compensated absences
Plus: Current year addition /reduction of principal portion of debt & premium
Net Adjustment to reduce fund balance -total governmental
funds to arrive at net position - governmental activities
$ 27,917,315
1,831,541
7,183,222
$ 36,932,078
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 $12,482,871 difference are as follows:
Capital outlay $17,508,958
Plus: Contributed Capital $ 985,496
Less: Governmental depreciation expense (7,408,640)
Plus: Increase investment in joint venture 1,397,057
Net adjustment to increase net changes in fund balances -
Total governmental funds to arrive at changes in net position
ofgovernmental activities $12,482,871
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 ofresources in the fund statements $ (74,134)
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 $ (253,688)
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.
Washington State Auditor's Office Page 48
NOTE 4 — SUPPLEMENTAL APPROPRIATIONS
Operating Budget Funds
Appropriations established during 2014 for the City's operating budget funds are provided below. As explained in Note 1, both
original and supplemental appropriations are adopted by the City Council by ordinance. Both original and final budget
appropriations are shown on the accompanying financial statements. The final budget values include all adopted adjustments to
original budget amounts.
FUND
2014
ORIGINAL SUPPLEMENTAL
BUDGET APPROPRIATIONS FINAL BUDGET
General Fund
$ 39,822,081 $ 3,998,008 $ 43,820,089
Special Revenue Funds:
Street Fund 4,405,275 887,456 5,292,731
Arterial Street Fund 1,536,500 159,531 1,696,031
Utility Tax Fund 48,000 - 48,000
Solid Waste /Recycling Fund 467,261 32,151 499,412
Special Contracts / Studies 1,600 355,419 357,019
Hotel/Motel Lodging Tax 195,300 31,734 227,034
Federal Way Community Center 2,197,775 10,774 2,208,549
Traffic Safety - 625,000 625,000
Real Estate Excise Tax - - -
Community Development Block Grant 576,000 602,896 1,178,896
Paths & Trails - -
Subtotal Special Revenue Funds: 9,427,711 2,704,961 12,132,672
Debt Service Fund 2,075,550 (80,158) 1,995,392
Capital Project Funds:
Downtown Redevelopment - 8,237,300 8,237,300
City Facilities - 201,026 201,026
Parks 1,373,000 3,923,166 5,296,166
Transportation 7,087,000 9,982,610 17,069,610
Capital Project Reserve - -
Perfomvng Arts & Event Center - 9,944,763 9,944,763
Subtotal Capital Project Funds: 8,460,000 32,288,865 40,748,865
Total: $ 59,785,342 $ 38,911,676 $ 98,697,018
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, bankers' acceptances, or deposits with Washington State banks and savings and loan institutions.
In 2014 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, 2014, the equity in pooled cash and
investments was $75,611,568.
At year -end, the City had $75,611,568 in cash and cash equivalents which consisted of investments with the Local (LGIP)
Government Investment Pool of $63,798,002 the City's checking account bank balance prior to outstanding checks was
$11,526,504; and petty cash and change funds, advance travel fund and investigative fund totaling $48,860, Court Trustee
Washington State Auditor's Office
Page 49
Fund of $79,828, cash with escrow agent of $166,157, and bank fees of $7,783. 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
multiple - financial institution collateral pool, may be assessed on a prorated basis if the pool's collateral is insufficient to cover a
loss. Investments are carried at cost or book value because the City holds all investments until maturity. The fair value of the
positions in the State Investment Pool is the same as the value of the pool shares.
The State Treasurer's Office administers the Washington State Local Government Investment Pool 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, 2014 the City had the following investments and maturities:
SCHEDULE OF INVESTMENTS BY MATURITIES
AS OF DECEMBER 31, 2014
Investment Type
State Investment Pool
Investment maturities
Less than 1 to 2 Greater than
Book Value I year years 3 years
$ 63,798,002 $ 63,798,002 $ $
$ 63,798,002 $ 63,798,002 $ $
Reconciliation ofGovemment -Wide Statement of Net Position:
Key Bank checking account per books
Petty cash /change fund /advance travel/investigative fund
Local Govemment Investment Pool
Bank Fees
Municipal Court Trust on books
Subtotal cash and cash equivalents
Cash with escrow agent
Total cash and investments, Government -Wide
Statement of Net Position
$ ' 11,526,504
48,860
63,798,002
(7,783)
79,828
75,445,411
166,157
$ 75,611,568
Investments
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.
As of December 31, 2014, all City investments were in the LGIP. The LGIP is unrated. LGIP is comparable to Securities
Exchange Commission 2a -7 to minimize credit risk.
Washington State Auditor's Office
Page 50
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of an investment in a single issuer. The City diversifies
its investments by security type and institution. The investment policy states: "no more than 5% of the portfolio may be invested
in the securities of a single issuer, except for the U.S. Treasury, to which no limits apply, and commercial paper, which is limited
to 3% of the portfolio in accordance with state law. No more than 30% of the portfolio may be invested in bankers' acceptances
and certificates of deposit."
Other Information
Below is a schedule of investments by fund type:
SCHEDULE OF INVESTMENTS BY FUND CATEGORY AND INVESTMENT TYPE
AS OF DECEMBER 31, 2014
State Investment
Fund Type
Pool
Total
General Fund
$
12,701,839
$
12,701,839
Special Revenue Funds
11,575,464
11,575,464
Capital Projects Funds
20,863,963
20,863,963
Enterprise Funds
4,158,439
4,158,439
Intemal Services Funds
14,498,298
14,498,298
Total:
$
63,798,002
$
63,798,002
NOTE 6 — RECEIVABLES, DUE FROM OTHER GOVERNMENTS, UNEARNED REVENUES, AND DEFERRED
INFLOW OF RESOURCES
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, 2014, the total balance of property taxes
receivable recorded by the City was $242,510. Of this, $230,914 is recorded as deferred inflow of resources, since it was not
collected within the first 30 days of the end of 2014.
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
Washington State Auditor's Office Page 51
2. The Washington State Constitution limits the total regular property taxes to 1% of assessed valuation or $10 per $1,000 of
value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the 1%
limit.
The City's regular levy for 2014 was $1.39626 per $1,000 on an assessed valuation of $7,333,627,904 for a total regular levy of
$10,239,666.
Deferred Inflow of Resources
The table below provides details of the deferred inflow of resources as reported on the fund financial statements.
Unearned Revenues
The table below provides details of the unearned revenues as reported on the statement of net position.
DEFERRED INFLOW OF RESOURCES
AS OF DECEMBER 31, 2014
UNEARNED REVENUES
AS OF DECEMBER 31, 2014
Deferred Inflow
General
Downtown
Redev.
Total
General
Govt
Property tax
Downtown
Redev.
$ 230,939
$ (25)
$ 230,914
Surface
Water
Mgmt
Total by Fund:
$ 230,939
$ (25)
$ 230,914
Unearned Revenues
The table below provides details of the unearned revenues as reported on the statement of net position.
Receivables & Due from Other Governments
The receivables for the fiscal year ended December 31, 2014 on the government -wide statement of net position are detailed in the
following schedule.
UNEARNED REVENUES
AS OF DECEMBER 31, 2014
Unearned Revenues
General
Street
Downtown
Redev.
Debt
Service
Nonmajor
Gov't
Total
General
Govt
Surface
Water
Mgmt
Dumas
Bay
Centre
Total
Proprietary
SWM fees
-
-
-
-
-
-
102,969
-
102,969
Public Defender Grant
-
-
-
-
-
-
-
-
-
King County New Solution Grant
-
-
-
-
-
-
-
-
-
Commute Trip Reduction Grant
-
71,116
-
-
-
71,116
-
-
-
South King Fire & Rescue Buy -
I
In of ValleyCom
366,731
973,814
Other receivable
34,518
-
34,518
-
- -
2,030
Recreation programs / facility
rentals
55,285
-
-
-
119,286
174,571
-
256,037
256,037
Total by Fund:
$ 55,285
$ 71,116
$ -
$ 34,518
$ 119,286
$ 280,205
$ 102,969
$ 256,037
$ 359,007
Receivables & Due from Other Governments
The receivables for the fiscal year ended December 31, 2014 on the government -wide statement of net position are detailed in the
following schedule.
NOTE 7 - CAPITAL ASSETS
Capital assets activity for the year ended December 31, 2014 is as follows:
Washington State Auditor's Office Page 52
RECEIVABLES & DUE FROM OTHER GOVFRMsIE IS
AS OF DECEMBER 31, 2014
Receivable
General
Real Estate
Street Utility Tax Excise Tax
Downtown
Redevelopment
Trans port- Nonmajor
ation Gov't
Proprietary
Total
Property tax
$ 242,510
$ - $
- $ - $ (0)
$ - 8 - 8 -
8 242,510
Real Estate Excise tax
-
-
- 274,168
-
- -
-
274,168
Utility tax
-
-
1,698,136 -
-
- -
-
1,698,136
Gambling tax
17,884
-
- -
-
- -
-
17,884
Recreation programs/
facilities
35,788
-
- -
-
- 67,672
39,600
143,060
Cants & contributions
32,395
-
- -
-
386,820 187,869
366,731
973,814
Other receivable
233,863
-
- -
-
- -
2,030
235,893
State Shared revenue
1,303,331
82,334
2,674 -
119,036
•
24,583 53,165
-
1,585,124
Surface Water
Management fees
_
-
- _
_
- _
137,937
137,937
Total by Fund:
$ 1,865,771
$ 82,334 S 1,700,810 $ 274,168
$ 119,036
$ 411,403 8 308,706
$ 546,298
$5,308,527
NOTE 7 - CAPITAL ASSETS
Capital assets activity for the year ended December 31, 2014 is as follows:
Washington State Auditor's Office Page 52
CAPITAL ASSETS
AS OF DECEMBER 31, 2014
Governmental Activity
Beginning Balance
1/1/2014
Additions Deletions
Ending Balance
12/31/2014
Capital Assets, not being depreciated:
Land $ 304,177,872 $ 8,729,473 $ - $ 312,907,345
Construction in progress 14,380,488 9,186,947 (691,631) 22,875,804
Total capital assets, not being depreciated: 318,558,360 17,916,420 (691,631) 335,783,149
Capital assets, being depreciated:
Buildings 17,268,117 139,706 (8,039) 17,399,784
Improvements other than buildings 43,865,580 457,531 44,323,111
Infrastructure 164,610,040 703,434 165,313,474
Machinery & equipment 15,640,833 1,141,792 (461,637) 16,320,988
Total capital assets, being depreciated: 241,384,570 2,442,463 (469,676) 243,357,357
Less accumulated depreciation for:
Buildings
Improvements other than buildings
Infrastructure
Machinery & equipment
Total accumulated depreciation:
Total assets being depreciated, net
(7,441,336) (917,709) 8,039 (8,351,006)
(19,316,335) (2,141,647) - (21,457,982)
(46,079,820) (5,255,338) (51,335,158)
(10,762,730) (1,205,096) 461,637 (11,506,189)
(83,600,221) (9,519,790) 469,676 (92,650,335)
157,784,349 (7,077,327) 150,707,022
Governmental activities capital assets, net $ 476,342,710 $ 10,839,093 $ (691,631) $ 486,490,172
Business -Type Activities
Beginning Balance
1/1/2014
Additions Deletions
Ending Balance
12/31/2014
Capital Assets, not being depreciated:
Land $ 10,933,528 $ - $ $ 10,933,528
Construction in progress 3,237,352 153,463 3,390,815
Total capital assets, not being depreciated: 14,170,880 153,463 14,324,343
Capital assets, being depreciated:
Buildings 3,600,864 3,600,864
Improvements other than buildings 7,079,899 7,079,899
Infrastructure 42,809,205 - 42,809,205
Machinery & equipment 122,200 122,200
Total capital assets, being depreciated: 53,612,167 53,612,167
Less accumulated depreciation for:
Buildings (2,980,066) (150,742) (3,130,808)
Improvements other than buildings (378,616) (69,570) (448,186)
Infrastructure (13,047,007) (430,858) (13,477,865)
Machinery & equipment (94,310) (5,515) (99,825)
Total accumulated depreciation: (16,499,999) (656,685) (17,156,684)
Total assets being depreciated, net 37,112,168 (656,685) 36,455,483
Business -Type activities capital assets, net
$ 51,283,048 $ (503,222) $
- $ 50,779,826
Washington State Auditor's Office Page 53
At the end of 2014, 33 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, 2014, are as follows:
AS OF DECEMBER 31, 2014
Governmental Activities Projects
Construction Remaining
in progress Commitment
Downtown Redevelopment $ 279,919 $
Major Facility Rehabilitation 231,109 54,462
Performing Arts & Event Center 2,822,335 144,877
Regional Park Development 300,666
Downtown Park 346,324 1,585,000
Lakota Park 166,912
Hylebos Boardwalk Replacement 1,365,764 23,747
Sacajawea Park Masterplan 690,686 41,816
Trail and pedestrian access improvements 250,326 1,086,912
Laurelwood 40,460 161,984
Celebration Park Maintenance Building 18,079 53,504
Saghalie Track Improvements 117,393 13,015
S 320th St @ 20th Ave South 2,453,063 549,202
SW 312th ST @ SR509 322,381 25,444
10th Avenue SW / SW 344th St: SW Campus Drive - 21st Ave SW 252,301 66,230
1st Ave South & South 28th Intersection 125,271 105,579
S 352nd Street Extension From SR -99 to SR -161 452,008
S 304th St @ 28th Ave S 232,496 183,318
South 356th St: SR99 - SR161 200,337 595,196
SR99HOVLanes Phase 5 1,120,974 2,095,153
SW 336th Way / SW 340th St: 26th P1 SW - Hoyt Rd 52,312 212,694
21ST AVE SW @ SW 336TH ST 4,785,307 141,020
Citywide Flashing Yellow Lights Installation 158,973
SR 99 @ S 312th St 7,260 55,936
S 344th Way @ Weyerhaeuser Way S 281,685 12,371
SW 312th St & 14th Ave SW Lakota Safe Rt to School Imp 2,265,643
City Wide Safety Projects (Flashing Yellow Lights Installation) 617,743 260,261
Safety Improvement Projects - S320th Street from SR99 to I -5 279,353 208,129
Safety Improvement Projects - SR99 from S320th Street to S330th Street 156,205 134,317
S 320th Street - 11th PI South to I -5 Limited Access Preservation Project 1,360,196 129,933
13th Ave SW: SW 314th St to SW 316th St Safe Route to School Improvements
14th Avenue S: S 308th Street - South 312th Street 671,985 4,484
School Zone Enhancements 450,338 207,000
Total governmental activities $ 22,875,804 $ 8,151,584
Washington State Auditor's Office Page 54
Depreciation expense was charged to functions /programs of the primary government as follows:
CAPITAL ASSETS DEPRECIATION BY TYPE
AS OF DECEMBER 31, 2014
Governmental and Internal Service Activities
General Government
$ 420,698
Security of Persons & Property
997,565
Transportation
5,511,456
Physical Environment
16,361
Economic Environment
97,929
Health
25,905
Culture & Recreation
2,449,876
Total Depreciation - Governmental Activities
$ 9,519,790
Business -Type Activities
Utilities - Surface Water Management
$ 501,420
Culture & Recreation - Dumas Bay Centre
155,264
Total Depreciation - Business -Type Activities
$ 656,685
NOTE 8 — PENSION PLANS
Washington State Department of Retirement Systems
Substantially all City full -time and qualifying part-time employees participate in one of the following statewide retirement systems
administered by the Washington State Department of Retirement Systems, under cost - sharing multiple- employer public employee
defined benefit retirement plans. The Department of Retirement Systems (DRS), a department within the primary government of
the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial
statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of
Retirement Systems, Communications Unit, P.O. Box 48380, Olympia, WA 98504 -8380; or it may be downloaded from the DRS
website at www.drs.wa.gov.
The following disclosures are made pursuant to GASB Statements No. 27, Accounting for Pensions by State and Local
Government Employers and No. 50, Pension Disclosures, an Amendment of GASB Statements No. 25 and No. 27.
Public Employees' Retirement System (PERS) Plan I, 2 and 3
Plan Description
The Legislature established PERS in 1947. Membership in the system includes: elected officials; state employees; employees of
the Supreme, Appeals, and Superior courts (other than judges currently in the Judicial Retirement System); employees of
legislative committees; community and technical colleges, college and university employees not participating in higher education
retirement programs; judges of district and municipal courts; and employees of local governments. PERS retirement benefit
provisions are established in Chapters 41.34 and 41.40 RCW and may be amended only by the State Legislature.
PERS is a cost - sharing multiple - employer retirement system comprised of three separate plans for membership purposes: Plans 1
and 2 are defined benefit plans and Plan 3 is a defined benefit plan with a defined contribution component.
PERS members who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977
and by either, February 28, 2002 for state and higher education employees, or August 31, 2002 for local government employees,
are Plan 2 members unless they exercised an option to transfer their membership to Plan 3. PERS members joining the system on
or after March 1, 2002 for state and higher education employees, or September 1, 2002 for local government employees have the
irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days
of employment. An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to
Washington State Auditor's Office Page 55
PERS Plan 3. Notwithstanding, PERS Plan 2 and Plan 3 members may opt out of plan membership if terminally ill, with less than
five years to live.
PERS Plan 1 and Plan 2 defined benefit retirement benefits are financed from a combination of investment earnings and employer
and employee contributions.
PERS Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement
after 30 years of service, or at the age of 60 with five years of service, or at the age of 55 with 25 years of service. The monthly
benefit is 2 percent of the average final compensation (AFC) per year of service. (AFC is the monthly average of the 24
consecutive highest -paid service credit months.) The retirement benefit may not exceed 60 percent of AFC. The monthly benefit
is subject to a minimum for PERS Plan 1 retirees who have 25 years of service and have been retired 20 years, or who have 20
years of service and have been retired 25 years. Plan 1 members retiring from inactive status prior to the age of 65 may receive
actuarially reduced benefits. If a survivor option is chosen, the benefit is further reduced. A cost -of- living allowance (COLA) was
granted at age 66 based upon years of service times the COLA amount. This benefit was eliminated by the Legislature, effective
July 1, 2011. Plan 1 members may elect to receive an optional COLA that provides an automatic annual adjustment based on the
Consumer Price Index. The adjustment is capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is
reduced.
PERS Plan 1 provides duty and non -duty disability benefits. Duty disability retirement benefits for disablement prior to the age of
60 consist of a temporary life annuity payable to the age of 60. The allowance amount is $350 a month, or two- thirds of the
monthly AFC, whichever is less. The benefit is reduced by any workers' compensation benefit and is payable as long as the
member remains disabled or until the member attains the age of 60. A member with five years of covered employment is eligible
for non -duty disability retirement. Prior to the age of 55, the allowance amount is 2 percent of the AFC for each year of service
reduced by 2 percent for each year that the member's age is less than 55. The total benefit is limited to 60 percent of the AFC and
is actuarially reduced to reflect the choice of a survivor option. A cost -of- living allowance was granted at age 66 based upon years
of service times the COLA amount. This benefit was eliminated by the Legislature, effective July 1, 2011. Plan 1 members may
elect to receive an optional COLA that provides an automatic annual adjustment based on the Consumer Price Index. The
adjustment is capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is reduced.
PERS Plan 1 members can receive credit for military service. Members can also purchase up to 24 months of service credit lost
because of an on-the-job injury.
PERS Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members are eligible for normal
retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. (AFC is the
monthly average of the 60 consecutive highest -paid service months.)
PERS Plan 2 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 reduced benefit. The benefit is reduced by an early retirement factor (ERF) that varies according to age, for each year
before age 65.
PERS Plan 2 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 3 percent for each year before age 65.
• With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return-to -work rules.
PERS Plan 2 retirement benefits are also actuarially reduced to reflect the choice, if made, of a survivor option. There is no cap on
years of service credit; and a cost -of- living allowance is granted (based on the Consumer Price Index), capped at 3 percent
annually.
The surviving spouse or eligible child or children of a PERS Plan 2 member who dies after leaving eligible employment having
earned ten years of service credit may request a refund of the member's accumulated contributions.
PERS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component and member contributions
finance a defined contribution component. The defined benefit portion provides a monthly benefit that is 1 percent of the AFC per
year of service. (AFC is the monthly average of the 60 consecutive highest -paid service months.)
Washington State Auditor's Office Page 56
Effective June 7, 2006, PERS 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 twelve months of that service are earned after age 44; or after five service credit years earned in PERS
Plan 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan.
Vested Plan 3 members are eligible for normal retirement at age 65, or they may retire early with the following conditions and
benefits:
• If they have at least ten service credit years and are 55 years old, the benefit is reduced by an ERF that varies with age, for
each year before age 65.
• If they have 30 service credit years and are at least 55 years old, they have the choice of a benefit that is reduced by 3
percent for each year before age 65; or a benefit with a smaller (or no) reduction factor (depending on age) that imposes
stricter return-to -work rules.
PERS Plan 3 defined benefit retirement benefits are also actuarially reduced to reflect the choice, if made, of a survivor option.
There is no cap on years of service credit and Plan 3 provides the same cost -of- living allowance as Plan 2.
PERS Plan 3 defined contribution retirement benefits are solely dependent upon contributions and the results of investment
activities.
The defined contribution portion can be distributed in accordance with an option selected by the member, either as a lump sum or
pursuant to other options authorized by the Director of the Department of Retirement Systems.
PERS Plan 2 and Plan 3 provide disability benefits. There is no minimum amount of service credit required for eligibility. The
Plan 2 monthly benefit amount is 2 percent of the AFC per year of service. For Plan 3, the monthly benefit amount is 1 percent of
the AFC per year of service.
These disability benefit amounts are actuarially reduced for each year that the member's age is less than 65, and to reflect the
choice of a survivor option. There is no cap on years of service credit, and a cost -of- living allowance is granted (based on the
Consumer Price Index) capped at 3 percent annually.
PERS Plan 2 and Plan 3 members may have up to ten years of interruptive military service credit; five years at no cost and five
years that may be purchased by paying the required contributions. Effective July 24, 2005, a member who becomes totally
incapacitated for continued employment while serving the uniformed services, or a surviving spouse or eligible children, may
apply for interruptive military service credit. Additionally, PERS Plan 2 and Plan 3 members can also purchase up to 24 months of
service credit lost because of an on-the-job injury.
PERS members may also purchase up to five years of additional service credit once eligible for retirement. This credit can only be
purchased at the time of retirement and can be used only to provide the member with a monthly annuity that is paid in addition to
the member's retirement benefit.
Beneficiaries of a PERS Plan 2 or Plan 3 member with ten years of service who is killed in the course of employment receive
retirement benefits without actuarial reduction, if the member was not at normal retirement age at death. This provision applies to
any member killed in the course of employment, on or after June 10, 2004, if found eligible by the Department of Labor and
Industries.
A one -time duty - related death benefit is provided to the estate (or duly designated nominee) of a PERS member who dies in the
line of service as a result of injuries sustained in the course of employment, or if the death resulted from an occupational disease or
infection that arose naturally and proximately out of said member's covered employment, if found eligible by the Department of
Labor and Industries.
Judicial Benefit Multiplier
During January 1, 2007 through December 31, 2007, judicial members of PERS were given the choice to participate in the Judicial
Benefit Multiplier Program (JBM) enacted in 2006. Justices and judges in PERS Plan 1 and Plan 2 were able to make a one -time
irrevocable election to pay increased contributions that would fund a retirement benefit with a 3.5 percent multiplier. The benefit
would be capped at 75 percent of AFC. Judges in PERS Plan 3 could elect a 1.6 percent of pay per year of service benefit, capped
at 37.5 percent of AFC.
Washington State Auditor's Office Page 57
Members who chose to participate in JBM would accrue service credit at the higher multiplier beginning with the date of their
election; be subject to the benefit cap of 75 percent of AFC, pay higher contributions; stop contributing to the Judicial Retirement
Account (JRA); and be given the option to increase the multiplier on past judicial service. Members who did not choose to
participate would continue to accrue service credit at the regular multiplier; continue to participate in JRA, if applicable; never be a
participant in the JBM Program; and continue to pay contributions at the regular PERS rate.
Newly elected or appointed justices and judges who chose to become PERS members on or after January 1, 2007, or who had not
previously opted into PERS membership, were required to participate in the JBM Program. Members required into the JBM
program would return to prior PERS Plan if membership had previously been established; be mandated into Plan 2 and not have a
Plan 3 transfer choice, if a new PERS member; accrue the higher multiplier for all judicial service; not contribute to JRA; and not
have the option to increase the multiplier for past judicial service.
There are 1,176 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial
valuation date for the plans of June 30, 2014:
Retirees and beneficiaries receiving benefits
83,328
Terminated plan members entitled to but not yet receiving benefits
31,047
Active plan members vest
150,706
Terminated plan members nonvested
101,191
Total
368,272
Funding Policy
Each biennium, the state Pension Funding Council adopts PERS Plan 1 employer contribution rates, PERS Plan 2 employer and
employee contribution rates, and PERS Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established
by statute at 6 percent for state agencies and local government unit employees, and at 7.5 percent for state government elected
officials. The employer and employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by
the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to
contribute at the level established by the Legislature. Under PERS Plan 3, employer contributions finance the defined benefit
portion of the plan and member contributions finance the defined contribution portion. The Plan 3 employee contribution rates
range from 5 percent to 15 percent, based on member choice. Two of the options are graduated rates dependent on the employee's
age. As a result of the implementation of the Judicial Benefit Multiplier Program in January 2007, a second tier of employer and
employee rates was developed to fund, along with investment earnings, the increased retirement benefits of those justices and
judges that participate in the program. The methods used to determine the contribution requirements are established under state
statute in accordance with Chapters 41.40 and 41.45 RCW.
The required contribution rates expressed as a percentage of current -year covered payroll, as of December 31, 2013, are as follows:
Members not participating in JBM:
PERS Plan 1 PERS Plan 2 PERS Plan 3
Employer* 9.21 %* 9.21% 9.21 % **
Employee 6.00% 4.92% * **
* The employer rates include the employer administrative expense fee currently set at 0.18 %.
* * Plan 3 defined benefit portion only.
* ** Variable from 5.0% to 15.0% maximum based on rate selected by the PERS 3 member.
Members participating in JBM:
PERS Plan 1
PERS Plan 2 PERS Plan 3
Employer* 9.21 %* 9.21% 9.21 % **
Employee 12.26% 12.30% 7.50 * **
* The employer rates include the employer administrative expense fee currently set at 0.18%
* * Plan 3 defined benefit portion only.
* ** Minimum Rate
Washington State Auditor's Office Page 58
Both the City and employees made the required contributions. The City's required contributions for the years ended December 31
were:
PERS Plan 1
PERS Plan 2 PERS Plan 3
2014 $ 0 $ 905,173 $ 203,877
2013 $ 779 $ 775,972 $ 150,523
2012 $ 1,588 $ 708,790 $ 132,404
Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) Plans 1 and 2
Plan Description
The Legislature established LEOFF in 1970. Membership in the system includes all full -time, fully compensated, local law
enforcement commissioned officers, firefighters and, as of July 24, 2005, emergency medical technicians. LEOFF membership is
comprised primarily of non -state employees, with Department of Fish and Wildlife enforcement officers, who were first included
prospectively effective July 27, 2003, being an exception. LEOFF retirement benefit provisions are established in Chapter 41.26
RCW and may be amended only by the State Legislature.
LEOFF is a cost - sharing multiple - employer retirement system comprised of two separate defined benefit plans. LEOFF members
who joined the system by September 30, 1977 are Plan 1 members. Those who joined on or after October 1, 1977 are Plan 2
members.
LEOFF defined benefit retirement benefits are financed from a combination of investment earnings, employer and employee
contributions, and a special funding situation in which the state pays through state legislative appropriations.
Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established by Initiative 790 to provide governance of LEOFF
Plan 2. The Board's duties include adopting contribution rates and recommending policy changes to the Legislature for the
LEOFF Plan 2 retirement plan.
Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for
retirement with five years of service at the age of 50. The benefit per year of service calculated as a percent of final average salary
is as follows:
Term of Service
20 or more years
10 but less than 20 years
5 but Less than 10 years
Percent of Final Average
2.0%
1.5%
1.0%
The final average salary is the basic monthly salary received at the time of retirement, provided a member has held the same
position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months'
salary within the last 10 years of service. A cost -of- living allowance is granted (based on the Consumer Price Index).
LEOFF Plan 1 provides death and disability benefits. Death benefits for survivors of Plan 1 members on active duty consist of the
following: (1) If eligible spouse, 50 percent of the FAS, plus 5 percent of FAS for each eligible surviving child, with a limitation
on the combined allowances of 60 percent of the FAS; or (2) If no eligible spouse, eligible children receive 30 percent of FAS for
the first child plus 10 percent for each additional child, subject to a 60 percent limitation of FAS, divided equally.
A one -time duty - related death benefit is provided to the estate (or duly designated nominee) of a LEOFF Plan 1 member who dies
as a result of injuries or illness sustained in the course of employment, if found eligible by the Department of Labor and Industries.
The LEOFF Plan 1 disability allowance is 50 percent of the FAS plus 5 percent for each child up to a maximum of 60 percent.
Upon recovery from disability before the age of 50, a member is restored to service with full credit for service while disabled.
Upon recovery after the age of 50, the benefit continues as the greater of the member's disability allowance or service retirement
allowance.
LEOFF Plan 1 members may purchase up to five years of additional service credit once eligible for retirement. This credit can
only be purchased at the time of retirement and can be used only to provide the member with a monthly annuity that is paid in
addition to the member's allowance.
Washington State Auditor's Office Page 59
LEOFF Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members may retire at the age of
50 with 20 years of service, or at the age of 53 with five years of service, with an allowance of 2 percent of the FAS per year of
service. (FAS is based on the highest consecutive 60 months). Plan 2 members who retire prior to the age of 53 receive reduced
benefits. Benefits are actuarially reduced for each year that the benefit commences prior to age 53 and to reflect the choice of a
survivor option. If the member has at least 20 years of service and is age 50, the reduction is 3 percent for each year prior to age
53. A cost -of- living allowance is granted (based on the Consumer Price Index), capped at 3 percent annually.
LEOFF Plan 2 provides disability benefits. There is no minimum amount of service credit required for eligibility. The Plan 2
allowance amount is 2 percent of the FAS for each year of service. Benefits are actuarially reduced for each year that the
member's age is less than 53, unless the disability is duty- related, and to reflect the choice of a survivor option. If the member has
at least 20 years of service and is age 50, the reduction is 3 percent for each year prior to age 53. A catastrophic disability benefit
equal to 70 percent of their FAS, subject to offsets for workers' compensation and Social Security disability benefits received, is
also available to those LEOFF Plan 2 members who are severely disabled in the line of duty and incapable of future substantial
gainful employment in any capacity.
Effective June 2010, benefits to LEOFF Plan 2 members who are catastrophically disabled include payment of eligible health care
insurance premiums.
Members of LEOFF Plan 2 who leave service because of a line of duty disability are allowed to withdraw 150 percent of
accumulated member contributions. This withdrawal benefit is not subject to federal income tax. Alternatively, members of
LEOFF Plan 2 who leave service because of a line of duty disability may be eligible to receive a retirement allowance of at least
10 percent of FAS and 2 percent per year of service beyond five years. The first 10 percent of the FAS is not subject to federal
income tax.
LEOFF Plan 2 retirees may return to work in an eligible position covered by another retirement system, choose membership in that
system and suspend their pension benefits, or not choose membership and continue receiving pension benefits without interruption.
LEOFF Plan 2 members who apply for retirement may purchase up to five years of additional service credit. The cost of this
credit is the actuarial equivalent of the resulting increase in the member's benefit.
LEOFF Plan 2 members can receive service credit for military service that interrupts employment. Additionally, LEOFF Plan 2
members who become totally incapacitated for continued employment while servicing in the uniformed services may apply for
interruptive military service credit. Should any such member die during this active duty, the member's surviving spouse or
eligible child (ren) may request service credit on behalf of the deceased member.
LEOFF Plan 2 members may also purchase up to 24 consecutive months of service credit for each period of temporary duty
disability.
Beneficiaries of a LEOFF Plan 2 member who is killed in the course of employment receive retirement benefits without actuarial
reduction, if found eligible by the Director of the Department of Labor and Industries.
Benefits to eligible surviving spouses and dependent children of LEOFF Plan 2 members killed in the course of employment
include the payment of on -going health care insurance premiums paid to the Washington state Health Care Authority.
A one -time duty- related death benefit is provided to the estate (or duly designated nominee) of a LEOFF Plan 2 member who dies
as a result of injuries or illness sustained in the course of employment, if found eligible by the Department of Labor and Industries.
There are 374 participating employers in LEOFF. Membership in LEOFF consisted of the following as of the latest actuarial
valuation date for the plans of June 30, 2013:
Retirees and beneficiaries receiving benefits
10,511
Terminated plan members entitled to but not yet receiving benefits
699
Active plan members vest
16,830
Terminated plan members nonvested
1,600
Total
29,640
Washington State Auditor's Office Page 60
Funding Policy
Starting on July 1, 2000, LEOFF Plan 1 employers and employees contribute zero percent as long as the plan remains fully funded.
Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plan. LEOFF Plan 2
employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. The Legislature, by
means of a special funding arrangement, appropriated money from the state General Fund to supplement the current service
liability and fund the prior service costs of LEOFF Plan 2 in accordance with the requirements of the Pension Funding Council and
the LEOFF Plan 2 Retirement Board. However, this special funding situation is not mandated by the state constitution and this
funding requirement could be returned to the employers by a change of statute.
The required contribution rates expressed as a percentage of current year covered payroll, as of December 31, 2014 were:
LEOFF Plan 1 LEOFF Plan 2
Employer 0.18 %* 5.23 % **
Employee 0.00% 8.41%
State N/A 3.45%
* The employer rates include the employer administrative expense fee currently set at 0.18 %.
** The employer rate for ports and universities is 8.59 %.
Both the City and employees made the required contributions. The City's required contributions for the years ended December 31
were:
LEOFF Plan 1 LEOFF Plan 2
2014 $ - $ 628,345
2013 $ - $ 574,682
2012 $ $ 575,718
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 2014, there were a total of 295 individuals covered by this system. As of the end of the year, 302 remained as active
employees of the City and four were drawing retirement benefits. The 20 inactive had left the City's employment and either had
been reimbursed their contributions, or the reimbursement was pending, or they elected to have their contributions remain in the
plan if the balance was $1,000 or greater.
All regular employees of the City of Federal Way are required to participate in the system, with the City matching the employee's
required contribution. The employee pays 6.2% and this is matched by the composite of a cash match (approximately 5.2 %) and
insurance payments (1 %) for disability, survivor, accidental death and dismemberment, and lump sum death benefit coverage.
Contributions into the plan are tax deferred.
Employees are entitled to make voluntary contributions to the plan, assuming that highly compensated and non - highly
compensated employees are treated equally. Each payroll period, employees may make a voluntary contribution equal to a
minimum of 1% of the participant's compensation, not to exceed 10% of the participant's compensation.
Covered payroll for 2014 was $21,975,372 excluding PERS, LEOFF, FWRS, deferred comp, flex plan, and section 125 and total
City payroll was $25,956,942. Actual City contributions for the year were $1,234,329. Actual employee contributions were
$1,499,596. 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.
Washington State Auditor's Office
Page 61
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, 2014 were $1,575,859.
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 9 — 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 — auto liability 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 2014. The fund balance for
the Risk Fund as of 12/31/2014 is $1.35 million.
The following is a summary of coverage in force in 2014.
SCHEDULE OF INSURANCE IN FORCE
AS OF DECEMBER 31, 2014
Company Policy Period Details of Coverage Liability Limits
Argonaut
12/31/14- 12/31/15 General liability (auto, general, police, e &
o, employment practices, & stop gap)
$250,000 self-insured retention (SIR) with
aggregate limits of $10,000,000.
National
Casualty
12/31/14 - 12/31/15 Excess liability
$10,000,000 in excess of $10,000,000 with
aggregate limits of $10,000,000.
Travelers
Crime /fidelity (employee theft, forgery or
alternation, on premises, in transit, money
1/1/15- 1/1/16 orders and counterfeit money, computer
crime, fund transfer fraud and claims
expense)
Deductible ranges from $5,000 to $25,000
with single loss limits ranging from $50,000
to $1,000,000.
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.
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 $151 - $637 depending upon the
wages earned. At December 31s`, 2014 the City had $1,912,291 in reserve.
Washington State Auditor's Office
Page 62
Unemployment compensation benefits 2013 2014
Unemployment reserve, Jan. 1st $ 1,529,657 $ 1,685,026
Unemployment compensation benefits 223,510 242,207
Unemployment compensation interest 647
Claim payments during the year (68,142) (15,590)
Unemployment reserve, Dec. 31st $ 1,685,026 $ 1,912,291
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 3151, 2014 the City had $1,031,753 in reserve.
Health Insurance benefits
2014
Health Insurance reserve, Jan. 1st $
Health Insurance benefits 3,958,828
Health Insurance Employee Contributions 214,481
Health Insurance COBRA Contributions 4,812
Health Insurance interest 431
Prescription Claim payments during the year (498,763)
Medical Claim payments during the year (1,982,077)
Other services and charges (665,958)
Health Insurance reserve, Dec. 31st $ 1,031,753
NOTE 10 — 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 68.
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 2014 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 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).
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 will be paid off with the sale of the land in three
years. Currently the bond calls for interest only payments before the bond is paid off.
C) The City in conjunction with several South King County cities (Renton, Auburn, Tukwila, and Kent) agreed to build new
dispatch facility known as Valley Communications Center. Total bond in 2000 was $12.758 million. Valley
Communications Center refinanced the 2000 bond in 2010 for $5.325 million. The City of Federal Way portion at that
time was $1.065 million. The City will make its final payment 12/1/2015.
D) The City in conjunction with several other South King County cities (Kent, Renton, Seatac, Des Moines) agreed to build a
facility to hold its inmates. The total bond in 2009 was $86.325 million and the City of Federal Way's portion at that
time was $15.522 million. In 2015 the facility was able to use its excess revenue from excess space rented to non-
member cities to pay the bond in 2015.
Washington State Auditor's Office Page 63
SCORE and Valley Communications joint venture information can be found on pages 72 and 73.
The following schedules detail the long -term debt activity and balances of the City.
OUTSTANDING GENERAL OBLIGATION DEBT AND LONGTERM LIABILITIES - BY TYPE
DECEMBER 31, 2014
Amount Beginning
Ending
Description
Bond Rating
Issue
Maturity
Interest
Originally Outstanding
Amount
Amount
Outstanding
at Issuance
Date
Date
Rate
Issued Debt
Redeemed
Debt
Debt
Govemmental Activities:
General Obligation Bonds:
A) 2014 KeyBank Bond Anticipation Note i
-
Nov 26, 14
Dec 01, 17
1.51
$ - $ - $ 8,209,960
$ - $ 8,209,960
B) 2013 Refund Ltd /Community Center 2
Aa3
Dec 01, 13
Dec 01, 33
2.67
12,415,000 12,250,000
-
445,000
11,805,000
Subtotal GO Bonds:
-
-
-
12,415,000 12,250,000
8,209,960
445,000
20,014,960
Other Miscellaneous Debt - Intergovernmental:
C) 2010 Limited /Valley Comm. PDA3
A 1
Mar 05, 10
Dec 01, 15
3.00 -4.00
1,065,000 432,000
-
212,000
220,000
D) 2009 SCORE/Special Obligation Bond°
A 1 /AA
Nov 04, 09
Jan 01, 39
3.00 -6.62
15,522,300 14,826,600
-
358,200
14,468,400
Subtotal miscellaneous:
-
-
-
-
16,587,300 15,258,600
-
570,200
14,688,400
Subtotal GO Bonds plus Misc.
29,002,300 27,508,600
8,209,960
1,015,200
34,703,360
Compensated absences
-
-
-
-
1,577,612
2,014,302
1,760,373
1,831,541
Subtotal GO bonds, mist. & comp absences:
-
-
-
-
29,002,300 29,086,212
10,224,262
2,775,573
36,534,901
Business -Type Activities:
Public Works Trust Fund Loan:
PWTL - Kitts Comer Drain Imp
-
Aug 31,94
Jul 01, 14
1.00
233,316 1,695
-
1,695
-
PWTL - Kitts Comer Drain Imp
-
Jul 24,96
Jul 01,14
1.00
1,166,580 68,155
-
68,155
PWTL - Kitts Comer Drain Imp
-
Sep 04, 97
Jul01, 14
1.00
155,544 16,389
-
16,389
-
PWTL - SeaTac Mall Drain Imp
-
May 31,00
Jul 01, 19
1.00
412,500 96,120
-
16,020
80,100
PWTL - SeaTac Mall Drain Imp
-
Aug 14, 00
Jul 01, 19
1.00
2,062,500 480,599
-
80,099
400,500
Subtotal PWTFL
-
-
-
-
4,030,440 662,958
-
182,358
480,600
Compensated absences
-
-
-
-
- 71,733
97,809
84,650
84,892
Subtotal PWTFL plus compensated absences:
-
-
-
-
4,030,440 734,691
97,809
267,008
565,492
Grand Total All Long -Term Debt:
-
-
-
- $ 33,032,740 $ 29,820,903
$ 10,322,071
$ 3,042,581
$37,100,393
On November 16, 2014 the City issued $8,209,906 of general obligation bond anticipation note with KeyBank with an interest only rate of 1.51 percent and principal due
12/01/2017. 2The ending 2014 refunding Community Center bond premium is $397,176 with current year amortisation of $11,539. 3Debt service principal payments in
Debt Service Fund include credits of $31,800 from Interlocal agreement with Federal Way Fire District to participate in capital cost obligations with Valley
Communications joint venture with the City of Federal Way. 4The $492 thousand adjustment is due to reporting SCORE debt at 18% debt service allocation to owner
cities instead of 17 %. Currently the City has an inter -local agreement with Des Moines where they contribute 1% to the City of Federal Way SCORE Debt.
Washington State Auditor's Office Page 64
OUTSTANDING GENERAL OBLIGATION DEBT AND LONG-TERM LIABILITIES - BY FUND
DECEMBER 31, 2014
Amount Beginning
Beginning
Facing
Ending
Description
Originally Outstanding
Amount
Amount
Outstanding
Due within
Debt
Issued pew
Issued
Redeemed
Debt
one year
Govemmental Long -Term Debt:
$ 1,089,689
$ 96,120
General Obligation Bonds
$ 12,250,000
$ 8,209,960
General Obligation Bonds:
$ 20,014,960
Other - intergovernmental debt
15,258,600
-
(570,200)
A) 2014 Key Bank Bond Anticipation Note 1
$ - $ - $ 8,209,960
$ - $ 8,209,960
$ -
B) 2013 Refund Ltd /Community Center 2
12,415,000 12 250,000 -
. 445,000
11,805,000
455,000
Subtotal GO Bonds:
12,415,000 12,250,000
8,209,960
445,000
20,014,960
455,000
Other Miscellaneous Debt- Intergovemmental:
Enterprise Funds
838,854
96,120
961
1,040,420
C) 2010 Limited /Valley Comm PDA3
1,065,000 432,000
-
212,000
220,000
220,000
D) 2009 SCORE/Special Obligation Bond4
15 522,300 14,826,600
-
358,200
14,468,400
371,700
Subtotal miscellaneous:
16,587,300 15 258,600
-
570,200
14,688,400
591,700
Subtotal GO Bonds plus Misc.
29,002,300 27,508,600
8,209,960
1,015,200
34,703,360
1,046,700
Compensated absences
- 1,577,612
2,014,302
1,760,373
1,831,541
121,723
Subtotal GO bonds, misc. & comp absences:
29,002,300 29,086,212
10,224,262
2,775,573
36,534,901
1,168,423
Business -Type Activities:
$ 34,703,360
$ 13,102,180
$ 480,598
$ 14,418
$ 35,183,958
Enterprise Funds:
Public Works Trust Fund Loan
4,030,440 662 958
-
182,358
480,600
96,120
Subtotal Bus -Type Long -Term Debt
4,030,440 662,958
-
182,358
480,600
96,120
Compensated absences
- 71,733
97,809
84,650
84,892
5,688
Total Bus -Type plus comp. absences LTD:
4 030,440 734,691
97,809
267,008
565,492
101,808
Grant Total All Long -Term Debt:
$ 33,032,740 $ 29,820,903
$ 10,322,071
$ 3,042,581
$ 37,100,393
$ 1,270,231
SCHEDULE OF CHANGES IN LONG -TERM LIABILITIES
PERIOD ENDED DECEMBER 31, 2014
Government Activities
Beginning
Ending
Work
Outstanding
Additions
Reductions
Outstanding
Principal
Debt
_Public
Principal
Interest
Debt
Govemmental Activities:
2015
$ 1,046,700
$ 1,089,689
$ 96,120
General Obligation Bonds
$ 12,250,000
$ 8,209,960
$ (445,000)
$ 20,014,960
Other - intergovernmental debt
15,258,600
-
(570,200)
14,688,400
Compensated absences
1,577,612
2,014,302
(1,760,373)
1,831,541
Total Governmental Activities
29,086,212
10,224,262
(2,775,573)
36,534,901
Business -Type Activities:
1,922
1,011,920
869,291 1,881,210
2019
Enterprise Funds
838,854
96,120
961
1,040,420
Public Works Trust Fund Loan
662,958
-
(182,358)
480,600
Compensated absences
71,733
97,809
(84,650)
84,892
Total Bus iness -Type Activities
734,691
97,809
(267,008)
565,492
Total All Funds
$ 29,820,903
$ 10,322,071
$ (3,042,581)
$ 37,100,393
SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY
AS OF DECEMBER 31, 2014
Government Activities
Business -Type Activities
General Governmental Debt
Work
Trust Fund
Grand Total
Year
Principal
Interest
_Public
Principal
Interest
Principal
Interest P &I
2015
$ 1,046,700
$ 1,089,689
$ 96,120
$ 4,806
$ 1,142,820
$ 1,094,495 $ 2,237,314
2016
856,100
1,051,845
96,120
3,845
952,220
1,055,689 2,007,909
2017
9,098,160
1,020,026
96,120
2,884
9,194,280
1,022,909 10,217,189
2018
915,800
867,368
96,120
1,922
1,011,920
869,291 1,881,210
2019
944,300
838,854
96,120
961
1,040,420
839,816 1,880,235
2020
973,700
' 809,452
-
-
973,700
809,452 1,783,152
2021 -2025
5,490,100
3,476,236
-
-
5,490,100
3,476,236 8,966,336
2026 -2030
6,541,800
2,484,798
-
-
6,541,800
2,484,798 9,026,598
2031 -2035
6,161,900
1,230,606
-
-
6,161,900
1,230,606 7,392,506
2036 -2039
2,674,800
233,306
-
-
2,674,800
233,306 2,908,106
Total
$ 34,703,360
$ 13,102,180
$ 480,598
$ 14,418
$ 35,183,958
$ 13,116,598 $ 48,300,556
Washington State Auditor's Office
Page 65
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 21/2 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 71/2 percent of the valuation. The debt service on unlimited tax debt is
secured by excess property tax levies, whereas the debt service on limited tax debt is secured by property taxes collected with the
City's councilmanic levy.
The City's legally remaining debt capacities as of December 31, 2014 are:
General government (no vote required) $ 92,631,358
General government (3/5 majority vote required) 83,190,592
Parks and open space (3/5 majority vote required) 207,976,480
Utilities (3/5 majority vote required) 207,976,480
Total Capacity $ 591,774,910
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.
Governmental Activities:
Current portion
Noncurrent portion
Business -Tvne Activities:
Current portion
Noncurrent portion
$ 121,723
1,709,818
5,688
79,204
Total Compensated absences
$ 1,916,433
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, 2014 is $ -0- for its tax - exempt general obligation bond issues subject to the Tax Reform Act
issued through that date.
Washington State Auditor's Office Page 66
NOTE 11 — INTERFUND TRANSACTIONS
Interfund transfers for the year ended December 31, 2014 were as follows:
Interfund Transfers
In Out
Governmental Funds:
General Fund $ 10,619,159 $ 3,641,682
Street Fund 3,600,567
Utility Tax Fund 1,735,831 13,888,383
Debt Service 25,169 3,217,000
Downtown Redevelopment 300,000 4,209,763
Transportation 1,598,000 5,726,278
Performing Arts & Event Center 9,944,763
Nonmajor Govemmental Funds 12,617,302 7,923,492
Proprietary Funds:
Surface Water Management
Dumas Bay Centre
Internal Service Funds
116,000
1,764,833 3,715,026
Total: $42,321,624 $42,321,624
The following describes the amounts transferred out during 2014:
General Fund:
• $3,073,432 to Street Fund to subsidize street maintenance and operations
• $34,082 to Information Systems Fund for public defenders case management system
• $25,000 to Federal Way Community Center for use of facilities by General Parks and Recreation
• $4,000 to Dumas Bay Center for pump station
• $25,169 Debt Service Fund for SCORE Bonds
• $480,000 to Capital Reserve Fund
Utility Tax Fund:
• $3,293,000 to General Fund for ongoing support of operations
• $600,000 to General Fund for redirect overlay
• $607,000 to General Fund for Public Safety Positions
• $22,663 to General Fund for Red, Whites & Blues Festival
• $73,337 to General Fund for Arts Commission
• $58,432 to General Fund for Mayor's Office operations
• $173,458 to General Fund for Court operations
• $42,924 to General Fund for Human Resources operations
• $209,952 to General Fund for Law operations
• $2,293,556 to General Fund for Police Positions
• $37,500 to General Fund for Safecity
• $115,482 to General Fund for Parks maintenance and operations
• $301,944 to Federal Way Community Center for maintenance and operations
• $5,210,000 to PACC CIP project
• $300,000 to Downtown Redevelopment CIP project
• $224,000 to General Fund for Celebration Park maintenance & operations
• $48,000 to General Fund for new Parks maintenance and operations
• $165,135 to Street Fund for maintenance and operations
• $112,000 to Dumas Bay Centre Fund for Knutzen Family Theatre subsidy
Debt Service Fund:
• $2,000,000 to Real Estate Excise Tax Fund for reserves
• $1,217,000 to Real Estate Excise Tax Fund for CIP projects
Washington State Auditor's Office Page 67
Downtown Redevelopment Fund:
• $2,000,000 to PACC for LIFT local match
• $710,965 to PACC for utility tax balance
• $1,498,798 to PACC for LIFT sales tax
Transportation System Fund:
• $32,000 to Street Fund for equipment purchase
• $50,000 to Arterial Street Fund for CIP projects
• $1,254,670 to Utility Tax Fund for unspent amount from completed projects
• $4,389,608 to REET Fund for unspent amount from completed project
Internal Service:
• $30,000 from Risk Management to General Fund for Court Security
• $1,685,026 from Risk Management to Unemployment Insurance Fund for reserve
• $2,000,000 from Risk Management to General Fund for committed strategic opportunity reserve
Nonmajor Fund:
• $47,212 from Traffic Safety Fund to General Fund for support of Municipal Court
• $450,000 from Traffic Safety Fund to General Fund for support of Police Department
• $200,000 from Traffic Safety Fund to General Fund for support of 2.0 FTE police offers
• $330,000 from Traffic Safety Fund to Street Fund for support of Traffic Services
• $50,000 from Traffic Safety Fund to General Fund for support of Nick & Derek DUI patrol
• $16,000 from Traffic Safety Fund to General Fund for police downtown substation signage
• $6,435 from Traffic Safety Fund to Information System Fund for Police equipment
• $39,290 from Traffic Safety Fund to Information System Fund for Police license plate readers
• $998,000 from Real Estate Excise Tax (REET) Fund to Arterial Street Fund for street overlay
• $1,598,000 from REET Fund to Transportation CIP for 320th Street @ 20`s Ave South project
• $100,000 from REET Fund to Parks CIP for major parks facilities maintenance
• $100,000 from REET Fund to Parks CIP for trail and pedestrian access improvement
• $100,000 from REET Fund to Parks CIP for Lakota Soccer Field Upgrade
• $2,698,751 from REET Fund to Parks CIP for downtown park project
• $525,000 from REET Fund to PACC for capital project
• $26,643 from CDBG Fund to General Fund for Recreation Inclusive Coordinator
• $157,000 from Paths & Trails Fund to Parks CIP for Trail and Pedestrian Access Improvements
• $481,161 from City Facility Fund to Utility Tax Fund for unspent amount from completed project
Interfund loans for the year ended December 31, 2014 were as follows:
Interfund Loans Receivable Payable
General Fund
Special Revenue Funds:
Community Development Block Grant
$ 10,000 $
10,000
Total Interfund Loans $ 10,000 $ 10,000
NOTE 12 — CONTINGENCIES AND LITIGATION
As of December 31, 2014 there were a small number of claims for damages and lawsuits pending against the City. In the opinion
of the City Attorney, however, neither the potential liability for any single claim or lawsuit, nor the aggregate potential liability
arising from all actions currently pending would materially affect the financial condition of the City. Due to both their uncertainty
and immateriality, no liabilities or estimated liabilities have been included in the City's financial statements.
NOTE 13 — JOINT VENTURES
Valley 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, Tukwila, and Federal Way which
was formally admitted in 2000. The agreement is sanctioned by the provisions and terms of the Interlocal Cooperation Act
Washington State Auditor's Office Page 68
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 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 2014 cost distributions for the five member cities are as follows:
Dispatchable Percent
City Calls of Total
Kent 151,995 28.15%
Renton 109,645 20.31%
Auburn 119,731 22.17%
Tukwila 47,125 8.73%
Federal Way 111,474 20.64%
Total 539,970 100.00%
Valley Com is governed by an Administration Board, composed of the Mayors or designated representatives from the five
participating cities of Renton, Kent, Auburn, Tukwila, and Federal Way. The Administration Board is authorized to establish
bylaws that govern procedures of the Board and Valley Com's general operations for the following functions: 1) Budget review
and recommendations to the legislative bodies of the member cities, and budget adoption after each legislative body has approved
the required financial participation for the ensuing year; 2) Approve appointment and/or discharge of the Director; 3) Approve
personnel policy and make final decisions on all major policy changes; and 4) Review and approves all contracts.
In addition, an Operating Board was established and consists of two members of each participating City's Public Safety
Departments, including the heads of such departments or their designees. The Operating Board performs the following functions:
1) Oversees the general operation of Valley Com, and advises and makes recommendations to the Administration Board; 2) Make
recommendations on Director selection; 3) Presents proposed policies and budgets to the Administration Board; and 4) Reviews
disbursements of funds by the Director.
The Director presents a proposed budget to the Operating Board on or before August 15 of each year. Said budget is then
presented to the Administrative Board by September 1 of each year. The Administration Board can make changes to the proposed
Valley Com budget as it finds necessary, but final approval falls to the legislative body of each member city, in accordance with
the provisions of the interlocal agreement.
In May 1993 Valley Com entered into an agreement with King County to provide joint project management for the acquisition and
installation of 800 -MHz emergency radio communications system approved by the voters of King County in conjunction with a
$57 million levy. In August 1993 Valley Com also entered into an Interlocal Cooperation Agreement with the sub - regions of King
County, Seattle, and Eastside Public Safety Communications, which governs the development and installation of the new 800 -
MHz emergency radio system. Valley Com now provides emergency communication dispatch services to a population of
approximately 570,000.
Valley Com operates as an enterprise fund and is totally self - supporting through the implementation of user fees, and the primary
source of revenue is provided by charges for calls for service. The 800 -MHz emergency radio communications system operated
by the agreement with King County is operated as a separate enterprise fund, and the Member Cities have no equity interest in the
contributed capital from this system.
The share of equity belonging to the five participating cities is shown below. Liabilities are the responsibility of the five
participating cities in direct proportion to their equity position.
Washington State Auditor's Office Page 69
Kent
Balances in 2014
Renton Auburn Tukwila Federal Way Total
Equity @ January I, 2014 $ 7,378,791 $ 5,240,607 $ 4,959,646 $ 2,927,158 $ 3,508,470 $ 24,014,672
Current year increase
151,995 109,645 119,731 47,125 111,474 539,970
Equity @ December 31. 2014 $ 7,530,786
$ 5,350,252 $ 5,079,377 $ 2,974,283 $ 3.619,944 $ 24.554,642
Percent of equity
30.67%
Prior year's percent of equity 30.73%
21.79%
21.82%
20.69%
20.65%
12.11%
12.19%
14.74%
14.61%
100.00%
100.00%
A complete set of financial statements is available from:
Valley Communications Center, 27519 108`s Avenue SE, Kent, WA 98030.
South Correction Entity (SCORE)
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:
*Of the 523,939,045 allocation to Federal Way, $14,468,400 is for the principal portion and the remainder is for interest.
Washington State Auditor's Office
Page 70
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%
2015
$ 1,990,000
$ 4,995,069
$ (1,514,410)
$ 5,470,659
$ 1,695,904
$ 218,826
$ 984,719
$ 1,969,437
$ 164,120
$ 437,653
2016
2,065,000
4,911,886
(1,513,594)
5,463,292
1,693,621
218,532
983,393
1,966,785
163,899
437,063
2017
2,145,000
' . 4,820,241
(1,503,576)
5,461,665
1,693,116
218,467
983,100
1,966,199
163,850
436,933
2018
2,240,000
' 4,715,979
(1,503,576)
5,452,403
1,690,245
218,096
981,433
1,962,865
163,572
436,192
2019
2,310,000 r 4,602,229
(1,467,237)
5,444,992
1,687,948
217,800
980,099
1,960,197
163,350
435,599
2020 -2024
12,905,000
' 21,102,168
(7,183,090)
26,824,078
8,315,464
1,072,963
4,828,334
9,656,668
804,722
2,145,926
2025 -2029
15,675,000
16,833,706
(6,067,796)
26,440,910
8,196,682
1,057,636
4,759,364
9,518,728
793,227
2,115,273
2030 -2034
19,265,000
11,158,380
(4,128,483)
26,294,897
8,151,418
1,051,796
4,733,081
9,466,163
788,847
2,103,592
2035- 2039
23,775,000
' 4,064,705
(1,697,914)
26,141,791
8,103,955
1,045,672
4,705,522
9,411,045
784,254
2,091,343
Total
$ 82,370,000
577,204,363
$(26,579,676)
$ 132,994,687
$ 41,228,353
5 5,319,788
5 23,939,045
547,878,087
5 3,989,841
$10,639,574
*Of the 523,939,045 allocation to Federal Way, $14,468,400 is for the principal portion and the remainder is for interest.
Washington State Auditor's Office
Page 70
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,
2014 related to SCORE:
South Correction Entity (SCORE)
2014 Owner Cities Equity Allocation
Member
Percent of
2013
2014
City
Equity
Equity Balance
Distribution
Equity Balance
Auburn
29.00%
$ 2,517,237
$ 1,725,997
$ 4,243,234
Burien
3.00%
294,323
221,087
515,410
Des Moines
2.00%
107,970
184,190
292,160
Federal Way
25.00%
1,820,940
1,855,784
3,676,724
Renton
29.00%
2,548,219
1,672,186
4,220,405
SeaTac
5.00%
331,708
380,958
712,666
Tukwila
7.00%
601,934
478,536
1,080,470
Total
100.00%
$ 8,222,331
$ 6,518,740
$ 14,741,071
A complete set of f nancial statements is available from: SCORE, 20817 17th Avenue South, Des Moines, WA 98198.
Joint Venture Reconciliation to Government Wide Financial Statements
Balance Adj Bal Balance
1/1/2014 Prior Per Adj 1/1/2014 Additions Reductions 12/31/2014
Valley Communications Public Development Authority $ 432,000 $ - $ (212,000) $ 220,000
SCORE Public Development Authority 14,334,400 492,200 14,826,600 (358,200) $ 14,468,400
Total Balance Due to Other Governments 14,766,400 492,200 - (570,200) 14,688,400
Valley Communications Center 3,508,470 111,474 3,619,944
South Correctional Entity (SCORE) 1,820,940 1,855,784 3,676,724
Total Joint Venture Capital Assets 5,329,410 1,967,258 - 7,296,668
Total Investment in Joint Ventures
$ 20,095,810 5 492,200 $ 1,967,258 $ (570,200) $ 21,985,068
The $0.49 million adjustment is due to reporting SCORE debt at 18% debt service allocation to owner cities instead of 17 %.
Currently the City has an inter -local agreement with Des Moines where they contribute 1% to the City of Federal Way SCORE
Debt.
NOTE 14 — SUBSEQUENT EVENT
On February 23, 2015 the City issued Request for Qualifications for Master Developer for Federal Way Town Center 3 which
includes 7.48 acres of retail office, and residential development opportunities next to the Federal Way Transit Center. The City
hired a Performing Arts & Event Center Executive Director on February 2015 to assist with the construction of the Performing
Arts & Event Center and manage the center when completed.
NOTE 15 — PRIOR PERIOD ADJUSTMENTS
Governmental -type activity prior period adjustments of $4,944,409 are required for depreciation adjustment for infrastructure
added during GASB 34 implementation that were not depreciated for prior years. This includes depreciation for ACP roads of
$3.6 million, sidewalks of $0.31 million, and curbs and gutters of $0.99 million.
Washington State Auditor's Office Page 71
Beginning Adjusted Ending
Balance Prior Period Beginning Balance
Governmental Activity 1/1/2014 Adjustment Balance Additions Deletions 12/31/2014
Capital assets, not being depreciated:
Land $ 304,177,872 $ - $ 304,177,872 $ 8,729,473 $ - $ 312,907,345
Construction in progress 14,380,488 14,380,488 9,186,947 (691,631) 22,875,804
Total capital assets, not being depreciated: 318,558,360 318,558,360 17,916,420 (691,631) 335,783,149
Capital assets, being depreciated
Buildings 17,268,117 17,268,117 139,706 (8,039) 17,399,784
Improvements other than buildings 43,865,580 43,865,580 457,531 - 44,323,111
Infrastructure 164,610,040 164,610,040 703,434 - 165,313,474
Machinery and equipment 15,640,833 15,640,833 1,141,792 (461,636) 16,320,988
Total capital assets, being depreciated: 241,384,570 241,384,570 2,442,463 (469,675) 243,357,357
Less accumulated depreciation for :
Buildings
Improvements other than buildings
Infrastructure
Machinery and equipment
Total accumulated depreciation:
Total assets being depreciated, net 162,728,758 (4,944,409) 157,784,349 (7,077,327) 1 150,707,022
Govemmental activities capital assets, net S 481,287119 $ 4944409 $ 476342,710 S 10,839 093 $ 691 630 $ 486 490 172
(7,441,336) (7,441,336) (917,709) 8,039 (8,351,006)
(19,316,335) (19,316,335) (2,141,647) - (21,457,982)
(41,135,411) (4,944,409) (46,079,820) (5,255,338) - (51,335,158)
(10,762,730) (10,762,730) (1,205,096) 461,637 (11,506,189)
(78,655,812) (4,944,409) (83,600,221) (9,519,790) 469,676 (92,650,335)
Business -type activity prior period classification adjustments of $40,892,560 and $12,908,033 are due to classification errors in
reporting pipes, structures, catch basins, & manholes as improvements other than buildings.
Business -Type Activities
Capital assets, not being depreciated:
Land $ 10,933,528 $ $ 10,933,528 $ - $ - $ 10,933,528
Construction m progress 3,237,352 3,237,352 153,463 3,390,815
Total capital assets, not being depreciated: 14,170,880 14,170,880 153,463 14,324,343
Capital assets, being depreciated
Buildings 3,600,864 3,600,864 3,600,864
Improvements other than buildings 47,972,459 (40,892,560) 7,079,899 7,079,899
Infrastructure 1,916,645 40,892,560 42,809,205 42,809,205
Machinery and equipment 122,200 - 122,200 122,200
Total capital assets, being depreciated: 53,612,167 53,612,167 53,612,167
Less accumulated depreciation for :
Buildings (2,980,066) - (2,980,066) (150,742) (3,130,808)
Improvements other than buildings (13,286,649) 12,908,033 (378,616) (69,570) (448,186)
Infrastructure (138,974) (12,908,033) (13,047,007) (430,858) (13,477,865)
Machinery and equipment (94,310) - (94,310) (5,515) (99,825)
Total accumulated depreciation: (16,499,999) - (16,499,999) (656,685) (17,156,684)
Total assets being depreciated, net 37,112,168 37,112,168 (656,685) 36,455,483
Business Type activities capital assets, net $ 51,283,048 $ $ 51,283,048 $ (503,222) $ $ 50,779,826
Beginning Adjusted Fading
Balance Prior Period Beginning Balance
1/1/2014 Adjustment Balance Additions Deletions 12/31/2014
NOTE 16 — LEASES
Operating Leases
The City of Federal Way leases the office buildings for the downtown Police substation and WIFI site for operating leases. Total
Cost for the leases was $3,720 for the year ended December 31, 2014. The future minimum lease payments for the downtown
Police substation leases and WIFI site leases are as follows:
Year Ending December 31
Amount
2015
$
41,336
2016
41,900
2017
3,500
Total:
$
86,736
Washington State Auditor's Office Page 72
MCAG NO. 0711 SCHEDULE 16
CITY OF FEDERAL WAY, WASHINGTON
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For Year Ended December 31, 2014
Federal Agency Current
Pass-Thru Agency (if applicable) CFDA Other Year
Federal Program Name BARS Account # I.D. # Expenditures
US Department of Housing and Urban Development Office of Community Planning and Development
Pass -thru King County
Community Development Block Grants /Entitlement Grants 119 - 7300 - 961 - 331 -14 -218 14.218 961 74,908
Community Development Block Grants/Entitlement Grants 119- 7300 - 966 - 331 -14 -218 14.218 966 26,643
Community Development Block Grants /Entitlement Grants 119 - 7300 -967- 331 -14 -218 14.218 967 23,434
Community Development Block Grants /Entitlement Grants 119 - 7300 - 972 - 331 -14 -218 14.218 972 17,178
Community Development Block Grants /Entitlement Grants 119 - 7300 - 974 - 331 -14 -218 14.218 974 17,178
Community Development Block Grants /Entitlement Grants 119 - 7300 - 993 - 331 -14 -218 14.218 993 9,625
Community Development Block Grants /Entitlement Grants 119 - 7300 - 994 - 331 -14 -218 14.218 994 72,620
Community Development Block Grants /Entitlement Grants 119 -7300- 996 - 331 -14 -218 14.218 996 136,167
Community Development Block Grants /Entitlement Grants 119- 7300 - 997- 331 -14 -218 14.218 997 12,178
SUBTOTAL CFDA 14.218 REFER TO NOTE 2 389,931
US Department of Housing and Urban Development Office of Community Planning and Development
Pass -thru Washington State Department of Commerce
Community Development Block Grants /State's program and Non- 119- 7300 - 992- 333 -14 -228 14.228 992 152,059
Entitlement Grants in Hawaii
SUBTOTAL CFDA 14.228 REFER TO NOTE 2 152,059
US Department of Transportation National Highway Traffic Safety Administration
Pass -thru Washington Traffic Safety Commission
State and Community Highway Safety 001 - 0000 - 090 - 333 -20 -600 20.600 DHGN 20,173
SUBTOTAL CFDA 20.600 REFER TO NOTE 2 20,173
US Department of Justice Bureau of Justice Assistance
State Criminal Alien Assistance Program 001- 0000 - 090 - 331 -16 -606 16.606 SCARP 4,073
SUBTOTAL CFDA 16.606 REFER TO NOTE 2 4,073
US Department of Justice Bureau of Justice Assistance
Bulletproof Vest Partnership Program 001 - 0000 - 090 - 331 -16 -607 16.607 BPV 5,619
SUBTOTAL CFDA 16.607 REFER TO NOTE 2 5,619
US Department of Justice Bureau of Justice Assistance
Edward Byme Memorial Justice Assistance Grant 001 - 0000 - 090 - 331 -16 -738 16.738 2010 -DJ -BX- 0624 34,082
Edward Byme Memorial Justice Assistance Grant 001 - 0000 - 090 - 333 -16 -738 16.738 2012 -DJ -BX -0526 19,670
Edward Byme Memorial Justice Assistance Grant 001 - 0000 - 090 - 333 -16 -738 16.738 2013 -DJ -BX -0715 5,666
SUBTOTAL CFDA 16.738 REFER TO NOTE 2 59,418
US Department of Justice Office of Community Oriented Policing Services
Public Safety Partnership and Community Policing Grant 001 - 0000 - 090 - 331 -16 -710 16.710 #2010UMWX0338 78,206
SUBTOTAL CFDA 16.710 REFER TO NOTE 2 78,206
US Department of Transportation Federal Highway Administration
Pass -thru Washington State DOT
Highway Planning and Construction 306 -4400- 156 - 333-20 -050 20.205 STPUL - 1020(010) 2,931
Highway Planning and Construction 306 - 4400 -165- 333 -20 -050 20.205 STPUL- 0099(126) 711,711
Highway Planning and Construction 306 - 4400 -183- 333 -20 -050 20.205 SRTS - 1040(003) 22,953
Highway Planning and Construction 306 - 4400- 184 - 333 -20 -050 20.205 HSIP- 0005(308) 514,804
Highway Planning and Construction 306 - 4400 - 185 - 333 -20 -050 20.205 HSIP - 1020(011) 229,482
Highway Planning and Construction 306 -4400- 186 - 333 -20 -050 20.205 HSIP- 0099(123) 116,522
Highway Planning and Construction 306 - 4400 -187- 333-20 -050 20.205 STPUL - 1020(012) 1,002,285
Highway Planning and Construction 306- 4400 - 189 - 333 -20 -050 20.205 SRTS- 0443(007) 207,651
Highway Planning and Construction 306 -4400- 190 - 333 -20 -050 20.205 SRTS - 0443(066) 592,022
SUBTOTAL CFDA 20.205 REFER TO NOTE 2 3,400,361
US Department of Homeland Security
Pass -thru Military Department
FEMA Grant 101- 0000 - 000 - 333 -97 -036 97.036 n/a -
Emergency Management Performance Grant 101- 0000 - 000 - 333 -97 -042 97.042 n/a 36,793
SUBTOTAL CFDA 97.042 REFER TO NOTE 2 36,793
TOTAL FEDERAL ASSISTANCE: 4,146,633
Note 1. -BASIS OF ACCOUNTING
The 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 adapted 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 eamed
and 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.
Note 2.- Program Costs
The amounts shown as current year expenditures represent only the federal grant portion of the program cost.
Washington State Auditor's Office
Page 73
ABOUT THE STATE AUDITOR'S OFFICE
The State Auditor's Office is established in the state's Constitution and is part of the executive
branch of state government. The State Auditor is elected by the citizens of Washington and
serves four -year terms.
We work with our audit clients and citizens to achieve our vision of government that works for
citizens, by helping governments work better, cost less, deliver higher value, and earn greater
public trust.
In fulfilling our mission to hold state and local governments accountable for the use of public
resources, we also hold ourselves accountable by continually improving our audit quality and
operational efficiency and developing highly engaged and committed employees.
As an elected agency, the State Auditor's Office has the independence necessary to objectively
perform audits and investigations. Our audits are designed to comply with professional standards
as well as to satisfy the requirements of federal, state, and local laws.
Our audits look at financial information and compliance with state, federal and local laws on the
part of all local governments, including schools, and all state agencies, including institutions of
higher education. In addition, we conduct performance audits of state agencies and local
governments as well as fraud, state whistleblower and citizen hotline investigations.
The results of our work are widely distributed through a variety of reports, which are available
on our website and through our free, electronic subscription service.
We take our role as partners in accountability seriously, and provide training and technical
assistance to governments, and have an extensive quality assurance program.
Contact information for the State Auditor's Office
Deputy Director for Communications
Thomas Shapley
Thomas.Shapley @sao.wa.gov
(360) 902 -0367
Public Records requests
(360) 725 -5617
Main telephone
(360) 902 -0370
Toll -free Citizen Hotline
(866) 902 -3900
Website
www.sao.wa.gov
Washington State Auditor's Office
Page 74