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2018-02-20 Council PKT - Special.4k. CITY OF Federal Way Centered on Opportunity CITY COUNCIL SPECIAL MEETING STUDY SESSION AGENDA Council Chambers - City Hall February 20, 2018 — 5:00 p.m. 1. CALL MEETING TO ORDER 2. EXECUTIVE SESSION a. Potential Litigation pursuant to RCW 42.30.110(1)(i) b. Property Acquisition pursuant to RCW 42.30.110(1)(b) c. Evaluate Qualifications of an Applicant for Public Employment pursuant to RCW 42.30.110(1)(g) 3. STUDY SESSION — REVENUE OPTIONS/2018 BUDGET ADJUSTMENT • Staff Report: Finance Director Ade Ariwoola • Council Discussion/Questions • Citizen Comments (3 minutes) 4. ADJOURNMENT City Council Meetings are wheelchair accessible; and assisted listening devices for use in the Council Chambers are available upon request to the City Clerk. Regular Meetings are recorded and televised live on Government Access Channel 21. To view Council Meetings online please visit www.cityoffederalway.com. CITY OF Federal Way DATE: February 8, 2018 TO: Mayor Jim Ferrell FROM: Ade Ariwoola, Finance Direct SUBJECT: 2018 Budget Adjustments Finance Department Background After the adjustment of the 2017 budget in November 2017, I sent out a report to the Directors requesting their review of the 2018 budget knowing full well I will not have a firm number on the fund balance until I close 2017. So I have been communicating with the Directors to confirm their needs and desires. Initial new requests from these five funds was $4.68 million which resulted in combined $3.0 million deficit in the five funds, after further revenue review and discussion we have $0.85 million that we cannot resolve without additional revenue for 2018: [ FUND Original Budget Request Fund Balance Adjusted FB General $48.85 $2.33 -$1.54 -$0.40 Street 4.26 0.36 -0.33 0 FWCC 2.25 0.09 -0.09 0 Traffic 3.84 0.47 -0.05 0 PAEC 0.99 1.43 -0.99 -0.45 $4.68 -$3.00 -$0.85 The following are the major reasons for the General fund deficit: Items Amount SCORE $ 0.68 Parks — Staff 0.25 Public Works - Staff 0.15 CD — Downtown Dev. 0.10 Police — Unfunded equipment reserve 0.36 Total $ 1.54 (1l Analysis The Biennial Budget 2017/18 was approved without fully funding equipment replacement reserve. This was an indication of not having enough revenue to fund the operation. The new 2018 budget adjustment requests indicate the majority of the department requests that need to be addressed before the 2019/20 budget. The City must address the $0.85 million now and put plan in place in preparation for 2019/20 biennial budget, which will start shortly. In 2019, the City will also face increasing labor costs based on the current bargaining agreement, the pressure to pay market rate wages for the non -represented employees, and the need to hire more staff to keep up with the work load in Parks, Community Development, Public Works, IT, Police, and Municipal Court. Our buildings are getting old. City Hall was built in 1994 and we moved in 2004. The roof, elevator, exterior paint, and HVAC need attention. The Community Center pool slide will need to be replaced in few years and Dumas Bay and our Park buildings are in need of maintenance. These are the issues ahead that will be addressed in the 2019/20 budget and the reason why these recommendations must be implemented now. Recommendations 1. Immediately remove the cap on Admissions Tax. This will generate $218k per year. This can be done by authorizing the staff to bring forth a new ordinance. 2. Delay hiring of five new police officers till July 2018. It will net the City about $155k this year. 3. Extend the useful life on the police cars from five years to seven years. It will save the City $104k. The City owns 76 police cars and their years range from 2012-2016. 4. Adjust the PAEC's staff level pending the time the business increases. This will save the City $71k. 5. Use the Fund balance to absorb the $300k ($845k -218k -155k -104k -71k) difference. 6. Levy full 7.75% Utility Tax on Lakehaven, which will net $980k annually. 7. Police will coordinate with Courts, Finance, and Prosecutors to manage the ADP with SCORE. 8. We have 229 registered not-for-profit businesses in Federal Way that do not pay a business registration fee. Charging these businesses the $80 regular business registration fee will net the City $18,320. 9. LID Lift on Property Tax will take couple of years and the process should start now to help the future demand. Options 1 — 8 must be implemented right away. Please keep in mind the Council adopted 2017/18 budget knowing equipment replacement was not fully funded. This problem cannot wait again. I hope this will be addressed at the February 20 Special Meeting. Thank you. l 2 2018 Budget Adjustment O U (3) O c p a) co O Do C 0 a) N DC0 a) � _6 (13 L O U u_ Q O cn Q cip -PJ rt cn CCj N 7:i E cn 4D ;77T < 1-ci -4--) au 0bc � ,-- o0 ct GO N T--4 N 3. How did we get here? nc+ W 4 ct cn -CC; 4 December 6, 2016 Council adopted 2017/18 Biennial Budget 00 0 N a) E O au a) a) -' 2a) q ct• N CP d cn cu .- � o u 4-) O rzj 7 4ai 41-3) biD GA ►--4 • • 2017 Budget Adjustment Public Hearing - Nov 7, 2017 2017 Budget Adjustment 1st Reading of Ordinance - Nov 21, 2017 I CU U ct rti O 0 0 -4E1_1 0 rti ct 'Li ct bA ct CD a)E cn 7:i CD CN PC) Ili - u CD a' N 2018 Budget Adjustment CD O O O O di O Lf) O 43.i O O O O co co O O O $48.85 N 4 N N OHO_ 0\ c� O 7 = U a U V , W z I ow • i• we • et h -r- easons or Deficit in General F nt •••CL)CI) %-tzi 0 SCORE ADP Increasing labor costs, retain and attract capable staff What is ahead? .r..1 73 U a, o 4 0 > o ci 0 a) a) -"S -.1-7 7:4 -"S .,--i .,.-1 eti 8 ' CU o a,t X ra.i -2 E "6 -? cf) P-1 o c) U a o a) a) .5 (1) ..,> "rzi O Q (Ti 0 O 6_, -E E_,.'-, U a) bCoE 4a—i) � ct a) 5 ca.! 1-;15 7d E 'Ci = 4 (,) E ._)_, .. u c„ 0 co up cu .,, , u u cz1 0 ,._ E ,76 • ,`—" 5 r c) illi E , ,., —, .,, ...,._ 4 fa, cuP-,U�HPO-, �UH °�Q • . How do we remedy this? 1. Immediately remove the cap on Admissions Tax ($218k per year) 2. Delay the hiring of five new police officers until July ($155k) 3. Extend the useful life on the police cars from five years to seven years ($104k) 4. Adjust the PAEC's staff level pending the time the business increases ($71k) 5. Use the Fund balance to absorb the $300k difference 6. Levy full 7.75% Utility Tax on Lakehaven ($980k) 7. Manage SCORE ADP cn cn a) cn 4 ct N v 0 Q., E N a) 0 0 cn O cz; N czi bA O O N cil w O O v cz% bA .t1 c 4 !DC, U 00 9. LID Lift on Property will help with future demand act of the Chane A. Admissions Tax Tickets that cost more than $12 will see the increase L.,, - ,e_ ,n !_c a) (1) ci, . , cz5 cic .CD 4) 4) 4 $40 @ 7.75% —> $2.00 Utility Tax Rebate Program Lakehaven IAATUN b 41 at.6jTFIRST AYE`tJE iiTH FftekAl naY, the 44973? 1253il2?4322•it53+911'5'6 Ohy:fid'::tttr7'•trf+: ¢, ;�i a -r ?4 tr d' µ 1JA :kr': r " . OEJNT tti MSR Bt ..: PC DATE .3221)1; w oicha tit ref Ab aA1E °gEr1RYi rrt t t5 1R' It : tt14 ' 19'27 201; 11'2 V21)1 ?cr. 17 } ,"w+ Vow aeacng H4uv •' I-, ]' 1+ ))1• 7517 '17 2217 ii Elatiote MOM Aee119114 Lew tharjet ate rr--$,ieavc yuua#h csirripq Uwlierrlun plies en to Sits da trusty urorph of n f yet: r�.a.a your viler r17on s 0.i0+4ir'arr !tort L441hamee, these *singe NI he stoononthar bib fah*. WWI Air ,oltir ieo.z :hairs mor nrtrie,.tary a ar 4.41t taw,. . 4tanger;. 'dor a)iaJo)n lees etc' ) ' twin re styrAqn. mane s i Si maq aortlal- Ma WC al befit slay mend7Et' les 7f Airlfinavlf 5'A Fir evmoi 2.6% . 1 5% a entire v ,at:' arxt eeNef owe aiargt?i nittilLtrC4icdrnJrid+'utF, f4.'Lar 36.1knal !7:6016 C:te4EH" to A'A' UiAAEi WI :7 I Pnedix.* NU -co zavmeres Curtail Chatdt3 Ist detail Below) Current Charges Quad 41 Me C189° S37.30* Seng :harge 54::° Stool Lip $4.)3 5a,r111, 011:corel c vior; S '.a3 37 3 0 x '7151. :..- ?..39 Lig 53 X 77s /. . 3.29, 3 TOTAL DUE tN* $00,83 !fru ere ern/led in car 10,11J'i3 bat >Irrre'Y,:rxram the Ernst 5e deducMC (KO r iP19.111 er t ri ;o scar :nest care cc :'te due dale Fer btlina 5 rpm astiiable leggiig int our axaurt aL wtiew,f3110P tnta'g aro chu>cin9 lRaperias A In prat wet he added iFpepsin! is recaysd mei than MI cavilt tlnr `he bill date Owe stare- Pa Werk'fcmt t 12 Hath Val tit crecre31ty 1EY1 NINO t trj %At% pat nom' ere 4101 of bet sErt x rrIc€tly c+u r„r; R ovi '7d ;gnarl ell iron cuxKnarat to tdt; xrter 1 ,Yr t Sim P+nmcr 6lakehav 31617 FIRST AUENLE 5OUTk FEDERA,-. V AY IAA MO Mutt a 54M4e Resod 24 fix( pain- in Hrr 1-$44 -531.3'"Q Thy sL1 CIAii;tt'1r5 Pia! your Fa jr!riet i t3 prtz5set0 aCra'afsty 311:620115 931:1.E2 10 lakehaven 31127 FIRST AVENUE 3o11'1H FEDERAL WAS WA 4!003 12$3 977 ?29 • r2531 941-15'b r1 'ill r; .,rl1'.t4d.!' .i') 7J1(a-f,ibrllf aIw n. ,ias,rl.Pi At.. CYJNT N C11$TONER NAME BILL N3 Qgg D1.419F2Ii1 01729(2018 METEREfc dlNC> rano s MCDA fasneerRUC ]ATE MOM ki rDIF4 h!TII IJM 4 art WOW iCiled201>v AS iff411 in u in u • 1lerfr Fu.I r , I c>rT 116477 Rawl Dab ?»IT aei�sarq sr.w Maya sM fWwerid =Was fling n. niunpton Wel of toe bio diol Jewry Nemo 4*4 f yay -vane /Dar nae Mine a prove* dear tie LafNwes thew '4aA ngs WIN Own en OW eNa NI muse pollees #0evafa+ttv. oat. melee a'aywn III *maul rhteegea 15sr►711PR :Aster ANL. Qt ,)li4r1Ju9 IIr10n er:Hartel y.e rKf1Tf vale DI OW rr711111 lac 1111 I I o '007e ol use lellovrete * eraedihd tan % el ararUunkev 5% tot Wow :,P: kr :vela, 134 b• ;-4,.+a .r4, u .arae :rt. ewe TOTAL 0 U E srmw cholla earn IF( Cfif Cf Ft47r:l ta..r ireuuYI iteid711:10a1 0 p.1 ere annelid In Cu automatic bit psementiN-rpnm the ennui wil be emailed fray yew acaourit r shyged le yxlr artd t 23r41 O911te 4411 sink 40%4 i1.'.17rt JLii 134Nwr !!:Mine .rir t 2011 ya eti bisobli t3 Ow the tah ftsven Water & $Viae Oatftct formai N'a11ar Otarttr Rsport nnalno et 7wrr.uKtiarsoLvCR. Tis roost: tssrrtolia Inrportert htornadon eGct t tw ears. all quell/ Tri year driedrp elate dares, 2016. Reese :311 r2t'') 9445{4 ! y0.1 SOLI Id like a paper moll dtlhvoad Ib ytelr Vilna, MOM 66:1 Preen s ialalre Payrxi Rat Faward 141411 1M 4Ja' WI St moor IiYt5.98 4915,s S6�OQ Water. .62 Eewe• ,:harpf $$45:4bT - - Cltrte►It chirps$11137 4,5 Li cz x T�s'j, 3s L51 55 x i I S'Is 3" * 70 45 ;`-2c R > E- 24317 $911.57 Piparlecs WON k now available try kW do Into fax iornrrrt al relay id•oherI ori and classing'Peperkis: Bill erg' OOP rat Ne tit A 10%ports rf slit be riled 11 pervert to rrarvel rho* than 31 darn after .ht a/ dab lion ebofs. Ptymerdarewired a f.r'2'eel tellIimadmelti nut Winn iv, Dreupanl notices ere copra' claim sant to prrprty ori111111. JirYdA /W po►ratr Medi MO Ie 1-Ae bever: Sewer 1!t'ahc+a' te lakehaven 1107 FIRST AYGWJF f 1r1'N FEDERAL Wfi1', w 4Far3 Address Store Ftnq p ed 24 h r ;pry rnoi, li*: i 444531-37M Ttus .s'ub e7zras tfia'rout "rift 6 7Essec' dccw JeIy mown $911.57 Imo ran 'r 1 44 .ae • c c r Lakehavea f, '1" 91621 FIRST AVEM,f SO4 TB FEDERAL WAY_ WA WO (Ji f2? -21z2 * I253) 941.15i6 pry yen IA Ey wile.; ' Au `31 J.fJ2 et e1, ('1r art I)( .? own lacetawn cry R[FH0J6 [iEJv [M7! CUM wT Rae p4Ti Et". f s s' w U r eMh' niacin% 1%srr role 1L 11IETER FEADVIOS TUNER r ftME SERACE LecATICN KLING =ATE 111111.111.11111111,1111111111 307 201 7 »2T017 i1r17 .08 MFMattttptiYC Nf toSLAIu_r C::'t•Pftnorm lt3AGENIX QJk •e':E Raul Dote 831 9406Ntr r ICU Fr•vote15 F'.`d2n.>U Balm[' Forlear4 Sewn Chug' Comet Charm. 56.45 4+b-Lci 1`- Aryrfinbd snsr ctlarl•. w. ,0.60k..,e1ed lseusly *gm v! e. 'plica Mad or to& 'mkt Ji.wry t,...rgr Agri.yeu wove row 449110 wow a 114:191104 Orli. Urn Lilrh.nr 04.901 roc`ya _Alta 405•01 •11 A,wr Ms lar lose perm's. Nrudlift•44i1ayrrppss eat WHO efiWgrt 1a acieurt (homes, aeaeMwpre chid eneseNw Ices tic ituroome uoon'a turas lass MONO. raw illi nw w'1 Oar Or ism e1 Om Merle lista iirsialial boom of aeProrwmey I.. Olio. 1 Cy. ter Slow 1.41. ler 6MertrpMts ,U stair Inc sawn. Omer ellars wino, be Cty .• FrErralM`n .duds o,1 od11i1Q1ol ars !unman 1i.. Ityou no, mtNltld In otic pstamae blI Norwell frogrem ri erverr. roll 7e 1Ruucl.d hurl 4.5.1' gsnl er coigne pm four crit card oe lie dui dent &i WMA G14110r,F ai tinting July 1. 2D16 yoio iN$ be able ie VIA M 1ebelhe pan Weler it Dover Dhcdct Annual Wow tioe Ity Roped 01F;lde it Je etav l nrgCCR The ewer means lrpo11a* i rsAdr; poet Me Miro! and quitty c4) or *king silt drain( X'I 171131111 Cal i : '191114.412 W Yat ns+l+ld like ■ psprr new, delhiridte ilei Wee rpn c„ ',Moil is now uil*i c tri 67,94+1,1 mto rue 'brie'[ :8I .., • 1 1.! r.39 encl its Pull fll'jI U 1Ir.1$ lhng TOTAL DUE IIII* AM:x.'NT $1,04242 -11,042.62 $0.00 swwr.v ; S5n ,k $1,176.06 $1,176.06 irG1i'r'4% f A 11Yee penat�.} ui11 ire wow N morrow' n revelro-d 0 Irl roar' IFbn'diyi Ott . e1, dao shown f k F' ./1 rEN Bum. Payrnslo&',Wtvtrd�r'•loon rd.!becrsdttsrsitsai>.eadi k.I,*IltiT♦w Occupant nebula ere cc Floe 91 def{ WA 19 pp1l? arrow tirll.rn ria porno"' &('lyce, ri@dspayatdt es' 'I *yeomen Witt d Smear Mince 1a e a : o11r: :OW FIRST AVENUE 5...11M4 FEOERAI WAN, WA!!(43 Adm terms Rinp,r Ied 24 tour print !ire. 1.$44•531.37W MO Slut &',.Vies Mat you paKixvii1,• FOI€ $I1u DOGlivarely. 09,2712013 11.176.65 12 ;••1 a) N X • r•-1 • C - .11W CO 0 0 N 0 -0 Mc x rriurn Annual 0 4 C0 0E .4., .0 ci c cia n cn er (/) 0) 1+4 cC% x , rt. riii .4./' ;..4cv PoO 4 ,,,n cu .. •,..,U ,-1© C•I Property Tax Rate Comparison V .- CO w N I� I� N r -I l0 N M d' M 00 00 N O r -I r1 00 d" r -I l0 II) Ni d- r -I r -i N 0 O N Ln00 N N O M N l0 N Ol M ri 01 r -I VD M Ni d' O r -i 00 0 O N M N LO 00 Ni I. M Ni lO CN r -i 0l r-1 00 Ni h C) Q al 0 O N Ln N M N M r-1 I� Ni N Lf) r -i N 00 r -I LSD M Ni M r -i r -i O r -I O N co CO N l0 Cr) M M 00 N l0 Lf) r -I M al r-1 00 d' r -I co N r -I r-1 r -I O N 00 00 N CO 1_f) M O r -I M O l0 r -i 00 O N I� L ) r --I co M r -i N r -I O N O - M 0) N M O r -I M O LO ----.i O r -I N Ol lD c -I N r -I m r -I O N O r-1 M O M LI) r -I M O LO I� r-1 N I_() l0 r-1 O d' r -i d• r-1 O N Q) a r -I N LO Ni r --I I� Ni Q) Ln 00 O N co L.n r -I L.f) N r -i Lf1 r -I O N LO r -I M N N Ni M 00 N l0 I..n O N r-1 Ln r -i Q) r -I r -i l0 ri O N Q) 00 N N L0 Ni r -I CD r -I LO co Ol N r -I r -I M r-1 r -i N r-1 O N Seattle co M Cr) N r -I M O lO r -I m h. N O 0o (Ni (NI N r•I l0 0 O N Renton a Q) •- i = m a = _o = Q w Federal Way i f0 C >_ 2017 Property Tax Breakdown 0 s� el i" to gam I' 4 ILO .10101 0 of r. 5 041'7'1-z- `•ti. h /7 .l, ,`'eta — •.fe .-,,;, )%\. E 6 2 4 8 4 4 4 4 E s I= l 5 (mss - -U.. el -- - +. .> . . •- . 0 s� Q) Tit' a) 0 P--4 rt I -Ci 00 O N cn v -�-+ C) clO 4 cci 4 b!J 4 cz1 4 u a) c!) Burien $337,000 c c c cT (N O O O O Cr) {e} f) *U (Federal Way H 4) Cr) cn v -�-+ C) clO 4 cci 4 b!J 4 cz1 4 u a) c!) O 4O r-ci ici) --) ct .7.-iu cn cip a) 0 .4..J..po Increase the value of downtown Mayor 's Recommendations rci 0 0 • bA O O a) foJJ ap CI) V E V • "Zi 0 �U v O a, °�' H om 2 5 a,8 4 H 0 . • . Business Registration Fees The Mayor has authorized the following: Delay the hiring of five police officers until July 2018 Extend the useful life for patrol cars to seven years Suspend the hiring of one PAEC staff position saving $71k us - 0 V a) c 0 c 0 U I • V w � O .5 Uw 0 c o 4 (1) � • o 00 V) C.) • , �aQ . . ORDINANCE NO. 16-815 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF FEDERAL WAY, WASHINGTON, GRANTING LAKEHAVEN UTILITY DISTRICTt, A MUNICIPAL CORPORATION, A NONEXCLUSIVE FRANCHISE TO OCCUPY THE RIGHTS-OF-WAY OF THE CITY OF FEDERAL WAY, WASHINGTON, THROUGH THE FRANCHISE AREA FOR THE PURPOSES OF CONSTRUCTING, MAINTAINING, REPAIRING, RENEWING, AND OPERATING A WATER AND SEWER SYSTEM WITHIN AND THROUGH THE CITY OF FEDERAL WAY AND ADDRESSING HYDRANT COSTS WITHIN CITY BOUNDARIES. WHEREAS, Lakehaven Utility District and the City of Federal Way have determined that it is in the best interests of the public and both parties that Lakehaven Utility District be granted a franchise from the City of Federal Way, in order to specify the rights and duties of Lakehaven to install, operate and maintain a water and sewer system including all related appurtenances located in certain rights-of-way as depicted in Exhibit A; and WHEREAS, RCW 35A.47.040 permits the -City of Federal Way to grant nonexclusive franchises for the use of public streets, bridges or other public ways for, inter alia, poles, conduits, tunnels, towers and structures, pipes and wires and appurtenances thereof for water, sewer, and other private and publicly owned and operated facilities for public service; and WHEREAS, in granting such a nonexclusive franchise, the City of Federal Way reserves such other powers and authorities granted to Washington code cities by general law; and WHEREAS, the parties acknowledge the Washington State Supreme Court's ruling in Lane v. Seattle that the cost of hydrants is a general government responsibility; and WHEREAS, Franchisee recognizes a benefit to its rate payers in not having the City attempt to assume its jurisdiction under the provisions of RCW Chapter 35.13A, Ordinance Na 16-815 Page 1 of 30 NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF FEDERAL WAY, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: Section 1. Definitions Where used in this Franchise the following terms shall be defined as follows: 1.1 "City" means the City of Federal Way, Washington, a municipal corporation of the State of Washington, and its respective successors and assigns. 1.2 "Council" means the City of Federal Way Council acting in its official capacity. 1.3 "Director" means the Public Works Director, or designee, of the City of Federal Way Public Works Department. 1.4 "Facilities" means all structures, antennas, equipment, pipes, mains, hydrants, valves, meters, service lines in the right-of-way manholes, clean outs, and all other related appurtenances owned or used by Franchisee and necessary for the distribution of water and collection of wastewater. The Parties acknowledge that the Franchisee deems sewer service lines to be owned by the property owner served by the service line. 1.5 "FWRC" means the Federal Way Revised Code. 1.6 "Franchise Area" means rights-of-way for public roads, streets, avenues, alleys, and highways of the City as set forth in Exhibit A. Exhibit A may be updated by the City upon the City' s acquisition or vacation of rights of way and upon any annexation of area that is within the Franchisee's service area. 1.7 "Franchisee" means Lakehaven Utility District, a municipal corporation, and public utility, and its respective successors and assigns. Ordinance No 16-815 Page 2 of 30 1.8 "Revenue" means the value proceeding or accruing from the performance of Franchisee's water and sewer business, which for the purposes of calculating the Franchise fee contemplated in Section 17, shall include only those proprietary water and sewer rates collected from Franchisee's retail customers with billing addresses that are within the corporate boundaries of the City. For the purposes of this definition, "revenue" shall not include the following: wholesale or contract water sales; maintenance charges for sewer systems not owned by Franchisee; hydrant meter water sales; penalties; late fees; meter shut-off or turn -on charges; impact fees; delinquent account charges; lien charges; telecommunications site lease payments; permit fees; surcharges; interest on fund balances; revenues from hydrant maintenance (fire suppression); connection charges; water or sewer system capacity rent; assessments; grants; contributed assets (contributions in aid of construction); loans; developer charges; income from legal settlements not related to retail water or sewer service; income from real property or equipment/vehicle sales; fees charged for Franchisee's services as expressed in Franchisee's Fees and Charges Resolution; street light revenues; labor, equipment, and material charges; or any other revenues that are not derived from the rates charged for the direct provision of water and sewer service to retail customers with billing addresses that are within the corporate boundaries of the City. Section 2. Grant/Acceptance 2.1 Grant of Franchise. The City does hereby grant to Franchisee, subject to the terms of this Franchise, the right, privilege, authority and franchise to: (a) Lay, construct, extend, repair, renew, and replace Facilities in the Franchise Area; and Ordinance No 16-815 Page 3 of 30 (b) To charge and collect tolls, rates, and compensation for such utility service and such uses. 2.2 Acceptance by Franchisee. Franchisee shall have no rights under this Franchise, nor shall Franchisee be bound by the terms and conditions of this Franchise, unless Franchisee shall, within sixty (60) days after the date the City Council passes this Franchise, file with the City its written acceptance of this Franchise and all of its terms and conditions. Section 3. Conditions of Use 3.1 Non -Franchise Area City Property. This Franchise does not and shall not convey any right to Franchisee to install its Facilities on, under, over, across, or to otherwise use City -owned or leased properties of any kind outside the Franchise Area, or to install Facilities on, under, over, across or otherwise use any City owned or leased property within the Franchise Area other than public roads, streets, avenues, alleys, and highways of the City. The Franchisee shall place Facilities within the Franchise Area, but not on any other public property owned, in whole or in part, leased, or otherwise occupied by the City unless an easement is granted. 3.2 Termination of Easements. Franchisee agrees to voluntarily relinquish its easements on private property that has become City property pursuant to public projects when notified by the City. In exchange for the voluntary relinquishment of easements on private property that become public right-of-way, the City and Franchisee agree to the following: A. For the Project. The City agrees to pay Franchisee's necessary relocation or adjustment costs of its water and/or sewer facilities on private property if required as part ofproject construction when the property will become City property. Ordinance No 16-815 Page 4 of 30 B. Five Years after Completion of the Project. The City agrees to pay Franchisee's necessary relocation costs of its water and/or sewer facilities for five years after completion of the project in the event a City public project requires the relocation. Completion of the project means the action taken by the City Council during the regular City Council meeting to accept the project as complete. 3.3 Operation costs. To the extent permitted by law and as otherwise expressed in this agreement, Franchisee shall be solely responsible for the operation, maintenance, repair, and construction of its Facilities. 3.4 Facilities Abandonment. Franchisee will notify the City when a Facility has been deemed obsolete and its use discontinued. The Facility shall be removed by Franchisee, at its expense, within one hundred (180) days of the date the Facility' s use is discontinued. The City may deem a Franchisee's facility obsolete if the Facility ceases to be operational for more than ninety (90) days and the Franchisee has not initiated repair or removal. If Franchisee fails to begin repair or remove the Facility, the City or its agent may cause the Facility to be removed pursuant to Section 14 of the Franchise; however, with the express written consent of the City, Franchisee may leave such Facilities in place. The City's consent shall not relieve Franchisee of the obligation and/or costs to subsequently remove or relocate such Facilities at the City's request, in which case Franchisee shall perform such work at no cost to the City in accordance with Section 15. The provisions of this Section shall survive the expiration, revocation or termination of this Franchise. Section 4. Term. Subject to Franchisee filing its acceptance pursuant to Subsection 2.2, the term of this Franchise shall be for a period of ten (10) years commencing on the effective date of this Franchise, Ordinance No 16-815 Page 5 of 30 unless terminated earlier pursuant to the terms of this Franchise or other applicable law. This Franchise may be extended by mutual written agreement of the parties for two (2) extensions of five (5) years. Section 5. Hydrant (Fire Suppression System) costs. The parties agree that during the term of the Franchise, Franchisee shall be responsible to operate and maintain all portions of the water system, including the fire hydrants (fire suppression system) and those components of the water system that provide fire suppression benefits within City boundaries. The City shall, during the term of this Franchise, pay Franchisee for the cost of maintaining the fire hydrants and those portions of the system that provide fire suppression benefits within City boundaries ("fire hydrants"). Franchisee shall, during the term of this Franchise, indemnify and hold the City harmless from any costs associated with the maintenance of the water system, except the cost of maintaining the fire hydrants (fire suppression system). The amount of the charge for the cost of maintaining the fire hydrants (fire suppression system) shall be as established! by Franchisee resolution. The parties agree that Franchisee shall begin charging and billing the City for the fire hydrant (fire suppression system) costs after June 30, 2016. The fire hydrant (fire suppression system) costs shall be billed to the City on a quarterly basis. Payment shall be due within forty-five (45) days from the invoice date. Section 6. Location of Facilities 6.1 Location. The location of existing Facilities, their depths below the surface of ground or grade of a right-of-way (if available), shall be submitted to the City in the form of a map showing the approximate location of Franchisee's existing water and sewer systems within the Franchise Area. Upon written request of the City, Franchisee shall update such map to reflect actual or Ordinance No 16-815 Page 6 of 30 anticipated improvements to the Franchisee's water and sewer systems within the Franchise Area. Any such map (or update thereof) so submitted shall be for City informational purposes only and shall not obligate Franchisee to undertake any specific improvements, nor shall such map be construed as a proposal to undertake any specific improvements. 6.2 GIS Data. The Franchisee shall provide, at such time as Franchisee develops and employs Geographic Information System ("GIS") technology for its water and sewer system maps and records throughout its service area, information required in section 6.1 in digital GIS format for its Facilities within the Franchise Area. 6.3 Design Markings. In the event the City desires to design new streets or intersections, renovate existing streets, or make any other public improvements, Franchisee shall at the City's reasonable request, provide the location of Franchisee's underground Facilities within the Franchise Area by either field markings or by locating the Facilities on the City's design drawings, and shall provide all other reasonable cooperation and assistance to the City. 6.4 No Warranty or Waiver. Nothing herein is intended to expand, or relieve the parties of, their respective obligations arising under Chapter 19.122 RCW or other applicable law with respect to determining the location of utility facilities prior to construction. Further, neither the provisions of this Franchise nor the absence of any specific provision in this Franchise is intended to limit, detract from or render ineffective any disclaimer (including, without limitation, any disclaimer as to accuracy or completeness) placed by Franchisee on any map furnished to the City pursuant to Sections 6.1 and 6.2 of this Franchise. Ordinance No 16-815 Page 7 of 30 Section 7. Noninterference of Facilities Franchisee agrees to maintain its Facilities and perform all work within the Franchise Area: (1) so as not to unreasonably interfere with the free passage of traffic, (2) in accordance with the laws of the State of Washington and City ordinances, regulations, resolutions, and rules, and (3) as required by the Director. Section 8. Requirement to Obtain Permits 8.1 Permits. Franchisee shall, at its expense, obtain all permits (including rights-of-way permits) and pay all fees required by applicable City ordinances, regulations, resolutions, and rules prior to commencing any work within the Franchise Area, excluding blanket permits for water and sewer routine maintenance work. Permit applications shall: (1) show the position and location of the Facilities to be constructed, laid, installed, or erected at that time; (2) show their relative position to existing rights-of-way or property lines upon prints drawn to scale, unless otherwise approved by the Director; (3) designate rights-of-way by their names and; (4) show improvements as required by the Director, such as, but not limited to, sidewalks, curbs, gutters, shoulders of roadway, ditches, paved roadways, roadways to property lines, turnouts, parking strips, telephone or electric distribution poles, and pipes existing on the ground to be occupied. The Franchisee shall specify the class and type of materials to be used, equipment to be used, and mode of safeguarding and facilitating the public traffic during construction. The manner of excavation, construction, installation, backfill, and temporary structures such as, but not limited to, traffic turnouts and road obstructions shall meet the standards of the FWRC and be satisfactory to the Director. All traffic control shall be in accordance with the right-of-way permit, and shall be in accordance with the Manual on Uniform Traffic Control Devices ("MUTCD"). The Franchisee shall indicate on the right-of-way use permit application the Ordinance No 16-815 Page 8 of 30 time needed to complete the work. The time needed to complete the work is subject to approval by the City as a condition of the issuance of the right-of-way permit. 8.2 Exception to Permit Requirement. In the event of an emergency in which Franchisee's Facilities within the Franchise Area are in a condition as to immediately endanger the safety or health of life, property or the environment, Franchisee may take action immediately to correct the dangerous condition without first obtaining any required permit so long as: (1) Franchisee informs the City of the nature and extent of the emergency and the work to be performed prior to or at the commencement of the work, if reasonably possible, or immediately following cessation of the emergency; and (2) such permit is obtained by Franchisee as soon as practicable thereafter. 8.3 Routine Maintenance. Franchisee shall have the right to conduct routine maintenance to repair, modify, supplement, replace or upgrade the Franchisee's Facilities, provided that the Franchisee shall obtain any necessary right-of-way use permit and any other permits or authorizations required by all applicable federal, state, and local laws, rules, and regulations prior to the performance of any said routine maintenance. The following non -emergency related activities such as water main flushing, valve exercising, sanitary sewer line cleaning/inspection, and other activities as approved shall be allowed to occur under an annual maintenance blanket permit. 8.4 Notice of Entry. At least forty-eight (48) hours prior to entering right-of-way adjacent to private property to perform the installation, maintenance, repair, reconstruction, or removal of facilities, except those emergency activities exempted from permit requirements, a written notice describing the nature and location of the work to be performed shall be communicated to the private property occupant to be impacted by Franchisee' s work. Examples of acceptable notice include but are not limited to a pre-printed door hanger, mailed letter, and/or sandwich boards. Ordinance No 16-815 Page 9 of 30 Section 9. Standard of Performance The Franchisee shall not excavate for a distance of more than one hundred feet (100') without immediately backfilling and compacting to surface grade and permit requirements. Backfilled trench areas within a driving lane must be patched, either temporarily or permanently, or plated, before the end of the workday in which they have been opened. Trench areas within the right-of-way, but not within a driving lane, must also be plated, patched backfilled, and/or patched within the time limits specified by the City on the right-of-way use permit. Final surface restoration shall be completed within thirty (30) days and shall be equal to or better than the surface condition prior to permit issuance. Any asphalt overlay completed within the Franchise Area during a five (5) year period immediately prior to the date of permit application shall not be open cut by Franchisee unless required by an emergency or as approved by the Director. In the event of this emergency cut in new pavement, Franchisee shall install new asphalt overlay on the street that is open cut, for a minimum of 250 feet in both directions from the open cut, or pay a mitigation fee, or as determined otherwise by the Director. Franchisee shall, in carrying out any authorized activities within the Franchise Area, comply with all applicable laws, ordinances, codes, and standards, as now existing or hereafter adopted or amended, and shall comply with the terms of this Franchise, whether the work is performed by the Franchisee, its agents, employees, subcontractors, or other third parties at Franchisee's direction. Upon completion of any installation of Franchisee's Facilities within the Franchise Area, Franchisee shall submit to the Director plans, stamped by a Professional Engineer licensed by the State of Washington (if required in the permit), showing the "as -built" location of the Facilities. Nothing Ordinance No 16-815 Page 10 of 30 herein is intended to relieve the parties of their respective obligations arising under applicable law with respect to determining the location of utility facilities. Section 10. Survey Markers and Monuments Franchisee shall, using a licensed surveyor, immediately replace all markers or monuments disturbed during any work by Franchisee within the Franchise Area. Franchisee shall pay all costs associated with such lost, destroyed or disturbed monuments or markers. Section 11. Surface Markings/Stakes Prior to Franchisee commencing any excavation work within the Franchise Area that disturbs any monument or marker, Franchisee shall, using a licensed surveyor, reference all monuments and markers relating to subdivisions, plats, highway, and other surveys. The reference points shall be located so that they shall not be disturbed during the Franchisee's operations under this Franchise. The method referencing these monuments or other points shall be approved by the City before placement. The construction shall be made as expeditiously as conditions permit, and as directed by the City. The cost of monuments or other markers lost, destroyed, or disturbed, and the expense of replacement of the monuments, shall be borne solely by the Franchisee. A complete set of reference notes for monuments, markers, and other ties shall be filed with the City. In the event of any conflict or inconsistency between this Section 11 and Chapter 19.122 RCW, as now existing or hereafter amended, Chapter 19.122 RCW will control. Section 12. Notification to Fire District Except in emergencies, if it is necessary to shut down or diminish the water pressure so that fire hydrants may be adversely affected, the Franchisee shall notify the appropriate fire district by telephone followed by faxed transmittal or written notification, that water pressure or fire flow Ordinance No 16-815 Page 11 of30 conditions have been affected. In case of an emergency, Franchisee shall contact the appropriate fire district as soon as circumstances allow. In case of a planned shutdown or diminished water flow, at least forty-eight (48) hour prior notification to the fire district is required. If more than one fire hydrant is affected, Franchisee must provide a map of the affected area to the fire district. Section 13. Right of City to Undertake Maintenance Work The laying, construction, maintenance, and operation of Franchisee's system of water and sewer pipes, and appurtenances granted under this Franchise shall not preclude the City, its accredited agents or its contractors from doing necessary maintenance work contiguous to the Facilities, provided that the Franchisee shall have sufficient notice of blasting, regrading, or excavating in order that Franchisee may protect its lines or pipe or property. Section 14. Right of City to Complete Work In the event Franchisee fails to comply with any applicable federal, state, or City laws, ordinances, rules, regulations, or standards or with any of the terms of this Franchise, and such noncompliance continues for a period of fourteen (14) days after Franchisee receives written notice from the City regarding the noncompliance, the City may, but in no event is the City obligated to, order any work completed, including without limitation Franchisee's obligation to repair pursuant to Section 16 herein and Franchisee's obligation to remove facilities pursuant to Section 15 herein. If the City causes such work to be done by its own employees or by any person or entity other than Franchisee, the City will notify the state Department of Health or Department of Ecology, as appropriate, prior to such work. The Franchisee shall, upon the City's written request, immediately reimburse the City for all reasonable costs and expenses incurred by the City in having such work performed, which costs may include the City's reasonable overhead expenses and attorneys' fees. Ordinance No 16-815 Page 12 of 30 Section 15. Required Relocation of Facilities 15.1 City Reservation of Rights. The City reserves the right to use, occupy and enjoy the Franchise Area for any purpose that is not inconsistent with the terms and conditions of this Franchise. The Rights reserved herein include, without limitation, the construction of any City owned electrical, water, sewer or storm drainage line, installation of traffic signals, street lights, trees, landscaping, bicycle paths and lanes, equestrian trails, sidewalks, other pedestrian amenities, and other public street improvement projects. This Franchise is not an exclusive franchise. Without limiting Franchisee' s rights under this Franchise, this Franchise shall not in any manner prohibit the City from granting other and further franchises in, under, over, upon, and along the Franchise Area. 15.2 City's Duties. In the event the City undertakes any work, including necessary maintenance within a right-of-way in which Franchisee' s Facilities are located, and such work necessitates the relocation of Franchisee' s then existing Facilities within the Franchise Area, the City shall: (a) Provide written notice to Franchisee requesting such relocation within a reasonable time prior to the commencementof such City work; (b) Pursuant to RCW 35.21.905, consult with Franchisee on projects that will require relocation to facilitate coordination of design; (c) Provide Franchisee with copies of pertinent portions of the City's plans and specifications for such City work so that Franchisee may relocate its Facilities to accommodate such City work; and (d) Coordinate to minimize conflicts between existing Facilities and Franchise Area improvements where possible. Ordinance No 16-815 Page 13 of 30 15.3 Franchisee's Duties. After receipt of the City notice requesting the relocation of the Facilities pursuant to Subsection 15.2(a) and receipt of the plans and specifications pursuant to Subsection 15.2(b), Franchisee shall, within such reasonable time as approved by the Director, raise, lower, or move such Facilities within the Franchise Area at its sole cost and expense so as to conform to such new grades as may be established, and place the pipe in a location or position causing the least interference with the improvement, repair, or alteration contemplated by the City. 15.4 Exclusivity. Except as provided in Section 3.2 above, this Section 15 shall govern all relocations of Franchisee's Facilities required in accordance with this Franchise. Nothing in this Section 15 shall require Franchisee to bear any cost or expense in connection with the location or relocation of any Facilities existing under benefit of easement on property owned by a person or entity other than the City. Section 16. Damage Repair In case of damage by the Franchisee or by the Facilities of the Franchisee to rights-of-way, or to public and private improvements to rights-of-way, the Franchisee agrees to repair the damage at its own cost and expense. The Franchisee shall, upon discovery of such damage, immediately notify the City. The City will inspect the damage, and set a time limit for completion of the repair. If the City discovers damage caused by the Franchisee to rights-of-way, or to public and private improvements to rights-of-way, the City shall give the Franchisee notice of the damage and set a time limit so the Franchisee may repair the damage. In the event the Franchisee does not repair a right-of-way or an improvement to a right-of-way as required in this section, the City may repair the damage pursuant to Section 14 of this Agreement. The parties agree that they shall cooperate to investigate the cause of any damage to the right-of-way. The City shall hold Franchisee responsible for damage that is Ordinance No 16-815 Page 14 of 30 determined, to a reasonable degree of certainty, to have resulted from issues with Franchisee's Facilities or the actions of Franchisee. Section 17. Franchise Fee and Utility Tax 17.1 The City levies a Franchise fee pursuant to this Franchise agreement to ensure that the City's transportation, landscape, drainage, and storm water system infrastructure is maintained and preserved during the ongoing operation of utility work in the City. Utility work within the City's right-of-way causes a deterioration of the right-of-way and requires the City to perform annual maintenance and longer-term capital improvements to maintain and preserve the City's right-of-way infrastructure. Administration of this Franchise, and annual maintenance and preservation work includes the work and cost for City employees, materials, engineering, inspection, administration of the Franchise agreement, planning, electronic mapping, pavement management, and other outside services for shoulder maintenance, street drain maintenance, roadside maintenance, street overlays, sweeping and mowing, and street and drainage capital projects.. If the City adopts a utility tax applicable to Franchisee, and Franchisee makes the payments to the City contemplated by such a utility tax, then the Franchise fee will be cancelled effective the beginning date for the utility tax. 17.2 In consideration of the rights granted to Franchisee by this agreement, Franchisee agrees: (a) To collect and distribute to the City a Franchise fee equal to 3.6 percent of Revenue generated within the City as defined in this agreement for 2016-19, 3.8 percent for 2020-23, and 4.0 percent for 2024-26. The parties agree that Franchisee shall begin charging the Franchise fee with billings issued after June 30, 2016. The Franchise fee shall be paid on a monthly basis, with the first payment due July 15th and subsequent payments due the 15th Ordinance No 16-815 Page 15 of 30 day of each month thereafter throughout the Franchise term. The amount of the monthly payment will equal the total Franchise fee owed during the prior year divided by twelve (2016 payments shall initially be based on 2015 revenues). It is agreed that by the thirtieth day following the end of the year, Franchisee shall calculate the actual Franchise Fee owing during the prior year and the amount of any underpayment shall be submitted to the City with the second payment of the year, or the amount of any overpayment shall be returned to the Franchisee within forty five (45) days of the date the amount is invoiced to the City. No interest shall accrue on any overpayment or underpayment owed pursuant to this section. (b) Should Franchisee be prevented by judicial or legislative action from collecting a Franchise fee on all or part of Franchisee's Revenue, Franchisee shall be excused from the collection and distribution of that portion of the Franchise fee. (c) Should a court of competent jurisdiction declare, or a change in law make the Franchise fee invalid, in whole or in part, then Franchisee's obligation to collect and distribute the Franchise fee contemplated under this section shall be terminated in accordance with and to the degree required to comply with such court or legislative action. (d) Franchisee agrees that it will not pursue any legal challenge to the Franchise fee established under this Franchise. (e) Upon the City's request, Franchisee shall make available Franchisee's books and records pertaining to all revenue derived by the Franchisee by virtue of the Franchise for City review, to verify the accuracy of payments. The City shall maintain the confidentiality of such information to the extent permitted by law. 17.3 In consideration for the Franchise fee collected and distributed to the City by Ordinance No 16-815 Page 16 of 30 Franchisee, the City agrees: (a) To pay Franchisee for the cost of maintaining the fire hydrants (fire suppression system) within City boundaries as discussed in Section 5 of this Franchise. (b) To forego, during the term of the Franchise, the initiation of any proceedings under Chapter 35.13A RCW to assume the water and/or sewer service jurisdiction of Franchisee. Should a court of competent jurisdiction declare, or a change in law make the Franchise fee invalid, in whole or in part, then the assumption forbearance shall be cancelled and this Subsection 17.3 (b) shall be stricken from the agreement. (c) To bear the cost of the Puget Sound Energy streetlights located in the right-of- way within City boundaries currently paid for by Franchisee and billed to Franchisee's customers after June 30, 2016. (d) If a lawsuit is filed challenging the Franchise fee, the City agrees to defend and hold Franchisee harmless from the cost/liability of such a lawsuit. 17.4 If the Franchise fee is declared invalid, in whole or in part, the parties agree to meet to discuss alternatives and amendments to this Franchise to retain the essential purposes of this section. Section 18. General Maintenance of Facilities Franchisee will maintain Facilities located within the Franchise Area in good operating condition and repair in a manner consistent with applicable law and prudent utility practice, and will comply with the following procedures: (a) Franchisee will provide the City, on an annual basis upon the City's written request, a proposed schedule of its routine Facility replacement or repair activities within the Franchise Area. Ordinance No 16-815 Page 17 of 30 (b) Franchisee will meet, at least annually upon the City's written request, with a City representative to discuss the City's concerns regarding the timing, scope, nature, or method of such repair or replacement activities within the Franchise Area. Section 19. Emergency Operations Prior to the beginning of each winter storm season, Franchisee will, at the request of the City, attend an annual coordination meeting with the City to discuss Franchisee's Emergency Response Plan. At the request of the City, a copy of those portions of Franchisee's Emergency Response Plan that Franchisee makes generally publicly available will be provided to the City at the coordination meeting, along with appropriate telephone number and pager numbers during each emergency. Section 20. Default 20.1 Notice of Default. If Franchisee shall fail to comply with any of the provisions of this Franchise, the City may serve a written notice to Franchisee ordering such compliance and Franchisee shall have sixty (60) days from the receipt of such notice in which to comply. 20.2 Revocation of Franchise. If Franchisee is not in compliance with this Franchise after the expiration of the sixty (60) day period, the City may, by ordinance, declare an immediate forfeiture of this Franchise; provided, however, if any failure to comply with this Franchise by Franchisee cannot reasonably be corrected with due diligence within such sixty (60) day period (Franchisee's obligation to comply and to proceed with due diligence being subject to unavoidable delays and events beyond its control), then the time within which Franchisee may so comply shall be extended, upon notice to the Director, for such time as may be reasonably necessary and so long as Franchisee commences promptly and diligently to effect such compliance. In the event of the City's Ordinance No 16-815 Page 18 of 30 cancellation of this Franchise, all rights and obligations associated therewith, including the Franchisee's obligation to pay a Franchise fee, shall be terminated. Section 21. Limited Rights This Franchise is intended to convey only a limited right and interest to Franchisee in the Franchise Area. This Franchise is not a warranty of title or conveyance of any ownership interest in or to the Franchise Area to Franchisee. Section 22. Eminent Domain The existence of this Franchise shall not preclude the City from acquiring by condemnation, in accordance with applicable law, all or a portion of Franchisee's Facilities within the Franchise Area for the fair market value thereof. In determining the value of such Facilities, no value shall be attributed to the right to occupy the Franchise Area conferred by this Franchise. Section 23. Vacation If at any time the City, by ordinance, vacates all or any portion of public streets, roads and/or rights-of-way within the Franchise Area, the City will not be liable for any damages or loss to the Franchisee by reason of such vacation. The City agrees to exert reasonable good faith efforts to reserve an easement for Franchisee's existing or proposed Facilities when a street, public way, or area is vacated. The City may, after thirty (30) days' written notice to Franchisee, terminate this Franchise with respect to any such vacated area. Section 24. Compliance with Laws Franchisee shall comply with all applicable federal, state, and City laws, ordinances, resolutions, regulations, standards and procedures, as now existing or hereafter amended or adopted, including without limitation the State Environmental Protection Act; the Federal Occupational Safety Ordinance No 16-815 Page 19 of 30 and Health Act of 1970 ("OSHA"), and the Washington Safety .and Health Act of 1973 ("WISHA") provided, however, that if any term or condition of this Franchise and any term or condition of any City law, code, ordinance, resolution, regulation, standard, procedure, permit, or approval are in conflict, the term or condition of this Franchise will control. Section 25. Guarantee Franchisee shall guarantee work completed by the Franchisee after the date of this franchise for a period of twenty (20) years from completion against settlement or conditions requiring repair. Section 26. Charge for Administrative Costs Nothing herein shall preclude the City from recovering any administrative costs incurred by the City in the approval of permits or in the supervision, inspection or examination of all work by Franchisee in the Franchise Area as prescribed in accordance with applicable provisions of the City's code. Section 27. Indemnification Franchisee agrees to indemnify and hold harmless and defend the City, its elected officials, officers, employees, agents, and volunteers from any and all claims, demands, losses, actions and liabilities (including costs and all attomeys' fees) to or by any and all persons or entities, including, without limitation, their respective agents, licensees, or representatives, arising from, resulting from, or connected with this Franchise to the extent caused in part or in whole by the acts, errors or omissions of the Franchisee, its officers, partners, shareholders, agents, employees, or by the Franchisee's breach of this Franchise. This Section shall not be construed to require Franchisee to indemnify, hold harmless or defend the City against claims or damages arising from the negligence of the City, its agents, or employees. In the event any claim, demand, suit or action is commenced Ordinance No 16-815 Page 20 of30 against the City that constitutes an obligation of Franchisee pursuant to this Section 27, the City shall promptly notify Franchisee thereof, and Franchisee shall defend any such claim, demand, suit or action. Franchisee shall not settle or compromise any such suit or action except with prior written consent of the City, which shall not be unreasonably withheld. The City shall have the right at all times to participate through its own attorney in any suit or action which arises pursuant to this Franchise when the City determines that such participation is required to protect the interest of the City or the public. In the event it is determined that RCW 4.24.115 applies to this Franchise, Franchisee agrees to defend, hold harmless and indemnify the City to the maximum extent permitted thereunder, to the full extent of Franchisee's negligence. Section 28. Insurance 28.1 Minimum Limits. The Franchisee agrees to carry as a minimum, the following insurance, in such forms and with such carriers as are satisfactory to the City. (a) Workers compensation and employer's liability insurance in amounts sufficient pursuant to the laws of the State of Washington; (b) Commercial general liability insurance with limits of liability not less than $5,000,000 each occurrence and $5,000,000 aggregate for bodily injury, including personal injury or death, products liability, contractual coverage, operations, explosion, collapse, underground and property damage; and (c) Automobile Liability insurance with limits of liability not less than $5,000,000 each accident for bodily injury, or death and property damage. 28.2 Mandatory Insurance Provisions. The commercial general liability insurance and automobile liability insurance policies shall be endorsed to contain the following provisions: Ordinance No 16-815 Page 21 of 30 (a) The City, its officers, elected officials, employees, and volunteers are to be named as additional insured; (b) Coverage shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability; (c) Coverage shall not be suspended, canceled, modified or reduced except after thirty (30) days' prior written notice to the City delivered by certified mail, return receipt requested; and (d) Coverage shall be primary as to the City, its officers, officials, employees, and volunteers. Any insurance or self-insurance by the City, its officers, officials, employees, or volunteers shall be in excess of Franchisee's required insurance. 28.3 Verification of Coverage. Franchisee shall furnish the City with certificates of insurance and original endorsements evidencing the coverages required by this Section. The certificates and endorsements shall be signed by a person authorized by the insurer to bind coverage on its behalf and must be received and approved by the City annually. At the City's request, Franchisee shall deliver certified copies of all required insurance policies. 28.4 Self -Insurance. In satisfying the insurance requirements set forth in this Section, Franchisee may self -insure against such risks in such amounts as are consistent with good utility practices. Franchisee shall provide the City with sufficient written evidence, upon request, that such insurance (or self-insurance) is being so maintained by Franchisee. Such written evidence shall include, to the extent available from Franchisee's insurance carrier, a written certificate of insurance with respect to any insurance maintained by Franchisee in compliance with this Section. Ordinance No 16-815 Page 22 of 30 Section 29. General Provisions 29.1 Entire Agreement. This Franchise contains all of the agreements of the Parties with respect to any matter covered or mentioned in this Franchise and no prior agreements or understandings pertaining to any such matters shall be effective for any purpose. 29.2 Modification. No provision of this Franchise may be amended or added to except by agreement in writing signed by both of the Parties. 29.3 Assignment. Franchisee shall not have the right to transfer or assign, in whole or in part, any or all of its obligations and rights hereunder without the prior written consent of the City, which consent will not be unreasonably withheld. Any assignee shall, within thirty (30) days of the date of any approved assignment, file written notice of the assignment with the City together with its written acceptance of all terms and conditions of this Franchise. Notwithstanding the foregoing, Franchisee shall have the right, without such notice or such written consent, to mortgage its rights, benefits and privileges in and under this Franchise to the Trustee for its bondholders. 29.4 Attorneys' Fees. In the event the City or the Franchisee defaults on the performance of any terms in this Franchise, and the Franchisee or the City places the enforcement of the Franchise or any part thereof or the collection of any monies due, or to become due hereunder, in the hands of an attorney, or files suit upon the same, the prevailing party shall be entitled to an award of all reasonable attorneys' fees, costs, and expenses. The venue for any dispute related to this Franchise shall be King County, Washington. 29.5 No Waiver. Failure of either party to declare any breach or default by the other party immediately upon the occurrence thereof, or delay in taking any action in connection therewith, shall not waive such breach or default, but such party shall have the right to declare any such breach or Ordinance No 16-815 Page 23 of 30 default at any time. Failure of either party to declare one breach or default, does not act as a waiver of such party's right to declare another breach or default. 29.6 Goveming Law. This Franchise shall be made in and shall be govemed by and interpreted in accordance with the laws of the State of Washington. 29.7 Authority. Each individual executing this Franchise on behalf of the City and Franchisee represents and warrants that such individual is duly authorized to execute and deliver this Franchise on behalf of the Franchisee or the City. 29.8 Notices. Any notices required to be given by the City to Franchisee or by Franchisee to the City shall be delivered to the parties at the following addresses: Franchisee: Lakehaven Utility District Attn: General Manager 31627 1st Ave South P.O. Box 4249 Federal Way, WA 98063 City: City of Federal Way Attn: City Attomey 33325 8th Avenue South Federal Way, WA 98003 Any notices may be delivered personally to the addressee of the notice or may be deposited in the United States mail, postage prepaid, to the address set forth herein. Any notice so posted in the United States mail shall be deemed received three (3) days after the date of mailing. 29.9 Captions. The respective captions of the sections of this Franchise are inserted for convenience of reference only and shall not be deemed to modify or otherwise affect in any respect any of the provisions of this Franchise. Ordinance No 16-815 Page 24 of 30 29.10 Remedies Cumulative. Any remedies provided for under the terms of this Franchise are not intended to be exclusive but shall be cumulative with all other remedies available to the City at law, in equity, or by statute. Section 30. Severability Should any section, subsection, paragraph, sentence, clause, or phrase of this Franchise, or its application to any person or situation, be declared unconstitutional or invalid for any reason, such decision shall not affect the validity of the remaining portions of this Franchise or its application to any other person or situation. The City Council of the City of Federal Way hereby declares that it would have adopted this Franchise and each section, subsection, sentence, clauses, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. Section 31. Ratification Any act consistent with the authority and prior to the effective date of this Franchise is hereby ratified and affirmed. Section 32. Implementation The terms of the previous Franchise and any amendments shall control until the effective date of this Franchise. Section 33. Effective Date This Franchise shall take effect and be in full force thirty (30) days after its passage and publication, according to law (see Effective Date below). PASSED by the City Council of the City of Federal Way this (('t day of March, 2016. Ordinance No 16-815 Page 25 of 30 ATTEST: awi ERIC, STEPHANIE C FILED WITH THE CITY CLERK: 02/12/2016 PASSED BY THE CITY COUNCIL: 03/01/2016 PUBLISHED: 03/04/2016 EFFECTIVE DATE: 04/03/2016 ORDINANCE NO.: 16-815 Ordinance No 16-815 Page 26 of 30 ACCEPTANCE: The undersigned hereby accepts all the rights and privileges of the above granted Franchise and acknowledges that such rights and privileges are subject to and limited by all of the terms, conditions and obligations contained therein. DATED this 22 day of AA co -re.-\( , 2016. LAKEHAVEN UTILITY DISTRICT By: Its: Ordinance No 16-815 Page 27 of30 EXHIBIT A Location of Facilities within Franchise Area Ordinance No 16-815 Page 28 of 30 City of Water Service Mrp Dale. Merck 2010 cry d Feoe�at Way PO.Baw brt8 Wiwi. Wa. Federal Way Franchise Area tI 213 '-' Ni www. otyotbarrriwa com Exhibit A-1 Des Kent J I— - -.. Moi t— ;.l�_ - 1 -' -; f y i_ - o %--Ya I LtLif Jr 1 t,_,, I 1 L. 1 _ _, i t..- ' A. NI f - I` j 1 + LTTacoma '� � --t _- Auburn V ./ • / Legend Franchise Area r J Water Service Area L Federal Way City Limits , / 1J— a IJ ?Hilton Fife Edgewood c1.r o� This map is intended for use A Federal Wa 0 0.5 t as agraphical representation. Y �Mdes The Cdy of Federal Way makes no warranty as to its accuracy. Rts Jw.'SS7N0,0Ka'Acr• 0 ,.1r:a'..4.sh f .!' ,w: Ordinance No 16-815 Page 29 of 30 Mao Dee Mrcn, Salo City of Sewer Service G'ydra°e"""4' P0.8o14 4716 Federal Way Franchise Area {Pwai)2S3-84}/000 06' {VV) www dydf4oaratway con Exhibit A-2• Kam Des Mai s $;72.9A r1 /, ,4{1f f r ... I e ��"".-- ; Federal 1 , — t f may r , L 1 �. 1 'a< � i� �� 1`—�- •--� -i.��_. _ •i , I Roti \\ i- _ \Z _� - I H l rm 1 )4 —;� .,\`Auburn Tatem \I-7 4 \` , '-� ;; - �r x ;:' \ — i� \\— ./ f I © t •... J \ \ Legend Franchise Arca I= J sewer Service Area Federal Way City Limns lb \ /I '-'-r '•'r 1 Milton Fife Edgewood city or The map is intended lar use Federal Way 0 0.5 1 as a graphcal represerdation. The City of Federal Way makes N Milos no warranty as to its accuracy. R1aaaaOWSlitataP*oacri1Agreeran814.UDMaratLURSe.a rft7 mad Ordinance No 16-815 Page 30 of 30 Federal Way Popular Annual Financial Report Celebration Park City of Federal Way, Washington For the year ended December 31, 2016 Federal Way VISION Federal Way is a community known for its cultural diversity, attractive parks, safe neighborhoods, and vibrant business centers. MISSION The City of Federal Way is responsive, innovative and fiscally responsible in delivering quality services, promoting economic development, improving infrastructure, and managing growth. POPULAR ANNUAL FINANCIAL REPORT (PAFR) For the year ended December 31,2016 GOALS • Integrate the public safety strategy into all facets of City operations, building on a strong community -based approach. • Create a multi -use urban city center that is pedestrian friendly, linked to neighborhoods and parks, and services as the social and economic hub of the City. • Establish Federal Way as an economic leader and job center in South King County by attracting a regional market for high-quality office and retail businesses. • Maintain the capital facilities plan and provide financing options for transportation and surface water improvements, parks, recreation, cultural arts and public facilities. • Ensure a responsive service culture within the City organization where employees listen carefully, treat citizens and each other respectfully and solve problems creatively, efficiently, and proactively. • Position Federal Way as a regional leader by working collaboratively with other local and regional jurisdictions to leverage resources. 02 Table of Contents Message from the Mayor 03 About the City 05 About the PAFR 08 Financial Condition 09 General Fund Highlights 12 Other Financial Information 13 So, How Do We Stack Up? 14 Sales Tax 18 Property Tax 20 Utility Tax 23 Other Taxes 24 Long -Term Debt 25 Economic Condition 26 Federal Way June 30, 2017 To Council, and the Citizens of City of Federal Way: It is our pleasure to present to you the 2016 City of Federal Way Popular Annual Financial Report (PAFR). This is the City's third PAFR. It is an easy -to -read version of the City's Comprehensive Annual Financial Report (CAFR) that is published on an annual basis. CAFR is a detailed account of the financial activities of the City prepared in accordance with Generally Accepted Accounting Principles (GAAP) and audited by the Washington State Auditor's Office (WSAO). A copy of the CAFR is available on the City's website at http://www.citvoffederalway.com/ The City received the "Certificate of Achievement for Excellence in Financial Reporting" award for its 2015 CAFR. The 2016 CAFR has been submitted to the Government Finance Officers Association of United States and Canada (GFOA) for review and consideration for the award to attest to its continuing strive to maintain the highest best practices in financial reporting and presentation. The award is good for only one year and the City has received this award every year since 1991. The award is given by the GFOA to government entities that meet the rigorous financial reporting guidelines. This PAFR is designed to provide citizens with an overview of the City's revenues, expenditures, and some general information in a more simplified way than the CAFR. The financial information included is from the audited CAFR, but the report itself is not required to be audited by WSAO. This report is another opportunity to share the City's financial information with its citizens and to let one know how the City is doing financially. This report, the award-winning CAFR, and the award-winning budget presentation are clear testimony to the City's commitment to high-quality financial reporting and genuine concern for citizen engagement. The City produced its first biennial budget in 1996 for the fiscal years 1997 and 1998 as a part of an attempt to improve it's efficiency with regards to the amount of time spent on the budget process annually. The 2015-2016 Biennial Budget received GFOA's Distinguished Budget Presentation Award. The City has received awards on its budget presentations since the 1990 Annual Budget presentation. The award represents a significant achievement, reflecting the commitment of the governing body and the staff to meeting the highest principles in government budgeting. In order to receive this award, a government unit must publish a budget document that meets program criteria as a policy document, as an operating guide, as a financial plan, and as a communication device. The award is valid for a period of only two years covering the budget periods. The City submitted its 2017-2018 Biennial Budget for review again. G�9 Go.crnmem Finance Olticem Association Certificate of Achievement for Excellence in Financial Reporting Preserved to City of Federal Way Washington For Its Comprehcnsine Annual F,naneml Report (or the Fiscal Year Ended December 31, 2015 Pac..mno Ut,r„tot,CE() 03 A Federal Way The local economic condition for the City of Federal Way looks very good. The license permits for new construction have increased. The sales tax revenue is up and is back to prerecession levels, and the City continues to grow. Through the sacrifices of the past, the fund balance in the City's General Fund was at the required level at the end of 2016, providing the city a reasonable opportunity to evaluate its mission and objectives. The City will continue to align its resources to meet long-term goals and the immediate needs of the community. The City will also continue to find innovative ways to reach its goals through collaboration with other willing parties without sacrificing the safety of its citizens. The City has also taken several steps in 2016 to enhance the economic viability and sustainability of the City, positioning the City and its residents for a better tomorrow. The following are some of the initiatives: • Performing Arts and Event Center in downtown will be opened August 19, 2017. It has started to generate more business, created more jobs, and it is expected to help revitalize the downtown core and generate more sales tax revenue. • The City signed a Purchase and Sale Agree- ment (PSA) with Ottone-Salinas, Inc on building a new hotel next to the Performing Arts and Event Center on June 15, 2017. The hotel is expected to be opened by December 1, 2019. In 2017, the City sold 1.86 acres of the TC -3 prop- erty for the hotel in the amount of $2,187,756 ($27/ sq.) GOVERNMENT FINANCE OFFICERS ASSOCIATION D istingu ished Budget Presentation Award Ntogmaa TO City of Federal Way Washington F t& xMIAMI Negiming Januar 1,2015 i0_ Federal way can't wait; the City is on the move and we hope you will join us to raise our City to a higher level. Thank you for your interest in the City of Federal Way and its financial operation and performance. As always, we encourage readers to send questions, feedback, or comments about this report (PAFR) to Finance Director Ade Ariwoola at ade.ariwoolaecitvoffederalway.com. Sincerely, Jim Ferrell, Mayor 04 ABOUT THE CITY ELECTED OFFICIALS he seven -member City Council is elected at large and members serve a four-year term. The Mayor is elected at large to serve a four-year term. The Mayor is the Chairman of the Council and the presiding member at Council meetings. The Mayor has an equal vote with other Councilmembers. Mayor End of Term Mayor Jim Ferrell December 31, 2017 jim.ferrell(@,citvoffederalway.com The current Councilmembers are listed below in position order: Official End of Term Position 1 Lydia Assefa-Dawson December 31, 2019 lydia.assefa-dawson@cityoffederalway.com Position 2 Bob Celski November 28, 2017 bob.celski@cityoffederalway.com Position 3 Susan Honda December31, 2019 susan.honda@citvoffederalway.com Position 4 Jeanne Burbidge December 31, 2017 Jeanne.burbidge@citvoffederalway.com Position 5 Mark Koppang December 31, 2019 mark.koppang@citvoffederalway.com Position 6 Martin A. Moore December 31, 2017 martin.moore@citvoffederalway.com Position 7 Dini Duclos December 31, 2019 dini.duclosCa citvoffederalway.com 05 Federal Way The City Council meets the first and third Tuesday of every month at 7:00 p.m. in Council Chambers. Federal Way City Council meetings are open to the public. The Council meeting agendas and minutes are available on the City's website under "Agendas and Minutes". Video recordings of the meetings are televised on Comcast public television channel 21 and broadcast live on the City's YouTube channel, FWYouTube, and previously recorded meetings may be viewed online at www.cityoffederalway.com. Councilmember Bob Celski was appointed to replace Councilmember Kelly Maloney in January 2017 when she voluntarily resigned from her position. In addition to the elected legislative branch, the citizens of Federal Way also have the elected judiciary to preside over its municipal courts. The following are the elected judges that preside over the municipal courts of the City of Federal Way: Official Beg. Of Term • Judge David Larson March 3, 2008 • Judge Rebecca Robertson January 1, 2010 APPOINTED OFFICIALS The Mayor is elected by the citizens to execute Council policies and to provide administrative direction to city departments. Department directors are appointed by the Mayor and subject to Council approval. The following is the list of the current City - appointed officials in alphabetical order by department. Official Ryan CaII Stephanie Courtney Brian Davis Tim Johnson Ade Ariwoola Jean Stanley Thomas Fichtner John Hutton Theresa Yvonne Andy Hwang Marwan Salloum Title City Attorney City Clerk Community Dev. Director Economic Dev. Director Finance Director Human Resources Manager IT Manager Parks Director PAEC Executive Director Police Chief Public Works Director „,, OfA Federal Way PROFILE The City of Federal Way was incorporated in February 1990. Federal Way is the ninth largest city in Washington State encompassing an area of 21.5 square miles south of Seattle on Interstate 5. Federal Way has grown from a population of 89,540 in 2010 to 96,757 in 2016. Federal Way is a non charter code city, operating under Section 35A of the Revised Code of Washington. It had a Council/City Manager form of government until November 2010, when the citizens elected to change their form of government to Mayor/Council. The Council is composed of seven councilmembers elected at large to four-year terms on a non-partisan ballot. 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 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 police, planning and zoning, street maintenance and construction, parks and recreation, and general administrative services. The City operates enterprise funds for stormwater management. According to www.deptofnumbers.com, Washington State had more than 189,172 people unemployed (5.1%) as of the end of 2016. The unemployment rate for Washington fell 0.10 percentage points in May 2017 to 4.50%. The state unemployment rate was 0.2 percentage points higher than the national rate for the month. The peak unemployment rate in Washington was 10.40% in November 2009 and is now 5.90 percentage points lower. The Seattle -Tacoma -Bellevue annual unemployment rate for 2016 was 4.00%, down from 4.90% in 2015. The last time Seattle-Tacoma-Bellevue's annual unemployment rate was below 4.00% was in 2007 (3.70%) just before the "mortgage market” crash of 2008. 06 Federal Way As an urban city, Federal Way has an inventory of parks for the enjoyment of its citizens that rivals any community. The total acreage of our neighborhood parks is over 130 acres. They include: Adelaide Park is located at 3061916th Avenue SW with natural, picnic, play areas 11. and a walking trail on 6.7 acres of land. 2. Alderbrook Park is located at 32730 17th Avenue SW with natural, picnic, play areas 12. and a walking trail on 35.69 acres of land. 3. Alderdale Park is located at 2700 SW 340th Place with picnic, play areas and a 13. walking trail on 2 acres of land. 4. Cedar Grove Park is located at 2200 S 333rd Street with natural, picnic, play are- as and a walking trail on 2.6 acres of land. 5. Coronado Park is located at 2501 SW 349th Place with a basketball court, picnic, 15. and play areas on 1.2 acres of land. ' 6. Dash Point Highlands Park is located at 5300 SW 324th Place with natural, picnic, and play areas on 5 acres of land. 7. English Gardens Park is located at 1210 SW 333rd Street with natural, picnic, play 17. areas and a walking trail on 3.4 acres of land. 8. Heritage Woods Park is located at 28159 18. S 24th Place with picnic, play areas and a walking trail on 4 acres of land. 9. Lake Grove Park is located at 833 SW 19. 308th Street with a basketball court, natural, picnic, play areas and a walking trail on 5 Acres of land. 10. 14. 16. 20. Lake Kilarney Park is located at 34902 Weyer- haeuser Way S with natural, picnic areas and a walking trail on 10 acres of land. Laurelwood Park is located at 2301 S 292nd Street with a basketball court, softball field, natural and picnic areas on 18.28 acres of land. Madrona Park is located at 1508 SW 356th street with natural, picnic, play areas and a walking trail on 19.8 acres of Land. Mirror Lake Park is located at 915 S 315th Street with natural, picnic, play areas and a walking trail on 3.4 acres of land. Olympic view Park is located at 29th Avenue SW and 330th with natural, picnic, play areas and a walking trail on 21.39 acres of land. Palisades Park is located at 5039 Dash Point Road with a basketball court, picnic, play areas and a walking trail on 4.5 acres of land. 312th Sport court is located at SW 312th and 11th Avenue SW with basketball, tennis and Pickleball courts on 2 acres of land. Wedgewood Park is located at 3913 SW 337th Street with natural, picnic, play areas and a walking trail on 3.09 acres of land. Wildwood Park is located at 2315 S 300th Street with natural, picnic, play areas and a walking trail on 2.43 acres of land. WinCo Park is located at SW Campus Drive with small plaza, benches and natural area on 1.6 acres of land. Town Square Park is located at 31620 Pete von Reichbauer Avenue South with a play area, water activities, walking trail and concert area on 4.14 acres of land. It is the City's newest parks addition and was opened in 2016. 07 Federal Way ABOUT THE PAFR Our Popular Annual Financial Report (PAFR) is a supplementary financial report in a summarized format. The PAFR is designed to meet the needs of interested parties who prefer a less detailed overview of the City's activities and for those who prefer information on particular areas of City business. While the principal source for the PAFR is the audited Comprehensive Annual Financial Report (CAFR), the PAFR itself is not audited and does not include all details and disclosure necessary for presentation, according to Generally Accepted Accounting Principles (GAAP). This report focuses ONLY on the primary government, which is composed of governmental funds (including General Fund) and its business -type basic reports (Statement of Net Assets, and Statement of Activities). Users can access the City's overall financial condition and its operational accountability via these reports. These reports will help provide answers to questions like, "Were current year revenues sufficient to fund current year's operation?" and "Did the City's financial condition improve or worsen at the end of the year in question?". Evaluation regarding fiscal accountability and stewardship, however, are better addressed by fund -level financial reports presented in the CAFR. This year's CAFR is available on the City's website: www.citvoffederalway.com/cafr. GOVERNMENTAL ACCOUNTING TERMS AND CONCEPTS Government -wide reporting provides an aggregate view of the City's financial activities by consolidating all of its governmental and business -type activities. Traditional governmental fund statements are converted to full accrual mainly by including all long-term debt and capital assets. Statement of Net Position reports the City's assets and liabilities with the difference reported as "net position" (Similar to the traditional "balance sheet"). Statement of Activities reports on the City's total expenses and shows the extent of funding from program revenues and from general revenues. Change in Net Position represents the increase or decrease in net position over the previous year. Net position (Assets minus Liabilities) represents the City's equity interest in the assets it employs in providing services to its citizens. Assets are resources with present service capacity that the City controls. For example, cash from taxes paid by citizens is an asset that can be put to use to provide public safety. Accrual basis of accounting is where financial transactions or events are recorded in the period they are incurred rather than when cash is received or disbursed. 08 Current assets include cash or near cash items that can be used to liquidate liabilities due within a year. Capital assets are tangible or intangible nonfinancial assets that have a useful life of more than one year and are used in providing services and for City administration. Liabilities are present obligations of the City to sacrifice resources that it has little or no discretion to avoid such as the amounts the City owes to creditors. Net investment in capital assets is the portion of net position that represents the City's equity interest in its capital assets (capital assets less the amount of debt used to acquire them). Restricted net position is the portion of net position subject to external restrictions e.g. state law, bond covenants. Unrestricted net position is the portion of net position not tied to capital assets or subject to legal restrictions, hence available to be used to provide services. FINANCIAL CONDITION Fund balance is used only in governmental funds, such as in the General Fund, to denote the difference between fund assets and fund liabilities. The information presented here is the city-wide assets, liabilities and net position as of December 31, 2016. A city is a family of companies serving the communities. Included in this family of companies is one utility company designed to run like any business and considered "business -type activities". Several other companies that carry out the functions of general government or that support other companies, are considered "governmental activities". Federal Way Statement of Net Position (Million) Governmental Activities Business Type Activities Total Primary Government Assets Current & other assets 97.13 7.17 104.30 Capital assets 463.16 59.35 522.51 Total Assets $560.29 $66.52 $626.81 Total Deferred Outflows $ 3.93 $ 0.31 $ 4.24 Liabilities Other liabilities 9.16 0.62 9.78 Long-term liabilities 49.98 1.96 51.94 Total Liabilities $59.14 $2.58 $61.72 Total Deferred Inflows $ 0.32 $0.03 $ 0.35 Net Position Invested in capital asset net of related debt 440.81 59.06 499.87 Restricted 21.37 0.02 21.39 Unrestricted 42.58 5.14 47.72 Total Net Position $504.76 $64.22 $568.98 The Total Net Position (assets minus liabilities) may serve over time as a gauge of the government's financial condition which is the value of what the government owns compared to what it owes. Most of what the government owns may not be easily converted into cash to satisfy the government creditors (i.e. infrastructures like bridges and roads). The City's net position is remaining stable over the years and that is a good gauge of good financial health. The utility fund is accounted for in the business -type activities. 700.00 600.00 500.00 400.00 300.00 200.00 100.00 0.00 Detail Net Position Trend (In Millions) 2012 2013 2014 2015 2016 Unrestricted 51.00 55.08 65.06 51.83 47.72 • Restricted 22.87 22.62 17.41 20.21 21.39 • Inv In Capital 520.88 519.57 516.38 483.24 499.87 Another factor that should be noted is the restriction and liquidity of the Net Position. The largest portion of the Net Position is invested in capital and infrastructure of the City. 09 Federal Way Even though the Net Position Invested in Capital Assets is net of related debt, capital and infrastructure are usually expected to provide services over a long period of time. This portion of the Net Position is not available for spending or future appropriation. The restricted portion of the Net Position is not subject to the control of the City and therefore not available for spending or appropriation other than for which it is intended. The restriction is usually placed through contract agreements, bond agreements or other third party legally enforceable requirements. The third group of the Net Position is unrestricted, which is the portion that may be spent or appropriated as the Council sees fit. The City's Unrestricted Net Position has decreased from $51.00 million in 2012 to $47.72 million at the end of 2016. The City has been spending funds on economic development projects such as the Performing Arts and Event Center. The City has also increased budgeted staff from 319 FTEs in 2012 to 333 FTEs in 2016. 700 600 500 400 300 200 100 0 Net Position Trend (in Millions) Eli Mil 2012 2013 2014 2015 2016 * Government 538.47 540.05 541.31 490.45 504.76 ■Business 56.28 57.22 57.54 64.83 64.22 As shown in the table Statement of Activities, general government program activities do not generate enough program revenues of their own to cover the cost of services provided. A large part of program revenues in the governmental activities are derived from grants and service fees. Taxes are the major source of revenue used to pay for governmental activities. Unlike most other cities, the larger share of taxes paid to the City of Federal Way are in the form of taxes based on usage; such as sales, utilities, excise, and business taxes. Property taxes account for a smaller portion of the total tax needed to run the general government. In 2016, the Change in Net Position increased by $13.97 million, bringing its total Net Position to $568.98 million. The increase is primarily due to an increase in capital grants and contributions totaling $11.40 million. Statement of Activities (In Millions) Governmental Activities Business -type Activities Total Primary Government Program Expense $68.47 $5.51 $73.98 Program Revenue 35.71 5.76 41.47 Net Expense $(32.76) $0.25 $(32.51) General Revenue Property Tax 10.54 - 10.54 Sales Tax 14.22 - 14.22 Utility Tax 11.90 - 11.90 Other Taxes 9.78 - 9.78 Transfers and Other 0.63 (0.59) 0.04 Total General Revenues and Transfer $47.07 $(0.59) $46.48 Change In Net Position $14.31 $(0.34) $13.97 10 Federal Way The pie chart shows the makeup of 2016 taxes that were used to run the general government activities. Utility tax accounted for 26.51% of the taxes collected and Sales tax accounted for 31.67% of taxes collected. Property tax was 23.47% and Other taxes were 18.35%. In February 2016, 9.89 % or $1.41 million of sales tax was collected in December 2015. The holiday activities are reflected in the pattern of the sales tax revenue and collections. The average for all the other months was 8.19%. The percentage of utility tax collected in March was 9.34%, June was 12.91%, and 8.35 % in December. The City's sales tax rate is 9.50% which is the same as neighboring cities in King County. See more information on sales tax under "Sales Tax". Other Taxes 18.35% Taxes Property — Tax 23.47% Utility Tax 26.51 % Sales Tax 31.67% The utility tax is based on the gross receipts of the utility service provider (i.e. Puget Sound Energy (PSE)). Utility tax is not a direct payment from the consumer to the City. A major part of the general government resources were spent on public safety, parks and road related programs as shown on the pie chart below. Security of Persons & Property consumed 52.61% of the total general government activities resources last year. This is a major indication of the City's priority to protect its citizens and properties. Transportation takes a distant second at 18.87% of the general government's expenditures last year. Transportation includes the development, construction and Security of maintenance of the City's roads. PHealth and Persons & Human Services Culture and Recreation took a close Government Activities -Expenses Property 52.61% / 2.19% third at 13.69% for maintenance of our parks, community and cultural Economic centers, and for the development of .� Environment 4.68% community -related programs and activities. The rest of the general Physical government resources were spent on -Environment Economic Environment, Health and 0.69% Human Services, Physical Environment, and Interest on Long \._Transportation Term Debt. In any government, these 18.87% expenditure distributions may change year to year depending on the priority Cuture and . General of the City and its leadership. Recreation Interest on \Government 13.69% Long-term Debt 6.64% 0.63% 11 40 38 36 34 32 30 28 48 46 44 42 40 38 36 GENERAL FUND HIGHLIGHTS 4 Federal Way The General Fund is the chief operating fund of the City. At the end of 2016, the total fund balance was $14.29 million. After deducting legal reserves, amounts committed by the legislative body and those voluntarily set aside for specific purposes, the remaining available amount that may be appropriated in 2017 and beyond was $1.79 million, about 3.98% of the 2016 Total Expenditures. The actual revenue consistently exceeded the budgeted revenue as shown in the graph below. In 2016, the actual revenue in the General Fund was $37.85 with taxes accounting for $27.27 million. More than $14.22 million was from sales tax and more than $10.35 million was from property tax. The City saw its lowest revenue in 2012, as shown in the graph. Revenues (in Millions) 5 -Year Trend 2012 2013 2014 2015 2016 Expenditures (in Millions) 5 -Year Trend 2012 2013 2014 2015 2016 • Budget • Actual • Budget • Actual Revenue 2016 Budget 2016 Actual Taxes $ 27.30 $ 27.27 Licenses & Permit 3.27 2.98 Intergovernmental 2.01 2.26 Service Charges and fees 4.02 3.60 Fines & forfeiture 1.16 0.94 Other 0.49 0.80 Total $ 38.26 $37.85 Department Expenditure 2016 Budget 2016 Actual Mayor $1.38 $1.38 Council 0.38 0.37 Court 1.37 1.33 Human Resources 0.43 0.47 Clerk 0.56 0.48 Finance 0.94 0.87 Law 1.32 1.48 Community Development 3.32 3.08 Parks And Recreation 3.80 3.91 Police 25.19 25.59 Non Departmental 6.79 5.67 Total $45.95 $44.94 The actual expenditures a so fell behind the budgeted expenditures in the past five years. The City had its lowest spending in 2012 out of the five years shown in the graph. The spending increased in 2016. The City's sustainability for the future depends on controlling spending while growing revenues. A challenge for sustainability is to hire and retain valuable staff by paying competitive wages in the growing labor market. The City spends most of its resources to ensure the security of its citizens and their properties as evidenced by the appropriation and spending breakdown. In 2016, the City spent 56.94% ($25.59 Million) on Police and Jail Services, 8.70% on Parks and Recreational programs, 6.85% on Community Development and 6.69% on Courts and Law. The remaining 20.82% was used for Council, Human Resources, Finance, and Non Departmental expenditures. 12 Federal Way OTHER FINANCIAL INFORMATION Revenues: 2007 2008 2016 Total Utility Tax & Prop 1 $ 12,796,462 $ 13,469,136 $ 11,902,866 Property Tax $ 9,066,922 $ 9,213,312 $ 10,358,893 Sales Tax $ 13,048,624 $ 12,144,276 $ 14,222,497 Total Police Cost $ 22,103,232 $ 23,447,615 $ 32,306,646 Between 2007 and 2016 property tax grew by 16%, sales tax by 9%, and Police spending grew by 47%. The utility tax revenue decreased by 7% due to warmer weather in winter months. Between 2008 and 2016, total Police Department spending increased by $8.86 million. Score Jail and Valley Communications Center services account for $3.67 million of the increase. The remaining amount is primarily for salary and wages. The table above shows the growth in the three major sources of revenue for the $34,500,000 City in relation to ensuring the security of $29,500,000 its people. Over the years, City of $24,500,000 Federal Way invested a lot of its financial $19,500,000 resources on the security of people and $14,500,000 properties within its boundaries. A major $9,500,000 part of Proposition 1 is spent on our $4,500,000 Police Department. The City charges 7.75% tax (1.75% is dedicated to Prop. 1) on utility services except Water and Sewer within its jurisdiction. r Revenues • 2007 1111 ■ 2008 2016 Total Utility Property Sales Tax Total Police Tax & Prop Tax Cost 1 The growth in the labor cost between 2008 and 2016 is a testament to the City's commitment to our law enforcement. Positions: 2007 2008 2016 Admin Assistant II (F) $ 4,309 $ 4,455 $ 4,869 Police Officer ( E) $ 5,588 $ 5,684 $ 6,902 Lieutenant (F) $ 7,618 $ 7,618 $ 9,676 Prop 1 took effect in 2007, Lieutenant and Police Officer salaries increased by 27.01% and 23.51% respectively. Administrative Assistant salaries grew by 13.00% between 2007 and 2016. Between 2008 and 2016, Police Officer salary increased by 21.43%, Lieutenant Salary increased by 27.01%, and Administrative Assistant increased by 9.29%. $10,500 $9,500 $8,500 $7,500 $6,500 $5,500 $4,500 $3,500 $2,500 13 Positions Admin Assistant II (F) Police Officer (E) Lieutenant (F) • 2007 • 2008 2016 Federal Way SO, HOW DO WE STACK UP? The City of Federal Way is the 9th largest city in the state of Washington and King County is the 13th most populous county in the United States. By WashingtonDemographics.com The City of Federal Way is the fourth populous city compared to other local cities as shown in the table below. According to www.U.S.Census.gov, out of 281 cities in the state, Federal Way is the ninth most populated city. The City of Seattle is the most populous city in the state of Washington. Population for 2016 Poverty Rate for 2016 800,000 700,000 704,392 25.00% 600,000 18.20% 500,000 20.00% 15.40% 15.50% 15.90% 400,000 15.00% 300,000 200,000 96,757 124,435 10.00% 100,000 . 50,99777,472 100,953 II al 28,873 11.1 5.00% Ili Fe\S�a, )i�c ie°" o, <' • aha` coo° a�`e 0.00% ae`a ° P° 5¢ e¢ 5e Federal Burien Kent Aubum SeaTac Renton Seattle Way 20.50% 12.20% 13.50% Source Data - WashingtonDemographics.com Even though Federal Way is fourth in population among comparable cities, it is ranked fifth in poverty rate. 15.40% of residents live below the poverty level according to www.Washingtondemographics.com. Federal Way Housing Units for 2016 (%) Single] 55% 350,000 Multi- 300,000 Family 250,000 41% 200,000 150,000 100,000 50,000 Mobile - • -_IL- ■ Home 3% All Housing Units for 2016 315,915 36,424 45,010 40,058 10,271 19,578 Federal Kent Renton Burien SeaTac Seattle Way Source data - United State Census Bureau The City of Federal Way was ranked fourth compared to other local cities in regards to the number of housing units. Seattle has the highest number of housing units at 315,915, followed by Kent at 45,010 and Renton at 40,058 units. In 2016, there were 36,424 housing units in Federal Way, an increase of 1.88% over 2015 of 35,752 housing units. Of these units, 55.30% or 20,142 were single family homes, 41.27% or 15,031 were multi -family units, and 3.43% or 1,251 were mobile homes and trailers. 14 Seattle Renton SeaTac Aubum Kent Burien Federal Way Median Household Income for 2016 $45,985 $64,802 $59,347 $60,191 $53,712 $55,673 $70,594 $35,000 $45,000 $55,000 $65,000 $75,000 Source Data - WashingtonDemographic.com rtr or 01 Federal Way Federal Way ranks fifth in median household income at $55,673. The City of Seattle has the highest at $70,594 and City of SeaTac is the lowest at $45,985. Employment Retention Rate Total City FTEs per 1,000 Residents (5 -Year Trend) ( 5 -Year Trend) 3.60 3.50 3.56 3.40 3.30 3.20 3.39 3.34 3.40 3.43 2012 2013 2014 2015 2016 96.0% 95.0% 94.0% 93.0% 92.0% 91.0% 90.0% 89.0% 88.0% 94.9% 91.1% 93.4% 89.8% 90.0% 2012 2013 2014 2015 2016 Budgeted Total FTE's Year 2012 2013 2014 2015 2016 Number of FTE's 318.70 303.90 311.88 323.95 333.20 Source Data - City of Federal Way's Adopted Biennial Budget Although the City's FTE per 1,000 residents trend shows stability, budgeted full-time employees has increased between 318.70 FTE in 2012 to 333.20 FTE and 2016. The City of Federal Way's employment retention rate has decreased from 2012 to 2016 by 4.93%. The City works hard to pay their employees competitive wages. The market and the economy have recovered from the mortgage crash in 2008, resulting in an increase in job availability. With many in the workforce approaching retirement age, we are seeing an increase in the retirement rate. 15 urr nr Federal Way 300 250 200 150 100 50 0 2016 Crime Rate Per Capita 269 108.4 97.8 116.9 98 42-N.° .tc e�� PJ� �a 4V 52.9 96.9 .r.,� 67.5 (20 ,c0 �a`� Source Data - Washington Association of Sheriffs and Police Chiefs Federal Way ranks third in crime rate per capita compared to other local cities. In 2016, 52.61% of the total general government resources were used for the security of persons and property. This will continue to make Federal Way a safe city. 1.41 1.39 1.37 1.35 1.33 1.31 Full -Time Police Officer per 1,000 Residents as of October 31st ( 5 -Year Trend) 1.36 1.36 1.32 1.37 1.39 2012 2013 2014 2015 2016 5.00 4.00 3.00 2.00 1.00 0.00 Full -Time Police Officers per 1,000 Residents for 2016 as of October 31st 3.94 1.39 1.15 1.12 1 ■�I 1.40 1.32 2.02 1 Federal Renton Kent Aubum Tukwila Bothell Seattle Way Source Data - Washington Association of Sheriffs and Police Chiefs The City of Federal Way's full-time police officers per 1,000 residents has increased in the last four years. This rate is also higher than most local cities. The City of Federal Way has the 4th highest per capita at 1.39 compared to Tukwila at 3.94, Auburn at 1.40, and Seattle, the largest city in Washington State, at 2.02. Tukwila does not have as many residents as Seattle, but it has many shopping centers that require monitoring; and therefore, the highest number of police officers per 1000 residents. The City of Federal Way is working toward being one of the safest cities in King county. 16 2015 PER CAPITA GENERAL FUND TAX REVENUES FOR KING COUNTY CITIES City Population Per Capita Rank Tukwila 19,300 $ 1,476 1 Hunts Point 410 1,203 2 Medina 3,095 1,120 3 Woodinville 11,240 851 4 Seattle 662,400 849 5 Yarrow Point 1,020 799 6 SeaTac 27,650 684 7 Bellevue 135,000 676 8 Snoqualmie 12,850 670 9 Beaux Arts Village 300 658 10 Mercer island 23,480 640 11 Auburn 75,545 639 12 North Bend 6,460 602 13 Issaquah 33,330 587 14 Enumclaw 11,140 561 15 Kent 122,900 547 16 Renton 98,470 540 17 Kirkland 83,460 518 18 Algona 3,105 506 19 Normandy Park 6,420 502 20 Redmond 59,180 487 21 Carnation 1,790 485 22 Covington 18,520 481 23 Black Diamond 4,200 475 24 Bothell 42,640 467 25 Shoreline 54,500 465 26 Sammamish 49,980 452 27 Clyde Hill 3,020 447 28 Duvall 7,345 426 29 Federal Way 90,760 418 30 Pacific 6,840 394 31 Newcastle 10,940 393 32 Lake Forest Park 12,810 390 33 Kenmore 21,500 386 34 Des Moines 30,100 362 36 Burien 48,810 361 35 Maple Valley 24,700 360 37 Average: 49,330 S 591 37 Tukwila Hunts Point Medina Woodinville Seattle Yarrow Point SeaTac Bellevue Snoqualmie Beaux Arts Village Mercer 1 sland Aubum North Bend Issaquah Enumclaw Kent Renton Kirkland Algona Normandy Park Redmond CamAion Covington Black Diamond Bothdl Shoreline Sammamish Clyde Hill Duvall Federal Way Pad fie Newcastle Lake Forest Park Kenmore Des Moines Burien Maple Valley 2015 Per Capita General Fund Taxes 3- $400 $800 81.200 30th of37 Ring County Cities Source: Local Government Financial Reporting System data from the State Auditor's Office and Office of Financial Management. Taxes include Property Tax, Sales Tax, Criminal Justice Sales Tax, Utility Tax reported in the General Fund, and excludes Fire/Library. 2016 data is not available as of the time of this report. 17 Federal Way SALES TAX Sales tax accounted for 31.67% of the total tax revenue for the city in 2016. The retail sales tax rate in Federal Way in 2016 was 9.50%. This translates to nine and half cents on every dollar or nine dollars and fifty cents on every one hundred dollars spent. Eight entities share the sales tax collected in the City of Federal Way and the share of individual jurisdictions range from one tenth of a cent to six and half cents. For every dollar paid in sales tax, the City of Federal Way receives 8.95 cents and the state receives 68.42 cents. The total sales tax rate for the City _ iT. TT!W- m---rcfr 1 of Federal Way is 9.50%, and the ," ' i' ' ' \ ITI I) ST,V'' I " t) I' state of Washington chargesk., i) j) 2 a 6.50% (68.42% of the 9.50%).The UV f actual rate charged by the City of `-."' ' ;N Federal Way is 0.85% (8.95% of —r the 9.50%). One of the major <-, differences between the sales tax and the property tax is that there is no residency requirement on sales tax. The growth in sales tax revenue is not due to an increased tax rate and thus may be a major signal of economic growth in the retail sector of the economy. Growth in the retail sector is due to increased sales, which may be due to increase number of businesses or increased sales by current businesses. Either way, increased sales are often traceable to more people coming into the City to shop, or the people that live in the City are buying locally and spending more, or a mixture of the two. By increasing our economic development, the government can play a major role in ensuring financial growth of the City by enticing people to work, live and play in Federal Way. Construction sales tax has also increased due to the construction of buildings in the City. One of the major construction projects was the Performing Arts and Event Center which is planned to open in August 2017. Effective April 1, 2017, the Regional Transit Authority (RTA) tax will be increasing the sales and use tax by 0.05% to 10% in Federal Way. The tax increase will be used to expand light-rail, commute -rail, express bus service, and improve access to Federal Way. 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Sales Tax Distribution 0.85% 0.90% 0.90% 0.10% 0.10% 0.15+ . $ _� 6.50% Criminal King King City of King Sound State Jutice County County Federal County Transit Sales Tax Mental Sales Tax Way Metro (ST1) Health Transit 18 Federal Way SALES TAX REVENUE BY INDUSTRY CLASS (5 YEARS) According to a listing of businesses registered with the City of Federal Way and sorted by the Standard Industrial Classification, the business economy appears to be configured as follows: retail trade 55%; services 20%; construction 11%; information 5%; wholesale trade 4%, manufacturing 1%, and other 3%. Other includes transportation/utilities (22X), government (9XX), fire (52X and 53X) and other classifications. Although retail trade businesses account for 30% of the business industry, retail sales are bringing in 55% of the sales tax revenue. Construction sales tax is based on the construction of buildings in the City. One of the major construction projects was the Performing Arts and Event Center. In 2015 and 2016, the percentage of revenue increased to 11% compared to 8% in 2012 and 2013. Services, wholesaling, information and manufacturing businesses remain fairly constant between 2012 and 2016. 19 2016 2015 2014 2013 2012 % Of Revenue % By Industry Class % Of Revenue % By Industry Class % Of Revenue % By Industry Class % Of Revenue % By Industry Class % Of Revenue % By Industry Retail Trade (44X&45X) 55% 30% 56% 27% 56% 26% 58% 26% 57% 25% Services (5XX (not 51X), 6X, 7X, 81X) 20% 23% 20% 23% 20% 24% 20% 24% 21% 25% Construction (23X) 11% 22% 11% 24% 10% 24% 8% 24%24 24%8% ° ° /o Wholesaling (423&424) 4% 13% 3% 13% 5% 13% 4% 13% 4% 13% Information (51X) 5% 3% 5% 3% 4% 3% 4% 3% 4% 3% Manufacturing (3XX) 1% 6% 1% 6% 1% 6% 2% 6% 1% 6% Other 4% 3% 4% 4% 4% 4% 5% 4% 5% 4% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% According to a listing of businesses registered with the City of Federal Way and sorted by the Standard Industrial Classification, the business economy appears to be configured as follows: retail trade 55%; services 20%; construction 11%; information 5%; wholesale trade 4%, manufacturing 1%, and other 3%. Other includes transportation/utilities (22X), government (9XX), fire (52X and 53X) and other classifications. Although retail trade businesses account for 30% of the business industry, retail sales are bringing in 55% of the sales tax revenue. Construction sales tax is based on the construction of buildings in the City. One of the major construction projects was the Performing Arts and Event Center. In 2015 and 2016, the percentage of revenue increased to 11% compared to 8% in 2012 and 2013. Services, wholesaling, information and manufacturing businesses remain fairly constant between 2012 and 2016. 19 aI Federal Way PROPERTY TAX Property tax is the third largest tax of the three major taxes levied and collected in Federal Way in 2016. The amount levied in 2016 for collection and operations in 2017 was $13.68066 per $1,000 of property value. For example, a property worth $100,000 paid $1,368.07 (100,000 / 1,000 * 13.68066) in 2017 to support the government entities that have taxing authorities on the properties within the City of Federal Way. Out of the $13.68066 per $1,000 property tax levied, 55.46% ($7.58695 out of $13.68066) was voted on by the citizens of Federal Way. Federal Way School District #210 will receive 46.18% ($6.31715 of $13.68066) of the property tax collected in 2017. Washington State, the School District and King County combined will receive 71.14% of the property tax revenue. The tax rates and entities that have taxing authorities on the properties within the City of Federal Way and their tax rates are: City of Federal Way FWPS King County Washington State County Flood Zone Port of Seattle Fire District #39 Vo d Total yo 8.27% 6.31715 - 6.31715 46.18% 10.11% 2.03205 2.03205 14.85% 0.86% 0.15334 0.15334 1.12% 13.39% 0.62438 1.13118 1.13118 0.75856 1.38294 0.33237 0.11740 1.50000 0.11740 1.83237 Library 0.05000 0.40118 0.45118 EMS 0.26305 7.58695 6.09371 Or 55% Or 44.5% 0.26305 13.68066 3.3% 1.92% 100% The City of Federal Way levied the lowest tax rate among the other King County cities for the past ten years. The lowest was in 2009 with $0.97 per $1,000 of property value. The $1.20 per $1,000 levied in 2012 was lower than the $1.30 rate levied 8 years earlier in 2004. The 2017 rate of $1.13 per $1,000 is the lowest among the comparable cities in 2017. The City received $10.36 million property tax in 2016. Expenditure for Security of Persons and Property was $36.02 million in 2016. To give a benchmark, property tax equates to 28.76% of the expenditures for Security of Persons and Property. 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2017 Property Tax Distribution 46.18% 8.27% 14.85% 1339% 10.11% 0.86% 1.12% 3.30% 1.92% y o° was o e a` e �` sa `"1.. Lo c ati �e �L� czo \pQo ��o < oo 8, Stit rS oJc�i Qo� <'s L 20 • Federal Way As shown in the table below, the City of Federal Way has levied the lowest property tax rate every year among the comparable neighboring cities since 2008. 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Aubum 2.20 2.05 2.08 2.17 2.10 2.08 1.93 1.82 1.49 1.49 Federal Way 1.13 1.19 1.25 1.40 1.42 1.30 1.20 1.13 0.97 1.04 Kent 1.41 1.51 1.58 1.65 1.69 1.57 1.48 2.36 2.18 2.36 Renton 2.61 2.71 2.83 3.15 3.10 3.10 2.83 2.71 2.37 2.62 SeaTac 2.89 3.00 3.16 3.10 3.10 2.88 2.80 2.58 2.34 2.45 Seattle 2.61 2.77 2.62 3.05 3.29 3.58 3.36 3.23 2.86 3.07 Out of the last ten years, Seattle levied the highest property tax rate 6 years, SeaTac three years and Renton one year. Among King County cities, the City of Tukwila levied the highest property tax in 2017 at $3.06 per $1,000 of assessed value. The City of Hunts Point levied the lowest at $0.28045 per $1,000 of assessed property value. The City of Seattle levied $2.61 per $1,000. 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Property Tax Rate for 2017 1.41% 1.13% 1 2.20% 2.61% 2.61% 2.89% Federal Kent Auburn Renton Seattle SeaTac Way According to the King County Assessor's Office, the City of Federal Way has 25,609 parcels on its tax rolls in 2016. Out of the 25,609 parcels, 20,301 parcels are considered single family residents, 3,907 condominium, 1,113 commercials, 268 apartment complexes, and the rest are considered undeveloped land. 21 Federal Way Property Assessed Amount and Levied Amount in 2016 Cities Population* (P) Property Tax Rate** (R) Assessed Amount** (A) Levied Amount ** (L)(P) Poverty Rate (%) Ranking (P,R,A,L,P) Auburn 77,472 2.20 8,578,752,525 18,760,376 15.90% 4,3,4,3,2 Federal Way 96,757 1.13 9,490,312,184 10,657,115 15.40% 3,5,3,5,4 Kent 124,435 1.41 16,402,977,700 23,056,215 15.50% 1,4,1,2,3 Renton 100,953 2.61 15,106,038,959 24,204,815 12.29% 2,2,2,1,5 SeaTac 28,873 2.89 5,431,615,466 15,645,315 20.50% 5,1,5,4,1 Seattle 704,352 2.62 186,325,342,799 486,947,806 13.50% 3.50 3.00 2.50 2.00 1.50 1.00 0.50 • Population (100,000) Property Tax Rate Assessed Amount($10B) s Levied Amount ($100M) Poverty Rate (%) Federal Way Kent Auburn SeaTac * Wahington-demographics.com ** King County Assessor's Office 22 Renton Federal Way UTILITY TAX The City of Federal Way, like most cities in Washington State, charges utility tax on the businesses that provide utility services within its jurisdiction. According to the City of Federal Way Revised Code No.3.10, the following businesses are subject to utility tax of 7.75%: (1) telegraph businesses; (2) competitive telecommunication service or network telecommunication services; (3) cellular telephone service; (4) selling, brokering or furnishing natural gas for domestic, business or industrial consumption; (5) operating storm drainage; (6) selling or furnishing electric energy; (7) collecting solid waste; and (8) engaged in or carrying on the business of cable communications. In 2003, the City Council recognized that senior citizens could be negatively affected by the increases in utility taxes. They created the Utility Tax Rebate Program and in 2007, disabled citizens were included in the program. To qualify for this program, a person requesting reimbursement for the amount of city utility taxes imposed during the previous calendar year must (1) be 65 years of age or older at all times during any period for which reimbursement is requested or be disabled and unable to work as defined under RCW 84.36.381, and (2) have income during the calendar year or in part thereof for which reimburse- ment is requested from all sources whatsoever not exceeding the low-income guidelines for King County area as published by the Secretary of Housing and Urban Development. The following are the utility tax rates paid by the residents of the City of Federal Way and neighboring cities: Utility Auburn Burien Federal Way**** Kent* Renton** SeaTac*** Electric Rate 6.00% 6.00% 7.75% 6.00% 6.00% No utility tax Gas 6.00% 6.00% 7.75% 6.00% 6.00% Solid Waste 7.00% 6.00% 7.75% 7.80% 6.80% Storm Water 7.00% 0.00% 7.75% 13.00% 6.80% Cable TV 6.00% 6.00% 7.75% 6.00% 6.00% Cable Franchise Fee 5.00% 5.00% 5.00% 5.00% 5.00% Water 7.00% 0.00% 3.60%* 13.00% 6.80% Sewer 7.00% 0.00% 3.60%* 13.00% 6.00% Phone/Cellular Phone 6.00% 6.00% 7.75% 6.00% 6.00% Average Tax 6.33% 3.89% 7.36% 8.42% 6.16% 0.00% Kent* - Water, Sewer, Drainage going down to 12.00% in 2015 Renton** - Water, Drainage, and Garbage went up by 0.80% to 6.80% in 2013 for capital SeaTac *** - Current under consideration. Federal Way****- 1.75% of the 7.75% is voter -approved rate to fund Police and Community Water & Sewer *- 3.60% Franchise Fee starting July 2016 23 Federal Way OTHER TAXES Hotel/Motel Lodging Tax RCW 67.28 Most cities in King County may levy a 1% Lodging Tax on overnight stays at hotels, motels, rooming houses, campgrounds, RV parks and similar facilities for continuous periods of less than one month. The total tax paid on overnight lodging in King County by visitors at a facility with 60 or more rooms is 12.4%, and 9.8% for less than 60 rooms, including the 1% City Lodging Tax. The City enacted this tax in 1999 to fund tourism promotion programs. Real Estate Excise Tax (REET) RCW 82.46.010, RCW 82.46.035 The State of Washington is authorized to levy a real estate excise tax on all sales of real estate (measured by the full selling price, including the amount of any liens, mortgages and other debts given to secure the purchase) at a rate of 1.28 percent. A locally -imposed tax is also authorized. All cities and counties may levy a quarter percent tax (described as "the first quarter percent of the real estate excise tax" or "REET 1"). Cities and counties planning under the Growth Management Act (GMA) have the authority to levy a second quarter percent tax (REET 2). The statute further specifies that if a county is required to plan under GMA or if a city is located in such a county, the tax may be levied by a vote of the legislative body. If, however, the county chooses to plan under GMA, the tax must be approved by a majority of the voters. Gambling Excise Tax The City levied gambling taxes at the maximum allowed level on all activities: 5% for bingo and raffles, 2% for amusement games, 5% for punchboards and pull -tabs, and 20% for card rooms (RCW 9.46.110) prior to 2010. Gambling taxes were amended from 5% to 3% on June 1, 2010 for punchboards/pull-tabs and from 20% to 10% for card rooms on August 1, 2010. Revenues from these activities are required to be used primarily for the purpose of gambling enforcement (RCW 9.46.113). Case law has clarified that "primarily" means "first be used" for gambling law enforcement purposes to the extent necessary for that city. The remaining funds may be used for any general government purpose. The City receipts gambling tax in the General Fund and identifies the revenue as law enforcement resources. Admissions Tax Starting in 2017, the City will add a 5% admissions tax upon any person who is charged an admissions fee to any place, including persons who are admitted free of charge, or at reduced rates to any place in the amount of five percent of the admission charge. The 5% admissions tax shall not exceed sixty cents ($0.60) per ticket of admission sold. Other Taxes Auburn Burien Federal Way Kent Renton SeaTac Hotel/Motel 1.00% 0.00% 1.00% 1.00% 1.00% 1.00% REET 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% Bingo/Raffles 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Punch Boards/Pull-tabs 10.00% 8.00% 3.00% 10.00% 10.00% 5.00% Charitable Pull-tab/Punch Boards 10.00% 8.00% 10.00% 10.00% 10.00% 5.00% Card Rooms 4.00% 8.00% 10.00% 11.00% 10.00% 10.00% Admissions 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Amusement Games 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 24 Federal Way LONG-TERM DEBT As of December 31, 2016, the City of Federal Way had a total of $36.02 million in bonds and notes outstanding. This amount comprises of $10.88 million of 2013 Refunding of Community Center General Obligation Bonds, $13.71 million of SCORE Special Obligation Bonds, $8.21 million of 2014 Key Bank Bond Anticipation Note, 2016 HUD Loan $2.93 million, and $0.29 million of Public Works Trust Fund Loans. The City's Community Center Refunding Bond was rated Aa3 by Moody and SCORE was rated AA by Standard and Poor's. Moody's Aa3 rating of the City's General Obligation Bonds signifies to the bondholders that issuer's capacity to meet its debt service requirement on the debt is very good and the bondholder will be assuming very low risk. Annual Debt Service ($ Millions) Governmental Activities Business -type Activities Year Principal 1 Interest I Total Principal 1 Interest I Total 2017 2018 2019 2020 2021 9.25 1.07 1.10 1.13 1.17 1.05 0.9 0.87 0.83 0.79 10.3 1.97 1.97 1.96 1.96 0.096 0.096 0.096 0.000 0.000 0.003 0.002 0.001 0.000 0.000 0.099 0.096 0.096 0.000 0.000 *The three year loan used to purchase the Target property was an interest -only loan and the $8.21 million in principal is due in December 2017. RCW 39.36.02 (2(a)i) "Counties, cities, and towns are limited to an indebtedness amount not exceeding one and one-half percent of the value of the taxable property in such counties, cities, or towns without the assent of three-fifths of the voters therein voting at an election held for that purpose." The 2016 City's Assessed Valuation was $9.42 billion, making the Councilmanic debt capacity $141.30 million. Outstanding debt was $35.73 million (not including $2.51 million available to service the debt) and Councilmanic excess capacity was $94.20 million. The City may increase its General Obligation Debt above the Councilmanic 1.50% limit to 2.50% by the 3/5 vote of its citizens. The following are the City's remaining debt capacity by category as of December 31, 2016: General government Councilmanic (no vote required) General government 3/5 majority vote required Parks and Open space 3/5 majority vote required Utilities 3/5 majority vote required $108.09 million 94.20 235.51 235.51 The City has a debt capacity of $202.29 million ($108.09+94.20) for the general government with the 2/3 majority vote of the people of Federal Way. In assessing the ability to borrow, we must use two important measurements: (1) legal restrictions, and (2) ability to service the debt. The debt capacity answered the first measurement - the legal restrictions. The second measurement, ability to service the debt, is the ability of the entity to make the annual payments without affecting the service delivery. 25 Federal Way ECONOMIC CONDITION ('I IN TI:RI:[) ON OPPOR I Y. The economic condition for the City of Federal Way looks very good. The state of Washington tops the list of the best states to make a living and was second two consecutive years previously according to Forbes Magazine. As the City of Federal Way leadership says, "Federal Way can't wait." The Performing Arts and Event Center has been completed and will be opened on August 19, 2017. The multipurpose facility features a 716 -seat auditorium that will serve a growing demand for community performing arts space, as well as serve as a South King County venue for touring acts and performance series. The PAEC has started to generate more businesses in the downtown area, creating more jobs and sales tax revenues. The facility will be complemented by an on-site hotel that is owned by a private developer. The City of Federal Way is investing in its road infrastructure and economic development. The City leadership is focusing on the future of Federal Way. The Seattle -Tacoma -Bellevue annual unemployment rate for 2016 was 4.00% down from 4.90% in 2015. The last time the annual unemployment rate was below 4.00% was in 2007 at 3.70% just before the "mortgage market" crash in 2008, according to the State Employment Security Department. The Washington state unemployment rate in 2016 was 5.3%. A few of the advantages the community of Federal Way offers include low-cost office space, affordable housing, quick and easy access to Seattle - Tacoma International Airport, short commutes to and from Seattle, convenient access to quality recreation facilities, rich infrastructure, and a skilled workforce. The City is partnering with neighbors and friends to make Federal Way a destination of choice for retreats, shopping, visiting, residency, and raising a family. The major employers in the city are shown in the table below. Both the health services and medical services are growing : Employer Type of Business Number of Employees St. Francis Hospital Medical Services 5,026 Federal Way Public Schools Education Services 2,242 World Vision Inc. Christian Relief Agency -Nonprofit 854 Wild Waves Theme & Water Park Amusement Center 871 US Postal Services -Bulk Mail Postal Services 600 Walmart Retail 496 City of Federal Way Government Services 476 DaVita Health Services 456 Weyerhaeuser Company Lumber Products 303 Virginia Mason Federal Way Medical Services 253 26 City of Federal Way e p 9 a Q � O .5 R3 e CO CO b `1 VI 'G O 8 H d 2017 / 2018 e 04 01 O en Biennial Budget ,gee.e. W N V , n O N n � Ni N O eT W CO s 2 N 2p P V M N m O N 0 vv o, N e ..n 00 O CV 'G N. N O eenn CT T 00 en h O N eV dN N •N tz,,•N ti n o a g 43'44Ow -3 Q w W O w -1 {Fy W Q m a z d � eV 0. y ter TOTAL REVENUES 0. U z 0 F z 0 0 z ti 0 0 e e e e e e e e e NO V — 0, C.- COen N 00 do P d S Q' co00 N— 00 — d N N h < 0,0 N N CO N s ow DEBT SERVICE & SPECIAL REVENUE Jim Ferrell, Mayor a. 00 s - C . •0 as U G� >, aQi as U ti Q Martin A. Moore 0 os Q ezt o U aU at eeee.eeeeeee°o O N O , N - IA 8 0 0 0 O D Cr,— — P < = 00 v e o — , S 0 X } o F U N 4 Solid Waste and Recycling 'O .0 O r N 7 b .0 44, a0 Special Studies/Contract 01 N N O 0 0 eV N N 0 N M N T Q N HoteVMotel Lodging Tax — b ' d PP 8 ' r b N d m d H. N N Community Center t b d Community Development Block Gran a v S oo Nn CO TOTAL REVENUES h h e e e e e e e e e e e e e N e O a, N N en 01 N O, M n ,O0, 00 N V, 0, a w, eT 00 00 o M 7 0M, Ce 0, N d M— Y N' O M N en d P` N M d d 0, O' h d 0 eOC V1 M 00 ,0 �.-. en e' .en v u C e� os o r d o N V N N N U> .-.i.,--: N Y 00 U o ,-,7, o a a o o .0 8T-11 a € E o S > S 1 3 ,0 3 8 - 2 0 V i' a 4..U x 5 a V W 2 0. e. z Councilmember Councilmember en O N Dini Duclos Susan Honda Councilmember Councilmember >1 s _ a 0 LecNalLL o ar >w • END. FUND BALANCE r 0 33325 8th Avenue South Federal Way Population : 96,757 e e e e e e e e 0 e e N '0 0 P O h 0, N h oo , _ N M_ ,0 P h a M O ,,, M 0 ye _ —F.; N e,i ao N en — - v00i N .-. 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